<PAGE>
Filed Pursuant to Rule 497(e)
Registration File No.: 2-94996
THE HUDSON RIVER TRUST
Principal Office Located at
1345 Avenue of the Americas -- New York, New York 10105
The Hudson River Trust (Trust) is a mutual fund, currently issuing thirteen
series of shares of beneficial interest, each representing a separate
investment portfolio (Portfolio). The Portfolios are The Asset Allocation
Series: Conservative Investors, Balanced and Growth Investors; The Equity
Series: Growth and Income, Equity Index, Common Stock, Global, International
and Aggressive Stock; and The Fixed Income Series: Money Market, Intermediate
Government Securities, Quality Bond and High Yield. An investment in the
Money Market Portfolio is neither insured nor guaranteed by the U.S.
Government.
This prospectus sets forth concisely the investment objectives and policies
of the thirteen Portfolios and the information about the Trust a prospective
investor should know before investing. It should be read and retained for
future reference.
A Statement of Additional Information (SAI) dated May 1, 1995 has been filed
with the Securities and Exchange Commission (SEC). This SAI is incorporated
by reference into this prospectus and is available at no charge by writing
the Trust at the above address.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Financial Highlights ........................ 2
The Trust ................................... 11
Investment Objectives and Policies .......... 11
Investment Techniques ....................... 25
Certain Investment Restrictions ............. 31
Management of the Trust ..................... 32
Description of the Trust's Shares ........... 35
Dividends, Distributions and Taxes .......... 36
Investment Performance ...................... 36
Appendix A -- Performance Information ...... A-1
Appendix B -- Description of Bond Ratings .. B-1
</TABLE>
An investment in the Trust is not a deposit or obligation of, or guaranteed
or endorsed by, any bank and is not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROSPECTUS DATED MAY 1, 1995
-----------------------------------------------------------------------------
HRT103 (5/95) Copyright 1995 The Hudson River Trust. All rights reserved.
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables give information regarding income, expenses and capital
changes in the Common Stock and Money Market Portfolios attributable to a
Portfolio share of beneficial interest outstanding throughout the periods
indicated, based upon monthly average shares outstanding, and other
supplementary data. The information is presented under the continuing entity
basis of accounting as if the reorganization described in "General
Information and History" in the SAI had always been in effect.
The succeeding tables also give equivalent information for a share of
beneficial interest in each of the other Portfolios outstanding throughout
the periods indicated. No information is given with respect to the
International Portfolio, which commenced operations on April 3, 1995.
Information regarding portfolio turnover rates, some of which exceeded 100%
during 1994 and 1993, is also included. Higher levels of portfolio activity
result in higher transaction costs, including higher brokerage expenses. The
equity component of the Balanced Portfolio's portfolio turnover rates in 1994
and 1993 was 81% and 85%, respectively, and the fixed income component was
196% and 128%, respectively, in 1994 and 1993.
On December 16, 1992, the Trust's Board of Trustees declared a 10-for-1 stock
split of the outstanding shares of the Money Market, High Yield, Balanced,
Common Stock, Global and Aggressive Stock Portfolios (Split Portfolios). The
split was effected on January 1, 1993 for shareholders of record on that
date. Consequently, the shares of beneficial interest outstanding and net
asset value per share presented in the Financial Highlights for a Split
Portfolio share outstanding throughout each period (other than the periods
ended December 31, 1993 and December 31, 1994), and the shares outstanding at
the end of such periods presented for the Split Portfolios, have been
restated.
The financial information in the tables below for the fiscal years ended
December 31, 1993 and December 31, 1994 has been audited by Price Waterhouse
LLP, the Trust's independent accountants. Financial highlights for prior
years have been audited by Deloitte & Touche LLP. The audited financial
statements for the Trust appear in the SAI. The Trust's annual report, which
contains additional performance information, is available without charge upon
request.
FINANCIAL HIGHLIGHTS
PER SHARE INCOME AND CAPITAL CHANGES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)(C)
ASSET ALLOCATION SERIES
CONSERVATIVE INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
OCTOBER 2,
YEAR ENDED DECEMBER 31, 1989 TO
-------------------------------------------- DECEMBER 31,
1994 1993* 1992 1991 1990 1989
---- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) ......... $11.12 $10.94 $11.29 $10.23 $10.26 $10.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS: ...............
Net investment income ............................ 0.55 0.52 0.64 0.69 0.72 0.15
Net realized and unrealized gain (loss) on
investments ..................................... (1.00) 0.65 (0.01) 1.28 (0.09) 0.16
------ ------ ------ ------ ------ ------
Total from investment operations ................. (0.45) 1.17 0.63 1.97 0.63 0.31
====== ====== ====== ====== ====== ======
LESS DISTRIBUTIONS: ..............................
Dividends from net investment income ............. (0.52) (0.50) (0.62) (0.66) (0.66) (0.05)
Dividends in excess of net investment income ..... -- (0.00) -- -- -- --
Distributions from realized gains ................ -- (0.49) (0.36) (0.25) -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions ................ (0.52) (0.99) (0.98) (0.91) (0.66) (0.05)
------ ------ ------ ------ ------ ------
Net asset value, end of period ..................... $10.15 $11.12 $10.94 $11.29 $10.23 $10.26
====== ====== ====== ====== ====== ======
Total return (d) ................................... (4.10)% 10.76% 5.64% 19.80% 6.30% 3.10%
====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA: ..........................
Net assets, end of period (000's) .................. 73,691 $114,418 $70,675 $50,279 $29,971 $13,984
Ratio of expenses to average net assets ............ 0.59% 0.60% 0.61% 0.64% 0.73% 0.26%
Ratio of net investment income to average net
assets ........................................... 5.22% 4.49% 5.77% 6.45% 7.06% 1.54%
Portfolio turnover rate ............................ 228% 178% 136% 171% 88% 0%
<FN>
Footnotes appear on page 10.
</TABLE>
2
<PAGE>
BALANCED PORTFOLIO:
<TABLE>
<CAPTION>
JANUARY 27,
YEAR ENDED DECEMBER 31, 1986 TO
---------------------------------------------------------------------------- DECEMBER 31,
1994 1993* 1992 1991 1990 1989 1988 1987 1986
---- ----- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of Period (A) ... $16.67 $16.19 $18.48 $14.40 $15.16 $13.38 $12.39 $12.79 $10.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income .... 0.45 0.50 0.56 0.60 0.78 0.85 0.67 0.41 0.39
Net Realized and Unrealized
Gain (Loss) On Investments (1.78) 1.46 (1.11) 5.23 (0.76) 2.53 0.95 (0.47) 2.52
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Total from Investment
Operations .............. (1.33) 1.96 (0.55) 5.83 0.02 3.38 1.62 (0.06) 2.91
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
LESS DISTRIBUTIONS:
Dividends from Net
Investment Income ....... (0.44) (0.50) (0.55) (0.55) (0.78) (0.85) (0.63) (0.34) (0.11)
Dividends in Excess of Net
Investment Income ....... (0.03) -- -- -- -- -- -- -- --
Distributions from Realized
Gains ................... -- (0.95) (1.19) (1.20) -- (0.75) -- -- (0.01)
Distributions in Excess of
Realized Gains .......... -- (0.03) -- -- -- -- -- -- --
Tax Return of Capital
Distributions ........... (0.00) -- -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Total Dividends and
Distributions ........... (0.47) (1.48) (1.74) (1.75) (0.78) (1.60) (0.63) (0.34) (0.12)
========== ========== ========== ========== ========== ========== ========== ========== ==========
Net Asset Value, End
of Period $ 14.87 $ 16.67 $ 16.19 $ 18.48 $ 14.40 $ 15.16 $ 13.38 $ 12.39 $ 12.79
========== ========== ========== ========== ========== ========== ========== ========== ==========
Total Return (d) .......... (8.02)% 12.28% (2.85)% 41.25% 0.25% 25.84% 13.27% (0.86)% 29.10%
========== ========== ========== ========== ========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(000'S) .................. $1,329,820 $1,364,640 $1,076,670 $964,262 $286,432 $241,910 $161,819 $108,913 $23,858
Ratio of Expenses to
Average Net Assets ....... 0.39% 0.39% 0.40% 0.41% 0.45% 0.45% 0.51% 0.47% 0.62%
Ratio of Net Investment
Income to Average Net
Assets ................... 2.87% 2.99% 3.30% 3.60% 5.35% 5.71% 5.15% 2.88% 3.03%
Portfolio Turnover Rate .. 115% 99% 91% 159% 119% 132% 204% 197% 219%
<FN>
----------
Footnotes appear on page 10.
</TABLE>
3
<PAGE>
GROWTH INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
OCTOBER 2,
YEAR ENDED DECEMBER 31, 1989 TO
-------------------------------------------------------- DECEMBER 31,
1994 1993* 1992 1991 1990 1989
---------- ---------- ---------- --------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) $15.61 $14.69 $15.17 $11.03 $10.33 $10.00
------ ----- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS: .....
Net investment income .................. 0.50 0.43 0.44 0.41 0.44 0.11
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .......................... (0.98) 1.79 0.28 4.93 0.64 0.29
------ ------ ------ ------ ------ ------
Total from investment operations ....... (0.48) 2.22 0.72 5.34 1.08 0.40
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS: ....................
Dividends from net investment income ... (0.46) (0.42) (0.41) (0.37) (0.38) (0.06)
Dividends in excess of net investment
income ................................ (0.01) -- -- -- -- --
Distributions from realized gains ...... -- (0.88) (0.79) (0.83) -- (0.01)
------ ------ ------ ------ ------ ------
Total dividends and distributions ...... (0.47) (1.30) (1.20) (1.20) (0.38) (0.07)
------ ------ ------ ------ ------ ------
Net asset value, end of period ........... $14.66 $15.61 $14.69 $15.17 $11.03 $10.33
====== ====== ====== ====== ====== ======
Total return (d) ......................... (3.15)% 15.26% 4.85% 48.83% 10.70% 4.00%
====== ====== ======== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA: ................
Net asset, end of period (000's) ........ $492,478 $278,467 $148,650 $84,338 $24,539 $6,018
Ratio of expenses to average net assets . 0.59% 0.62% 0.60% 0.66% 0.78% 0.29%
Ratio of net investment income to average
net assets ............................. 3.32% 2.71% 3.00% 3.03% 4.11% 1.01%
Portfolio turnover rate .................. 131% 118% 129% 139% 92% 6%
</TABLE>
EQUITY SERIES
GROWTH AND INCOME PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 1, 1993 TO
DECEMBER 31, DECEMBER 31,
1994 1993**
---------------- ------------------
<S> <C> <C>
Net asset value, beginning of period (a) .............. $ 9.95 $ 10.00
------- ------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.31 0.03
Net realized and unrealized gain (loss) on
investments .......................................... (0.36) (0.06)
------- -----
Total from investment operations ..................... (0.05) (0.03)
------- -----
LESS DISTRIBUTIONS:
Dividends from net investment income ................. (0.20) (0.02)
Dividends in excess of net investment income ........ -- (0.00)
Tax return of capital distribution ................... -- (0.00)
------- ------
Total dividends and distributions .................... (0.20) (0.02)
------- ------
Net asset value, end of period ........................ $ 9.70 $ 9.95
======= ======
Total return (d) ...................................... (0.58)% (0.25)%
======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ..................... $31,522 $1,456
Ratio of expenses to average net assets ............... 0.78% 2.70%(b)
Ratio of net investment income to average net assets . 3.13% 1.12%(b)
Portfolio turnover rate ............................... 52% 48%
<FN>
Footnotes appear on page 10.
</TABLE>
4
<PAGE>
EQUITY INDEX PORTFOLIO:
<TABLE>
<CAPTION>
MARCH 1, 1994 TO
DECEMBER 31, 1994
-------------------
<S> <C>
Net asset value, beginning of period (a) .......... $10.00
------
INCOME FROM INVESTMENT OPERATIONS: ................
Net investment income ............................. 0.20
Net realized and unrealized loss on investments .. (0.09)
------
Total from investment operations .................. 0.11
------
LESS DISTRIBUTIONS:
Dividends from net investment income .............. (0.20)
Distributions of realized gains ................... (0.03)
Distributions in excess of realized gains ........ (0.01)
------
Total dividends and distributions ................. (0.24)
------
Net asset value, end of period ..................... $ 9.87
======
Total return (d) ................................... (1.08)%
======
RATIOS/SUPPLEMENTAL DATA: ..........................
Net assets, end of period (000's) .................. $36,748
Ratio of expenses to average net assets ............ 0.49%(b)
Ratio of net investment income to average net
assets ............................................ 2.42%(b)
Portfolio turnover rate ............................ 7%
</TABLE>
COMMON STOCK PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993* 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year (a) ...... $14.65 $13.49 $14.18 $11.22 $12.87 $12.19
---------- ---------- ---------- ---------- ---------- -----------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income ......... ...... 0.20 0.23 0.24 0.32 0.21 0.27
Net realized and
unrealized gain
(loss) on invest-
ments and
foreign currency
transactions ......... (0.51) 3.10 0.20 3.91 (1.25) 2.84
---------- ---------- ---------- ---------- ---------- -----------
Total from invest-
ment operations ...... (0.31) 3.33 0.44 4.23 (1.04) 3.11
---------- ---------- ---------- ---------- ---------- -----------
LESS DISTRIBUTIONS:
Dividends from net
investment
income ............... (0.19) (0.23) (0.24) (0.29) (0.22) (0.26)
Dividends in
excess of net
investment
income ............... (0.01) (0.00) -- -- -- --
Distributions from
realized gains ....... (0.77) (1.94) (0.89) (0.98) (0.39) (2.17)
Tax return of capital
distributions ....... (0.01) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- -----------
Total dividends
and distributions ... (0.98) (2.17) (1.13) (1.27) (0.61) (2.43)
---------- ---------- ---------- ---------- ---------- -----------
Net asset value, end
of year ............... $13.36 $14.65 $13.49 $14.18 $11.22 $12.87
========== ========== ========== ========== ========== ===========
Total return (d) ....... (2.14) 24.84% 3.22% 37.90% (8.11)% 25.59%
========== ========== ========== ========== ========== ===========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's) .......... $3,466,245 $3,125,128 $2,307,292 $2,126,402 $673,476 $725,627
Ratio of expenses to
average net assets ... 0.38% 0.38% 0.38% 0.40% 0.44% 0.43%
Ratio of net invest-
ment income to
average net assets ... 1.40% 1.55% 1.73% 2.32% 1.72% 1.87%
Portfolio turnover rate 52% 82% 71% 90% 82% 90%
</TABLE>
<TABLE>
<CAPTION>
1988 1987 1986 1985
---------- ---------- ----------- ---------
<S> <C> <C> <C>
$10.15 $11.34 $11.28 $9.04
---------- ---------- ----------- ---------
0.23 0.17 0.19 0.24
2.04 0.72 1.77 2.77
---------- ---------- ----------- ---------
2.27 0.89 1.96 3.01
---------- ---------- ----------- ---------
(0.23) (0.17) (0.15) (0.19)
-- -- -- --
-- (1.91) (1.75) (0.58)
-- -- -- --
---------- ---------- ----------- ---------
(0.23) (2.08) (1.90) (0.77)
---------- ---------- ----------- ---------
$12.19 $10.15 $11.34 $11.28
========== ========== =========== =========
22.44% 7.49% 17.33% 33.40%
========== ========== =========== =========
$537,827 $434,558 $351,580 $242,904
0.46% 0.46% 0.47% 0.47%
2.02% 1.21% 1.43% 2.29%
71% 86% 89% 71%
</TABLE>
----------
Footnotes appear on page 10.
5
<PAGE>
GLOBAL PORTFOLIO:
<TABLE>
<CAPTION>
AUGUST 27,
YEAR ENDED DECEMBER 31, 1987 TO
--------------------------------------------------------------------------- DECEMBER 31,
1994 1993* 1992 1991 1990 1989 1988 1987
--------- ---------- --------- --------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (a) ...................... $13.62 $ 11.41 $ 11.64 $ 9.76 $ 10.74 $ 9.57 $ 8.67 $10.00
--------- ---------- --------- --------- --------- --------- -------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .......... 0.20 0.08 0.14 0.22 0.38 0.17 0.13 0.01
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions . 0.52 3.58 (0.20) 2.74 (1.03) 2.38 0.82 (1.34)
--------- ---------- --------- --------- --------- --------- -------- ----------
Total from investment operations 0.72 3.66 (0.06) 2.96 (0.65) 2.55 0.95 (1.33)
--------- ---------- --------- --------- --------- --------- -------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.17) (0.15) (0.11) (0.23) (0.33) (0.14) (0.05) --
Distributions from realized
gains ......................... (0.28) (1.30) (0.06) (0.85) -- (1.24) -- --
Distributions in excess of
realized gains ................ (0.00) (0.00) -- -- -- -- -- --
Tax return of capital
distributions ................. (0.02) -- -- -- -- -- -- --
--------- ---------- --------- --------- --------- --------- -------- ----------
Total dividends and
distributions ................. (0.47) (1.45) (0.17) (1.08) (0.33) (1.38) (0.05) --
--------- ---------- --------- --------- --------- --------- -------- ----------
Net asset value, end of period .. $13.87 $ 13.62 $ 11.41 $ 11.64 $ 9.76 $ 10.74 $ 9.57 $8.67
========= ========== ========= ========= ========= ========= ======== ==========
Total return (d) ......... ........ 5.23% 32.09% (0.50)% 30.54% (6.06)% 26.73% 10.88% (13.30)%
========= ========== ========= ========= ========= ========= ======== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $421,698 $141,257 $49,171 $39,487 $24,097 $15,409 $9,212 $6,030
Ratio of expenses to average net
assets ......................... 0.69% 0.84% 0.70% 0.75% 0.75% 0.80% 1.06% 0.40%
Ratio of net investment income to
average net assets ............. 1.41% 0.62% 1.20% 1.94% 3.67% 1.49% 1.30% 0.19%
Portfolio turnover rate .......... 71% 150% 216% 267% 502% 399% 235% 11%
<FN>
----------
Footnotes appear on page 10.
</TABLE>
6
<PAGE>
AGGRESSIVE STOCK PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------- ,
1994 1993* 1992 1991 1990 1989 1988
--------- ---------- --------- --------- --------- --------- -------- -
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (a) ...................... $31.89 $29.81 $33.82 $ 19.37 $19.90 $14.07 $14.09
--------- ---------- --------- --------- --------- --------- -------- -
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .......... 0.04 0.09 0.17 0.12 0.16 0.23 0.20
Net realized and unrealized gain
(loss) on investments ......... (1.26) 4.91 (1.25) 16.68 1.46 5.87 (0.03)
--------- ---------- --------- --------- --------- --------- -------- -
Total from investment operations (1.22) 5.00 (1.08) 16.80 1.62 6.10 0.17
--------- ---------- --------- --------- --------- --------- -------- -
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.04) (0.09) (0.18) (0.10) (0.16) (0.23) (0.19)
Distributions from realized
gains ......................... -- (2.75) (2.75) (2.25) (1.99) (0.04) --
Distributions in excess of
realized gains ................ -- (0.07) -- -- -- -- --
Tax return of capital
distribution .................. (0.00) (0.01) -- -- -- -- --
--------- ---------- --------- --------- --------- --------- -------- -
Total dividends and
distributions ................. (0.04) (2.92) (2.93) (2.35) (2.15) (0.27) (0.19)
--------- ---------- --------- --------- --------- --------- -------- -
Net asset value, end of period .. $30.63 $31.89 $29.81 $33.82 $19.37 $19.90 $14.07
========= ========== ========= ========= ========= ========= ======== =
Total return (d) ................. (3.81)% 16.77% (3.16)% 86.87% 8.16% 43.50% 1.13%
========= ========== ========= ========= ========= ========= ======== =
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $1,832,164 $1,557,332 $1,210,576 $959,257 $120,960 $99,459 $62,116
Ratio of expenses to average net
assets ........................ . 0.49% 0.49% 0.50% 0.51% 0.55% 0.55% 0.65%
Ratio of net investment income to
average net assets ............. 0.12% 0.28% 0.57% 0.40% 0.78% 1.29% 1.35%
Portfolio turnover rate .......... 92% 89% 68% 117% 54% 89% 70%
</TABLE>
<TABLE>
<CAPTION>
JANUARY 27,
1986 TO
DECEMBER 31
1987 1986
-------- ----------
<S> <C>
$13.35 $10.00
-------- ----------
0.20 0.12
0.79 3.46
-------- ----------
0.99 3.58
-------- ----------
(0.13) (0.05)
(0.12) (0.18)
-- --
-- --
-------- ----------
(0.25) (0.23)
-------- ----------
$14.09 $13.35
======== ==========
7.30% 35.90%
======== ==========
$47,776 $8,414
0.58% 0.78%
1.19% 0.99%
134% 60%
</TABLE>
------------
Footnotes appear on page 10.
7
<PAGE>
FIXED INCOME SERIES
MONEY MARKET PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1994 1993* 1992 1991 1990 1989 1988 1987 1986 1985
--------- ---------- --------- --------- --------- --------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year(a) .... $10.12 $10.11 $10.13 $10.17 $10.14 $10.13 $10.09 $10.02 $10.01 $ 9.83
--------- ---------- --------- --------- --------- --------- -------- -------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ... 0.41 0.30 0.37 0.61 0.81 0.89 0.73 0.64 0.67 0.79
Net realized and
unrealized gain (loss)
on investments .. -- -- (0.01) -- 0.01 0.01 (0.01) 0.01 (0.01) (0.01)
--------- ---------- --------- --------- --------- --------- -------- -------- -------- -------
Total from investment
operations ............. 0.41 0.30 0.36 0.61 0.82 0.90 0.72 0.65 0.66 0.78
--------- ---------- --------- --------- --------- --------- -------- -------- -------- -------
LESS DIVIDENDS:
Dividends from net
investment income ...... (0.39) (0.29) (0.38) (0.65) (0.79) (0.89) (0.68) (0.58) (0.65) (0.60)
--------- ---------- --------- --------- --------- --------- -------- -------- -------- -------
Total dividends ......... (0.39) (0.29) (0.38) (0.65) (0.79) (0.89) (0.68) (0.58) (0.65) (0.60)
--------- ---------- --------- --------- --------- --------- -------- -------- -------- -------
Net asset value, end
of year ................ $10.14 $10.12 $10.11 $10.13 $10.17 $10.14 $10.13 $10.09 $10.02 $10.01
========= ========== ========= ========= ========= ========= ======== ======== ======== =======
Total return (d) ... ..... 4.02% 3.00% 3.57% 6.20% 8.22% 9.18% 7.32% 6.63% 6.60% 8.15%
========= ========== ========= ========= ========= ========= ======== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's) ........ $325,391 $248,460 $268,584 $302,395 $359,426 $289,338 $234,378 $154,606 $91,743 $87,652
Ratio of expenses to
average net assets ...... 0.42% 0.42% 0.43% 0.43% 0.44% 0.44% 0.48% 0.46% 0.46% 0.48%
Ratio of net investment
income to average
net assets .............. 4.01% 2.91% 3.63% 5.96% 7.85% 8.70% 7.14% 6.29% 6.45% 7.91%
</TABLE>
INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO (E):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------- APRIL 1, 1991 TO
1994 1993* 1992 DECEMBER 31, 1991
--------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (a) .............. $ 10.08 $ 10.53 $ 10.73 $ 10.00
--------- ---------- ---------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.65 0.59 0.60 0.52
Net realized and unrealized gain (loss) on
investments .......................................... (1.08) 0.51 (0.02) 0.66
--------- ---------- ---------- -----------------
Total from investment operations ..................... (0.43) 1.10 0.58 1.18
--------- ---------- ---------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income ................. (0.78) (0.68) (0.60) (0.34)
Distributions from realized gains .................... -- (0.87) (0.18) (0.11)
--------- ---------- ---------- -----------------
Total dividends and distributions .................... (0.78) (1.55) (0.78) (0.45)
--------- ---------- ---------- -----------------
Net asset value, end of period ........................ $ 8.87 $ 10.08 $ 10.53 $ 10.73
========= ========== ========== =================
Total return (d) ...................................... (4.37)% 10.58% 5.53% 12.10%
========= ========== ========== =================
RATIOS/SUPPLEMENTAL DATA: .............................
Net assets, end of period (000's) ..................... $48,518 $158,511 $293,587 $241,290
Ratio of expenses to average net assets ............... 0.56% 0.53% 0.52% 0.43%
Ratio of net investment income to average net assets . 6.75% 5.43% 5.63% 4.88%
Portfolio turnover rate ............................... 133 % 254 % 316 % 174 %
<FN>
----------
Footnotes appear on page 10.
</TABLE>
8
<PAGE>
QUALITY BOND PORTFOLIO:
<TABLE>
<CAPTION>
OCTOBER 1, 1993
YEAR ENDED TO DECEMBER 31,
DECEMBER 31, 1994 1993
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period (a) ............ $ 9.82 $ 10.00
----------------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .............................. 0.66 0.11
Net realized and unrealized loss on investments ... (1.16) (0.16)
----------------- -----------------
Total from investment operations ................... (0.50) (0.05)
----------------- -----------------
LESS DISTRIBUTIONS: ................................
Dividends from net investment income ............... (0.55) (0.12)
Distributions in excess of realized gains ......... -- (0.01)
Tax return of capital distributions ................ (0.05) --
----------------- -----------------
Total dividends and distributions .................. (0.60) (0.13)
----------------- -----------------
Net asset value, end of period ...................... $ 8.72 $ 9.82
================= =================
Total return (d) .................................... (5.10)% (0.51)%
================= =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ................... $127,575 $104,832
Ratio of expenses to average net assets ............. 0.59% 0.69%(b)
Ratio of net investment income to average net assets 7.17% 4.62%(b)
Portfolio turnover rate ............................. 222% 77%
</TABLE>
HIGH YIELD PORTFOLIO:
<TABLE>
<CAPTION>
JANUARY 2,
YEAR ENDED DECEMBER 31, 1987 TO
--------------------------------------------------------------------------- DECEMBER 31,
1994 1993* 1992 1991 1990 1989 1988 1987
--------- ---------- --------- --------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) .. $ 10.08 $ 9.15 $ 8.96 $ 7.97 $ 9.14 $ 9.72 $ 9.67 $ 10.00
--------- ---------- --------- --------- --------- --------- -------- ----------
Income from investment operations: ........
Net investment income ..................... 0.89 0.94 0.89 0.89 1.04 1.09 1.00 1.06
Net realized and unrealized gain (loss) on
investments .............................. (1.17) 1.10 0.19 0.99 (1.14) (0.60) (0.08) (0.60)
--------- ---------- --------- --------- --------- --------- -------- ----------
Total from investment operations .......... (0.28) 2.04 1.08 1.88 (0.10) 0.49 0.92 0.46
--------- ---------- --------- --------- --------- --------- -------- ----------
Less distributions: .......................
Dividends from net investment income ...... (0.88) (0.92) (0.89) (0.89) (1.07) (1.07) (0.87) (0.79)
Dividends in excess of net investment
income ................................... (0.01) -- -- -- -- -- -- --
Distributions from realized gains ......... -- (0.19) -- -- -- -- -- --
--------- ---------- --------- --------- --------- --------- -------- ----------
Total dividends and distributions ......... (0.89) (1.11) (0.89) (0.89) (1.07) (1.07) (0.87) (0.79)
--------- ---------- --------- --------- --------- --------- -------- ----------
Net asset value, end of period .............. $ 8.91 $ 10.08 $ 9.15 $ 8.96 $ 7.97 $ 9.14 $ 9.72 $ 9.67
========= ========== ========= ========= ========= ========= ======== ==========
Total return (d) ............................ (2.79)% 23.15% 12.31% 24.46% (1.10)% 5.14% 9.73% 4.68%
========= ========== ========= ========= ========= ========= ======== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...........$73,895 $67,169 $47,687 $45,066 $36,569 $41,280 $34,810 $10,687
Ratio of expenses to average net assets .... 0.61% 0.63% 0.60% 0.61% 0.62% 0.62% 0.73% 0.98%
Ratio of net investment income to average
net assets ................................ 9.23% 9.52% 9.58% 10.31% 12.04% 11.22% 10.05% 10.62%
Portfolio turnover rate ..................... 248% 280% 177% 187% 53% 116% 209% 235%
<FN>
----------
Footnotes appear on page 10.
</TABLE>
9
<PAGE>
----------
FOOTNOTES TO FINANCIAL HIGHLIGHTS
* Prior to July 22, 1993, Equitable Capital Management Corporation
(Equitable Capital) served as the investment adviser to the Trust. On
July 22, 1993, Alliance Capital Management L.P. acquired the business and
substantially all of the assets of Equitable Capital and became the
investment adviser to the Trust.
** Restated.
(a) Date as of which funds were first allocated to the Portfolios are as
follows:
Common Stock Portfolio -- June 16, 1975
Money Market Portfolio -- July 13, 1981
Balanced Portfolio -- January 27, 1986
Aggressive Stock Portfolio -- January 27, 1986
High Yield Portfolio -- January 2, 1987
Global Portfolio -- August 27, 1987
Conservative Investors Portfolio -- October 2, 1989
Growth Investors Portfolio -- October 2, 1989
Intermediate Government Securities Portfolio -- April 1, 1991
Quality Bond Portfolio -- October 1, 1993
Growth and Income Portfolio -- October 1, 1993
Equity Index Portfolio -- March 1, 1994
(b) Annualized.
(c) Net investment income and capital changes per share are based upon
monthly average shares outstanding.
(d) Total return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return calculated for a
period of less than one year is not annualized.
(e) On February 22, 1994 shares of the Intermediate Government Securities
Portfolio of the Trust were substituted for shares of the Trust's
Short-Term World Income Portfolio.
10
<PAGE>
THE TRUST
The Trust is an open-end management investment company under the Investment
Company Act of 1940 (Investment Company Act). As a "series" type of mutual
fund, the Trust issues shares of beneficial interest currently divided among
thirteen Portfolios. Each Portfolio is a separate diversified series of the
Trust. The Trust's assets and liabilities are divided among these Portfolios.
Additional Portfolios may be established. Originally organized as a Maryland
corporation which commenced operations on March 22, 1985, the Trust was
formed as a Massachusetts business trust on July 10, 1987.
The Trust's shares are sold only to separate accounts of insurance companies
in connection with variable life insurance contracts and variable annuity
certificates and contracts (collectively, the Contracts) issued by The
Equitable Life Assurance Society of the United States (Equitable), Equitable
Variable Life Insurance Company (Equitable Variable), an affiliate of
Equitable, and certain insurance companies unaffiliated with Equitable or
Equitable Variable. Equitable and Equitable Variable were the record owners
of approximately 99.5% of the Trust's shares as of March 31, 1995, and
consequently may be deemed to control the Trust.
Shares of the Trust are sold to insurance company separate accounts of
companies that are not affiliated with each other. The Trust does not
currently foresee any disadvantages to policy owners arising from offering
the Trust's shares to separate accounts of insurance companies that are
unaffiliated with each other; however, it is theoretically possible that the
interests of owners of various policies participating in the Trust through
their separate accounts might at some time be in conflict. In the case of a
material irreconcilable conflict, one or more separate accounts might
withdraw their investments in the Trust, which would possibly force the Trust
to sell portfolio securities at disadvantageous prices.
INVESTMENT OBJECTIVES AND POLICIES
FUNDAMENTAL INVESTMENT OBJECTIVES
The following investment objectives of each Portfolio are fundamental and,
unless permitted by law, will not be changed without a vote of the holders of
the majority of the voting securities of that Portfolio. There can, of
course, be no assurance that a Portfolio will achieve its investment
objective.
THE ASSET ALLOCATION SERIES
o The Conservative Investors Portfolio's fundamental investment objective
is to achieve a high total return without, in the investment adviser's
opinion, undue risk to principal. It will pursue this objective by
investing in a diversified mix of publicly traded equity and debt
securities.
o The Balanced Portfolio's fundamental investment objective is to achieve a
high return through both appreciation of capital and current income. The
Balanced Portfolio will pursue this objective by investing in a
diversified portfolio of publicly traded equity and debt securities and
short-term money market instruments.
o The Growth Investors Portfolio's fundamental investment objective is to
achieve the highest total return consistent with the investment adviser's
determination of reasonable risk. It will pursue this objective by
investing in a diversified mix of publicly traded equity and fixed income
securities, including at times common stocks issued by intermediate and
small-sized companies and at times fixed income securities that are
medium and lower quality debt securities known as "junk bonds."
THE EQUITY SERIES
o The Growth and Income Portfolio's fundamental investment objective is to
provide a high total return through a combination of current income and
capital appreciation by investing primarily in income-producing common
stocks and securities convertible into common stocks.
11
<PAGE>
o The Equity Index Portfolio's fundamental investment objective is to seek
a total return before expenses that approximates the total return
performance of the Standard & Poor's Corporation (S&P) 500 Index,
including reinvestment of dividends, at a risk level consistent with that
of the Index.
o The Common Stock Portfolio's fundamental investment objective is to
achieve long-term growth of its capital and increase income. It will
pursue this objective by investing primarily in common stock and other
equity-type instruments.
o The Global Portfolio's fundamental investment objective is to achieve
long-term growth of capital. The Global Portfolio will pursue this
objective by investing primarily in equity securities of non-United
States companies as well as United States issuers.
o The International Portfolio's fundamental investment objective is to
achieve long-term growth of capital by investing primarily in a
diversified portfolio of equity securities selected principally to permit
participation in non-United States companies with prospects for growth.
o The Aggressive Stock Portfolio's fundamental investment objective is to
achieve long-term growth of capital. The Aggressive Stock Portfolio will
pursue this objective by investing primarily in common stocks and other
equity-type securities issued by quality small and intermediate sized
companies with strong growth prospects and in covered options on those
securities.
THE FIXED INCOME SERIES
o The Money Market Portfolio's fundamental investment objective is to
obtain a high level of current income, preserve its assets and maintain
liquidity. The Money Market Portfolio will pursue this objective by
investing in primarily high quality U.S. dollar denominated money market
instruments.
o The Intermediate Government Securities Portfolio's fundamental investment
objective is to achieve high current income consistent with relative
stability of principal through investment primarily in debt securities
issued or guaranteed as to principal and interest by the U.S. Government
or any of its agencies or instrumentalities. The Portfolio's investments
will each have a final maturity of not more than ten years or a duration
not exceeding that of a 10-year Treasury note.
o The Quality Bond Portfolio's fundamental investment objective is to
achieve high current income consistent with preservation of capital by
investing primarily in investment grade fixed income securities. The
Quality Bond Portfolio reserves the right to invest in convertible debt
securities, preferred stocks and dividend-paying common stocks.
o The High Yield Portfolio's fundamental investment objective is to achieve
high return by maximizing current income and, to the extent consistent
with that objective, capital appreciation. The High Yield Portfolio will
pursue this objective by investing primarily in a diversified mix of high
yield, fixed income securities involving greater volatility of price and
risk of principal and income than high quality fixed income securities.
The medium and lower quality debt securities in which the Portfolio may
invest are known as "junk bonds."
INVESTMENT POLICIES
The following investment policies and restrictions, unless otherwise noted,
are not fundamental policies of the Portfolios. They may be changed by the
Board of Trustees without a shareholder vote, except as otherwise stated in
this Prospectus or in the Trust's SAI.
THE ASSET ALLOCATION SERIES
The Conservative Investors Portfolio, the Balanced Portfolio and the Growth
Investors Portfolio together are called the Asset Allocation Series. These
Portfolios invest in a variety of fixed income and equity securities, each
pursuant to a different asset allocation strategy, as described below. The
term "asset allocation" is used to describe the process of shifting assets
among discrete categories of investments in
12
<PAGE>
an effort to reduce risk while producing desired return objectives. Portfolio
management, therefore, will consist not only of specific securities selection
but also of setting, monitoring and changing, when necessary, the asset mix.
Each Portfolio has been designed with a view toward a different "investor
profile." The "conservative investor" has a relatively short-term investment
bias, either because of a limited tolerance for market volatility or a short
investment horizon. This investor is averse to taking risks that may result
in principal loss, even though such aversion may reduce the potential for
higher long-term gains and result in lower performance during periods of
equities market strength. Consequently, the asset mix for the Conservative
Investors Portfolio attempts to reduce volatility while providing modest
upside potential. The "growth investor" has a longer-term investment horizon
and is therefore willing to take more risks in an attempt to achieve
long-term growth of principal. This investor wishes, in effect, to be risk
conscious without being risk averse. The asset mix for the Growth Investors
Portfolio attempts to provide for upside potential without excessive
volatility.
The "balanced investor" is somewhat less aggressive than the growth investor
and seeks a medium to long-term investment posture. This investor is
sensitive to risk, but is willing to take on some risk in seeking high total
return. Consequently, the asset mix for the Balanced Portfolio attempts to
capture a sizable portion of the market's upside while diversifying risk
among asset classes.
The Trust's investment adviser has established an asset allocation committee
(the Committee), all the members of which are employees of the investment
adviser, which is responsible for setting and continually reviewing the asset
mix ranges of each Portfolio. The Committee meets at least twice each month.
Under normal market conditions, the Committee is expected to change
allocation ranges approximately three to five times per year. However, the
Committee has broad latitude to establish the frequency, as well as the
magnitude, of allocation changes within the guidelines established for each
Portfolio. During periods of severe market disruption, allocation ranges may
change frequently. It is also possible that in periods of stable and
consistent outlook no change will be made. The Committee's decisions are
based on a variety of factors, including liquidity, portfolio size, tax
consequences and general market conditions, always within the context of the
appropriate investor profile for each Portfolio. Consequently, asset mix
decisions for the Conservative Investors Portfolio particularly emphasize
risk assessment of each asset class viewed over the shorter term, while
decisions for the Growth Investors Portfolio are principally based on the
longer term total return potential for each asset class.
When the Committee establishes a new allocation range for a Portfolio, it
also prescribes the length of time during which that Portfolio should achieve
an asset mix within the new range. To achieve a new asset mix, the Portfolios
look first to available cash flow. If cash flow proves insufficient to
achieve the desired asset mix, the Portfolios will sell securities and
reinvest the proceeds in the appropriate asset class.
The Asset Allocation Series Portfolios are permitted to use a variety of
hedging techniques to attempt to control stock market, interest rate and
currency risks. Each of the Portfolios in the Asset Allocation Series may
make loans of up to 50% of its total portfolio securities. Each of the
Portfolios in the Asset Allocation Series may write covered call and put
options and may purchase call and put options on all the types of securities
in which it may invest, as well as securities indexes and foreign currencies.
Each Portfolio may also purchase and sell stock index, interest rate and
foreign currency futures contracts and options thereon, as well as forward
foreign currency exchange contracts. See "Investment Techniques--Forward
Foreign Currency Exchange Contracts," below.
Risk Factors. In addition to the risk factors associated with certain types
of securities in which the Portfolios in the Asset Allocation Series may
invest, and in addition to the risk of loss inherent in any securities
ownership, there is associated with these Portfolios the risk that the
investment adviser will not accurately assess and respond to changing market
conditions. While the investment adviser has established the Committee to
help it anticipate and respond positively to changes in market conditions,
there can be no assurance that this goal will be achieved. Furthermore, there
may be additional operating expenses for these Portfolios during periods of
frequently changing asset mix ranges.
CONSERVATIVE INVESTORS PORTFOLIO--INVESTMENT POLICIES
The Conservative Investors Portfolio attempts to achieve its investment
objective by allocating varying portions of its assets to high quality,
publicly traded fixed income securities (including money market
13
<PAGE>
instruments and cash) and publicly traded common stocks and other equity
securities of United States and non-United States issuers. All fixed income
securities held by the Portfolio will be of investment grade. This means that
they will be in one of the top four rating categories assigned by S&P or
Moody's Investors Service, Inc. (Moody's). Equity securities invested in by
the Portfolio will consist of the types of securities in which the Common
Stock Portfolio may invest and may include convertible securities. No more
than 15% of the Portfolio's assets will be invested in securities of
non-United States issuers. See "Investment Techniques--Foreign Securities and
Currencies," below.
The Portfolio will at all times hold at least 40% of its assets in investment
grade fixed income securities, each having a duration of less than that of a
10-year Treasury bond (the Fixed Income Core). Duration is a measure that
relates the price volatility of a bond to changes in interest rates. The
duration of a bond is the weighted average term to maturity, expressed in
years, of the present value of all future cash flows, including coupon
payments and principal repayments. Thus, by definition, duration is always
less than or equal to full maturity. As of December 31, 1994, the duration of
a 10-year Treasury bond was considered to be 7.0 years.
The Portfolio is generally expected to hold approximately 70% of its assets
in fixed income securities (including the Fixed Income Core) and 30% in
equity securities. Actual asset mixes will be adjusted in response to
economic and credit market cycles. The fixed income asset class will always
comprise at least 50%, but never more than 90%, of the Portfolio's total
assets. The equity class will always comprise at least 10%, but never more
than 50%, of the Portfolio's total assets.
BALANCED PORTFOLIO--INVESTMENT POLICIES
The Balanced Portfolio attempts to achieve its objective by investing varying
portions of its assets in publicly-traded equity and debt securities and
money market instruments. The Balanced Portfolio attempts to achieve
long-term growth of capital by investing in common stock and other
equity-type instruments. It will try to achieve a competitive level of
current income and capital appreciation through investments in publicly
traded debt securities and a high level of current income through investments
in money market instruments.
The portion of the Balanced Portfolio's assets invested in each type of
security will vary in accordance with economic conditions, the general level
of common stock prices, interest rates and other relevant considerations,
including the risks associated with each investment medium. Although the
Balanced Portfolio will seek to reduce the risks associated with any one
investment medium by utilizing a variety of investments, performance will
depend upon the investment adviser's ability to assess accurately and react
to changing market conditions.
The Balanced Portfolio will at all times hold at least 25% of its assets in
fixed income securities (including, for these purposes, that portion of the
value of securities convertible into common stock which is attributable to
the fixed income characteristics of those securities). The Portfolio's equity
securities will always comprise at least 25%, but never more than 75%, of the
Portfolio's total assets. Consequently, the Portfolio will have "Core
Holdings" of at least 25% fixed income securities and 25% equity securities.
Over time, holdings by the Portfolio are currently expected to average
approximately 50% in fixed income securities and approximately 50% in equity
securities. Actual asset mixes will be adjusted in response to economic and
credit market cycles.
The equity securities invested in by the Balanced Portfolio will consist of
the types of securities in which the Common Stock Portfolio may invest. The
money market securities will consist of the types of securities and credit
quality in which the Money Market Portfolio may invest. The debt securities
will consist principally of bonds, notes, debentures and equipment trust
certificates. The Portfolio may also buy debt securities with equity features
such as conversion or exchange rights or warrants for the acquisition of
stock or participations based on revenues, rates or profits. These debt
securities will principally be investment grade securities rated at least Baa
by Moody's or BBB by S&P, or will be issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. If such Baa or BBB debt
securities held by the Portfolio fall below those ratings, the Portfolio will
not be obligated to dispose of them and may continue to hold them if the
investment adviser considers them appropriate investments
14
<PAGE>
under the circumstances. In addition, the Balanced Portfolio may at times
hold some of its assets in cash. The Portfolio may invest no more than 20% of
its total assets in foreign securities. See "Investment Techniques--Foreign
Securities and Currencies," below. The Portfolio may make secured loans of up
to 50% of its total portfolio securities. See "Investment
Techniques--Securities Lending," below. The Balanced Portfolio may write
covered call and put options and may purchase call and put options on all the
types of securities in which it may invest, as well as securities indexes and
foreign currencies. The Balanced Portfolio may also purchase and sell stock
index, interest rate and foreign currency futures contracts and options
thereon. See "Investment Techniques--Options," "Investment Techniques--
Futures" and "Investment Techniques--Risk Factors in Options and Futures,"
below.
GROWTH INVESTORS PORTFOLIO--INVESTMENT POLICIES
The Growth Investors Portfolio attempts to achieve its investment objective
by allocating varying portions of its assets to a number of asset classes.
Equity investments will include common stocks that are listed on national
securities exchanges as well as those that are traded over-the-counter and
also equity-type securities, which may include preferred stock and
convertible securities, and include securities issued by intermediate and
small-sized companies with favorable growth prospects. More risk is
associated with investment in intermediate and small-sized companies because
they are often dependent on only one or two products. They are more
vulnerable to competition from larger companies with greater resources and to
economic conditions affecting their market sector. Intermediate and
small-sized companies may be new, without long business or management
histories, and perceived by the market as unproven. Their securities may be
held primarily by insiders or institutional investors, which may affect
marketability. The prices of these stocks often fluctuate more than the
overall stock market. Fixed income investments will include investment grade
fixed income securities (including cash and money market instruments) as well
as securities that have a high current yield and that are either rated in the
lower categories by nationally recognized statistical rating organizations
NRSROs (i.e., Baa or lower by Moody's or BBB or lower by S&P) or are unrated.
For a discussion of the risks associated with investment in these higher
yielding securities, see "Investment Techniques--Fixed Income Securities";
"Investment Techniques--Risk Factors of Lower Rated Fixed Income Securities,"
below. For the fiscal year ended December 31, 1994, approximately 20.4% of
the Portfolio was invested in fixed income securities in the following rating
categories, determined on a dollar weighted basis: 12.9% in securities rated
AAA or its equivalent, 6.4% in securities rated BB or its equivalent and 1.1%
in securities rated B or its equivalent. Of these securities, all were rated
by an NRSRO. No more than 30% of the Portfolio's assets will be invested in
securities of non-United States issuers. See "Investment Techniques--Foreign
Securities and Currencies," below.
The Portfolio will at all times hold at least 40% of its assets in publicly
traded common stocks and other equity securities of the type purchased by the
Common Stock Portfolio (the Equity Core). The Portfolio is generally expected
to hold approximately 70% of its assets in equity securities (including the
Equity Core) and 30% in fixed income securities. Actual asset mixes will be
adjusted in response to economic and credit market cycles. The fixed income
asset class will always comprise at least 10%, but never more than 60%, of
the Portfolio's total assets. The equity class will always comprise at least
40%, but never more than 90%, of the Portfolio's total assets.
THE EQUITY SERIES
GROWTH AND INCOME PORTFOLIO--INVESTMENT POLICIES
The Growth and Income Portfolio seeks to maintain a portfolio yield above
that of issuers comprising the S&P 500 Index and to achieve (in the long run)
a rate of growth in portfolio income that exceeds the rate of inflation. The
Growth and Income Portfolio will generally invest in common stocks of "blue
chip" issuers, i.e., those (1) which have a total market capitalization of at
least $1 billion, (2) which pay periodic dividends and (3) whose common stock
is in the highest four issuer ratings for S&P (i.e., A+, A, A-or B+) or
Moody's (i.e., High Grade, Investment Grade, Upper Medium Grade or Medium
Grade) or, if unrated, is determined to be of comparable quality by the
Trust's investment adviser. It is expected that on average the dividend rate
of these issuers will exceed the average rate of issuers constituting the S&P
500 Index.
15
<PAGE>
The Growth and Income Portfolio may invest without limit in securities
convertible into common stocks which include convertible bonds, convertible
preferred stocks and warrants convertible into common stocks. The Growth and
Income Portfolio may invest up to 30% of its total assets in high yield, high
risk convertible securities rated at the time of purchase below investment
grade (i.e., rated Ba or lower by Moody's or BB or lower by S&P or determined
by the Trust's investment adviser to be of comparable quality). Convertible
securities normally provide a higher yield than the underlying stock but
lower than a fixed income security without the convertible feature. Also, the
price of a convertible security will normally vary to some degree with
changes in the price of the underlying common stock although in some market
conditions the higher yield tends to make the convertible security less
volatile than the underlying common stock. In addition, the price of a
convertible security will also vary to some degree inversely with interest
rates. For additional discussion of the risks associated with investment in
lower- rated securities, see "Investment Techniques--Fixed Income Securities"
and "Investment Techniques--Risk Factors of Lower Rated Fixed Income
Securities," below. For more information concerning the bond ratings assigned
by Moody's and S&P, see Appendix B.
The Growth and Income Portfolio does not expect to invest more than 25% of
its total assets in foreign securities, although it may do so without limit.
It may enter into foreign currency futures contracts (and related options),
forward foreign currency exchange contracts and options on currencies for
hedging purposes. See "Investment Techniques--Forward Foreign Currency
Exchange Contracts," below.
The Growth and Income Portfolio may write covered call and put options on
securities and securities indexes for hedging purposes or to enhance its
return and may purchase call and put options on securities and securities
indexes for hedging purposes. The Growth and Income Portfolio may also
purchase and sell securities index futures contracts and may write and
purchase options thereon for hedging purposes. See "Investment
Techniques--Options," "Investment Techniques--Futures," and "Investment
Techniques-- Risk Factors in Options and Futures," below.
For temporary defensive purposes, the Growth and Income Portfolio may invest
in certain money market instruments. See "Investment Techniques--Certain
Money Market Instruments," below.
EQUITY INDEX PORTFOLIO--INVESTMENT POLICIES
The Equity Index Portfolio's investment objective is to seek a total return
before expenses that approximates the total return performance of the S&P 500
Index (Index), including reinvestment of dividends, at a risk level
consistent with that of the Index. The Index is a widely publicized index
that tracks 500 companies traded on the New York and American Stock Exchanges
and in the over-the- counter market. It is weighted by market value so that
each company's stock influences the Index in proportion to its market
importance. While most issuers are among the 500 largest U.S. companies in
terms of aggregate market value, some other stocks are included by S&P for
purposes of diversification. The value of the Index may change over time due
to a variety of factors, including economic factors and events affecting
issuers included in the Index.
In managing the Equity Index Portfolio, the Trust's investment adviser will
not utilize customary economic, financial or market analyses or other
traditional investment techniques. Rather, the investment adviser will use
proprietary modeling techniques to construct a portfolio which it believes
will, in the aggregate, approximate the performance results of the Index. The
investment adviser will first select from the largest capitalization
securities in the Index on a capitalization-weighted basis. Generally, the
largest capitalization securities reasonably track the Index because the
Index is significantly influenced by a small number of securities. However,
selecting securities on the basis of their capitalization alone would distort
the Equity Index Portfolio's industry diversification, and therefore economic
events could potentially have a dramatically different impact on the
performance of the Equity Index Portfolio from that of the Index. Recognizing
this fact, the modeling techniques also consider industry diversification
when selecting investments for the Equity Index Portfolio. The investment
adviser also seeks to diversify the Equity Index Portfolio's assets with
respect to market capitalization. As a result, the Equity Index Portfolio
will include securities of smaller and medium-sized capitalization companies
in the Index.
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Although the modeling techniques are intended to produce a portfolio whose
performance approximates that of the Index (before expenses), there can be no
assurance that these techniques will reduce "tracking error" (i.e., the
difference between the Equity Index Portfolio's investment results (before
expenses) and the Index's). Tracking error may arise as a result of brokerage
costs, fees and operating expenses and a lack of correlation between the
Equity Index Portfolio's investments and the Index.
Cash may be accumulated in the Equity Index Portfolio until it reaches
approximately 1% of the value of the Equity Index Portfolio at which time
such cash will be invested in common stocks as described above. Accumulation
of cash increases tracking error. The Equity Index Portfolio will, however,
remain substantially fully invested in common stocks even when common stock
prices are generally falling. Also, adverse performance of a stock will
ordinarily not result in its elimination from the Equity Index Portfolio.
In order to reduce brokerage costs, maintain liquidity to meet shareholder
redemptions or minimize tracking error when the Equity Index Portfolio holds
cash, the Equity Index Portfolio may from time to time buy and hold futures
contracts on the Index and options on such futures contracts. See "Investment
Techniques--Futures" and "Investment Techniques--Risk Factors in Options and
Futures," below. The contract value of futures contracts purchased by the
Equity Index Portfolio plus the contract value of futures contracts
underlying call options purchased by the Equity Index Portfolio will not
exceed 20% of the Equity Index Portfolio's total assets.
The Equity Index Portfolio may seek to increase income by lending securities
with a value of up to 50% of its total assets to brokers-dealers. See
"Investment Techniques--Securities Lending," below.
COMMON STOCK PORTFOLIO--INVESTMENT POLICIES
The Common Stock Portfolio attempts to achieve its investment objective by
investing primarily in common stocks and other equity-type securities that
the Trust's investment adviser believes will share in the growth of the
nation's economy over a long period.
Most of the time, the Common Stock Portfolio will invest primarily in common
stocks that are listed on national securities exchanges. Smaller amounts will
be invested in stocks that are traded over-the- counter and in other
equity-type securities (such as preferred stocks or convertible debt
instruments). Current income is an incidental consideration. The Common Stock
Portfolio generally will not invest more than 20% of its total assets in
foreign securities. See "Investment Techniques--Foreign Securities and
Currencies," below.
If, in light of economic conditions and the general level of common stock
prices, it appears that the Portfolio's investment objective will not be met
by using all its assets to buy equities, the Common Stock Portfolio may also
use part of its assets to make nonequity investments. These could include
buying securities such as nonparticipating and nonconvertible preferred
stocks and certain fixed income securities. Fixed income securities will
include investment grade bonds and debentures and money market instruments,
as well as securities that have a high current yield because they are either
rated in the lower categories by NRSROs (i.e., Baa or lower by Moody's or BBB
or lower by S&P) or are unrated. For a discussion of the risks associated
with investment in these higher yielding securities, see "Investment
Techniques--Fixed Income Securities" and "Investment Techniques--Risk Factors
of Lower Rated Fixed Income Securities," below. For the fiscal year ended
December 31, 1994, less than 1% of the average assets of the Portfolio were
invested in higher yielding securities.
The Common Stock Portfolio may make temporary investments in money market
instruments of the same type and credit quality in which the Money Market
Portfolio may invest. The Portfolio may make secured loans of up to 50% of
its total portfolio securities. See "Investment Techniques--Securities
Lending," below. The Common Stock Portfolio may write covered call and put
options and may buy call and put options on individual common stocks and
other equity-type securities, securities indexes, and foreign currencies. The
Portfolio may also purchase and sell stock index and foreign currency futures
contracts and options thereon. See "Investment Techniques--Options,"
"Investment Techniques-- Futures," and "Investment Techniques--Risk Factors
in Options and Futures," below.
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GLOBAL PORTFOLIO--INVESTMENT POLICIES
The Global Portfolio attempts to achieve its objective by investing primarily
in a diversified portfolio of equity securities selected principally to
permit participation in established non-United States companies with
prospects for growth, as well as in securities issued by United States
companies. These non-United States companies may have operations in the
United States, in their country of incorporation or in other countries. The
Global Portfolio intends to diversify investments among several countries and
to have represented in the Portfolio business activities in not less than
three different countries (including the United States). For temporary or
defensive purposes, the Global Portfolio may at times invest substantially
all of its assets in securities issued by United States companies or in cash
or cash equivalents, including money market instruments issued by foreign
entities.
The Global Portfolio may invest in any type of security including, but not
limited to, shares, preferred or common, as well as shares of mutual funds
which invest in foreign securities, bonds and other evidences of
indebtedness, and other securities of issuers wherever organized and
governments and their political subdivisions. Although no particular
proportion of stocks, bonds or other securities is required to be maintained,
the Global Portfolio, in view of its investment objective, intends under
normal conditions to maintain a portfolio consisting primarily of a
diversified list of equity securities. The Portfolio may make secured loans
of up to 50% of its total portfolio securities. See "Investment
Techniques--Securities Lending," below. The Global Portfolio may write
covered call and put options and may purchase call and put options on
individual equity securities, securities indexes, and foreign currencies. The
Global Portfolio may also purchase and sell stock index, foreign currency and
interest rate futures contracts and options on such contracts, as well as
forward foreign currency exchange contracts. See "Investment
Techniques--Options," "Investment Techniques--Forward Foreign Currency
Exchange Contracts," "Investment Techniques--Futures," and "Investment
Techniques--Risk Factors in Options and Futures," below.
Risk Factors. For a discussion of the risks associated with investments in
foreign securities, see "Investment Techniques--Foreign Securities and
Currencies," below.
INTERNATIONAL PORTFOLIO--INVESTMENT POLICIES
The International Portfolio attempts to achieve its objective by investing
primarily in a diversified portfolio of equity securities selected
principally to permit participation in non-United States companies or foreign
governmental enterprises with prospects for growth. These non-United States
companies may have operations in the United States, in their country of
incorporation and/or in other countries. The International Portfolio intends
to have represented in the Portfolio business activities in not less than
three different countries and may invest anywhere in the world, including
Europe, Canada, Australia, Asia, Latin America and Africa. The International
Portfolio may purchase securities of developing countries, which include,
among others, Mexico, Brazil, Hong Kong, India, Poland, Turkey and South
Africa. The International Portfolio intends to diversify investments among
several countries, although for temporary defensive purposes, the
International Portfolio may at times invest substantially all of its assets
in securities issued by a single major developed country (e.g., the United
States) or in cash or cash equivalents, including money market instruments
issued by that country.
The International Portfolio may invest in any type of investment grade, fixed
income security including, but not limited to, preferred stock, convertible
securities, bonds, notes and other evidences of indebtedness of foreign
issuers, including obligations of foreign governments. The International
Portfolio may also establish and maintain temporary cash balances in U.S. and
foreign short-term high-grade money market instruments for defensive purposes
or to take advantage of buying opportunities. Although no particular
proportion of stocks, bonds or other securities is required to be maintained,
the International Portfolio, in view of its investment objective, intends
under normal market conditions to maintain a portfolio consisting primarily
of a diversified list of equity securities. The International Portfolio may
make loans of up to 50% of its portfolio securities. See "Investment
Techniques--Securities Lending," below. The International Portfolio may write
covered call and put options and may purchase call and put options on
individual equity securities, securities indexes, and foreign currencies. See
"Investment Techniques--Options," below. The International Portfolio may also
purchase and sell stock
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index, foreign currency and interest rate futures contracts and options on
such contracts, as well as forward foreign currency exchange contracts. See
"Investment Techniques--Forward Foreign Currency Exchange Contracts,"
"Investment Techniques--Futures," and "Investment Techniques--Risk Factors in
Options and Futures," below.
Risk Factors. For a discussion of the risks associated with investments in
foreign securities, see "Investment Techniques--Foreign Securities and
Currencies," below.
AGGRESSIVE STOCK PORTFOLIO--INVESTMENT POLICIES
The Aggressive Stock Portfolio attempts to achieve its objective by investing
primarily in common stocks and other equity-type securities issued by
intermediate and small-sized companies with favorable growth prospects.
The Aggressive Stock Portfolio may also invest a portion of its assets in
securities of companies in cyclical industries, companies whose securities
are temporarily undervalued, companies in special situations and less widely
known companies.
If, in light of economic conditions, it appears that the Aggressive Stock
Portfolio's objective will not be achieved primarily through investments in
common stocks, the Portfolio may also invest in other equity-type securities
(such as preferred stocks and convertible debt instruments) and protective
options. Under certain market conditions, the Aggressive Stock Portfolio may
also invest in corporate fixed income securities, which will generally be
investment grade, or invest part of its assets in cash or cash equivalents
for liquidity or defensive purposes, including money market instruments rated
at least Prime-1 by Moody's or A-1 by S&P. The Aggressive Stock Portfolio may
invest no more than 20% of its total assets in foreign securities. See
"Investment Techniques--Foreign Securities and Currencies," below. The
Portfolio may make secured loans of up to 50% of its total portfolio
securities. See "Investment Techniques--Securities Lending," below. The
Aggressive Stock Portfolio may write covered call options and may purchase
call and put options on individual equity securities, securities indexes and
foreign currencies. The Aggressive Stock Portfolio may also purchase and sell
stock index and foreign currency futures contracts and options thereon. See
"Investment Techniques--Options," "Investment Techniques-- Futures" and "Risk
Factors in Options and Futures," below.
Risk Factors. More risk is associated with investment in intermediate and
small-sized companies, because they are often dependent on only one or two
products. They are more vulnerable to competition from larger companies with
greater resources and to economic conditions affecting their market sector.
Intermediate and small-sized companies may be new, without long business or
management histories, and perceived by the market as unproven. Their
securities may be held primarily by insiders or institutional investors,
which may affect marketability. The prices of these stocks often fluctuate
more than the overall stock market.
THE FIXED INCOME SERIES
MONEY MARKET PORTFOLIO--INVESTMENT POLICIES
The Money Market Portfolio attempts to achieve its objective by investing
primarily in a diversified portfolio of high-quality U.S. dollar-denominated
money market instruments. The instruments in which the Portfolio invests
include: (1) marketable obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities (collectively, the U.S.
Government); (2) certificates of deposit, bankers' acceptances, bank notes,
time deposits and interest bearing savings deposits issued or guaranteed by
(a) domestic banks (including their foreign branches) or savings and loan
associations having total assets of more than $1 billion and which are
members of the Federal Deposit Insurance Corporation (FDIC) in the case of
banks, or insured by the FDIC, in the case of savings and loan associations
or (b) foreign banks (either by their foreign or U.S. branches) having total
assets of at least $5 billion and having an issue of either commercial paper
rated at least A-1 by S&P or Prime-1 by Moody's or long term debt rated at
least AA by S&P or Aa by Moody's; (3) commercial paper (rated at least A-1 by
S&P or Prime-1 by Moody's or, if not rated, issued by domestic or foreign
companies having outstanding debt securities rated at least
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AA by S&P or Aa by Moody's) and participation interests in loans extended by
banks to such companies; (4) mortgage-backed securities and asset-backed
securities; (5) corporate debt obligations with remaining maturities of less
than one year, rated at least AA by S&P or Aa by Moody's, as well as
corporate debt obligations rated at least A by S&P or Moody's, provided the
corporation also has outstanding an issue of commercial paper rated at least
A-1 by S&P or Prime-1 by Moody's; (6) floating rate or master demand notes;
and (7) repurchase agreements covering securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities (see "Investment
Techniques--Repurchase Agreements," below). Time deposits with maturities
greater than seven days are considered to be illiquid securities.
Investments by the Money Market Portfolio are limited to those which present
minimal credit risk. If a security held by the Money Market Portfolio is no
longer deemed to present minimal credit risk, the Money Market Portfolio will
dispose of the security as soon as practicable unless the Trustees determine
that such action would not be in the best interest of the Portfolio.
Purchases of securities that are unrated must be ratified by the Trustees of
the Trust. Because the market value of debt obligations fluctuates as an
inverse function of changing interest rates, the Portfolio seeks to minimize
the effect of such fluctuations by investing only in instruments with a
remaining maturity of 397 calendar days or less at the time of investment,
except for obligations of the U.S. Government, its agencies, and
instrumentalities which may have a remaining maturity of 762 calendar days or
less. The Portfolio will maintain a dollar- weighted average portfolio
maturity of 90 days or less. The Money Market Portfolio may invest up to 20%
of its total assets in U.S. dollar-denominated foreign money market
instruments. See "Investment Techniques--Foreign Securities and Currencies,"
below. The Portfolio may make secured loans of up to 50% of its total
portfolio securities. See "Investment Techniques--Securities Lending," below.
INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO--INVESTMENT POLICIES
The Intermediate Government Securities Portfolio (Government Portfolio)
attempts to achieve its investment objective by investing primarily in debt
securities issued or guaranteed as to the timely payment of principal and
interest by the U.S. Government or any of its agencies or instrumentalities
(U.S. Government Securities). The Government Portfolio may also invest in
repurchase agreements and forward commitments related to U.S. Government
Securities. The Portfolio may seek to enhance its current return and may seek
to hedge against changes in interest rates by engaging in transactions
involving related options, futures and options on futures.
The Government Portfolio expects that under normal market conditions it will
invest at least 80% of its total assets in U.S. Government Securities and
repurchase agreements and forward commitments relating to U.S. Government
Securities. U.S. Government Securities include, without limitation, the
following:
o U.S. Treasury Bills--Direct obligations of the U.S. Treasury which are
issued in maturities of one year or less. No interest is paid on Treasury
Bills; instead, they are issued at a discount and repaid at full face
value when they mature. They are backed by the full faith and credit of
the U.S. Government.
o U.S. Treasury Notes--Direct obligations of the U.S. Treasury issued in
maturities which vary between one and ten years, with interest payable
every six months. They are backed by the full faith and credit of the
U.S. Government.
o U.S. Treasury Bonds--These direct obligations of the U.S. Treasury are
issued in maturities more than ten years from the date of issue, with
interest payable every six months. They are backed by the full faith and
credit of the U.S. Government.
o "Ginnie Maes"--Ginnie Maes are debt securities issued by a mortgage
banker or other mortgagee and represent an interest in a pool of
mortgages insured by the Federal Housing Administration or the Farmer's
Home Administration or guaranteed by the Veteran's Administration. The
Government National Mortgage Association (GNMA) guarantees the timely
payment of principal and interest. Ginnie Maes, although not direct
obligations of the U.S. Government, are guaranteed by the U.S. Treasury.
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o "Fannie Maes"--The Federal National Mortgage Association (FNMA) is a
government- sponsored corporation owned entirely by private stockholders
that purchases residential mortgages from a list of approved
seller/servicers. Pass-through securities issued by FNMA are guaranteed
as to timely payment of principal and interest by FNMA and supported by
FNMA's right to borrow from the U.S. Treasury, at the discretion of the
U.S. Treasury. Fannie Maes are not backed by the full faith and credit of
the U.S. Government.
o "Freddie Macs"--The Federal Home Loan Mortgage Corporation (FHLMC), a
corporate instrumentality of the U.S. Government, issues participation
certificates (PCs) which represent an interest in residential mortgages
from FHLMC's National Portfolio. FHLMC guarantees the timely payment of
interest and ultimate collection of principal, but PCs are not backed by
the full faith and credit of the U.S. Government.
o Governmental Collateralized Mortgage Obligations--These are securities
issued by a U.S. Government instrumentality or agency which are backed by
a portfolio of mortgages or mortgage-backed securities held under an
indenture. See "Other Investments," below.
o "Sallie Maes"--The Student Loan Marketing Association (SLMA) is a
government-sponsored corporation owned entirely by private stockholders
that provides liquidity for banks and other institutions engaged in the
Guaranteed Student Loan Program. These loans are either directly
guaranteed by the U.S. Treasury or guaranteed by state agencies and
reinsured by the U.S. Government. SLMA issues both short term notes and
longer term public bonds to finance its activities.
The Portfolio may also invest in "zero coupon" U.S. Government Securities
which have been stripped of their unmatured interest coupons and receipts or
in certificates representing undivided interests in such stripped U.S.
Government Securities and coupons. These securities tend to be more volatile
than other types of U.S. Government Securities.
Guarantees of the Portfolio's securities by the U.S. Government or its
agencies or instrumentalities guarantee only the payment of principal at
maturity and interest when due on the guaranteed securities, and do not
guarantee the securities' yield or value or the yield or value of the
Government Portfolio's shares.
The Portfolio buys and sells securities with a view to maximizing current
return without, in the view of the investment adviser, undue risk to
principal. Potential capital gains resulting from possible changes in
interest rates will not be a major consideration. The Portfolio may take full
advantage of a wide range of maturities of U.S. Government Securities and may
adjust the dollar-weighted average maturity of its portfolio from time to
time, depending on its assessment of relative yields on securities of
different maturities and the expected effect of future changes in interest
rates on the market value of the Portfolio's portfolio. However, at all
times, each instrument in the Portfolio will have either a final maturity of
not more than ten years or a duration not exceeding that of a 10-year
Treasury note. Duration is a measure that relates the price volatility of a
security to changes in interest rates. The duration of a security is the
weighted average term to maturity, expressed in years, of the present value
of all future cash flows, including coupon payments and principal repayments.
Thus, by definition, duration is always less than or equal to full maturity.
As of December 31, 1994, the duration of a 10-year Treasury bond was
considered to be 7.0 years. The Portfolio may also invest a substantial
portion of its assets in money market instruments. See "Investment
Techniques--Certain Money Market Instruments," below.
It is a fundamental policy of the Government Portfolio that under normal
market conditions it will invest at least 65% of its total assets in U.S.
Government Securities and repurchase agreements and forward commitments
relating to U.S. Government Securities.
Other Investments. The Government Portfolio may also purchase collateralized
mortgage obligations (CMOs) issued by non-governmental issuers and securities
issued by a real estate mortgage investment conduit (REMIC). See "Investment
Techniques--Mortgage-Backed and Asset-Backed Securities," below. The
Government Portfolio will purchase only CMOs collateralized by U.S.
Government Securities. However, CMOs issued by entities other than U.S.
Government agencies or instrumentalities
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and securities issued by REMICs are not considered U.S. Government Securities
for purposes of the investment policies of the Government Portfolio even
though the CMOs may be collateralized by U.S. Government Securities. Such
securities will generally be investment grade. In the event such securities
fall below investment grade, the Portfolio will not be obligated to dispose
of such securities and may continue to hold such securities if, in the
opinion of the investment adviser, such investment is considered appropriate
under the circumstances.
In order to enhance its current return and to reduce fluctuations in net
asset value, the Portfolio may write call and put options on U.S. Government
Securities which are "covered" as described herein and may purchase call and
put options on U.S. Government Securities. The Portfolio may also enter into
interest rate futures contracts with respect to U.S. Government Securities,
and may write and purchase options thereon. See "Investment
Techniques--Options" and "Investment Techniques--Futures," below.
The Portfolio may also enter into forward commitments for the purchase of
U.S. Government Securities, purchase such securities on a when-issued or
delayed delivery basis, make secured loans of its portfolio securities
without limitation and enter into repurchase agreements with respect to U.S.
Government Securities with commercial banks and registered broker-dealers.
See "Investment Techniques--Forward Commitments and When-Issued and Delayed
Delivery Securities," below.
The Portfolio may make short sales involving either securities retained in
the Portfolio's portfolio or securities which the Portfolio has the absolute
right to acquire without additional consideration.
Special Considerations. U.S. Government Securities are considered among the
safest of fixed income investments. As a result, however, their yields are
generally lower than the yields available from corporate debt securities. As
with other mutual funds, the value of the Portfolio's shares will fluctuate
with the value of its investments. The value of the Portfolio's investments
will change as the general level of interest rates fluctuates. During periods
of falling interest rates, the values of U.S. Government Securities generally
rise. Conversely, during periods of rising interest rates, the values of U.S.
Government Securities generally decline. In an effort to preserve the capital
of the Portfolio when interest rates are generally rising, the investment
adviser may shorten the average maturity of the U.S. Government Securities in
the Portfolio's portfolio. Because the principal values of U.S. Government
Securities with shorter maturities are less affected by rising interest
rates, a portfolio with a shorter average maturity will generally diminish
less in value during such periods than a portfolio of longer average
maturity. Since U.S. Government Securities with shorter maturities, however,
generally have a lower yield to maturity, the Portfolio's current return
based on its net asset value will generally be lower as a result of such
action than it would have been had such action not been taken. Ginnie Maes
and other mortgage-backed or mortgage related securities in which the
Portfolio invests may not be an effective means of "locking in" favorable
long-term interest rates since the Portfolio must reinvest scheduled and
unscheduled principal payments relating to such securities. At the time
principal payments or prepayments are received by the Portfolio and
reinvested, prevailing interest rates may be higher or lower than the
Portfolio's current yield.
At times when the Portfolio has written call options, its ability to profit
from declining interest rates will be limited. Any resulting appreciation in
the value of the Portfolio would likely be partially or wholly offset by the
losses on call options written by the Portfolio. The termination of option
positions under such conditions would result in the realization of capital
losses, which would reduce the amounts available for distribution to
shareholders.
QUALITY BOND PORTFOLIO--INVESTMENT POLICIES
The Quality Bond Portfolio expects to invest in readily marketable securities
with relatively attractive yields, but which do not, in the opinion of the
Trust's investment adviser, involve undue risk of loss of capital. The
Quality Bond Portfolio will follow a policy of investing at least 65% of its
total assets in securities which at the time of purchase are rated at least
Baa by Moody's or BBB by S&P, or in unrated fixed income securities
determined by the investment adviser to be of comparable quality. In the
event that the credit rating of a security held by the Quality Bond Portfolio
falls below investment grade (or, in the case of unrated securities, the
investment adviser determines that the quality of such security has
deteriorated below investment grade), the Quality Bond Portfolio will not be
obligated to dispose of such
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security and may continue to hold the obligation if, in the opinion of the
investment adviser, such investment is considered appropriate in the
circumstances. The Quality Bond Portfolio will also seek to maintain an
average aggregate quality rating of its portfolio securities of at least A
(Moody's and S&P). For more information concerning the bond ratings assigned
by Moody's and S&P, see Appendix B.
The Quality Bond Portfolio has complete flexibility as to the types of
securities in which it will invest and the relative proportions thereof, and
the Quality Bond Portfolio plans to vary the proportions of its holdings of
long- and short-term fixed income securities (including debt securities,
convertible debt securities and U.S. Government obligations) and preferred
stocks in order to reflect its assessment of prospective cyclical changes
even if such action may adversely affect current income. The Quality Bond
Portfolio will not, however, invest more than 5% of its total assets in the
securities of any one issuer, excepting U.S. Government obligations, although
up to 25% of the total assets of the Portfolio may be invested without regard
to this restriction. Further, the Quality Bond Portfolio will not own more
than 10% of the outstanding voting securities of any issuer.
The Quality Bond Portfolio may invest in foreign securities. The Quality Bond
Portfolio will not invest more than 20% of its total assets in securities
denominated in currencies other than the U.S. dollar. See "Investment
Techniques--Foreign Securities and Currencies," below. The Quality Bond
Portfolio may enter into foreign currency futures contracts (and related
options), forward foreign currency exchange contracts and options on foreign
currencies for hedging purposes. See "Investment Techniques--Forward Foreign
Currency Exchange Contracts," below.
For temporary defensive purposes, the Quality Bond Portfolio may invest in
certain money market instruments. See "Investment Techniques--Certain Money
Market Instruments," below.
The Quality Bond Portfolio may purchase put and call options written by
others and write covered put and call options overlying the types of
securities in which the Quality Bond Portfolio may invest. The Quality Bond
Portfolio also intends to write covered call options for cross-hedging
purposes. A call option is for cross-hedging purposes if it is designed to
provide a hedge against a decline in value of another security which the
Portfolio owns or has the right to acquire. See "Investment
Techniques--Options," below.
Interest Rate Transactions. The Quality Bond Portfolio may seek to protect
the value of its investments from interest rate fluctuations by entering into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. The Portfolio expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio. The Quality Bond Portfolio may also
enter into these transactions to protect against an increase in the price of
securities the Portfolio anticipates purchasing at a later date. The Quality
Bond Portfolio intends to use these transactions as a hedge and not as a
speculative investment. Interest rate swaps involve the exchange by the
Quality Bond Portfolio with another party of their respective commitments to
pay or receive interest, e.g., an exchange of floating rate payments for
fixed rate payments. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined
interest rate, to receive payments on a notional principal amount from the
party selling such interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate floor.
The Quality Bond Portfolio may enter into interest rate swaps, caps and
floors on either an asset-based or liability-based basis depending on whether
it is hedging its assets or its liabilities, and will only enter into such
swaps, caps and floors on a net basis, i.e., the two payment streams are
netted out, with the Quality Bond Portfolio receiving or paying, as the case
may be, only the net amount of the two payments. The net amount of the
excess, if any, of the Quality Bond Portfolio's obligations over its
entitlements with respect to each interest rate swap, cap or floor will be
accrued on a daily basis and an amount of cash or liquid securities having an
aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the custodian. The Quality Bond
Portfolio will not enter into any interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least
one NRSRO at the time of entering into
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such transaction. If there is a default by the other party to such a
transaction, the Quality Bond Portfolio will have contractual remedies
pursuant to the agreements related to the transaction. The swap market has
grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and agents. As a result,
the swap market has become well established and provides a degree of
liquidity. Caps and floors are more recent innovations which tend to be less
liquid than swaps.
Zero Coupon Securities. To the extent consistent with its investment
objective, the Quality Bond Portfolio may invest in "zero coupon" securities,
which are debt securities that have been stripped of their unmatured interest
coupons, and receipts or certificates representing interests in such stripped
debt obligations and coupons. A zero coupon security pays no interest to its
holder during its life. Its value to an investor consists of the difference
between its face value at the time of maturity and the price for which it was
acquired, which is generally an amount significantly less than its face
value. Accordingly, such securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of
comparable maturities that make current distributions of interest. The
Quality Bond Portfolio may also invest in "pay-in-kind" debentures (i.e.,
debt obligations the interest on which may be paid in the form of additional
obligations of the same type rather than cash) which have characteristics
similar to zero coupon securities.
The Quality Bond Portfolio may invest in collateralized mortgage obligations
or CMOs. See "Investment Techniques--Mortgage-Backed and Asset-Backed
Securities," below. The Portfolio may purchase and sell interest rate futures
contracts and options thereon and may make loans of securities with a value
of up to 50% of its total assets. See "Investment Techniques--Futures,"
"Investment Techniques--Risk Factors in Options and Futures" and "Investment
Techniques--Securities Lending," below.
HIGH YIELD PORTFOLIO--INVESTMENT POLICIES
The High Yield Portfolio attempts to achieve its objective by investing
primarily in a diversified mix of high yield, fixed income securities
potentially involving greater volatility of price and risk of principal and
income than high quality fixed income securities.
Ordinarily, the Portfolio will invest a portion of its funds in fixed income
securities which have a high current yield and that are either rated in the
lower categories of NRSROs (i.e., rated Baa or lower by Moody's or BBB or
lower by S&P) or are unrated. The Portfolio may also make temporary
investments in money market instruments of the same type as the Money Market
Portfolio. The Portfolio will not invest more than 10% of its total assets in
(i) fixed income securities which are rated lower than B3 or B- or their
equivalents by one NRSRO or if unrated are of equivalent quality as
determined by the investment adviser, and (ii) money market instruments of
any entity which has an outstanding issue of unsecured debt that is rated
lower than B3 or B- or their equivalents by an NRSRO or if unrated is of
equivalent quality as determined by the investment adviser; however, this
restriction will not apply to (i) fixed income securities which, in the
opinion of the investment adviser, have similar characteristics to securities
which are rated B3 or higher by Moody's or B- or higher by S&P, or (ii) money
market instruments of any entity that has an unsecured issue of outstanding
debt which, in the opinion of the investment adviser, has similar
characteristics to securities which are so rated. See Appendix B,
"Description of Bond Ratings," for a description of each rating category. In
the event that any securities held by the High Yield Portfolio fall below
those ratings, the Portfolio will not be obligated to dispose of such
securities and may continue to hold such securities if, in the opinion of the
investment adviser, such investment is considered appropriate under the
circumstances.
For the fiscal year ended December 31, 1994, the approximate percentages of
the Portfolio's average assets invested in securities of each rating
category, determined on a dollar weighted basis, were as follows: 8.5% in
securities rated AAA or its equivalent, 16.5% in securities rated BB or its
equivalent, 64.2% in securities rated B or its equivalent and 1.6% in
securities rated C or its equivalent. Of these securities, 90.8% were rated
by an NRSRO and 9.2% were unrated. All of the unrated securities were
considered by the investment adviser to be of comparable quality to the
Portfolio's investments rated by an NRSRO.
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The Portfolio may also invest in fixed income securities which are providing
high current yields because of risks other than credit, such as prepayment
risks, in the case of mortgage-backed securities, or currency risks, in the
case of non-U.S. dollar denominated foreign securities. Smaller amounts may
also be invested in common stocks and other equity-type securities (such as
convertible debt securities). See "Investment Techniques--Fixed Income
Securities" and "Investment Techniques--Risk Factors of Lower Rated Fixed
Income Securities," below.
The High Yield Portfolio will be managed to maximize current income by taking
advantage of market developments, yield disparities and variations in the
creditworthiness of issuers. Substantially all of the Portfolio's investments
will be income producing. The Portfolio will use various strategies in
attempting to achieve its objective. The Portfolio may make secured loans of
its portfolio securities without limitation. See "Investment
Techniques--Securities Lending," below. In order to enhance its current
return and to reduce fluctuations in net asset value, the Portfolio may write
covered call and put options and may purchase call and put options on
individual fixed income securities, securities indexes and foreign
currencies. The Portfolio may also purchase and sell stock index, interest
rate and foreign currency futures contracts and options thereon. See
"Investment Techniques--Options," "Investment Techniques-- Futures," and
"Risk Factors in Options and Futures," below.
INVESTMENT TECHNIQUES
The Portfolios have the flexibility to invest, within limits, in a variety of
instruments designed to enhance their investment capabilities. All of the
Portfolios, other than the Equity Index Portfolio, may make investments in
repurchase agreements, and all of the Portfolios may purchase or sell
securities on a when-issued, delayed delivery or forward commitment basis.
The Portfolios, other than the Money Market and the Equity Index Portfolios,
may write (i.e., sell) covered put and call options and buy put and call
options on securities and securities indexes. The Portfolios, other than the
Money Market, Equity Index and Government Portfolios, may also write covered
put and call options and buy put and call options on foreign currencies. The
Balanced, Common Stock, Aggressive Stock, High Yield, Global, International,
Conservative Investors, Growth Investors, Government, Quality Bond, Growth
and Income and Equity Index Portfolios may use exchange-traded financial
futures contracts, and options thereon. A brief description of certain of
these investment instruments and their risks appears below. More detailed
information is to be found in the SAI.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
The Portfolios, other than the Equity Index Portfolio, may invest in
mortgage-backed securities, which are mortgage loans made by banks, savings
and loan institutions and other lenders that are assembled into pools, that
are (i) issued by an agency of the U.S. Government (such as GNMA) whose
securities are guaranteed by the U.S. Treasury, (ii) issued by an
instrumentality of the U.S. Government (such as FNMA) whose securities are
supported by the instrumentality's right to borrow from the U.S. Treasury, at
the discretion of the U.S. Treasury, though not backed by the full faith and
credit of the U.S. Government itself, or (iii) collateralized by U.S.
Treasury obligations or U.S. Government agency securities. Interests in such
pools are described in this prospectus as mortgage-backed securities. The
Portfolios, other than the Equity Index Portfolio, may invest in (i)
mortgage-backed securities, including GNMA, FNMA and FHLMC certificates, (ii)
CMOs that are issued by non-governmental entities and collateralized by U.S.
Treasury obligations or by U.S. Government agency or instrumentality
securities, (iii) REMICs and (iv) other asset-backed securities. Other
asset-backed securities (unrelated to mortgage loans) may include securities
such as certificates for automobile receivables (CARS) and credit card
receivable securities (CARDS) as well as other asset-backed securities that
may be developed in the future.
The rate of return on mortgage-backed securities, such as GNMA, FNMA and
FHLMC certificates and CMOs, and, to a lesser extent, asset-backed securities
may be affected by early prepayment of principal on the underlying loans or
receivables. Prepayment rates vary widely and may be affected by changes in
market interest rates. It is not possible to accurately predict the average
life of a particular mortgage pool or pool of loans or receivables.
Reinvestment of principal may occur at higher or lower rates than the
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original yield. Therefore, the actual maturity and realized yield on
mortgage-backed securities and, to a lesser extent, asset-backed securities
will vary based upon the prepayment experience of the underlying pool of
mortgages or pool of loans or receivables.
The fixed rate mortgage-backed and asset-backed securities in which the Money
Market Portfolio invests will have remaining maturities of less than one
year. The Portfolios may also invest in floating or variable rate
mortgage-backed and asset-backed securities on the same terms as they may
invest in floating or variable rate notes, described below under "Certain
Money Market Instruments."
CERTAIN MONEY MARKET INSTRUMENTS
All of the Portfolios may utilize money market instruments, including
certificates of deposit, time deposits, bankers' acceptances, bank notes and
other short-term debt obligations issued by commercial banks and certificates
of deposit, time deposits, and other short-term obligations issued by savings
and loan associations (S&Ls). Certificates of deposit are receipts from a
bank or an S&L for funds deposited for a specified period of time at a
specified rate of return. Time deposits in banks or S&Ls are generally
similar to certificates of deposit, but are uncertificated. Bankers'
acceptances are time drafts drawn on commercial banks by borrowers, usually
in connection with international commercial transactions.
The Portfolios, other than the Equity Index Portfolio, may also use
commercial paper, meaning short- term, unsecured promissory notes issued by
corporations to finance their short-term credit needs. In addition, these
Portfolios may invest in variable or floating rate notes. Variable and
floating rate notes provide for automatic establishment of a new interest
rate at fixed periodic intervals (e.g., daily, monthly) or whenever some
specified interest rate changes. The interest rate on variable or floating
rate securities is ordinarily determined by reference to some other objective
measure such as the U.S. Treasury bill rate. Many floating rate notes have
put or demand features which allow the holder to put the note back to the
issuer or the broker who sold it at certain specified times and upon notice.
Floating rate notes without such a put or demand feature, or in which the
notice period is greater than seven days, may be considered illiquid
securities.
FIXED INCOME SECURITIES
Fixed income securities include preferred and preference stocks and all types
of debt obligations of both domestic and foreign issuers (such as bonds,
debentures, notes, equipment lease certificates, equipment trust
certificates, conditional sales contracts, commercial paper, mortgage-backed
securities and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities).
Corporate debt securities may bear fixed, contingent or variable rates of
interest and may involve equity features, such as conversion or exchange
rights or warrants for the acquisition of stock of the same or a different
issuer or participation based on revenues, sales or profits or the purchase
of common stock in a unit transaction (where corporate debt securities and
common stock are offered as a unit).
RISK FACTORS OF LOWER RATED FIXED INCOME SECURITIES
Fixed income investments that have a high current yield and that are either
rated in the lower categories by NRSROs (i.e., Baa or lower by Moody's or BBB
or lower by S&P) or are unrated are known as "junk bonds" and are regarded as
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments. Because investment in medium and lower
quality bonds involves greater investment risk, achievement of a Portfolio's
investment objective will be more dependent on the investment adviser's
analysis than would be the case if that Portfolio were investing in higher
quality bonds. Medium and lower quality bonds may be more susceptible to real
or perceived adverse economic and individual corporate developments than
would investment grade bonds. For example, a projected economic downturn or
the possibility of an increase in interest rates could cause a decline in
high yield bond prices because such an event might lessen the ability of
highly leveraged high yield issuers to meet their principal and interest
payment obligations, meet projected business goals or obtain additional
financing. In addition, the secondary trading market for medium and lower
quality bonds may be less liquid than the market for investment grade bonds.
This potential lack of liquidity may make it more
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difficult for the investment adviser to value accurately certain portfolio
securities. Further, as with many corporate bonds (including investment grade
issues), there is the risk that certain high yield bonds containing
redemption or call provisions may be called by the issuers of such bonds in a
declining interest rate market, and the relevant Portfolio would then have to
replace such called bonds with lower yielding bonds, thereby decreasing the
net investment income to the Portfolio. Prepayment of mortgages underlying
mortgage-backed securities, even though these securities will generally be
rated in the higher categories of NRSROs, may reduce their current yield and
total return. However, the Trust's investment adviser intends to invest in
these securities only when the potential benefits to a Portfolio are deemed
to outweigh the risks.
REPURCHASE AGREEMENTS
In repurchase agreements, a Portfolio buys securities from a seller, usually
a bank or brokerage firm, with the understanding that the seller will
repurchase the securities at a higher price at a future date. During the term
of the repurchase agreement, the Portfolio's custodian retains the securities
subject to the repurchase agreement as collateral securing the seller's
repurchase obligation, continually monitors on a daily basis the market value
of the securities subject to the agreement and requires the seller to deposit
with the Portfolio's custodian collateral equal to any amount by which the
market value of the securities subject to the repurchase agreement falls
below the resale amount provided under the repurchase agreement. The
creditworthiness of sellers is determined by the investment adviser, subject
to direction of and review by the Board of Trustees. Such transactions afford
an opportunity for the Portfolio to earn a fixed rate of return on available
cash at minimal market risk, although the Portfolio may be subject to various
delays and risks of loss if the seller is unable to meet its obligation to
repurchase. The staff of the SEC currently takes the position that repurchase
agreements maturing in more than seven days are illiquid securities. No
Portfolio will enter into a repurchase agreement if as a result more than 15%
of the Portfolio's net assets would be invested in "illiquid securities"
(except that the limitation is 10% for the Money Market Portfolio).
LOAN ASSIGNMENTS AND PARTICIPATIONS
The High Yield Portfolio may invest in participations and assignments of
loans to corporate, governmental, or other borrowers originally made by
institutional lenders or lending syndicates. These investments are subject to
the same risks associated with fixed income securities generally. For
example, loans to foreign governments will involve a risk that the
governmental entities responsible for the repayment of the loan may be
unable, or unwilling, to pay interest and repay principal when due. In
addition, loan participations and assignments may have a lower yield because
they are often not rated and may also be less liquid than other debt
interests.
Even if the loans are secured, there is no assurance that the liquidation of
collateral from a secured loan would satisfy the borrower's obligation, or
that the collateral can be liquidated. Also, if a loan is foreclosed, the
Portfolio could become part owner of any collateral, and would bear the costs
and liabilities associated with owning and disposing of the collateral. In
addition, it is conceivable that under emerging legal theories of lender
liability, the Portfolio could be held liable as a co-lender.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, the Portfolio has direct recourse against the borrower
(usually not the case with loan participations), it may have to rely on the
agent to apply appropriate credit remedies against a borrower. Consequently,
loan participations may also be adversely affected by the insolvency of the
lending bank or other intermediary.
FORWARD COMMITMENTS AND WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Portfolios may enter into forward commitments for the purchase or sale of
securities and may purchase and sell securities on a when-issued or delayed
delivery basis. Forward commitments and when- issued or delayed delivery
transactions arise when securities are purchased or sold by a Portfolio with
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payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price or yield to the Portfolio at the time
of entering into the transaction. However, the market value of such
securities may be more or less than the purchase price payable at settlement.
No payment or delivery is made by the Portfolio until it receives delivery or
payment from the other party to the transaction. When a Portfolio engages in
forward commitments or when-issued or delayed delivery transactions, the
Portfolio relies on the other party to consummate the transaction. Failure to
consummate the transaction may result in the Portfolio missing the
opportunity of obtaining a price or yield considered to be advantageous.
Forward commitments and when-issued and delayed delivery transactions are
generally expected to settle within three months from the date the
transactions are entered into, although the Portfolio may close out its
position prior to the settlement date. The Portfolio's custodian will
maintain, in a segregated account of the Portfolio, cash, U.S. Government
securities or other liquid high-grade debt obligations having a value equal
to or greater than the Portfolio's purchase commitments; the custodian will
likewise segregate securities sold under a forward commitment or on a delayed
delivery basis. A Portfolio will sell on a forward settlement basis only
securities it owns or has the right to acquire.
OPTIONS
The Portfolios, other than the Money Market and the Equity Index Portfolios,
may write (sell) covered put and call options and buy put and call options,
including options relating to individual securities and securities indexes.
The Portfolios, other than the Money Market, Government and Equity Index
Portfolios, may also write covered put and call options and buy put and call
options on foreign currencies.
A call option is a contract that gives to the holder the right to buy a
specified amount of the underlying security at a fixed or determinable price
(called the exercise or strike price) upon exercise of the option. A put
option is a contract that gives the holder the right to sell a specified
amount of the underlying security at a fixed or determinable price upon
exercise of the option. In the case of index options, exercises are settled
through the payment of cash rather than the delivery of property. A call
option on a security will be considered covered, for example, if the
Portfolio holds the security upon which the option is written. The Portfolios
may write call options on securities or securities indexes for the purpose of
increasing their return or to provide a partial hedge against a decline in
the value of their portfolio securities or both. The Portfolios may write put
options on securities or securities indexes in order to earn additional
income or (in the case of put options written on individual securities) to
purchase the underlying security at a price below the current market price.
If a Portfolio writes an option which expires unexercised or is closed out by
the Portfolio at a profit, it will retain all or part of the premium received
for the option, which will increase its gross income. If the option is
exercised, the Portfolio will be required to sell or purchase the underlying
security at a disadvantageous price, or, in the case of index options,
deliver an amount of cash, which loss may only be partially offset by the
amount of premium received. Each of the Portfolios noted above may also
purchase put or call options on securities and securities indexes in order to
hedge against changes in interest rates or stock prices which may adversely
affect the prices of securities that the Portfolio wants to purchase at a
later date, to hedge its existing investments against a decline in value, or
to attempt to reduce the risk of missing a market or industry segment
advance. In the event that the expected changes in interest rates or stock
prices occur, the Portfolio may be able to offset the resulting adverse
effect on the Portfolio by exercising or selling the options purchased. The
premium paid for a put or call option plus any transaction costs will reduce
the benefit, if any, realized by the Portfolio upon exercise or liquidation
of the option. Unless the price of the underlying security or level of the
securities index changes by an amount in excess of the premium paid, the
option may expire without value to the Portfolio. See "Risk Factors in
Options and Futures," below.
Options purchased or written by the Portfolios may be traded on the national
securities exchanges or negotiated with a dealer. Options traded in the
over-the-counter market may not be as actively traded as those on an
exchange, so it may be more difficult to value such options. In addition, it
may be difficult to enter into closing transactions with respect to such
options. Such options, and the securities used as "cover" for such options,
may be considered illiquid securities.
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In instances in which a Portfolio has entered into agreements with primary
dealers with respect to the over-the-counter options it has written, and such
agreements would enable the Portfolio to have an absolute right to repurchase
at a pre-established formula price the over-the-counter option written by it,
the Portfolio would treat as illiquid securities only the amount equal to the
formula price described above less the amount by which the option is
"in-the-money," i.e., the amount by which the price of the option exceeds the
exercise price.
The Portfolios, except the Money Market, Government and Equity Index
Portfolios, may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines
in the dollar value of portfolio securities and against increases in the
dollar cost of securities to be acquired. Such investment strategies will be
used as a hedge and not for speculation. As in the case of other types of
options, however, the writing of an option on foreign currency will
constitute only a partial hedge, up to the amount of the premium received,
and the Portfolio could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements
adverse to the Portfolio's position, it may forfeit the entire amount of the
premium plus related transaction costs. Options on foreign currencies may be
traded on the national securities exchanges or in the over-the-counter
market. As described above, options traded in the over-the-counter market may
not be as actively traded as those on an exchange, so it may be more
difficult to value such options. In addition, it may be difficult to enter
into closing transactions with respect to options traded over-the-counter.
FUTURES
The High Yield, Global, International, Conservative Investors, Growth
Investors, Government, Balanced and Quality Bond Portfolios may each purchase
and sell futures contracts and related options on debt securities and on
indexes of debt securities to hedge against anticipated changes in interest
rates that might otherwise have an adverse effect on the value of their
assets or assets they intend to acquire. In addition, each Portfolio listed
above (except the Government and Quality Bond Portfolios) as well as the
Common Stock, Aggressive Stock and Growth and Income Portfolios may purchase
and sell stock index futures contracts and related options to hedge the
equity portion of its assets or equity assets it intends to acquire with
regard to market risk as distinguished from stock-specific risk. In the case
of the Equity Index Portfolio, futures contracts and related options on the
S&P 500 Index may be purchased in order to reduce brokerage costs, maintain
liquidity to meet shareholder redemptions or minimize tracking error. As
described below under "Foreign Securities and Currencies," the High Yield,
Global, International, Conservative Investors, Growth Investors, Balanced,
Common Stock, Aggressive Stock, Quality Bond and Growth and Income Portfolios
may each enter into futures contracts and related options on foreign
currencies in order to limit its exchange rate risk. All futures contracts
and related options will be traded on exchanges that are licensed and
regulated by the Commodity Futures Trading Commission (CFTC). All of the
Portfolios, except the Money Market Portfolio, may enter into futures
contracts and buy and sell related options without limitation, except as
noted below. Pursuant to regulations of the CFTC which provide an exemption
from registration as a commodity pool operator, a Portfolio will not purchase
or sell futures contracts or options on futures contracts unless either (i)
the futures contracts or options thereon are for "bona fide hedging" purposes
(as that term is defined under the CFTC regulations) or (ii) if for other
purposes, the sum of amounts of initial margin deposits and premiums required
to establish non-hedging positions would not exceed 5% of the Portfolio's
liquidation value. In addition, the contract value of futures contracts
purchased by the Equity Index Portfolio plus the contract value of futures
contracts underlying call options purchased by the Equity Index Portfolio
will not exceed 20% of the Equity Index Portfolio's total assets. When a
Portfolio purchases or sells a futures contract or writes a put or call
option on a futures contract, the Portfolio will segregate with its custodian
cash or cash equivalents (less any related margin deposits) equal to the cost
of the futures contract it intends to sell or purchase to insure that such
futures positions are not leveraged, or may otherwise cover such positions.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
All the Portfolios, except the Money Market, Government and Equity Index
Portfolios, may enter into contracts for the purchase or sale of a specific
currency at a future date at a price set at the time of the contract.
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Generally, such forward contracts will be for a period of less than three
months. The Portfolios will enter into forward contracts for hedging purposes
only. These transactions will include forward purchases or sales of foreign
currencies for the purpose of protecting the dollar value of securities
denominated in a foreign currency or protecting the dollar equivalent of
interest or dividends to be paid on such securities. Forward contracts are
traded in the inter-bank market, and not on organized commodities or
securities exchanges.
RISK FACTORS IN OPTIONS AND FUTURES
To the extent a hedging transaction is effective, it will protect the value
of the securities or currencies which are hedged but may reduce or eliminate
the potential for gain. The effectiveness of a hedge depends, among other
things, on the correlation between the price movements of the hedging vehicle
and the hedged items, but these correlations generally are imperfect. A
hedging transaction may produce a loss as a result of such imperfect
correlations or for other reasons. The risks of trading futures contracts
also include the risks of inability to effect closing transactions or to do
so at favorable prices; consequently, losses from investing in futures
contracts are potentially unlimited. The risks of option trading include
possible loss of the entire premium on purchased options and inability to
effect closing transactions at favorable prices. The extent to which a
Portfolio can benefit from investments involving options and futures
contracts may also be limited by various tax rules. Favorable results from
options and futures transactions may depend on the investment adviser's
ability to predict correctly the direction of securities prices, interest
rates and other economic factors.
FOREIGN SECURITIES AND CURRENCIES
All of the Portfolios, except the Government and Equity Index Portfolios, may
invest in foreign securities. Investments in foreign securities may involve a
higher degree of risk because of limited publicly available information,
non-uniform accounting, auditing and financial standards, reduced levels of
government regulation of foreign securities markets, difficulties and delays
in transaction settlements, lower liquidity and greater volatility,
withholding or confiscatory taxes, changes in currency exchange rates,
currency exchange control regulations and restrictions on and the costs
associated with the exchange of currencies and expropriation, nationalization
or other adverse political or economic developments. It may also be more
difficult to obtain and enforce a judgment against a foreign issuer or
enterprise and there may be difficulties in effecting the repatriation of
capital invested abroad. In addition, banking, securities and other business
operations abroad may not be subject to regulation as rigorous as that
applicable to similar activities in the United States. Further, there may be
restrictions on foreign investment in some countries. Special tax
considerations apply to foreign securities, and foreign brokerage commissions
and other fees are generally higher than in the United States.
The Portfolios may buy and sell foreign currencies principally for the
purpose of preserving the value of foreign securities or in anticipation of
purchasing foreign securities.
SECURITIES LENDING
For purposes of realizing additional income, each Portfolio may lend
securities with a value of up to 50% of its total assets to broker-dealers
approved by the Board of Trustees. In addition, the High Yield and Government
Portfolios may each make secured loans of its portfolio securities without
restriction. Any such loan of portfolio securities will be continuously
secured by collateral at least equal to the value of the security loaned.
Such collateral will be in the form of cash, marketable securities issued or
guaranteed by the U.S. Government or its agencies, or a standby letter of
credit issued by qualified banks. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of possible delay in
receiving additional collateral or in the recovery of the securities or
possible loss of rights in the collateral should the borrower fail
financially. Loans will only be made to firms deemed by the investment
adviser to be of good standing and will not be made unless, in the judgment
of the investment adviser, the consideration to be earned from such loans
would justify the risk.
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CERTAIN INVESTMENT RESTRICTIONS
The following restrictions apply to all of the Portfolios, unless otherwise
stated, and are fundamental. Unless permitted by law, they will not be
changed for any Portfolio without a vote of that Portfolio's shareholders.
Additional investment restrictions appear in the SAI.
None of the Portfolios will make loans, except that this restriction shall
not apply to secured loans of portfolio securities by each of the Portfolios.
Each Portfolio, other than the High Yield and Government Portfolios, may make
loans of portfolio securities not exceeding 50% of the value of that
Portfolio's total assets. This restriction does not prevent a Portfolio from
purchasing debt obligations in which a Portfolio may invest consistent with
its investment policies, or from buying government obligations, short-term
commercial paper or publicly traded debt, including bonds, notes, debentures,
certificates of deposit, and equipment trust certificates, nor does this
restriction apply to loans made under insurance policies or through entry
into repurchase agreements to the extent they may be viewed as loans. The
High Yield and Government Portfolios may make secured loans of portfolio
securities or cash without limitation.
Each Portfolio, except as noted below, elects not to "concentrate"
investments in an industry, as that concept is defined under applicable
federal securities laws. In general, this means that no Portfolio will make
an investment in an industry if that investment would make the Portfolio's
holding in that industry exceed 25% of the Portfolio's total assets. However,
this restriction does not apply to investments by the Money Market Portfolio
in certificates of deposit or securities issued and guaranteed by domestic
banks. Furthermore, the United States Government, its agencies and
instrumentalities are not considered members of any industry for purposes of
this restriction.
Each Portfolio intends to be "diversified," as that term is defined under
applicable Federal securities laws. In general, this means that no Portfolio
will make an investment unless, when considering all its other investments,
75% of the value of the Portfolio's assets would consist of cash, cash items,
U.S. Government securities, securities of other investment companies and
other securities. For the purposes of this restriction, "other securities"
are limited for any one issuer to not more than 5% of the value of the
Portfolio's total assets and to not more than 10% of the issuer's outstanding
voting securities.
As a matter of operating policy, except as noted below, the Money Market
Portfolio will invest no more than 5% of the value of its total assets, at
the time of acquisition, in the securities of any one issuer, other than
obligations of the U.S. Government, its agencies and instrumentalities.
However, the Money Market Portfolio may invest up to 25% of the value of its
total assets in First Tier Securities (as defined in Rule 2a-7 under the
Investment Company Act of 1940) of a single issuer for a period of up to
three business days after the purchase of such securities. The Money Market
Portfolio will also not (i) invest more than 5% of the value of its total
assets, at time of acquisition, in Second Tier Securities (as defined in Rule
2a-7 under the Investment Company Act of 1940) or (ii) invest more than the
greater of 1% of the value of the Portfolio's total assets or $1,000,000, at
the time of acquisition, in Second Tier Securities of a single issuer.
31
<PAGE>
MANAGEMENT OF THE TRUST
THE BOARD OF TRUSTEES
The Board of Trustees is responsible for the management of the business and
affairs of the Trust as provided in the laws of the Commonwealth of
Massachusetts and the Trust's Declaration of Trust and By-laws.
THE INVESTMENT ADVISER
Alliance Capital Management L.P. (Alliance), the main office of which is
located at 1345 Avenue of the Americas, New York, New York 10105, serves as
investment adviser to the Trust pursuant to an investment advisory agreement,
relating to each of the Portfolios, between the Trust and Alliance. Alliance,
a publicly traded limited partnership, is indirectly majority-owned by
Equitable.
Alliance is an investment adviser registered under the Investment Advisers
Act of 1940 (Advisers Act). Alliance, a leading international investment
adviser, acts as an investment adviser to various separate accounts and
general accounts of Equitable and other affiliated insurance companies.
Alliance also provides investment advisory and management services to other
investment companies and to endowment funds, insurance companies, foreign
entities, qualified and non-tax qualified corporate funds, public and private
pension and profit-sharing plans, foundations and tax-exempt organizations.
Alliance manages the day-to-day investment operations of the Trust and
exercises responsibility for the investment and reinvestment of the Trust's
assets. Alliance provides, without charge, personnel to the Trust to render
such clerical, accounting, administrative and other services, other than
investor services, as the Trust may request.
The advisory fee payable by the Trust is at the following annual percentages
of the value of each Portfolio's daily average net assets:
<TABLE>
<CAPTION>
DAILY AVERAGE NET ASSETS
---------------------------------------------
FIRST $350 NEXT $400 OVER $750
MILLION MILLION MILLION
-------------- -------------- -------------
<S> <C> <C> <C>
Conservative Investors .550% .525% .500%
Balanced .............. .400% .375% .350%
Growth Investors ...... .550% .525% .500%
Common Stock .......... .400% .375% .350%
Global ................ .550% .525% .500%
Aggressive Stock ...... .500% .475% .450%
Money Market .......... .400% .375% .350%
Intermediate
Government Securities .500% .475% .450%
High Yield ............ .550% .525% .500%
</TABLE>
<TABLE>
<CAPTION>
FIRST $500 NEXT $500 OVER $1
MILLION MILLION BILLION
-------------- -------------- ------------
<S> <C> <C> <C>
Growth and Income .550% .525% .500%
Quality Bond ...... .550% .525% .500%
<CAPTION>
FIRST $750 NEXT $750 OVER $1.5
MILLION MILLION BILLION
-------------- -------------- --------------
<S> <C> <C> <C>
EQUITY INDEX .350% .300% .250%
<CAPTION>
FIRST $500 NEXT $1 OVER $1.5
MILLION BILLION BILLION
-------------- ------------ -------------
<S> <C> <C> <C>
International .900% .850% .800%
</TABLE>
32
<PAGE>
THE PORTFOLIO MANAGERS
THE ASSET ALLOCATION SERIES
CONSERVATIVE INVESTORS AND GROWTH INVESTORS PORTFOLIOS
Franklin Kennedy III, has been the person principally responsible for the
Conservative Investors and Growth Investors Portfolios' investment program
since their inception. Mr. Kennedy, a Senior Vice President of Alliance, with
which he has been associated since 1993, previously was employed by Equitable
Capital Management Corporation (Equitable Capital) since prior to 1990.
BALANCED PORTFOLIO
Bruce Calvert is the person principally responsible for the Balanced
Portfolio's investment program as of May 1, 1995. Mr. Calvert, the Vice
Chairman of the Board and Chief Investment Officer of Alliance, has been
associated with Alliance since 1973.
THE EQUITY SERIES
GROWTH AND INCOME PORTFOLIO
Mr. Kennedy and W. Theodore Kuck have been the persons principally
responsible for the Growth and Income Portfolio's investment program since
its inception. Mr. Kuck, a Vice President of Alliance, with which he has been
associated since 1993, previously was employed by Equitable Capital since
prior to 1990.
EQUITY INDEX PORTFOLIO
Judith A. Maglio has been the person principally responsible for the Equity
Index Portfolio's investment program since inception. Ms. Maglio, a Vice
President of Alliance, has been associated with Alliance since prior to 1990.
COMMON STOCK PORTFOLIO
Tyler J. Smith has been the person principally responsible for the Common
Stock Portfolio's investment program since 1977. Mr. Tyler, a Senior Vice
President of Alliance, with which he has been associated since 1993,
previously was employed by Equitable Capital since prior to 1990.
GLOBAL AND INTERNATIONAL PORTFOLIOS
Ronald Simcoe has been the person principally responsible for the Global
Portfolio's investment program since 1988 and the International Portfolio's
investment program since its inception. Mr. Simcoe, a Vice President of
Alliance, with which he has been associated since 1993, previously was
employed by Equitable Capital since prior to 1990.
AGGRESSIVE STOCK PORTFOLIO
Alden M. Stewart and Randall E. Haase have been the persons principally
responsible for the Aggressive Stock Portfolio's investment program since
1993. Messrs. Stewart and Haase, Executive Vice President and Vice President
of Alliance respectively, with which they have been associated since 1993,
previously were employed by Equitable Capital since prior to 1990.
THE FIXED INCOME SERIES
MONEY MARKET PORTFOLIO
Raymond J. Papera has been the person principally responsible for the Money
Market Portfolio's investment program since 1990. Mr. Papera, a Vice
President of Alliance, with which he has been associated since 1993,
previously was employed by Equitable Capital since 1990.
33
<PAGE>
INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
Patricia J. Young and Paul A. Ullman are the persons principally responsible
for the Intermediate Government Securities Portfolio's investment program as
of May 1, 1995. Ms. Young, Senior Vice President of Alliance, with which she
has been associated since 1992, previously was employed by Hyperion Capital
(beginning in 1991) and Fischer, Francis, Trees & Watts prior thereto. Mr.
Ullman, Vice President of Alliance, with which he has been associated since
1992, previously was employed by Hyperion Capital since 1990.
QUALITY BOND PORTFOLIO
Matthew Bloom is the person principally responsible for the Quality Bond
Portfolio's investment program as of May 1, 1995. Mr. Bloom, a Vice President
of Alliance, has been associated with Alliance since 1989.
HIGH YIELD PORTFOLIO
Amy Nussbaum has been the person principally responsible for the High Yield
Portfolio's investment program since 1992. Ms. Nussbaum, a Vice President of
Alliance, with which she has been associated since 1993, previously was
employed by Equitable Capital since prior to 1990.
THE TRUST'S EXPENSES
The Trust's investment adviser pays all of the Trust's operating expenses not
specifically assumed by the Trust. In addition to the investment advisory fee
and brokers' commissions, transfer taxes and other fees relating to
purchases, loans and sales of investments, a number of expenses are paid
directly by the Trust. The Trust pays Trustees' fees and expenses; the fees
and expenses of its independent auditors and of its legal counsel; the costs
of printing and mailing of annual and semi-annual reports to shareholders,
proxy statements, prospectuses, prospectus supplements and SAIs, all to the
extent they are sent to existing Contract owners; the costs of printing of
registration statements; bank transaction charges and custodian's fees; any
proxy solicitors' fees and expenses; SEC filing fees; any federal, state or
local income or other taxes; any interest; any membership fees of the
Investment Company Institute and similar organizations; fidelity bond and
Trustees' liability insurance premiums; and any extraordinary expenses, such
as indemnification payments or damages awarded in litigation or settlements
made. (Of these expenses, only .25% of investment advisory fees are reflected
in the Financial Highlights for periods prior to March 22, 1985.) The
following table, reflecting the Trust's expenses, is based on information for
the year ended December 31, 1994.
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH GROWTH AND COMMON
INVESTORS BALANCED INVESTORS INCOME EQUITY INDEX STOCK
TYPE OF EXPENSE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO* PORTFOLIO
------------------------- -------------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.55% 0.37% 0.54% 0.55% 0.35% 0.36%
Other Expenses ........... 0.04% 0.02% 0.05% 0.23% 0.14% 0.02%
-------------- ----------- ----------- ----------- ------------ -----------
Total Expenses ........... 0.59% 0.39% 0.59% 0.78% 0.49% 0.38%
============== =========== =========== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE
AGGRESSIVE MONEY GOVERNMENT QUALITY
GLOBAL STOCK MARKET SECURITIES BOND HIGH YIELD
TYPE OF EXPENSE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------- ----------- ------------ ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.54% 0.47% 0.40% 0.50% 0.55% 0.55%
Other Expenses ........... 0.15% 0.02% 0.02% 0.06% 0.04% 0.06%
----------- ------------ ----------- -------------- ----------- -----------
Total Expenses ........... 0.69% 0.49% 0.42% 0.56% 0.59% 0.61%
=========== ============ =========== ============== =========== ===========
</TABLE>
-----------
* Annualized.
No information has been provided with respect to the International Portfolio
because such Portfolio has not yet completed a fiscal year.
TRANSACTIONS WITH AFFILIATES
In December 1984, Equitable acquired Donaldson, Lufkin & Jenrette, Inc.
(DLJ). A DLJ subsidiary, Donaldson, Lufkin & Jenrette Securities Corporation,
is one of the nation's largest investment banking
34
<PAGE>
and securities firms. Another DLJ subsidiary, Autranet, Inc., is a securities
broker that markets independently originated research to institutions.
Through the Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corporation, DLJ supplies security execution and clearance services to
financial intermediaries including broker-dealers and banks. To the extent
permitted by law, the Trust may engage in securities and other transactions
with the above entities or may invest in shares of the investment companies
with which those entities have affiliations. The Investment Company Act
generally prohibits the Trust from engaging in securities transactions with
DLJ or its affiliates, as principal, unless pursuant to an exemptive order
from the SEC. The Trust may apply for such exemptive relief. The Trust has
adopted procedures, prescribed by Section 17(e)(2)(A) of the Investment
Company Act and Rule 17e-1 thereunder, which are reasonably designed to
provide that any commissions it pays to DLJ or its affiliates do not exceed
the usual and customary broker's commission. In addition, the Trust will
adhere to Section 11(a) of the Securities Exchange Act of 1934 and any
applicable rules thereunder governing floor trading. The Trust has adopted
procedures permitting it to purchase securities, under certain restrictions
prescribed by an SEC rule, in a public offering in which DLJ or an affiliate
is an underwriter.
DESCRIPTION OF THE TRUST'S SHARES
CHARACTERISTICS
The Board of Trustees has authority to issue an unlimited number of shares of
beneficial interest, without par value. The shares are divided into thirteen
classes, one class for each Portfolio. Each share is entitled to one vote,
and fractional shares are entitled to fractional votes. The Board of Trustees
may establish additional Portfolios and related classes of shares. The Trust
is not required to hold annual shareholder meetings, but special meetings may
be called for purposes such as electing or removing trustees, changing
fundamental policies or approving an investment advisory agreement.
PURCHASE AND REDEMPTION
Equico Securities, Inc. (Equico), a wholly-owned subsidiary of Equitable, is
the principal underwriter of the Trust. Equico's address is 1755 Broadway,
New York, New York 10019. The Trust will offer and sell its shares without a
sales charge, at each Portfolio's net asset value per share. The price at
which a purchase is effected is based on the next calculation of net asset
value after an order is placed by an insurance company investing in the
Trust. Net asset value per share is calculated for purchases and redemption
of shares of each Portfolio by dividing the value of total Portfolio assets,
less liabilities (including Trust expenses, which are accrued daily), by the
total number of shares of that Portfolio outstanding. The net asset value per
share of each Portfolio is determined each business day at 4:00 p.m. Eastern
time. Values are not calculated on national business holidays.
All shares may be redeemed in accordance with the Trust's Declaration of
Trust and By-Laws. Shares will be redeemed at their net asset value. Sales
and redemptions of shares of the same class by the same shareholder on the
same day will be netted. All redemption requests will be processed and
payment with respect thereto will be made within seven days after tenders.
The Trust may also suspend redemption, if permitted by the Investment Company
Act, for any period during which the New York Stock Exchange is closed or
during which trading is restricted by the SEC or the SEC declares that an
emergency exists. Redemption may also be suspended during other periods
permitted by the SEC for the protection of the Trust's shareholders.
HOW ASSETS ARE VALUED
Values are determined according to accepted accounting practices and all laws
and regulations that apply. The assets of each Portfolio are generally valued
as follows, as further described in the SAI:
o Stocks and debt securities which mature in more than 60 days are valued
on the basis of market quotations.
35
<PAGE>
o Foreign securities not traded directly, or in American Depositary
Receipt or similar form in the United States, are valued at representative
quoted prices in the currency of the country of origin. Foreign currency
amounts are translated into U.S. dollars at the bid price last quoted by a
composite list of major U.S. banks.
o Short-term debt securities in the Portfolios other than the Money Market
Portfolio which mature in 60 days or less are valued at amortized cost, which
approximates market value. Securities held in the Money Market Portfolio are
valued at prices based on equivalent yields or yield spreads.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good faith
by the Valuation Committee of the Board of Trustees using its best judgment.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under current federal income tax law, the Trust believes that each Portfolio
is entitled, and the Trust intends that each Portfolio shall qualify each
year and elect, to be treated as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (Internal
Revenue Code). As a regulated investment company, a Portfolio will not be
subject to federal tax on its net investment income and net realized capital
gains to the extent such income and gains are timely distributed to its
insurance company shareholders. Accordingly, each Portfolio intends to
distribute all of its net investment income and net realized capital gains to
its shareholders. An insurance company which is a shareholder of a Portfolio
will generally not be taxed on distributions from that Portfolio. All
dividend distributions will be reinvested in full and fractional shares of
the Portfolio to which they relate.
Although the Trust intends that it and the Portfolios will be operated so
that they will have no federal income or excise tax liability, if any such
liability is nevertheless incurred, the investment performance of the
Portfolio or Portfolios incurring such liability will be adversely affected.
In addition, Portfolios investing in foreign securities and currencies may be
subject to foreign taxes which could reduce the investment performance of
such Portfolio.
In addition to meeting investment diversification rules applicable to
regulated investment companies under Subchapter M of the Internal Revenue
Code, because the Trust funds certain types of Contracts, each Portfolio is
also subject to the investment diversification requirements of Subchapter L
of the Internal Revenue Code. Were any Portfolio to fail to comply with those
requirements, owners of Contracts (other than "pension plan contracts")
funded through the Trust would be taxed immediately on the accumulated
investment earnings under their Contracts and would thereby lose any benefit
of tax deferral. Compliance is therefore carefully monitored by the
investment adviser.
Certain additional tax information appears in the SAI.
For more information regarding the tax implications for owners of Contracts
investing in the Trust, refer to the prospectuses for those products.
INVESTMENT PERFORMANCE
Each Portfolio may illustrate in advertisements or sales materials its
average annual total return, which is the rate of growth of the Portfolio
that would be necessary to achieve the ending value of an investment kept in
the Portfolio for the period specified and is based on the following
assumptions: (1) all dividends and distributions by the Portfolio are
reinvested in shares of the Portfolio at net asset value, and (2) all
recurring fees are included for applicable periods.
Each Portfolio may also illustrate in advertisements or sales materials its
cumulative total return for several time periods throughout the Portfolio's
life based on an assumed initial investment of $1,000. Any such cumulative
total return for each Portfolio will assume the reinvestment of all income
dividends and capital gains distributions for the indicated periods and will
include all recurring fees.
The Money Market Portfolio may illustrate in advertisements or sales
materials its yield and effective yield. The Portfolio's yield refers to
income generated by an investment in the Portfolio over a 7-day
36
<PAGE>
period, expressed as an annual percentage rate. The Money Market Portfolio's
effective yield is calculated similarly but assumes that income earned from
the investment is reinvested. The Portfolio's effective yield will be
slightly higher than its yield because of the compounding effect of this
assumed reinvestment.
The Government, Quality Bond and High Yield Portfolios each may illustrate in
advertisements or sales materials its yield based on a recent 30-day period,
which reflects the income per share earned by that Portfolio's investments.
The yield is calculated by dividing that Portfolio's net investment income
per share during that period by the net asset value on the last day of that
period and annualizing the result.
These performance figures are based on historical earnings and are not
intended to indicate future performance. Nor do they reflect fees and charges
imposed under the Contracts, which fees and charges will reduce such
performance figures; therefore, these figures may be of limited use for
comparative purposes. No Portfolio will use information concerning its
investment performance in advertisements or sales materials unless
appropriate information concerning the relevant separate account is also
included.
37
<PAGE>
APPENDIX A
PERFORMANCE INFORMATION
The following tables provide performance results for The Hudson River Trust
Portfolios, except for the International Portfolio which commenced operations
in 1995, net of investment management fees and direct operating expenses of
the Trust, together with comparative benchmarks, including both unmanaged
market indexes and universes of managed portfolios. This comparative
information (except for the Lipper averages described below) does not reflect
any asset-based charges for investment management or other expenses, which
are inapplicable to these benchmarks. The rates of return shown for the
Portfolios are not an estimate or guarantee of future investment performance
and do not take into account charges applicable to the Contracts or imposed
at the separate account level. The ultimate change in Contract values will
depend not only on the performance of the Portfolios at the underlying Trust
level, but also on the insurance and administrative charges, applicable sales
charges, and the mortality and expense risk charge applicable under such
Contracts. These Contract charges effectively reduce the dollar amount of any
net gains and increase the dollar amount of any net losses.
The Lipper averages are contained in Lipper's survey of the performance of a
large number of mutual funds. This survey is published by Lipper Analytical
Services, Inc., a firm recognized for its reporting of performance of
actively managed funds. According to Lipper, performance data are presented
net of investment management fees, direct operating expenses and, for funds
with Rule 12b-1 plans, asset-based sales charges. Performance data for funds
which assess sales charges in other ways do not reflect deductions for sales
charges. Performance data shown for the Portfolios does not reflect deduction
for sales charges (which are assessed at the policy level). This means that
to the extent that asset-based sales charges deducted by some funds have
lowered the Lipper averages, the performance data shown for the Portfolios
appears relatively more favorable than the performance data for the Lipper
averages.
The performance results presented below are based on Portfolio percent
changes in net asset values with dividends and capital gains reinvested.
Similarly, the market indexes have been adjusted, where necessary, to reflect
the benefit of total reinvestment of income, dividends and capital gains.
Cumulative rates of return reflect performance over a stated period of time.
Annualized rates of return represent the rate of growth that would have
produced the corresponding cumulative return had performance been constant
over the entire period.
From time to time the Trust and/or its shareholders may include in reports or
in advertising material descriptions of general economic and market
conditions affecting the Trust and/or its shareholders and may compare the
performance of the Trust's Portfolios with (1) that of other insurance
company separate accounts, if appropriate, or mutual funds included in the
rankings prepared by Lipper or similar investment services that monitor the
performance of insurance company separate accounts or mutual funds, (2) other
appropriate indices of investment securities and averages for peer universes
of funds which are described in this prospectus, or (3) data developed by the
Trust and/or its shareholders derived from such indices or averages.
Each Portfolio's performance may also be compared to the performance of other
mutual funds by Morningstar, Inc. which ranks mutual funds on the basis of
historical risk and total return. Morningstar rankings are calculated using
the mutual fund's average annual return for certain periods and a risk factor
that reflects the mutual fund's performance relative to three-month Treasury
bill monthly returns. Morningstar's rankings range from five stars (highest)
to one star (lowest) and represent Morningstar's assessment of the historical
risk level and total return of a mutual fund as a weighted average for 3, 5,
and 10-year periods. In each category, Morningstar limits its five star
rankings to 10% of the funds it follows and its four star rankings to 22.5%
of the funds it follows. Rankings are not absolute or necessarily predictive
of future performance.
The Lehman Treasury Bond Index (Lehman Treasury) represents an unmanaged
group of securities consisting of all currently offered public obligations of
the United States Treasury intended for distribution in the domestic market.
A-1
<PAGE>
The Standard and Poor's 500 Stock Index (S&P 500) represents an unmanaged
weighted index of 500 industrial, transportation, utility, and financial
companies, widely regarded by investors as representative of the stock
market.
The Lehman Government/Corporate Bond Index (Lehman Gov't Corp.) represents an
unmanaged group of securities widely regarded by investors as representative
of the bond market.
The Value Line Convertible Index is comprised of 585 of the most actively
traded convertible bonds and preferred stocks on an unweighted basis.
The Morgan Stanley Capital International World Index (MSCI World Index) is an
arithmetic, market value-weighted average of the performance of over 1,300
securities listed on the stock exchanges of twenty foreign countries and the
United States.
The National Association of Securities Dealers Automated Quotation System
(NASDAQ) Over-the- Counter Composite Index covers 4,500 stocks traded over
the counter. It represents many small company stocks but is heavily
influenced by about 100 of the largest NASDAQ stocks. It is a value-weighted
index calculated on price change only and does not include income.
The Lehman Intermediate Government Bond Index represents an unmanaged group
of securities consisting of all United States Treasury and agency securities
with remaining maturities of from one to ten years and issue amounts of at
least $100 million outstanding.
The Lehman Aggregate Bond Index is an index comprised of investment grade
fixed income securities, including U.S. Treasury, mortgage-backed, corporate
and "Yankee" bonds (U.S. dollar denominated bonds issued outside the United
States).
The Merrill Lynch High Yield Master Index (ML Master) represents an unmanaged
group of securities widely regarded by investors as representative of the
high yield bond market.
The "blended" performance numbers (e.g., 50% S&P/50% NASDAQ) in all cases
assume a static mix of the two indices.
The dates as of which funds were first allocated to the Portfolios are as
follows: the Common Stock Portfolio on June 16, 1975; the Money Market
Portfolio on July 13, 1981; the Balanced and Aggressive Stock Portfolios on
January 27, 1986; the High Yield Portfolio on January 2, 1987; the Global
Portfolio on August 27, 1987; the Conservative Investors and Growth Investors
Portfolios on October 2, 1989; the Government Portfolio on April 1, 1991; the
Quality Bond and Growth and Income Portfolios on October 1, 1993; and the
Equity Index Portfolio on March 1, 1994. In the "Since Inception" columns of
Table I and Table II below, the performance of each Portfolio and its
comparative indices is measured from the date funds were first allocated to
the Portfolios, except as follows: for the Common Stock Portfolio and its
comparative indices, from January 13, 1976, the date on which the unit value
was established and Contract owner contributions were first accepted by the
Common Stock Portfolio's separate account predecessor; for the Lipper Money
Market Funds Average, from June 1, 1981; for the Lipper Balanced Funds and
Small Company Growth Funds Averages, from January 1, 1986; and for the Lipper
Global Funds Average, from August 28, 1987.
The Trust's Portfolios serve as the underlying investment vehicles for
Contracts. Shares of these Portfolios cannot be purchased directly. Shares of
the Portfolios of the Trust are purchased by corresponding investment
divisions of insurance company separate accounts. Refer to the attached
Contract prospectus for further information about your Contract including a
description of all charges and expenses.
A-2
<PAGE>
TABLE I
ANNUALIZED RATES OF RETURN
PERIODS ENDING DECEMBER 31, 1994
<TABLE>
<CAPTION>
Since
PORTFOLIO/Benchmarks 1 Year 3 Years 5 Years 10 Years 15 Years Inception
------ ------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
THE ASSET ALLOCATION SERIES
CONSERVATIVE INVESTORS ...................... (4.10)% 3.97% 7.46% -- -- 7.71 %
Lipper Flexible Portfolio Average ........... (2.65) 5.82 8.33 -- -- 7.71
70% Lehman Treasury/30% S&P 500 ............. (1.97) 5.14 7.85 -- -- 8.11
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
BALANCED .................................... (8.02) 0.12 7.29 -- -- 11.25
Lipper Balanced Mutual Funds Average ....... (2.52) 5.27 7.87 -- -- 9.91
50% S&P 500/50% Lehman Gov't Corp. .......... (1.09) 5.55 8.20 -- -- 10.96
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
GROWTH INVESTORS ............................ (3.15) 5.42 14.05 -- -- 14.19
Lipper Flexible Portfolio Average ........... (2.65) 5.82 8.33 -- -- 7.71
70% S&P 500/30% Lehman Gov't Corp. .......... (0.13) 5.83 8.39 -- -- 8.49
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
THE EQUITY SERIES ...........................
GROWTH AND INCOME ........................... (0.58) -- -- -- -- (0.66 )
Lipper Growth & Income Funds Average ....... (0.94) -- -- -- -- 1.03
75% S&P 500/25% Value Line Convertible ..... 0.01 -- -- -- -- 1.84
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
EQUITY INDEX ................................ -- -- -- -- -- 1.08*
Lipper S&P 500 Index Funds Average .......... -- -- -- -- -- 0.43*
S&P 500 ..................................... -- -- -- -- -- 1.28*
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
COMMON STOCK ................................ (2.14) 8.03 9.82 15.25% 15.32% 13.91
Lipper Growth Equity Mutual Funds Average .. (2.15) 5.64 8.88 12.99 13.77 14.68
S&P 500 ..................................... 1.32 6.25 8.68 14.38 14.50 13.12
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
GLOBAL ...................................... 5.23 11.42 11.15 -- -- 10.39
Lipper Global Mutual Funds Average .......... (3.03) 8.27 6.05 -- -- 5.99
MSCI World .................................. 5.08 6.85 3.67 -- -- 4.97
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
AGGRESSIVE STOCK ............................ (3.81) 2.84 17.06 -- -- 18.78
Lipper Small Company Growth Funds Average .. (0.73) 9.93 12.29 -- -- 11.79
50% S&P 500/50% NASDAQ ...................... (0.94) 7.46 9.65 -- -- 11.41
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
THE FIXED INCOME SERIES .....................
MONEY MARKET ................................ 4.02 3.51 4.98 6.27 -- 7.54
Lipper Money Market Mutual Funds Average ... 3.65 3.19 4.59 5.89 -- 7.22
3 Month T-Bill .............................. 4.22 3.63 4.90 5.98 -- 7.19
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
INTERMEDIATE GOVERNMENT SECURITIES .......... (4.37) 3.75 -- -- -- 6.16
Lipper Intermediate Government Funds Average (3.72) 3.51 -- -- -- 5.93
Lehman Intermediate Government Bond ........ (1.75) 4.36 -- -- -- 6.55
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
QUALITY BOND ................................ (5.10) -- -- -- -- (4.49 )
Lipper Corporate Debt Funds A Rated Average (4.64) -- -- -- -- (4.00 )
Lehman Aggregate Bond ....................... (2.92) -- -- -- -- (2.30 )
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
HIGH YIELD .................................. (2.79) 10.37 10.60 -- -- 9.04
Lipper High Current Yield Mutual Funds
Average .................................... (3.83) 10.44 10.62 -- -- 8.13
ML Master ................................... (1.16) 11.03 11.99 -- -- 10.24
-------------------------------------------- --------- --------- --------- ---------- ---------- -----------
</TABLE>
*Unannualized
A-3
<PAGE>
TABLE II
CUMULATIVE RATES OF RETURN
PERIODS ENDING DECEMBER 31, 1994
<TABLE>
<CAPTION>
Since
PORTFOLIO/Benchmarks 1 Year 3 Years 5 Years 10 Years 15 Years Inception
------ ------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
THE ASSET ALLOCATION SERIES
CONSERVATIVE INVESTORS ................. (4.10)% 12.38% 43.28% -- -- 47.70%
Lipper Flexible Portfolio Average ..... (2.65) 18.49 49.18 -- -- 47.67
70% Lehman Treasury/30% S&P 500 ....... (1.97) 16.24 45.93 -- -- 50.68
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
BALANCED ............................... (8.02) 0.38 42.13 -- -- 159.23
Lipper Balanced Mutual Funds Average .. (2.52) 16.66 46.03 -- -- 132.30
50% S&P 500/50% Lehman Gov't Corp. .... (1.09) 17.61 48.29 -- -- 153.23
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
GROWTH INVESTORS ....................... (3.15) 17.15 92.96 -- -- 100.67
Lipper Flexible Portfolio Average. .... (2.65) 18.49 49.18 -- -- 132.30
70% S&P 500/30% Lehman Gov't Corp. .... (0.13) 18.54 49.63 -- -- 53.39
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
THE EQUITY SERIES
GROWTH AND INCOME ...................... (0.58) -- -- -- -- (0.83)
Lipper Growth & Income Funds Average .. (0.94) -- -- -- -- 1.29
75% S&P 500/25% Value Line Convertible 0.01 -- -- -- -- 2.30
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
EQUITY INDEX ........................... -- -- -- -- -- 1.08
Lipper S&P 500 Index Funds Average .... -- -- -- -- -- 0.43
S&P 500 ................................ -- -- -- -- -- 1.28
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
COMMON STOCK ........................... (2.14) 26.09 59.76 313.38% 748.81% 1,084.25
Lipper Growth Equity Mutual Funds
Average ............................... (2.15) 17.90 53.00 239.11 592.04 1,161.74
S&P 500 ................................ 1.32 19.95 51.64 283.20 662.68 938.20
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
GLOBAL ................................. 5.23 38.33 69.94 -- -- 106.78
Lipper Global Mutual Funds Average .... (3.03) 26.91 34.17 -- -- 53.23
MSCI World ............................. 5.08 21.99 19.74 -- -- 42.79
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
AGGRESSIVE STOCK ....................... (3.81) 8.75 119.82 -- -- 365.13
Lipper Small Company Growth Funds
Average ............................... (0.73) 32.86 78.56 -- -- 170.14
50% S&P 500/50% NASDAQ ................. (0.94) 24.10 58.49 -- -- 162.45
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
THE FIXED INCOME SERIES
MONEY MARKET ........................... 4.02 10.92 27.48 83.69 -- 166.44
Lipper Money Market Mutual Funds
Average ............................... 3.65 9.87 25.15 77.17 -- 154.82
3 Month T-Bill ......................... 4.22 11.29 26.99 78.68 -- 155.41
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
INTERMEDIATE GOVERNMENT SECURITIES .... (4.37) 11.66 -- -- -- 25.14
Lipper Intermediate Government Funds
Average ............................... (3.72) 10.89 -- -- -- 24.10
Lehman Intermediate Government Bond ... (1.75) 13.65 -- -- -- 26.89
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
QUALITY BOND ........................... (5.10) -- -- -- -- (5.58)
Lipper Corporate Debt Funds A Rated
Average ............................... (4.64) -- -- -- -- (4.98)
Lehman Aggregate Bond .................. (2.92) -- -- -- -- (2.86)
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
HIGH YIELD ............................. (2.79) 34.46 65.49 -- -- 99.86
Lipper High Current Yield Bond Funds
Average ............................... (3.83) 34.71 65.62 -- -- N/A
ML Master .............................. (1.16) 36.87 76.16 -- -- 118.08
--------------------------------------- --------- --------- --------- ---------- ---------- -----------
</TABLE>
A-4
<PAGE>
TABLE III
ANNUAL RATES OF RETURN
<TABLE>
<CAPTION>
YEAR ENDING COMMON MONEY AGGRESSIVE HIGH
DECEMBER 31 STOCK MARKET STOCK BALANCED YIELD
<S> <C> <C> <C> <C> <C>
1976 ......... 9.2%*
1977 ......... -9.2
1978 ......... 8.2
1979 ......... 29.8
1980 ......... 50.1
1981 ......... -5.8 7.1%*
1982 ......... 17.6 13.0
1983 ......... 26.1 8.9
1984 ......... -2.0 10.9
1985 ......... 33.4 8.2
1986 ......... 17.3 6.6 35.9%* 29.1%*
1987 ......... 7.5 6.6 7.3 -0.9 4.7%*
1988 ......... 22.4 7.3 1.1 13.3 9.7
1989 ......... 25.6 9.2 43.5 25.8 5.1
1990 ......... -8.1 8.2 8.2 0.3 -1.1
1991 ......... 37.9 6.2 86.9 41.3 24.5
1992 ......... 3.2 3.6 -3.2 -2.8 12.3
1993 ......... 24.8 3.0 16.8 12.3 23.2
1994 ......... -2.1 4.0 -3.8 -8.0 -2.8
</TABLE>
<TABLE>
<CAPTION>
GROWTH
YEAR ENDING CONSERV. GROWTH INTERMEDIATE QUALITY AND EQUITY
DECEMBER 31 GLOBAL INVESTORS INVESTORS GOVT. SECURITIES BOND INCOME INDEX
<S> <C> <C> <C> <C> <C> <C> <C>
1977 .........
1978 .........
1979 .........
1980 .........
1981 .........
1982 .........
1983 .........
1984 .........
1985 .........
1986 .........
1987 ......... -13.3%*
1988 ......... 10.9
1989 ......... 26.7 3.1%* 4.0%*
1990 ......... -6.1 6.3 10.7
1991 ......... 30.5 19.8 48.8 12.1%*
1992 ......... -0.5 5.6 4.9 5.5
1993 ......... 32.1 10.8 15.3 10.6 -0.5%* -0.3%*
1994 ......... 5.2 -4.1 -3.2 -4.4 -5.1 -0.6 1.1*
<FN>
*UNANNUALIZED FROM THE INCEPTION DATE DESCRIBED IN THE PROSPECTUS THROUGH
THE END OF THE CALENDAR YEAR INDICATED.
</TABLE>
A-5
<PAGE>
APPENDIX B
DESCRIPTION OF BOND RATINGS
Bonds are considered to be "investment grade" if they are in one of the top
four ratings.
S&P's ratings are as follows:
o Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
o Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
o Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher
rated categories.
o Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than in higher rated categories.
o Debt rated BB, B, CCC, CC or C is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse debt conditions.
o The rating C1 is reserved for income bonds on which no interest is
being paid.
o Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Moody's ratings are as follows:
o Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
o Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
o Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment some time in the
future.
o Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
B-1
<PAGE>
o Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
o Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
o Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
o Bonds which are rated Ca represent obligations which are speculative to
a high degree. Such issues are often in default or have other marked
shortcomings.
o Bonds which are rated C are the lowest class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies modifiers to each rating classification from Aa through B to
indicate relative ranking within its rating categories. The modifier "1"
indicates that a security ranks in the higher end of its rating category; the
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates
that the issue ranks in the lower end of its rating category.
B-2
<PAGE>
THE HUDSON RIVER TRUST
1345 Avenue of the Americas -- New York, New York 10105
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1995
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with The Hudson River Trust (Trust) Prospectus dated May
1, 1995 and retained for future reference.
A copy of the Prospectus to which this Statement of Additional Information
relates is available at no charge by writing the Trust at the above address.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
General Information and History ........................................ 2
Investment Restrictions of the Portfolios .............................. 4
Description of Certain Securities in Which the Portfolios May Invest .. 6
Management of the Trust ................................................ 21
Investment Advisory and Other Services ................................. 26
Brokerage Allocation ................................................... 29
Trust Expenses and Other Charges ....................................... 31
Purchase and Pricing of Securities ..................................... 31
Certain Tax Considerations ............................................. 33
Portfolio Performance .................................................. 34
Other Services ......................................................... 36
Financial Statements ................................................... 38
Appendix A--Description of Commercial Paper Ratings .................... A-1
</TABLE>
-----------------------------------------------------------------------------
HRT-SAI 103 (5/95) Copyright 1995. The Hudson River Trust. All rights
reserved. Catalog No. 126491
<PAGE>
GENERAL INFORMATION AND HISTORY
THE TRUST
The Hudson River Trust is an open-end management investment company--a type
of company commonly known as a "mutual fund." It is registered as such under
the Investment Company Act of 1940, as amended (Investment Company Act).
Originally organized as a Maryland corporation, the Trust's operations
commenced on March 22, 1985. On July 10, 1987, the Trust was formed as a
Massachusetts business trust. The Trust continuously offers its shares
exclusively to separate accounts of insurance companies in connection with
variable life insurance contracts and variable annuity certificates and
contracts (collectively, Contracts). Currently, the Trust's shareholders are
separate accounts of The Equitable Life Assurance Society of the United
States (Equitable), separate accounts of Equitable Variable Life Insurance
Company (Equitable Variable), a wholly-owned subsidiary of Equitable, a
separate account of Integrity Life Insurance Company, a separate account of
American Franklin Life Insurance Company, a separate account of Transamerica
Occidental Life Insurance Company and a separate account of SAFECO Life
Insurance Company, all of which are insurance companies unaffiliated with
Equitable. The Trust may offer its shares to separate accounts of other
insurance companies, both affiliated and not affiliated with Equitable. As of
March 31, 1995, Equitable and Equitable Variable owned approximately 99.5% of
the Trust's outstanding shares and, as a result, may be deemed to be control
persons with respect to the Trust.
As a "series" type of mutual fund, the Trust issues separate series of shares
of beneficial interest, each of which represents a separate portfolio
(Portfolio) of investments. Each Portfolio resembles a separate fund issuing
a separate class of stock. The Common Stock and Money Market Portfolios are
the successors to Separate Accounts I and II of Equitable Variable. (See
"Description of Reorganization and Other Matters"). The Balanced and
Aggressive Stock Portfolios received their initial funding on January 27,
1986 from Equitable Variable. The High Yield Portfolio received its initial
funding on January 2, 1987. The Global Portfolio received its initial funding
on August 27, 1987. The Conservative Investors and Growth Investors
Portfolios received their initial funding on October 2, 1989. The
Intermediate Government Securities Portfolio (Government Portfolio) received
its initial funding on April 1, 1991. The Quality Bond and Growth and Income
Portfolios received their initial funding on October 1, 1993. The Equity
Index Portfolio received its initial funding on March 1, 1994. The
International Portfolio received its initial funding on April 3, 1995.
Because of current Federal securities law requirements, the Trust expects
that its shareholders will offer to owners of the Contracts (Contractowners)
the opportunity to instruct them as to how shares allocable to their
Contracts will be voted with respect to certain matters, such as approval of
investment advisory agreements. As of March 31, 1995, to the Trust's
knowledge, no Contractowners other than those set forth below owned Contracts
entitling such persons to give voting instructions regarding more than 5% of
the outstanding shares of a Portfolio.
<TABLE>
<CAPTION>
GOVERNMENT QUALITY BOND EQUITY INDEX GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- ------------------------- ------------------------ ------------------------
UNITS % OF UNITS % OF UNITS % OF UNITS % OF
OWNED PORTFOLIO OWNED PORTFOLIO OWNED PORTFOLIO OWNED PORTFOLIO
--------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Boatmen's Trust Co.* 10,568,423 69.49
Equitable .......... 3,535,563 10.08
Mars Inc. .......... 2,592,388 17.05 2,797,041 63.51
Eugene Mercy, Jr. . 322,644 5.43
</TABLE>
---------------
* Boatmen's Trust Co., Trustee under Master Trust Agreement for SBC
Communications, Inc. Deferred Compensation Plans and other Executive Benefit
Plans.
The principal addresses of Boatmen's Trust Co., Equitable, Mars Inc. and
Eugene Mercy, Jr. are 175 East Houston Street, San Antonio, Texas; 787
Seventh Avenue, New York, New York; 6885 Elm Street, McLean, Virginia; and
1111 Park Avenue, New York, New York, respectively.
Were such a Contractowner's funds withdrawn from the Trust or transferred to
a different Portfolio at the Contractowner's request, the Trust could be
forced to sell portfolio securities at disadvantageous prices.
2
<PAGE>
LEGAL CONSIDERATIONS
Under Massachusetts law, annual election of Trustees is not required, and, in
the normal course, the Trust does not expect to hold annual meetings of
shareholders. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a
majority of the Trustees holding office have been elected by shareholders, at
which time the Trustees then in office will call a shareholders' meeting for
the election of Trustees. Pursuant to the procedures set forth in Section
16(c) of the Investment Company Act, shareholders of record of not less than
two-thirds of the outstanding shares of the Trust may remove a Trustee by a
vote cast in person or by proxy at a meeting called for that purpose.
Except as set forth above, the Trustees shall continue to hold office and may
appoint successor Trustees. Voting rights are not cumulative, so that the
holders of more than 50% of the shares voting in the election of Trustees
can, if they choose to do so, elect all the Trustees of the Trust, in which
event the holders of the remaining shares will be unable to elect any person
as a Trustee. Amendments to the Declaration of Trust of the Trust generally
require the affirmative vote of a majority of the outstanding shares of the
Trust.
The shares of each Portfolio, when issued, will be fully paid and
non-assessable and will have no preference, preemptive, conversion, exchange
or similar rights.
Under Massachusetts law, in certain circumstances shareholders may be held
personally liable as partners for the obligations of a business trust such as
the Trust. The shareholders of the Trust are the insurance companies whose
separate accounts invest in it. The Trust's Declaration of Trust contains
provisions designed to protect shareholders from such liability to the extent
of the Trust's assets. As a result, the risk of personal liability for the
insurance company shareholders is remote.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he or
she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his or her office. The Declaration of Trust permits the Trust to purchase
and maintain on behalf of the Trustees insurance against certain liabilities.
DESCRIPTION OF REORGANIZATION AND OTHER MATTERS
The following transactions, referred to as the Reorganization, were effected
simultaneously on March 22, 1985, pursuant to an Agreement and Plan of
Reorganization dated November 20, 1984, entered into by Equitable Variable,
Separate Accounts I and II, and The Hudson River Fund, Inc. (the Fund), the
predecessor of the Trust.
Equitable Variable divided Separate Account I into two divisions, a Common
Stock Division and a Money Market Division. Separate Account II was combined
with Separate Account I (the Continuing Separate Account). Rather than
investing directly, the Common Stock Division and the Money Market Division
of the Continuing Separate Account invested in shares of the Fund, which, in
turn, invested in diversified portfolios of common stock or money market
investments.
In order for the Fund to commence operations, all the investment assets of
Separate Accounts I and II (together with any related liabilities) were
transferred to the Common Stock and Money Market Portfolios of the Fund,
respectively, in exchange for shares in those Portfolios having an equivalent
aggregate net asset value.
On September 30, 1987, all of the Fund's assets and liabilities were
transferred to the Trust, pursuant to an Agreement and Plan of Reorganization
(the Plan) between the Fund and the Trust. The Plan was proposed to
shareholders in order to permit greater operating flexibility and
efficiencies. The Plan provided for changes of domicile (from Maryland to
Massachusetts) and of form of organization (from a corporation to a business
trust). However, in all other material respects the Trust was identical to
the Fund immediately prior to the execution of the Plan.
3
<PAGE>
INVESTMENT RESTRICTIONS OF THE PORTFOLIOS
FUNDAMENTAL RESTRICTIONS
The following restrictions apply to all of the Portfolios and are
fundamental. Unless permitted by law, they will not be changed for any
Portfolio without a vote of that Portfolio's shareholders.
None of the Portfolios will:
o underwrite securities issued by other persons except to the extent that,
in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under certain Federal securities laws;
o make short sales of securities, except when it has, by reason of
ownership of other securities, the right to obtain securities of equivalent
kind and amount that will be held so long as it is in a short position;
o issue senior securities;
o purchase real estate or mortgages; however, the Portfolios may, as
appropriate and consistent with their investment policies and other
investment restrictions, buy securities of issuers which engage in real
estate operations and securities which are secured by interests in real
estate (including partnership interests and shares of real estate investment
trusts), and may hold and sell real estate acquired as a result of ownership
of such securities;
o purchase any security on margin or borrow money, except that this
restriction shall not apply to borrowing from banks for temporary purposes,
to the pledging of assets to banks in order to transfer funds for various
purposes as required without interfering with the orderly liquidation of
securities in a Portfolio (but not for leveraging purposes), to margin
payments or pledges in connection with options, futures contracts, options on
futures contracts, forward contracts or options on foreign currencies or,
with respect to the Quality Bond Portfolio, to transactions in interest rate
swaps, caps and floors; or
o make loans (including lending cash or securities), except that this
restriction shall not apply to the High Yield and Government Portfolio.
Additionally, each of the other Portfolios may make loans of portfolio
securities not exceeding 50% of the value of that Portfolio's total assets.
This restriction does not prevent a Portfolio from purchasing debt
obligations in which a Portfolio may invest consistent with its investment
policies, or from buying government obligations, short-term commercial paper,
or publicly traded debt, including bonds, notes, debentures, certificates of
deposit, and equipment trust certificates, nor does this restriction apply to
loans made under insurance policies or through entry into repurchase
agreements to the extent they may be viewed as loans.
Each Portfolio, except as noted below, elects not to "concentrate"
investments in an industry, as that concept is defined under applicable
Federal securities laws. In general, this means that no Portfolio will make
an investment in an industry if that investment would make the Portfolio's
holding in that industry exceed 25% of the Portfolio's assets. However, this
restriction does not apply to investments by the Money Market Portfolio in
certificates of deposit or securities issued and guaranteed by domestic
banks. Furthermore, the U.S. Government, its agencies and instrumentalities
are not considered members of any industry. Each Portfolio intends to be
"diversified," as that term is defined under applicable Federal securities
laws. In general, this means that no Portfolio will make an investment
unless, when considering all its other investments, 75% of the value of the
Portfolio's assets would consist of cash, cash items, U. S. Government
securities, securities of other investment companies and other securities.
For the purposes of this restriction, "other securities" are limited for any
one issuer to not more than 5% of the value of the Portfolio's total assets
and to not more than 10% of the issuer's outstanding voting securities. As a
matter of operating policy, each Portfolio will not consider repurchase
agreements to be subject to the above-stated 5% limitation if all the
collateral underlying the repurchase agreements are U.S. Government
securities and such repurchase agreements are fully collateralized.
4
<PAGE>
Further, as a matter of operating policy, the Money Market Portfolio will
invest no more than 5% of the value of its total assets in securities of any
one issuer, other than U.S. Government securities, except that the Money
Market Portfolio may invest up to 25% of its total assets in First Tier
Securities (as defined in Rule 2a-7 under the Investment Company Act) of a
single issuer for a period of up to three business days after the purchase of
such security. Further, as a matter of operating policy, the Money Market
Portfolio will not invest more than (i) the greater of 1% of its total assets
or $1,000,000 in Second Tier Securities (as defined in Rule 2a-7 under the
Investment Company Act) of a single issuer and (ii) 5% of the Money Market
Portfolio's total assets, when acquired, in Second Tier Securities.
These policies of the Portfolios with respect to concentration and
diversification will not be changed for any Portfolio without a vote of that
Portfolio's shareholders, unless permitted by law.
NON-FUNDAMENTAL RESTRICTIONS
The following investment restrictions apply to all of the Portfolios, but are
not fundamental. They may be changed for any Portfolio without a vote of that
Portfolio's shareholders.
None of the Portfolios will:
o invest more than 15% of its assets in securities restricted as to
disposition under Federal securities laws, or securities otherwise considered
illiquid or not readily marketable, including repurchase agreements having a
maturity of more than seven days; however, this restriction will not apply to
securities sold pursuant to Rule 144A under the Securities Act of 1933, so
long as such securities meet liquidity guidelines to be established by the
Trust's Board of Trustees;
o trade in foreign exchange (except transactions incidental to the
settlement of purchases or sales of securities for a Portfolio); however, the
High Yield, Global, Quality Bond, Growth and Income, Conservative Investors,
Balanced, Common Stock, Aggressive Stock, Growth Investors and International
Portfolios may trade in foreign exchange, provided the amount of foreign
exchange underlying a Portfolio's currency hedging transactions does not
exceed 10% of such Portfolio's assets;
o acquire securities of any company that is a securities broker or dealer,
a securities underwriter, an investment adviser of an investment company, or
an investment adviser registered under the Investment Advisers Act of 1940
(other than any such company that derives no more than 15% of its gross
revenues from securities related activities), except the Portfolios (other
than the Money Market Portfolio) may purchase bank, trust company, and bank
holding company stock, and except that each of the Portfolios may invest, in
accordance with Rule 12d3-1 under the Investment Company Act, up to 5% of its
total assets in any such company provided that it owns no more than 5% of the
outstanding equity securities of any class plus 10% of the outstanding debt
securities of such company; or
o make an investment in order to exercise control or management over a
company.
In addition, none of the Portfolios will invest more than 5% of its assets in
the securities of any one investment company, own more than 3% of any one
investment company's outstanding voting securities, or have total holdings of
investment company securities in excess of 10% of the value of the
Portfolio's assets.
ADDITIONAL INVESTMENT RESTRICTION THAT APPLIES TO THE COMMON STOCK, BALANCED,
AGGRESSIVE STOCK AND CONSERVATIVE INVESTORS PORTFOLIOS
The Common Stock, Balanced, Aggressive Stock and Conservative Investors
Portfolios will operate under the general investment restrictions described
above. In addition, they will not:
o acquire securities of investment companies not registered under the
Investment Company Act.
5
<PAGE>
ADDITIONAL INVESTMENT RESTRICTIONS THAT APPLY TO THE MONEY MARKET PORTFOLIO
The Money Market Portfolio will operate under the general investment
restrictions described above. In addition, it will not:
o invest more than 10% of its assets in securities restricted as to
disposition under Federal securities laws, or securities otherwise considered
illiquid or not readily marketable, including repurchase agreements having a
maturity of more than seven days; however, this restriction will not apply to
securities sold pursuant to Rule 144A under the Securities Act of 1933, so
long as such securities meet liquidity guidelines to be established by the
Trust's Board of Trustees;
o purchase oil and gas interests;
o purchase or write puts or calls (options); or
o purchase equity securities, voting securities other than securities of
registered investment companies with investment policies not substantially
broader than those of the Portfolio (subject to the above percentage
limitations) or local or state government securities.
The Money Market Portfolio will invest only in funds whose investment
policies are similar to or narrower than those of the Portfolio. It is
expected that such investments would be made in funds designed for
institutional investors such as the Portfolio and would be used for amounts
which might otherwise be left uninvested because they do not meet the
minimums necessary for other permitted investments or to take advantage of
higher yields available at that time in such funds.
ADDITIONAL INVESTMENT RESTRICTION THAT APPLIES TO THE HIGH YIELD AND GROWTH
INVESTORS PORTFOLIOS
The High Yield and Growth Investors Portfolios will operate under the general
investment restrictions described above. In addition, each will not:
o invest more than 10% of its total assets in (i) fixed income securities
which are rated lower than B3 by Moody's Investors Service, Inc. (Moody's) or
B- by Standard & Poor's Corporation (S&P) or are unrated, and (ii) money
market instruments of any entity which has an outstanding issue of unsecured
debt that is rated lower than B3 by Moody's or B- by S&P, or is unrated;
however this restriction will not apply to (i) fixed income securities which,
in the opinion of the Trust's investment adviser, have similar
characteristics to securities which are rated B3 or higher by Moody's or B-
or higher by S&P, or (ii) money market instruments of any entity that has an
unsecured issue of outstanding debt which, in the opinion of the Trust's
investment adviser, has similar characteristics to securities which are so
rated.
DESCRIPTION OF CERTAIN SECURITIES IN WHICH THE PORTFOLIOS MAY INVEST
REPURCHASE AGREEMENTS
All of the Portfolios, except the Equity Index Portfolio, may enter into
repurchase agreements. Under a repurchase agreement, underlying debt
instruments are acquired for a relatively short period (usually not more than
one week and never more than a year) subject to an obligation of the seller
to repurchase and the Portfolio to resell the instrument at a fixed price and
time, thereby determining the yield during the Portfolio's holding period.
This results in a fixed rate of return insulated from market fluctuation
during that holding period.
Repurchase agreements may have the characteristics of loans by the Portfolio.
During the term of the repurchase agreement, the Portfolio retains the
security subject to the repurchase agreement as collateral securing the
seller's repurchase obligation, continually monitors on a daily basis the
market value of the security subject to the agreement and requires the seller
to deposit with the Portfolio collateral equal to any amount by which the
market value of the security subject to the repurchase agreement falls below
the resale amount provided under the repurchase agreement. A Portfolio enters
into repurchase agreements with respect to United States Government
obligations, certificates of deposit, or bankers' acceptances with registered
broker-dealers, United States Government securities dealers or domestic banks
whose
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creditworthiness is determined to be satisfactory by the Trust's investment
adviser, Alliance Capital Management L.P. (Alliance), pursuant to guidelines
adopted by the Board of Trustees. Generally, a Portfolio does not invest in
repurchase agreements maturing in more than seven days. The staff of the
Securities and Exchange Commission (SEC) currently takes the position that
repurchase agreements maturing in more than seven days are illiquid
securities. No Portfolio will enter into a repurchase agreement maturing in
more than seven days if as a result more than 15% of the Portfolio's net
assets (10% for the Money Market Portfolio) would be invested in "illiquid
securities."
If a seller under a repurchase agreement were to default on the agreement and
be unable to repurchase the security subject to the agreement, the Portfolio
would look to the collateral underlying the seller's repurchase agreement,
including the security subject to the repurchase agreement, for satisfaction
of the seller's obligation to the Portfolio. In the event a repurchase
agreement is considered a loan and the seller defaults, the Portfolio might
incur a loss if the value of the collateral declines and may incur
disposition costs in liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller, realization on the
collateral may be delayed or limited and a loss may be incurred.
FORWARD COMMITMENTS AND WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Portfolios may enter into forward commitments for the purchase or sale of
securities and may purchase or sell securities on a "when-issued" or "delayed
delivery" basis. Forward commitments and when-issued or delayed delivery
transactions arise when securities are purchased by a Portfolio with payment
and delivery taking place in the future in order to secure what is considered
to be an advantageous price or yield to the Portfolio at the time of entering
into the transaction. However, the price of or yield on a comparable security
available when delivery takes place may vary from the price of or yield on
the security at the time that the forward commitment or when-issued or
delayed delivery transaction was entered into. Agreements for such purchases
might be entered into, for example, when a Portfolio anticipates a decline in
interest rates and is able to obtain a more advantageous price or yield by
committing currently to purchase securities to be issued later. When a
Portfolio purchases securities on a forward commitment, when-issued or
delayed delivery basis, it does not pay for the securities until they are
received, and the Portfolio is required to create a segregated account with
the Trust's custodian and to maintain in that account cash, U.S. Government
securities or other liquid high-grade debt obligations in an amount equal to
or greater than, on a daily basis, the amount of the Portfolio's forward
commitments, when-issued or delayed delivery commitments.
A Portfolio will only enter into forward commitments and make commitments to
purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities. However, the Portfolio may
sell these securities before the settlement date if it is deemed advisable as
a matter of investment strategy. Forward commitments and when-issued and
delayed delivery transactions are generally expected to settle within three
months from the date the transactions are entered into, although the
Portfolio may close out its position prior to the settlement date by entering
into a matching sale transaction.
Although none of the Portfolios intends to make such purchases for
speculative purposes and each Portfolio intends to adhere to the policies of
the SEC, purchases of securities on such bases may involve more risk than
other types of purchases. For example, by committing to purchase securities
in the future, a Portfolio subjects itself to a risk of loss on such
commitments as well as on its portfolio securities. Also, a Portfolio may
have to sell assets which have been set aside in order to meet redemptions.
In addition, if a Portfolio determines it is advisable as a matter of
investment strategy to sell the forward commitment or when-issued or delayed
delivery securities before delivery, that Portfolio may incur a gain or loss
because of market fluctuations since the time the commitment to purchase such
securities was made. Any such gain or loss would be treated as a capital gain
or loss and would be treated for tax purposes as such. When the time comes to
pay for the securities to be purchased under a forward commitment or on a
when-issued or delayed delivery basis, a Portfolio will meet its obligations
from the then available cash flow or the sale of securities, or, although it
would not normally expect to do so, from the sale of the forward commitment
or when-issued or delayed delivery securities themselves (which may have a
value greater or less than a Portfolio's payment obligation).
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WARRANTS
All the Portfolios, except the Money Market Portfolio, may purchase warrants
and similar rights, which are rights to purchase securities at specific
prices valid for a specific period of time. Their prices do not necessarily
move parallel to the prices of the underlying securities, and warrantholders
receive no dividends and have no voting rights or rights with respect to the
assets of an issuer. Warrants cease to have value if not exercised prior to
the expiration date.
FOREIGN SECURITIES
Each Portfolio, except the Government and Equity Index Portfolios, may invest
in foreign securities. Each of the Common Stock, Balanced, Quality Bond and
Aggressive Stock Portfolios has the discretion to invest a portion of its
assets in foreign securities. Generally, this amount will not exceed 20% of
each Portfolio's total assets. The Money Market Portfolio may invest up to
20% of its assets in foreign money market instruments denominated in U.S.
dollars. The Conservative Investors Portfolio may invest up to 15% of its
assets in foreign securities, the Growth Investors Portfolio may invest up to
30% of its assets in foreign securities, and the Growth and Income Portfolio
may invest up to 25% of its assets in foreign securities. The High Yield
Portfolio may purchase foreign securities, provided the value of issues
denominated in foreign currency shall not exceed 20% of the Portfolio's total
assets and the value of issues denominated in United States currency shall
not exceed 25% of the Portfolio's total assets.
No percentage limitation applies to investments in foreign securities by the
Global Portfolio or the International Portfolio.
Foreign securities involve currency risks. The value of a foreign security
denominated in foreign currency changes with variations in the exchange
rates. Fluctuations in exchange rates may also affect the earning power and
asset value of the foreign entity issuing a security, even one denominated in
U.S. dollars. Dividend and interest payments will be repatriated based on the
exchange rate at the time of disbursement, and restrictions on capital flows
may be imposed.
Foreign securities may be subject to foreign government taxes which reduce
their attractiveness. Other risks of investing in such securities include
political or economic instability in the country involved, the difficulty of
predicting international trade patterns and the possibility of imposition of
exchange controls. The prices of such securities may be more volatile than
those of domestic securities. In addition, there may be less publicly
available information about a foreign issuer than about a domestic issuer.
Foreign issuers generally are not subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
issuers. There is generally less regulation of stock exchanges, brokers,
banks and listed companies abroad than in the United States, and settlements
may be slower and may be subject to failure. With respect to certain foreign
countries, there is a possibility of expropriation of assets or
nationalization, imposition of withholding taxes on dividend or interest
payments, difficulty in obtaining and enforcing judgments against foreign
entities or diplomatic developments which could affect investment in these
countries. Losses and other expenses may be incurred in converting between
various currencies in connection with purchases and sales of foreign
securities.
For many foreign securities, there are U.S. dollar-denominated American
Depository Receipts (ADRs) which are traded in the United States on exchanges
or over-the-counter, are issued by domestic banks or trust companies and for
which market quotations are readily available. ADRs do not lessen the foreign
exchange risk inherent in investing in the securities of foreign issuers.
However, by investing in ADRs rather than directly in stock of foreign
issuers, the Portfolios will avoid currency risks which might occur during
the settlement period for either purchases or sales. A Portfolio may purchase
foreign securities directly, as well as through ADRs.
MORTGAGE-BACKED SECURITIES
Government National Mortgage Association (GNMA) certificates are
mortgage-backed securities representing part ownership of a pool of mortgage
loans. These loans, issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations, are either insured by the Federal
Housing
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Administration or the Farmer's Home Administration or guaranteed by the
Veterans Administration. A "pool" or group of such mortgages is assembled and
after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and principal
on each mortgage is guaranteed by GNMA and backed by the full faith and
credit of the U.S. Treasury. GNMA certificates differ from bonds in that
principal is paid back monthly by the borrower over the term of the loan
rather than returned in a lump sum at maturity. GNMA certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the certificate.
In addition to GNMA certificates, a Portfolio (other than the Equity Index
Portfolio) may invest in mortgage-backed securities issued by the Federal
National Mortgage Association (FNMA) and by the Federal Home Loan Mortgage
Corporation (FHLMC). FNMA, a federally chartered and privately- owned
corporation, issues mortgage-backed pass-through securities which are
guaranteed as to timely payment of principal and interest by FNMA. FHLMC, a
corporate instrumentality of the United States whose stock is owned by the
Federal Home Loan Banks, issues participation certificates which represent an
interest in mortgages from FHLMC's portfolio. FHLMC guarantees the timely
payment of interest and the ultimate collection of principal. Securities
guaranteed by FNMA and FHLMC are not backed by the full faith and credit of
the United States. If other fixed or variable rate pass-through securities
issued by the United States Government or its agencies or instrumentalities
are developed in the future, the Portfolios reserve the right to invest in
them.
The Portfolios (other than the Equity Index Portfolio) may also invest in
other types of mortgage-backed securities issued by governmental or
non-governmental entities, such as banks and other mortgage lenders. These
other instruments include collateralized mortgage obligations (CMOs),
mortgage pass- through bonds and mortgage-backed bonds. Non-governmental
securities may offer a higher yield but may also be subject to greater price
fluctuation and risk than governmental securities.
CMOs are obligations fully collateralized directly or indirectly by a pool of
mortgages on which payments of principal and interest are passed through to
the holders of the CMOs on the same schedule as they are received, although
not necessarily on a pro rata basis. In reliance on an SEC interpretation,
investments in certain qualifying CMOs, including CMOs that have elected to
be treated as Real Estate Mortgage Investment Conduits (REMICs), are not
subject to the Investment Company Act's limitation on acquiring interests in
other investment companies. In order to be able to rely on the SEC's
interpretation, the CMOs and REMICs must be unmanaged, fixed-asset issuers
that (i) invest primarily in mortgage- backed securities, (ii) do not issue
redeemable securities, (iii) operate under general exemptive orders exempting
them from all provisions of the Investment Company Act, and (iv) are not
registered or regulated under the Investment Company Act as investment
companies. To the extent that a Portfolio selects CMOs or REMICs that do not
meet the above requirements, the Portfolio may not invest more than 10% of
its assets in all such entities and may not acquire more than 3% of the
voting securities of any single such entity. Mortgage-backed bonds are
general obligations of the issuer fully collateralized directly or indirectly
by a pool of mortgages. The mortgages serve as collateral for the issuer's
payment obligations on the mortgage-backed bonds but interest and principal
payments on the mortgages are not passed through directly (as with GNMA, FNMA
and FHLMC pass-through securities) or on a modified basis (as with CMOs).
Accordingly, a change in the rate of prepayments on the pool of mortgages
could change the effective maturity of a CMO but not the effective maturity
of a mortgage-backed bond (although, like many bonds, mortgage-backed bonds
may be callable by the issuer prior to maturity). It is expected that
governmental, government-related, or private entities may create mortgage
loan pools and other mortgage-backed securities offering mortgage
pass-through and mortgage-collateralized investments in addition to those
described above.
Commercial banks, savings and loans, private mortgage insurance companies,
mortgage bankers, and other secondary market issuers also create pass-through
pools of conventional residential mortgage loans. In addition, such issuers
may be the originators and/or servicers of the underlying mortgage loans as
well as the guarantors of the mortgage-backed securities. Pools created by
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because of the absence of direct or
indirect government or agency guarantors. Timely payment of interest and
principal with respect
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to these pools may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance, and letters of
credit. The insurance, guarantees, and creditworthiness of the issuers
thereof will be considered in determining whether a mortgage-backed security
meets a Portfolio's investment quality standards. There is no assurance that
the private insurers or guarantors can meet their obligations under the
insurance policies or guarantee arrangements.
Each Portfolio (other than the Equity Index Portfolio) may buy
mortgage-backed securities without insurance or guarantees, if the investment
adviser determines that the securities meet the Portfolio's quality
standards. The investment adviser will, consistent with each Portfolio's
investment objectives, policies, and quality standards, consider making
investments in new types of mortgage-backed securities as such securities are
developed and offered to investors.
Prepayment of mortgages underlying mortgage-backed securities may reduce
their current yield and total return. During periods of declining interest
rates, such prepayments can be expected to accelerate and the Portfolios
would be required to reinvest the proceeds at the lower interest rates then
available. In addition, prepayments of mortgages which underlie securities
purchased at a premium could result in capital losses because the premium may
not have been fully amortized at the time the obligation is repaid. The
Portfolios do not intend to invest in these securities unless the Trust's
adviser believes that the potential benefits outweigh the risks.
ASSET-BACKED SECURITIES
The Portfolios (other than the Equity Index Portfolio) may purchase
asset-backed securities (unrelated to first mortgage loans) that represent
fractional interests in pools of retail installment loans, both secured (such
as Certificates for Automobile Receivables) and unsecured, leases or
revolving credit receivables both secured and unsecured (such as Credit Card
Receivable Securities). These assets are generally held by a special purpose
trust and payments of principal and interest or interest only are passed
through or paid through monthly or quarterly to certificate holders and may
be guaranteed up to certain amounts by letters of credit issued by a
financial institution affiliated or unaffiliated with the trustee or
originator of the trust.
Underlying automobile sales contracts, leases or credit card receivables are
subject to prepayment, which may reduce the overall return to certificate
holders. Nevertheless, for asset-backed securities, principal repayment rates
tend not to vary much with interest rates and the short-term nature of the
underlying car loans, leases or receivables tends to dampen the impact of any
change in the prepayment level. Certificate holders may also experience
delays in payment on the certificates if the full amounts due on underlying
sales contracts, leases or receivables are not realized by the Trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors. If consistent with its
investment objective and policies, a Portfolio may invest in other
asset-backed securities that may be developed in the future.
SECURITIES ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT OR ITS AGENCIES OR
INSTRUMENTALITIES
These securities include issues of the United States Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of Congress.
Such agencies and instrumentalities include, but are not limited to, the
National Bank for Cooperatives, each of the Federal Financing Banks, FHLMC,
the Farm Credit Banks, Federal Land Banks, FNMA, Tennessee Valley Authority,
Farm Credit System, Farm Credit System Financial Assistance Corporation,
Inter-American Development Bank, Maritime Administration, Resolution Trust
Corporation, Federal Agricultural Mortgage Corporation, Small Business
Administration, U.S. Postal Service and Washington Metropolitan Transit
Authority.
Issues of the U.S. Treasury are direct obligations of the U.S. Government and
are backed by the full faith and credit of the United States. Issues of
agencies, such as GNMA, are guaranteed by the U.S. Treasury,
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and issues of other agencies and instrumentalities, such as FNMA, are
supported by the issuing agency's or instrumentality's right to borrow from
the U.S. Treasury, at the discretion of the U.S. Treasury, or are supported
by the issuing agency's or instrumentality's own credit.
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND BANK TIME DEPOSITS
Certificates of deposit are receipts issued by a bank in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest
to the bearer of the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior to maturity.
Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for
specific merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be
as long as 270 days, most maturities are six months or less.
Bank time deposits are funds kept on deposit with a bank for a stated period
of time in an interest bearing account. At present, bank time deposits
maturing in more than seven days are not considered by management of the
Trust to be readily marketable and therefore are subject to the 15% limit on
illiquid securities.
COMMERCIAL PAPER, MASTER DEMAND NOTES AND FLOATING RATE NOTES
Commercial paper consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance their
current operations.
Variable amount master demand notes are obligations that permit the
investment of fluctuating amounts by a Portfolio, at varying rates of
interest pursuant to direct arrangements between the Portfolio, as lender,
and the borrower. These notes permit daily changes in the amounts borrowed.
The Portfolio has the right to increase the amount under the note at any time
up to the full amount provided by the note agreement, or to decrease the
amount, and the borrower may repay up to the full amount of the note without
penalty. Because variable amount master notes are direct lending arrangements
between the lender and borrower, and not generally backed by bank letters of
credit, it is not generally contemplated that such instruments will be
traded, and there is no secondary market for these notes, although they are
redeemable (and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. Therefore, the Portfolio's right to
redeem depends on the ability of the borrower to pay principal and interest
on demand. Variable amount master demand notes are valued at their face
amount (par) because of their one-day demand feature. In connection with
master demand note arrangements, the Portfolio considers earning power, cash
flow, and other liquidity ratios of the issuer. Master demand notes, as such,
are not typically rated by credit rating agencies.
Floating or variable rate notes are generally medium to long-term debt
securities, but may include short-term debt securities, issued by entities
such as commercial banks, corporations or sovereign borrowers. They are
interest bearing securities on which the coupon is adjusted periodically to
reflect money market conditions. The period at the end of which the
adjustment occurs is often called the interest reset period. The Portfolios
will buy only notes with an interest reset period of six months or less. The
option is often granted to the noteholder to require the issuer or selling
broker to redeem the issue at par prior to maturity. This option is referred
to as a put option. Notes maturing in more than seven days that do not have
such a put option, or in which more than seven days' notice is required to
exercise the put, may be deemed to be illiquid securities. There is an active
secondary market for floating or variable rate notes.
EURODOLLAR SECURITIES
Negotiable certificates of deposit and time deposits of foreign branches of
American or foreign banks payable in United States dollars are known as
Eurodollar deposits. Eurodollar securities also include
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bonds underwritten by an international syndicate and sold "at issue" to
non-U.S. investors. Such securities are not registered with the SEC or issued
domestically and are primarily traded in foreign markets. Certain risks
applicable to foreign securities apply to Eurodollar instruments. Investment
risks from these securities include future political and economic
developments, possible foreign withholding taxes on interest, possible
seizure of foreign deposits, or the possible establishment of exchange
controls affecting payment on these securities. See "Foreign Securities,"
above, for additional information about foreign securities. In addition to
those risks, foreign branches of American and foreign banks have extensive
government regulation which may limit both the amount and type of loans and
interest rates. In addition, the banking industry's profitability is closely
linked to prevailing money market conditions for financing lending
operations. Both general economic conditions and credit risks play an
important part in the operations of the industry. American banks are required
to maintain reserves, are limited in how much they can loan a single borrower
and are subject to other regulations to promote financial soundness. Not all
of these laws and regulations apply to foreign branches of American and
foreign banks. In addition, foreign countries have accounting and reporting
principles that differ from those in the United States.
HIGH YIELD DEBT SECURITIES
The High Yield Portfolio, as described in the Prospectus, intends to invest
primarily in debt securities offering high current income. The Growth
Investors Portfolio may invest up to 15% of its total assets in such high
yield debt securities, and the Growth and Income Portfolio may invest up to
30% of its total assets in high yield convertible securities. High yield
securities may be medium and lower quality securities rated, for example, BB
or B by one of the nationally recognized statistical rating organizations
(NRSROs) or may be unrated but of similar investment quality as determined by
the Portfolio's investment adviser. These securities are also known as "junk
bonds." The market values of such high yield securities tend to reflect
individual corporate developments to a greater extent than higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such medium and lower rated securities also tend to be more
sensitive to real or perceived adverse economic conditions than higher rated
securities.
Companies that issue high yield securities are often highly leveraged and may
not have available to them more traditional methods of financing. Therefore,
the risk associated with acquiring the securities of such issuers generally
is greater than is the case with higher rated securities. For example, during
an economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of high yield securities may experience "financial stress"
and may not have sufficient revenues to meet their payment obligations. Such
an issuer's ability to service its obligations may also be adversely affected
by specific corporate developments, or the issuer's inability to meet
specific projected business forecasts, or the unavailability of additional
financing. Risk of loss due to default by the issuer is also significantly
greater for the holders of high yield securities because such securities are
generally unsecured and are generally subordinated to the debts of other
creditors of the issuer.
The High Yield, Growth and Income and Growth Investors Portfolios may have
difficulty disposing of certain high yield securities, particularly those
perceived to have a high credit risk, because there may be a thin trading
market for such securities. Because not all dealers maintain markets in all
high yield securities, there is no established retail secondary market for
certain of these securities, and the Portfolios anticipate that such
securities could be sold only to a limited number of dealers or institutional
investors. Moreover, to the extent a secondary trading market for high yield
securities does exist, it is generally less liquid than the secondary market
for higher rated securities. The lack of a highly liquid secondary market for
certain high yield securities may have an adverse impact on the market price
for such securities and each Portfolio's ability to dispose of particular
issues when necessary to meet the Portfolio's liquidity needs or in response
to a specific economic event such as a deterioration in the creditworthiness
of the issuer. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of high
yield securities, especially in a thinly traded market. The lack of a liquid
secondary market for certain securities may also make it more difficult for
the Portfolios to obtain accurate market quotations for purposes of valuing
certain of its high yield portfolio securities. Market quotations are
generally available on many high yield issues only from a limited number of
dealers and may not necessarily represent firm bids of such dealers or prices
for actual sales.
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In addition, the market for high yield securities, at its current size, has
not weathered a major economic recession, and one cannot be certain what
effect such a recession might have on such securities. It is possible,
however, that a recession could severely disrupt the market for such medium
and lower quality securities and may have an adverse impact on the value of
such securities. In addition, it is possible that an economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest on such securities.
From time to time, proposals have been discussed regarding new legislation
designed to limit the use of certain high yield securities by issuers in
connection with leveraged buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities. Such proposals if
enacted into law could: (i) reduce the market for such securities generally;
(ii) negatively affect the financial condition of issuers of high yield
securities by removing or reducing a source of future financing; and (iii)
negatively affect the value of specific high yield issues and the high yield
market in general.
Factors adversely impacting the market value of high yield securities may
adversely impact each Portfolio's net asset value. In addition, each
Portfolio may incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal or interest on its
portfolio securities. The Portfolios will not rely primarily on ratings of
NRSROs, but rather will rely on the investment adviser's judgment, analysis
and experience in evaluating the creditworthiness of an issuer. In evaluating
such securities, Alliance will take into consideration, among other things,
the issuer's financial resources, its sensitivity to economic conditions and
trends, its operating history, the quality of the issuer's management and
regulatory matters.
TRANSACTIONS IN OPTIONS, FUTURES AND FORWARD CONTRACTS
To the extent provided below, the Portfolios may enter into transactions in
options, futures and forward contracts on a variety of instruments and
indexes, in order to protect against declines in the value of portfolio
securities and increases in the cost of securities to be acquired and, in the
case of options written on securities or indexes of securities, to increase a
Portfolio's return. All the Portfolios, except the Money Market Portfolio,
are authorized to engage in futures transactions. In general, the Portfolios
will limit their use of futures contracts and options on futures contracts so
that either (i) the contracts or options thereon are for "bona fide hedging"
purposes as defined under regulations of the Commodity Futures Trading
Commission (CFTC) or (2) if for other purposes, no more than 5% of the
liquidation value of each Portfolio's total assets will be used for initial
margin or option premiums required to establish non-hedging positions. These
instruments will be used for hedging purposes and not for speculation or to
leverage the Portfolios.
OPTIONS ON SECURITIES
Writing Call Options. Every Portfolio, except the Money Market and Equity
Index Portfolios, may write (sell) covered call options on its portfolio
securities in an attempt to enhance investment performance. A call option is
a contract which gives the purchaser of the option (in return for a premium
paid) the right to buy, and the writer of the option (in return for a premium
received) the obligation to sell, the underlying security at the exercise
price at any time prior to the expiration of the option, regardless of the
market price of the security during the option period. A covered call option
is, for example, a call option written on a security that is owned by the
writer (or on a security convertible into such a security without additional
consideration) throughout the option period.
A Portfolio will write covered call options both to reduce the risks
associated with certain of its investments and to increase total investment
return through the receipt of premiums. In return for the premium income, the
Portfolio will give up the opportunity to profit from an increase in the
market price of the underlying security above the exercise price so long as
its obligations under the contract continue, except insofar as the premium
represents a profit. Moreover, in writing the call option, the Portfolio will
retain the risk of loss should the price of the security decline. The premium
is intended to offset that loss in whole or in part. Unlike the situation in
which the Portfolio owns securities not subject to a call option, the
Portfolio, in writing call options, must assume that the call may be
exercised at any time prior to the
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expiration of its obligation as a writer, and that in such circumstances the
net proceeds realized from the sale of the underlying securities pursuant to
the call may be substantially below the prevailing market price.
A Portfolio may terminate its obligation under an option it has written by
buying an identical option. Such a transaction is called a "closing purchase
transaction." The Portfolio will realize a gain or loss from a closing
purchase transaction if the amount paid to purchase a call option is less or
more than the amount received from the sale of the corresponding call option.
Also, because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the exercise or closing out of a call option is likely to be
offset in whole or part by unrealized appreciation of the underlying security
owned by the Portfolio. When an underlying security is sold from the
Portfolio's securities portfolio, the Portfolio will effect a closing
purchase transaction so as to close out any existing covered call option on
that underlying security. A closing purchase transaction for exchange-traded
options may be made only on a national securities exchange (exchange). There
is no assurance that a liquid secondary market on an exchange will exist for
any particular option, or at any particular time, and for some options, such
as over-the-counter options, no secondary market on an exchange may exist. If
the Portfolio is unable to effect a closing purchase transaction, the
Portfolio will not sell the underlying security until the option expires or
the Portfolio delivers the underlying security upon exercise.
Writing Put Options. The writer of a put option becomes obligated to purchase
the underlying security at a specified price during the option period if the
buyer elects to exercise the option before its expiration date. A Portfolio
which writes a put option will be required to "cover" it, for example, by
depositing and maintaining in a segregated account with its custodian cash,
United States Government securities or other liquid high-grade debt
obligations having a value equal to or greater than the exercise price of the
option.
The Portfolios, except the Money Market and Equity Index Portfolios, may
write put options either to earn additional income in the form of option
premiums (anticipating that the price of the underlying security will remain
stable or rise during the option period and the option will therefore not be
exercised) or to acquire the underlying security at a net cost below the
current value (e.g., the option is exercised because of a decline in the
price of the underlying security, but the amount paid by the Portfolio,
offset by the option premium, is less than the current price). The risk of
either strategy is that the price of the underlying security may decline by
an amount greater than the premium received. The premium which a Portfolio
receives from writing a put option will reflect, among other things, the
current market price of the underlying security, the relationship of the
exercise price to that market price, the historical price volatility of the
underlying security, the option period, supply and demand and interest rates.
A Portfolio may effect a closing purchase transaction to realize a profit on
an outstanding put option or to prevent an outstanding put option from being
exercised. If a Portfolio is able to enter into a closing purchase
transaction, the Portfolio will realize a profit (or loss) from that
transaction if the cost of the transaction is less (or more) than the premium
received from the writing of the option. After writing a put option, a
Portfolio may incur a loss equal to the difference between the exercise price
of the option and the sum of the market value of the underlying security plus
the premiums received from the sale of the option.
Purchasing Options. The Portfolios, except the Money Market and Equity Index
Portfolios, may purchase put options and call options. The Portfolios may
purchase put options on securities to protect their holdings against a
substantial decline in market value. The purchase of put options on
securities will enable a Portfolio to preserve, at least partially,
unrealized gains in an appreciated security in its portfolio without actually
selling the security. In addition, the Portfolio will continue to receive
interest or dividend income on the security. The Portfolios may also purchase
call options on securities to protect against substantial increases in prices
of securities the Portfolios intend to purchase pending their ability to
invest in an orderly manner in those securities. The Portfolios may sell put
or call options they have previously purchased, which could result in a net
gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put or call
option which was bought.
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<PAGE>
SECURITIES INDEX OPTIONS
The Portfolios, except for the Money Market and Equity Index Portfolios, may
write covered put and call options and purchase call and put options on
securities indexes for the purpose of hedging against the risk of unfavorable
price movements adversely affecting the value of a Portfolio's securities or
securities it intends to purchase. Each Portfolio writes only "covered"
options. A call option on a securities index is considered covered, for
example, if, so long as the Portfolio is obligated as the writer of the call,
it holds securities the price changes of which are, in the opinion of
Alliance, expected to replicate substantially the movement of the index or
indexes upon which the options written by the Portfolio are based. A put on a
securities index written by a Portfolio will be considered covered if, so
long as it is obligated as the writer of the put, the Portfolio segregates
with its custodian cash, United States Government securities or other liquid
high-grade debt obligations having a value equal to or greater than the
exercise price of the option. Unlike a stock option, which gives the holder
the right to purchase or sell a specified stock at a specified price, an
option on a securities index gives the holder the right to receive a cash
"exercise settlement amount" equal to (i) the difference between the exercise
price of the option and the value of the underlying stock index on the
exercise date, multiplied by (ii) a fixed "index multiplier."
A securities index fluctuates with changes in the market values of the
securities so included. For example, some securities index options are based
on a broad market index such as the S&P 500 or the NYSE Composite Index, or a
narrower market index such as the S&P 100. Indexes may also be based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. Options on stock indexes are currently traded
on the following exchanges among others: The Chicago Board Options Exchange;
New York Stock Exchange; and American Stock Exchange.
The effectiveness of hedging through the purchase of securities index options
will depend upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements in the
selected securities index. Perfect correlation is not possible because the
securities held or to be acquired by a Portfolio will not exactly match the
composition of the securities indexes on which options are written. In the
purchase of securities index options the principal risk is that the premium
and transaction costs paid by a Portfolio in purchasing an option will be
lost if the changes (increase in the case of a call, decrease in the case of
a put) in the level of the index do not exceed the cost of the option.
In writing securities index options, the principal risk is that price changes
in the hedged securities will not correlate with price changes in the
options, and thus the Portfolio could bear a loss on the options that would
be only partially offset (or not offset at all) by the increased value or
reduced cost of the hedged securities. Moreover, in the event the Portfolio
were unable to close an option it had written, it might be unable to sell the
securities used as cover.
OVER-THE-COUNTER OPTIONS
Options traded in the over-the-counter market may not be as actively traded
as those on an exchange. Accordingly, it may be more difficult to value such
options. In addition, it may be difficult to enter into closing transactions
with respect to options traded over-the-counter. The Portfolios will engage
in such transactions only with firms of sufficient credit so as to minimize
these risks. Such options and the securities used as "cover" for such options
may be considered illiquid securities.
The Portfolios may enter into contracts (or amend existing contracts) with
primary dealer(s) with whom they write over-the-counter options. The
contracts will provide that each Portfolio has the absolute right to
repurchase an option it writes at any time at a repurchase price which
represents the fair market value, as determined in good faith through
negotiation between the parties, but which in no event will exceed a price
determined pursuant to a formula contained in the contract. Although the
specific details of the formula may vary between contracts with different
primary dealers, the formula will generally be based on a multiple of the
premium received by each Portfolio for writing the option, plus the amount,
if any, of the option's intrinsic value (i.e., the amount the option is
"in-the-money"). The formula will also include a factor to account for the
difference between the price of the security and the strike price of the
option if the option is written "out-of-the-money." Although the specific
details of the formula may vary
15
<PAGE>
with different primary dealers, each contract will provide a formula to
determine the maximum price at which each Portfolio can repurchase the option
at any time. The Portfolios have established standards of creditworthiness
for these primary dealers, although the Portfolios may still be subject to
the risk that firms participating in such transactions will fail to meet
their obligations. In instances in which a Portfolio has entered into
agreements with respect to the over-the-counter options it has written, and
such agreements would enable the Portfolio to have an absolute right to
repurchase at a pre-established formula price the over-the-counter option
written by it, the Portfolio would treat as illiquid only securities equal in
amount to the formula price described above less the amount by which the
option is "in-the-money," i.e., the amount by which the price of the option
exceeds the exercise price.
FUTURES TRANSACTIONS
All the Portfolios, except the Money Market Portfolio, may trade in certain
futures contracts. A futures contract is a bilateral agreement to buy or sell
a security (or deliver a cash settlement price, in the case of a contract
relating to an index or otherwise not calling for physical delivery at the
end of trading in the contracts) for a set price in the future. No purchase
price is paid or received when the contract is entered into. Instead, a good
faith deposit known as initial margin is made with the broker and subsequent
daily payments known as variation margin are made to and by the broker
reflecting changes in the value of the security or level of the index.
Futures contracts are designated by boards of trade which have been
designated "contracts markets" by the CFTC. By using futures contracts as a
risk management technique, given the greater liquidity in the futures market
than in the cash market, it might be possible to accomplish certain results
more quickly and with lower transaction costs.
Purchases or sales of securities index futures contracts may be used to
attempt to protect a Portfolio's current or intended investments from broad
fluctuations in securities prices, and interest rate and foreign currency
futures contracts are purchased or sold to attempt to hedge against the
effects of interest or exchange rate changes on a Portfolio's current or
intended investments in fixed income or foreign securities. All the
Portfolios, except the Money Market, Equity Index and Government Portfolios,
may trade in foreign currency futures contracts. In the event that an
anticipated decrease in the value of portfolio securities occurs as a result
of a general stock market decline, a general increase in interest rates or a
decline in the dollar value of foreign currencies in which portfolio
securities are denominated, the adverse effects of such changes may be
offset, in whole or part, by gains on the sale of futures contracts. In
addition, the increased cost of portfolio securities to be acquired, caused
by a general rise in the dollar value of foreign currencies or by a rise in
stock prices or a decline in interest rates, may be offset, in whole or part,
by gains on futures contracts purchased by a Portfolio. In order to achieve
desired asset mix parameters, the Conservative Investors and Growth Investors
Portfolios may use futures contracts and related options transactions to
establish a position in an asset class as a temporary substitute for
purchasing individual securities, which may be subsequently purchased in
orderly fashion. Similarly, these transactions may enable the Conservative
Investors and Growth Investors Portfolios to reduce a position in an asset
class as a temporary substitute for selling individual securities, in order
to effect an orderly sale program. In the case of the Equity Index Portfolio,
futures contracts and related options on the S&P 500 Index may be purchased
in order to reduce brokerage costs, maintain liquidity to meet shareholder
redemptions or minimize tracking error. A Portfolio will incur brokerage fees
when it purchases and sells futures contracts, and it will be required to
maintain margin deposits. (See "Risks of Transactions in Options, Futures
Contracts and Forward Currency Contracts," below.) Positions taken in the
futures markets are not normally held until delivery or cash settlement is
required, but are instead liquidated through offsetting transactions which
may result in a gain or a loss. While futures positions taken by a Portfolio
will usually be liquidated in this manner, the Portfolio may instead make or
take delivery of underlying securities whenever it appears economically
advantageous to the Portfolio to do so. A clearing organization associated
with the exchange on which futures are traded assumes responsibility for
closing out transactions and guarantees that as between the clearing members
of an exchange, the sale and purchase obligations will be performed with
regard to all positions that remain open at the termination of the contract.
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SECURITIES INDEX FUTURES CONTRACTS
A securities index futures contract does not require the physical delivery of
securities, but merely provides for profits and losses resulting from changes
in the market value of the contract to be credited or debited at the close of
each trading day to the respective accounts of the parties to the contract.
On the contract's expiration date a final cash settlement occurs and the
futures positions are simply closed out. Changes in the market value of a
particular index futures contract reflect changes in the specified index of
securities on which the future is based.
By establishing an appropriate "short" position in index futures, a Portfolio
may seek to protect the value of its portfolio against an overall decline in
the market for such securities. Alternatively, in anticipation of a generally
rising market, a Portfolio can seek to avoid losing the benefit of apparently
low current prices by establishing a "long" position in securities index
futures and later liquidating that position as particular securities are in
fact acquired. To the extent that these hedging strategies are successful,
the Portfolio will be affected to a lesser degree by adverse overall market
price movements than would otherwise be the case.
OPTIONS ON FUTURES CONTRACTS
Each of the Portfolios, other than the Money Market Portfolio, may also
purchase and write exchange-traded call and put options on futures contracts
of the type which the particular Portfolio is authorized to enter into. These
options are traded on exchanges that are licensed and regulated by the CFTC
for the purpose of options trading. A call option on a futures contract gives
the purchaser the right, in return for the premium paid, to purchase a
futures contract (assume a "long" position) at a specified exercise price at
any time before the option expires. A put option gives the purchaser the
right, in return for the premium paid, to sell a futures contract (assume a
"short" position), for a specified exercise price, at any time before the
option expires. The Portfolios will write only options on futures contracts
which are "covered." A Portfolio will be considered "covered" with respect to
a put option it has written if, so long as it is obligated as a writer of the
put, the Portfolio segregates with its custodian cash, United States
Government securities or liquid high-grade debt obligations at all times
equal to or greater than the aggregate exercise price of the puts it has
written (less any related margin deposited with the futures broker). A
Portfolio will be considered "covered" with respect to a call option it has
written on a debt security future if, so long as it is obligated as a writer
of the call, the Portfolio owns a security deliverable under the futures
contract. A Portfolio will be considered "covered" with respect to a call it
has written on a securities index future if the Portfolio owns, so long as
the Portfolio is obligated as the writer of the call, a portfolio of
securities the price changes of which are, in the opinion of Alliance,
expected to replicate substantially the movement of the index upon which the
futures contract is based.
Upon the exercise of a call, the writer of the option is obligated to sell
the futures contract (to deliver a "long" position to the option holder) at
the option exercise price, which will presumably be lower than the current
market price of the contract in the futures market. Upon exercise of a put,
the writer of the option is obligated to purchase the futures contract
(deliver a "short" position to the option holder) at the option exercise
price which will presumably be higher than the current market price of the
contract in the futures market. When the holder of an option exercises it and
assumes a long futures position, in the case of a call, or a short futures
position, in the case of a put, its gain will be credited to its futures
margin account, while the loss suffered by the writer of the option will be
debited to its account and must be immediately paid by the writer. However,
as with the trading of futures, most participants in the options markets do
not seek to realize their gains or losses by exercise of their option rights.
Instead, the holder of an option will usually realize a gain or loss by
buying or selling an offsetting option at a market price that will reflect an
increase or a decrease from the premium originally paid.
Options on futures contracts can be used by a Portfolio to hedge
substantially the same risks as might be addressed by the direct purchase or
sale of the underlying futures contracts. If the Portfolio purchases an
option on a futures contract, it may obtain benefits similar to those that
would result if it held the futures position itself. Purchases of options on
futures contracts may present less risk in hedging than the purchase and sale
of the underlying futures contracts since the potential loss is limited to
the amount of the premium plus related transaction costs.
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The purchase of put options on futures contracts is a means of hedging a
portfolio of securities against a general decline in market prices. The
purchase of a call option on a futures contract represents a means of hedging
against a market advance when a Portfolio is not fully invested.
If a Portfolio writes options on futures contracts, the Portfolio will
receive a premium but will assume a risk of adverse movement in the price of
the underlying futures contract comparable to that involved in holding a
futures position. If the option is not exercised, the Portfolio will realize
a gain in the amount of the premium, which may partially offset unfavorable
changes in the value of securities held in or to be acquired for the
Portfolio. If the option is exercised, the Portfolio will incur a loss in the
option transaction, which will be reduced by the amount of the premium it has
received, but which will offset any favorable changes in the value of its
portfolio securities or, in the case of a put, lower prices of securities it
intends to acquire.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the underlying securities. If the futures
price at expiration is below the exercise price, the Portfolio will retain
the full amount of the option premium, which provides a partial hedge against
any decline that may have occurred in the value of the Portfolio's holdings
of securities. The writing of a put option on a futures contract is analogous
to the purchase of a futures contract in that it hedges against an increase
in the price of securities the Portfolio intends to acquire. However, the
hedge is limited to the amount of premium received for writing the put.
While the holder or writer of an option on a futures contract may normally
terminate its position by selling or purchasing an offsetting option of the
same series, a Portfolio's ability to establish and close out options
positions at fairly established prices will be subject to the existence of a
liquid market. The Portfolios will not purchase or write options on futures
contracts unless, in Alliance's opinion, the market for such options has
sufficient liquidity that the risks associated with such options transactions
are not at unacceptable levels.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS
The Portfolios will not engage in transactions in futures contracts and
related options for speculation. All the Portfolios, other than the Money
Market Portfolio, may enter into futures contracts and buy and sell related
options as described above. The Portfolios will not purchase or sell futures
contracts or related options unless either (1) the futures contracts or
options thereon are purchased for "bona fide hedging" purposes (as that term
is defined under the CFTC regulations) or (2) if purchased for other
purposes, the sum of the amounts of initial margin deposits on a Portfolio's
existing futures and premiums required to establish non-hedging positions
would not exceed 5% of the liquidation value of the Portfolio's total assets.
In instances involving the purchase of futures contracts or the writing of
put options thereon by a Portfolio, an amount of cash and cash equivalents,
equal to the cost of such futures contracts or options written (less any
related margin deposits), will be deposited in a segregated account with its
custodian, thereby insuring that the use of such futures contracts and
options is unleveraged. In instances involving the sale of futures contracts
or the writing of call options thereon by a Portfolio, the securities
underlying such futures contracts or options will at all times be maintained
by the Portfolio or, in the case of index futures and related options, the
Portfolio will own securities the price changes of which are, in the opinion
of Alliance, expected to replicate substantially the movement of the index
upon which the futures contract or option is based.
Positions in futures contracts may be closed out only on an exchange or a
board of trade which provides the market for such futures. Although the
Portfolios intend to purchase or sell futures only on exchanges or boards of
trade where there appears to be an active market, there is no guarantee that
such will exist for any particular contract or at any particular time. If
there is not a liquid market at a particular time, it may not be possible to
close a futures position at such time, and, in the event of adverse price
movements, a Portfolio would continue to be required to make daily cash
payments of maintenance margin. However, in the event futures positions are
used to hedge portfolio securities, the securities will not be sold until the
futures positions can be liquidated. In such circumstances, an increase in
the price of securities, if any, may partially or completely offset losses on
the futures contracts.
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FOREIGN CURRENCY OPTIONS, FOREIGN CURRENCY FUTURES CONTRACTS AND OPTIONS ON
FUTURES
The Portfolios, other than the Money Market, Government and Equity Index
Portfolios, may purchase or sell exchange-traded or over-the-counter foreign
currency options, foreign currency futures contracts and related options on
foreign currency futures contracts as a hedge against possible variations in
foreign exchange rates. The Portfolios will write options on foreign currency
or on foreign currency futures contracts only if they are "covered." A put on
a foreign currency or on a foreign currency futures contract written by a
Portfolio will be considered "covered" if, so long as the Portfolio is
obligated as the writer of the put, it segregates with the Portfolio's
custodian cash, U.S. Government securities or other liquid high-grade debt
securities equal at all times to the aggregate exercise price of the put. A
call on a foreign currency or on a foreign currency future contract written
by the Portfolio will be considered "covered" only if the Portfolio owns
short term debt securities with a value equal to the face amount of the
option contract and denominated in the currency upon which the call is
written. Option transactions may be effected to hedge the currency risk on
non-U.S. dollar-denominated securities owned by a Portfolio, sold by a
Portfolio but not yet delivered or anticipated to be purchased by a
Portfolio. As an illustration, a Portfolio may use such techniques to hedge
the stated value in U.S. dollars of an investment in a Japanese
yen-denominated security. In these circumstances, a Portfolio may purchase a
foreign currency put option enabling it to sell a specified amount of yen for
dollars at a specified price by a future date. To the extent the hedge is
successful, a loss in the value of the dollar relative to the yen will tend
to be offset by an increase in the value of the put option. As in the case of
other types of options, however, the writing of an option on foreign currency
will constitute only a partial hedge, up to the amount of the premium
received, and the Portfolio could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate
movements adverse to the Portfolio's position, it may forfeit the entire
amount of the premium plus related transaction costs.
Certain differences exist between foreign currency hedging instruments.
Foreign currency options provide the holder the right to buy or to sell a
currency at a fixed price on or before a future date. Listed options are
third-party contracts (performance is guaranteed by an exchange or clearing
corporation) which are issued by a clearing corporation, traded on an
exchange and have standardized prices and expiration dates. Over-the-counter
options are two-party contracts and have negotiated prices and expiration
dates. See "Over-the-Counter Options," above. A futures contract on a foreign
currency is an agreement between two parties to buy and sell a specified
amount of the currency for a set price on a future date. Futures contracts
and listed options on futures contracts are traded on boards of trade or
futures exchanges. Options traded in the over-the-counter market may not be
as actively traded as those on an exchange, so it may be more difficult to
value such options. In addition, it may be difficult to enter into closing
transactions with respect to options traded over-the-counter.
A Portfolio will not speculate in foreign currency options, futures or
related options. Accordingly, a Portfolio will not hedge a currency
substantially in excess of the market value of the securities denominated in
that currency which it owns or the expected acquisition price of securities
which it anticipates purchasing.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. These hedging transactions also preclude
the opportunity for gain if the value of the hedged currency should rise.
Whether a currency hedge benefits a Portfolio will depend on Alliance's
ability to predict future currency exchange rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
When a Portfolio invests in foreign securities, the securities are usually
denominated in foreign currency, and the Portfolio may temporarily hold
foreign currency in connection with such investments. As a result, the value
of the Portfolio's assets will be subject to fluctuations based on changes in
the relative value of the foreign currency and the United States dollar. To
control the effects of this exchange risk, all the Portfolios, except the
Money Market, Equity Index and Government Portfolios, may enter into forward
foreign currency exchange contracts (forward currency contracts), which are
agreements to purchase or sell foreign currencies at a specified future date
and price. Forward currency contracts are usually used to
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fix the United States dollar value of securities a Portfolio has agreed to
buy or sell (transaction hedging). The Portfolios may also use forward
currency contracts to hedge the United States dollar value of securities it
already owns (position hedging). The Portfolios will not speculate in forward
currency contracts.
In general, forward currency contracts are not regulated by any governmental
authority, or guaranteed by a third party or traded on an exchange.
Accordingly, each party to a forward currency contract is dependent upon the
creditworthiness and good faith of the other. Creditworthiness is evaluated
by Alliance.
RISKS OF TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS AND FORWARD CURRENCY
CONTRACTS
Although the Portfolios will enter into transactions in futures contracts,
options on securities and securities indexes, options on futures contracts,
forward currency contracts and certain currency options as described above
for hedging purposes, and transactions in options on securities and
securities indexes to generate option premium income, their use does involve
the following risks. A lack of correlation between the index or instrument
underlying an option or futures contract and the assets being hedged, or
unexpected adverse price movements, could render a Portfolio's hedging
strategy unsuccessful and could result in losses. Moreover, when an option
has been written, in the event of a decline, the underlying position is only
hedged to the extent of the amount of premium received. Over-the-counter
transactions in options on foreign currencies and options on securities and
securities indexes also involve a lack of an organized exchange trading
environment, making them less liquid, and making it more difficult to value
them than if they were exchange traded.
In addition, there can be no assurance that a liquid secondary market will
exist for any futures contract or option purchased or sold, and a Portfolio
may be required to maintain a position until exercise or expiration, which
could result in losses. If a futures market were to become unavailable, in
the event of an adverse movement, the Portfolio would be required to continue
to make daily cash payments of variation margin if it could not close a
futures position. If an options market were to become unavailable and a
closing transaction could not be entered into, an option holder would be able
to realize profits or limit losses only by exercising an option, and an
option writer would remain obligated until exercise or expiration. Finally,
if a broker or clearing member of an options or futures clearing corporation
were to become insolvent, the Portfolios could experience delays and might
not be able to trade or exercise options or futures purchased through that
broker. In addition, the Portfolios could have some or all of their positions
closed out without their consent. If substantial and widespread, these
insolvencies could ultimately impair the ability of the clearing corporations
themselves. While the principal purpose of hedging is to limit the effects of
adverse market movements, the attendant expense may cause the Portfolios'
returns to be less than if hedging had not taken place. The overall
effectiveness of hedging therefore depends on Alliance's accuracy in
predicting future changes in interest rate levels or securities price
movements, as well as on the expense of hedging.
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MANAGEMENT OF THE TRUST
As of March 31, 1995, the Trustees and officers of the Trust owned Contracts
entitling them to provide voting instructions in the aggregate with respect
to less than one percent of the Trust's shares of beneficial interest.
THE TRUSTEES
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
------------------------------------ -----------------------------------------------------------------
<S> <C>
*John D. Carifa ..................... President, Chief Operating Officer and a Director of Alliance
Alliance Capital Management L.P. Capital Management Corporation, the general partner of Alliance
1345 Avenue of the Americas ("ACMC"); Chairman and Chief Executive Officer of Alliance's
New York, NY 10105 Mutual Fund Division. Mr. Carifa also serves as a director or
trustee of all other registered investment companies sponsored by
Alliance, and a director of Frontier Trust Company, a subsidiary
of Equitable.
Richard W. Couper .................. President Emeritus and Trustee of Woodrow Wilson
The Burke Library National Fellowship Foundation and President Emeritus of the New
Hamilton College York Public Library.
P.O. Box 345
Clinton, NY 13323-0345
Brenton W. Harries ................. Director of Enhance Reinsurance Co. since December 1986. Mr.
14 Point Road Harris was also President and Chief Executive Officer, Global
Wilton Point, Electronic Markets Company from August 1985 to October 1986
South Norwalk, CT 06854
Howard E. Hassler (Chairman) ....... Mr. Hassler is former Chairman and Chief Executive Officer of
200 East 57th Street Brooks Fashion Stores, Inc. (specialty clothing stores); Former
Penthouse D Chairman, President and Chief Operating Officer of Allied Stores
New York, NY 10022 Corporation (department stores), 1987; Executive Vice President
and Director, Allied Stores Corporation from June 1984 to June
1987; former Director, Campeau Corporation and Ames Department
Stores, Inc.
William L. Mannion ................. Retired. Former Group Senior Vice President of Operations of
45 Bonnie Way American Ultramar Limited until December 31, 1986.
Allendale, NJ 07401
Alton G. Marshall .................. Senior Fellow, Nelson A. Rockefeller Institute of Government
136 E. 79th Street since January 1991. Mr. Marshall is also President of Alton G.
New York, NY 10021 Marshall Associates, Inc., New York, New York, a real estate
investment corporation, since 1981; Director of EQK Partners,
Atlanta, Georgia, since 1984; Director, New York State Electric &
Gas Corp., since 1971; Director and Chairman of the Executive
Committee of Lincoln Savings Bank since January 1991, and
Chairman and Chief Executive Officer of such bank from March 1984
through December 1990.
</TABLE>
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<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
------------------------------------ -----------------------------------------------------------------
<S> <C>
*Brian S. O'Neil .................... Executive Vice President and Chief Investment Officer of
Equitable Equitable since April 1992. Mr. O'Neil is also Director of ACMC,
787 Seventh Avenue October 1993 to present, FHJV Holdings, Inc., Equitable Real
New York, NY 10019 Estate Investment Management, The Equitable Foundation, Equitable
Life Financing Corporation (ELFCO) June 1985 to December 1991,
Equitable Realty Assets Corporation and Equitable Variable. He
also serves as officer of various subsidiaries or affiliates of
Equitable.
Donald J. Robinson ................. Partner and Member of the Executive Committee of the law firm of
599 Lexington Avenue Orrick, Herrington & Sutcliffe from July 1987 to December 1994.
New York, NY 10022 Of Counsel since January 1995.
Doris H. Smith ..................... Former President, College of Mount Saint Vincent.
3961 Carpenter Avenue
Bronx, New York 10466
</TABLE>
*Trustees Carifa and O'Neil are "interested persons" (as defined in the
Investment Company Act) of the Trust. Mr. Carifa is deemed an "interested
person" of the Trust by virtue of his position as a director and officer of
ACMC. Mr. O'Neil is deemed an "interested person" of the Trust by virtue of
his position as an officer of Equitable.
Trustees Couper, Harries and Robinson are Trustees (but not "interested
persons") of The Alliance Portfolios, a mutual fund. Trustee Marshall is an
independent general partner (but not an "interested person") of Equitable
Capital Partners, L.P. and Equitable Capital Partners (Retirement Fund),
L.P., both of which are business development companies registered under the
Investment Company Act.
COMMITTEES OF THE BOARD
The Trust has a standing audit committee consisting of Trustees Mannion,
Couper, Harries, Hassler, Marshall, Robinson and Smith. The audit committee's
function is to recommend to the Board of Trustees a firm of independent
auditors to conduct the annual audit of the Trust's financial statements;
review with such firm the outline, scope and results of this annual audit;
and review the performance and fees charged by the independent auditors for
professional services. In addition, the committee meets with the independent
auditors and representatives of management to review accounting activities
and areas of financial reporting and control. The Trust has no standing
executive committee.
The Trust has a nominating committee consisting of Trustees Hassler, Couper
and Robinson. This committee considers individuals for nomination as Trustees
of the Trust.
The Trust has a valuation committee consisting of Trustees Harries, Mannion
and O'Neil. This committee determines the value of any of the Trust's
securities and assets for which market quotations are not readily available
or for which valuation cannot otherwise be provided.
The Trust has a compensation committee consisting of Trustees Robinson,
Hassler and Mannion. The compensation committee's function is to review the
Trustees' compensation arrangements.
The Trust has a conflicts committee consisting of Trustees Hassler, Robinson
and Smith. The conflicts committee's function is to take any action necessary
to resolve conflicts among shareholders.
22
<PAGE>
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION FROM
RETIREMENT THE ALLIANCE FUND
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL COMPLEX,
COMPENSATION AS PART OF TRUST BENEFITS UPON INCLUDING THE
TRUSTEE FROM THE TRUST EXPENSES RETIREMENT TRUST (1)
------------------ -------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
John D. Carifa $ -0- $-0- $-0- $ -0-
------------------ -------------- ---------------- ---------------- -----------------
Richard W. Couper $31,000 $-0- $-0- $ 58,500
------------------ -------------- ---------------- ---------------- -----------------
Brenton W. Harries $29,000 $-0- $-0- $ 54,000
------------------ -------------- ---------------- ---------------- -----------------
Howard E. Hassler $41,500 $-0- $-0- $ 41,500
------------------ -------------- ---------------- ---------------- -----------------
William L.
Mannion(2) $33,000(3) $-0- $-0- $ 33,000
------------------ -------------- ---------------- ---------------- -----------------
Alton G. Marshall $31,000 $-0- $-0- $101,000
------------------ -------------- ---------------- ---------------- -----------------
Brian S. O'Neil $ -0- $-0- $-0- $ -0-
------------------ -------------- ---------------- ---------------- -----------------
Donald J. Robinson $31,000 $-0- $-0- $ 58,000
------------------ -------------- ---------------- ---------------- -----------------
Doris H. Smith $30,000 $-0- $-0- $ 30,000
------------------ -------------- ---------------- ---------------- -----------------
<FN>
---------------
(1) There are 105 investment companies in the Alliance Fund Complex.
(2) Including amounts deferred.
(3) Completely deferred.
</TABLE>
COMPENSATION OF TRUSTEES
Each Trustee, other than those who are "interested persons" of the Trust (as
defined in the Investment Company Act), receives from the Trust an annual fee
of $22,000, plus an additional fee of $2,000 per board meeting and $1,000 per
committee meeting attended. The meeting fee paid to the Trustee acting as
chairman of the meeting is increased by 50%. The Chairman of the Board
receives an additional annual retainer of $5,500. Trustees receive $1,000 for
each day spent performing special services requested by the Chairman or the
President of the Trust, and reimbursement for expenses in connection with the
performance of regular and special services.
During the year ended December 31, 1994 the Trust paid total retainer and
meeting fees of $226,500.
A deferred compensation plan for the benefit of the Trustees has been adopted
by the Trust. Under the plan each Trustee may defer payment of all or part of
the fees payable for such Trustee's services. Each Trustee may defer payment
of such fees until his retirement as a Trustee or until the earlier
attainment of a specified age. Fees deferred under the plan, together with
accrued interest thereon, will be disbursed to a participating Trustee in
monthly installments over a five to twenty year period elected by such
Trustee.
THE TRUST'S OFFICERS
No officer of the Trust receives any compensation paid by the Trust. Each
officer of the Trust is an employee of Alliance or Equitable. The Trust's
principal executive officers are:
<TABLE>
<CAPTION>
NAME POSITION WITH TRUST PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
------------------------- --------------------------------- -----------------------------------------------
<S> <C> <C>
James M. Benson President and Chief Executive President and Chief Operating Officer,
Officer Equitable (February 1994 to present); Senior
Executive Vice President, Equitable (April 1993
to February 1994); Director, Association for
Advanced Life Underwriting, Health Plans, Inc.
(August 1988 to present).
Mark D. Gersten Treasurer and Chief Financial Senior Vice President, Alliance Fund Services,
Officer Inc. (AFS) with which he has been associated
since prior to 1990.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION WITH TRUST PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
------------------------- --------------------------------- -----------------------------------------------
<S> <C> <C>
Laura Mah Controller and Chief Accounting Vice President, Alliance Capital Management
Officer Corporation (ACMC) (July 1993 to present);
Equitable Capital Management Corporation (ECMC)
(April 1989 to July 1993).
Kathleen A. Corbet Vice President Senior Vice President, ACMC (July 1993 to
present); Executive Vice President, ECMC (June
1992 to July 1993); Senior Vice President, ECMC
(May 1991 to June 1992); Managing Director,
ECMC (September 1988 to May 1991).
Nelson R. Jantzen Vice President Senior Vice President, ACMC (July 1993 to
present); Executive Vice President, ECMC (June
1992 to July 1993); Senior Vice President, ECMC
(February 1990 to June 1992); Managing
Director, ECMC (January 1987 to February 1990).
Director, Equitable Capital DHO Ltd. (November
1990 to July 1993); Secretary and Treasurer,
Equitable Capital Diversified Holdings L.P. II
(February 1990 to July 1993); Secretary and
Treasurer, Equitable Capital Diverisifed
Holdings L.P. I (May 1989 to July 1993);
Investment Officer, Equitable Variable
(February 1977 to July 1993); Investment
Officer, Equitable (February 1977 to July
1993).
Franklin Kennedy, III Vice President Senior Vice President, ACMC (July 1993 to
present); Senior Vice President, ECMC (March
1987 to July 1993); Investment Officer,
Equitable (February 1988 to July 1993).
Barbara J. Krumsiek Vice President Senior Vice President, Alliance Fund
Distributors Inc. (AFD) (July 1993 to present);
Executive Vice President, ECMC (June 1992 to
July 1993); Senior Vice President, ECMC (March
1987 to June 1992).
Michael S. Martin Vice President Chairman and Director, Equico Securities, Inc.
(January 1992 to present); Chairman and
Director, TRAEBCO (January 1992 to present);
Chairman and Director, Frontier Trust Company
(January 1992 to present); Senior Vice
President, Equitable (January 1988 to present).
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION WITH TRUST PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
------------------------- --------------------------------- -----------------------------------------------
<S> <C> <C>
Samuel B. Shlesinger Vice President Senior Vice President, Equitable Variable
(February 1986 to present); Senior Vice
President, Equitable (November 1986 to
present); President and Chief Executive
Officer, Equitable of Colorado (October 1985 to
present).
Alden M. Stewart Vice President Executive Vice President, ACMC (July 1993 to
present); ECMC since prior to 1990.
Edmund P. Bergan, Jr. Secretary Senior Vice President and General Counsel, AFD
with which he has been associated since prior
to 1990.
</TABLE>
25
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
GENERAL INFORMATION
Alliance, an investment adviser registered with the SEC under the Investment
Advisers Act of 1940, has served as the investment adviser to the Trust since
July 22, 1993. Alliance is a major international investment adviser that
serves its clients, who primarily are major corporate employee benefit funds,
public employee retirement systems, investment companies, foundations and
endowment funds, with a staff of more than 1,400 employees operating out of
domestic offices and the overseas offices of subsidiaries in London, England;
Tokyo, Japan; Vancouver and Toronto, Canada; Melbourne, Australia; and
Dusseldorf, Germany. The principal offices of Alliance are located at 1345
Avenue of the Americas, New York, New York 10105.
Alliance is a publicly-traded Delaware limited partnership whose limited
partnership interests, represented by units, are listed on the New York Stock
Exchange. As of December 31, 1994, ACMC, Inc. and Equitable Capital
Management Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, owned in the aggregate approximately 59% of the issued and
outstanding units representing assignments of beneficial ownership of limited
partnership interests in the Adviser ("Units"), and approximately 32% and 9%
of the Units were owned by the public and employees of the Adviser and its
subsidiaries, respectively, calculated including as outstanding Units subject
to options exercisable by employees within 60 days of December 31, 1994.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is a wholly-owned subsidiary of Equitable Investment
Corporation (EIC), which in turn is wholly-owned by Equitable Holding
Corporation (EHC), a wholly-owned subsidiary of Equitable.
Equitable, which is a New York life insurance company and one of the largest
life insurance companies in the United States, is a wholly-owned subsidiary
of The Equitable Companies Incorporated (The Equitable Companies), a
publicly-owned holding company. The principal offices of The Equitable
Companies and Equitable are located at 787 Seventh Avenue, New York, New York
10019.
AXA, a French insurance holding company, currently owns approximately 60% of
the outstanding voting shares of common stock of The Equitable Companies.
Under its investment arrangements with Equitable and The Equitable Companies,
AXA is able to exercise significant influence over the operations and capital
structure of The Equitable Companies, Equitable and their subsidiaries. AXA
is the principal holding company for most of the companies in one of the
largest insurance groups in Europe. The majority of AXA's stock is owned by a
group of five French mutual insurance companies, the AXA Group, which is the
third largest insurance group in France and one of the largest insurance
groups in Europe. Principally engaged in property and casualty insurance and
life insurance in Europe and elsewhere in the world, the AXA Group is also
involved in real estate operations and certain other financial services,
including mutual fund management, lease financing services and brokerage
services.
ADVISORY AGREEMENT
The new Investment Advisory Agreement terminates automatically in the event
of its assignment or, with respect to any Portfolio, upon 60 days' notice
given by the Trust's Board of Trustees, by Alliance or by majority vote (as
defined in the Investment Company Act and the rules thereunder) of the
Portfolio's shares. Otherwise, the term of the Investment Advisory Agreement
on behalf of each Portfolio is two years, but the Agreement will remain in
effect from year to year with respect to any Portfolio so long as its
continuance is approved at least annually by a majority of the non-interested
members of the Board of Trustees, and by (i) a majority vote (as defined in
the Investment Company Act and the rules thereunder) of the Portfolio's
shareholders or (ii) the Board of Trustees.
26
<PAGE>
The advisory fee payable by the Trust is at the following annual percentages
of the value of each Portfolio's daily average net assets:
<TABLE>
<CAPTION>
DAILY AVERAGE NET ASSETS
----------------------------------------------------
FIRST NEXT OVER
$350 MILLION $400 MILLION $750 MILLION
---------------- ---------------- ----------------
<S> <C> <C> <C>
Conservative Investors .... .550% .525% .500%
Balanced ................... .400% .375% .350%
Growth Investors ........... .550% .525% .500%
Common Stock ............... .400% .375% .350%
Global ..................... .550% .525% .500%
Aggressive Stock ........... .500% .475% .450%
Money Market ............... .400% .375% .350%
Intermediate Goverment
Securities ................ .500% .475% .450%
High Yield ................. .550% .525% .500%
<CAPTION>
FIRST NEXT OVER
$500 MILLION $500 MILLION $1 BILLION
---------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Growth and Income .......... .550% .525% .500%
Quality Bond ............... .550% .525% .500%
<CAPTION>
FIRST NEXT OVER
$750 MILLION $750 MILLION $1.5 BILLION
---------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Equity Index ............... .350% .300% .250%
<CAPTION>
FIRST NEXT OVER
$500 MILLION $1 BILLION $1.5 BILLION
---------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
International .............. .900% .850% .800%
</TABLE>
Because of undertakings made by Equitable Variable in connection with the
Reorganization, Equitable Variable reimburses the Common Stock and Money
Market Divisions of its Continuing Separate Account to offset completely the
effect on such divisions of the portion of the Trust's advisory fees
applicable to such divisions which exceed a .25% effective annual rate. In
addition, Equitable Variable reimburses the High Yield, Aggressive Stock and
Balanced Divisions of its Separate Account I for the portion of the Trust's
advisory fees applicable to those divisions which exceeds a .25% effective
annual rate. Because of expense limits in the variable annuity contracts
funded by its Separate Account A, Equitable reimburses the Common Stock,
Money Market and Balanced Division of that separate account for the portion
of the Trust's advisory fees applicable to those divisions which exceeds a
.26% effective rate, and the Aggressive Stock Division for the portion that
exceeds a .41% effective rate. Policies sold by insurers other than Equitable
and Equitable Variable and newer policy designs of Equitable Variable bear
the advisory fees without adjustment. For a discussion of the Reorganization,
see "General Information," above.
In 1994, the Trust paid advisory fees of $31,614,475 to Alliance. In 1993,
the Trust paid advisory fees of $15,066,885 to Equitable Capital Management
Corporation (Equitable Capital), the Trust's prior investment adviser, for
the period January 1, 1993 to July 22, 1993 and advisory fees of $9,858,491
to Alliance for the period July 23, 1993 to December 31, 1993. In 1992, the
Trust paid advisory fees to Equitable Capital of $20,358,474.
27
<PAGE>
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS OF THE INVESTMENT ADVISER
The name, address and principal occupation of the principal executive
officers and each director of ACMC, the general partner of Alliance, are as
follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
------------------------------ -----------------------------------------------------------
<S> <C>
Dave H. Williams .............. Chairman of the Board of ACMC and a Director of Equitable.
James M. Benson ............... President and Chief Operating Officer of Equitable.
Bruce W. Calvert .............. Vice Chairman and Chief Investment Officer of ACMC.
John D. Carifa ................ President and Chief Operating Officer of ACMC.
Henri de Castries ............. Executive Vice President--Finance of AXA.
Christophe Dupont-Madinier ... Manager of AXA.
Alfred Harrison ............... Vice Chairman of ACMC.
Jean-Pierre Hellebuyck ........ Chief Investment Officer of AXA.
Benjamin D. Holloway .......... Financial Consultant and former Vice Chairman of Equitable.
Henri Hottinguer .............. President/General Director of the French bank, Banque
Hottinguer.
Richard H. Jenrette ........... Chairman of The Equitable Companies and Chairman of the
Executive Committee of the Board of Directors of Equitable.
Joseph J. Melone .............. Chairman and Chief Executive Officer of Equitable.
Brian S. O'Neil ............... Executive Vice President and Chief Investment Officer of
Equitable.
Frank Savage .................. Chairman of Alliance Corporate Finance Group Incorporated.
Peter G. Smith ................ Managing Director of AXA Equity & Law, a subsidiary of AXA.
Madelon DeVoe Talley .......... Governor of the National Association of Securities Dealers.
Reba White Williams ........... Director of Special Projects for ACMC.
</TABLE>
28
<PAGE>
SPECIFIC SERVICES PERFORMED
Alliance performs the following services for or on behalf of the Trust
pursuant to the Investment Advisory Agreement.
Subject to the approval and supervision of the Board of Trustees, Alliance
exercises overall responsibility for the investment and reinvestment of the
Trust's assets. Alliance manages each Portfolio and is responsible for the
investment operations of the Trust and the composition of each Portfolio,
including the purchase, retention and disposition of the investments,
securities and cash contained therein, in accordance with each Portfolio's
investment objectives and policies as stated in the Trust's Declaration of
Trust, By-laws, Prospectus and SAI as from time to time in effect. In
connection therewith, Alliance provides investment research and supervision
of the Trust's investments and conducts a continuous program of investment
evaluation and, if appropriate, sales and reinvestment of the Trust's assets.
Alliance furnishes to the Trust such statistical information, with respect to
the investments which the Trust may hold or contemplate purchasing, as the
Trust may reasonably request. On Alliance's own initiative, it apprises the
Trust of important developments materially affecting each Portfolio and
furnishes the Trust from time to time such information as it may believe
appropriate for this purpose. In addition, Alliance furnishes to the Board of
Trustees such periodic and special reports as the Board may reasonably
request. Alliance also implements all purchases and sales of investments for
each Portfolio in a manner consistent with such investment policies, as from
time to time amended.
Alliance, on behalf of the Trust, arranges for the placement of orders and
other execution of transactions for each Portfolio. Alliance furnishes to the
Trust, at least once every three months, a schedule of the investments and
other assets held in each Portfolio and a statement of all purchases and
sales for each Portfolio made during the period since the last preceding
report. Alliance prepares the financial statements for the Trust's
Prospectuses, SAIs and annual and semi-annual reports to shareholders and
furnishes such other investment accounting services as the Trust may from
time to time reasonably request. Alliance computes the Trust's net asset
value per share for each Portfolio on a daily basis.
At the Trust's request, Alliance provides, without charge, personnel, who may
be the Trust's officers, to render such clerical, accounting, administrative
and other services, other than investor services, to the Trust as it may from
time to time request. Also, Alliance furnishes to the Trust, without charge,
such office facilities, which may be Alliance's own offices, as Alliance may
believe appropriate or as the Trust may reasonably request, subject to the
requirements of any regulatory authority to which Alliance may be subject.
However, the Trust may also hire its own employees and contract for services
to be performed by third parties.
Pursuant to the terms of the Investment Advisory Agreement, Alliance has
contracted with Equitable for the provision of certain administrative
services to the Trust.
Alliance also performs investment advisory services for certain of
Equitable's separate and advisory accounts and for other clients, including
mutual funds registered as investment companies under the Investment Company
Act, some of which fund Contracts issued by Equitable, Equitable Variable and
certain other unaffiliated insurance companies. There are occasions on which
transactions for the Trust may be executed as part of concurrent
authorizations to purchase or sell the same security for Equitable's general
account or for other accounts or investment companies managed by Equitable or
Alliance. These concurrent authorizations potentially can be either
advantageous or disadvantageous to the Trust. When these concurrent
authorizations occur, the objective is to allocate the executions and related
brokerage charges among the accounts or mutual funds in an equitable manner.
BROKERAGE ALLOCATION
SELECTION OF BROKERS
Pursuant to the Investment Advisory Agreement, Alliance, on behalf of the
Trust, arranges for the placement of orders and other transactions for each
Portfolio.
29
<PAGE>
BROKERAGE COMMISSIONS
The Portfolios are charged for securities brokers' commissions, transfer
taxes and similar fees relating to securities transactions. Alliance seeks to
obtain the best price and execution on all orders placed for the Portfolios,
considering all the circumstances except to the extent it may be permitted to
pay higher commissions as described below.
It is expected that securities will ordinarily be purchased in the primary
markets, whether over-the- counter or listed, and that listed securities may
be purchased in the over-the-counter market if that market is deemed the
primary market.
Transactions on stock exchanges involve the payment of brokerage commissions.
In transactions on stock exchanges in the United States, these commissions
are negotiated, whereas on many foreign stock exchanges these commissions are
fixed. However, brokerage commission rates in certain countries in which the
Portfolios may invest may be discounted for certain large domestic and
foreign investors such as the Portfolios. A number of foreign banks and
brokers will be used for execution of each Portfolio's portfolio
transactions. In the case of securities traded in the foreign and domestic
over-the-counter markets, there is generally no stated commission, but the
price usually includes an undisclosed com- mission or mark-up. In
underwritten offerings, the price generally includes a disclosed fixed
commission or discount.
Alliance may, in the allocation of brokerage business, take into
consideration research and other brokerage services provided by brokers and
dealers to Equitable or Alliance. The research services include economic,
market, industry and company research material. Based upon an assessment of
the value of research and other brokerage services provided, proposed
allocations of brokerage for commission transactions are periodically
prepared internally.
In limited cases, certain brokers have been advised informally that, although
the Trust is under no legal obligation, an attempt will be made to meet the
internally proposed level of allocated brokerage business to the broker for
brokerage and research services over a period of time. Equitable Variable and
its affiliates, in their insurance and investment operations, and Alliance,
in its investment advisory operations, engage in transactions in the normal
course of business with brokers and dealers which execute orders of the
Portfolios. The allocation of the Trust's portfolio brokerage business is not
affected by such transactions.
Commissions charged by brokers which provide research services may be
somewhat higher than commissions charged by brokers which do not provide
them. As permitted by Section 28(e) of the Securities Exchange Act of 1934
and by policies adopted by the Trustees, Alliance may cause the Trust to pay
a broker-dealer which provides brokerage and research services to Alliance an
amount of commission for effecting a securities transaction for the Trust in
excess of the commission another broker-dealer would have charged for
effecting that transaction.
Alliance does not engage brokers whose commissions it believes to be
unreasonable in relation to services provided. The overall reasonableness of
commissions paid will be evaluated by rating brokers on such general factors
as execution capabilities, quality of research (that is, quantity and quality
of information provided, diversity of sources utilized, nature and frequency
of communication, professional experience, analytical ability and
professional stature of the broker) and financial standing, as well as the
net results of specific transactions, taking into account such factors as
price, promptness, size of order and difficulty of execution. The research
services obtained will, in general, be used by Alliance for the benefit of
all accounts for which it makes investment decisions. The receipt of research
services from brokers will tend to reduce Alliance's expenses in managing the
Portfolios other than the Money Market Portfolio. This has been taken into
account when setting the amount paid for managing those Portfolios. Although
orders may be given by the Money Market Portfolio to brokers or dealers which
provide research services to Alliance, the fact that the investment adviser
may benefit from such research has not been considered when setting the
amount paid for managing that Portfolio. This is because Money Market
Portfolio transactions will generally be with issuers or market makers where
no commissions are charged. For the year ended December 31, 1992, the Trust
paid an aggregate of $9,615,607 in brokerage commissions. In
30
<PAGE>
1993 the Trust paid an aggregate of $14,267,261 in brokerage commissions of
which $2,154,951 was paid to brokers relating to transactions aggregating
$1,230,357,454 which were directed to them in part for research services
provided by them. In 1994 the Trust paid an aggregate of $15,624,978 in
brokerage commissions of which $3,918,833 was paid to brokers relating to
transactions aggregating $1,594,352,806 which were directed to them in part
for research services provided by them.
BROKERAGE TRANSACTIONS WITH AFFILIATES
To the extent permitted by law, the Trust may engage in brokerage
transactions with its affiliate, Donaldson, Lufkin & Jenrette, Inc. (DLJ),
with brokers who are DLJ affiliates, or with unaffiliated brokers who trade
or clear through DLJ. The Investment Company Act generally prohibits the
Trust from engaging in securities transactions with DLJ or its affiliates, as
principal, unless pursuant to an exemptive order from the SEC. The Trust may
apply for such exemptive relief. The Trust has adopted procedures, prescribed
by the Investment Company Act, which are reasonably designed to provide that
any commissions or other remuneration it pays to DLJ or its affiliates do not
exceed the usual and customary broker's commission. In addition, the Trust
will adhere to the requirements under the Securities Exchange Act of 1934
governing floor trading. Also, due to securities law limitations, the Trust
will limit purchases of securities in a public offering, if such securities
are underwritten by DLJ or its affiliates. For the year ended December 31,
1992, the Trust paid brokerage commissions to DLJ totalling $8,390. During
the years ended December 31, 1993 and December 31, 1994, the Trust paid no
brokerage commissions to DLJ.
TRUST EXPENSES AND OTHER CHARGES
Pursuant to the Trust's Investment Advisory Agreement, Alliance is obligated
to pay all of the Trust's operating expenses not specifically assumed by the
Trust. In addition, as principal underwriter, Equitable Variable will bear
the Trust's marketing expenses. Although the Trust does specifically assume
certain of its operating expenses (in addition to the investment advisory
fee), a daily adjustment will be made in the values under certain Contracts
outstanding and offered by Equitable and Equitable Variable when their
management separate accounts were reorganized into unit investment trust form
to offset completely the impact of any such expense on values under such
Contracts. Contracts sold by insurers other than Equitable and Equitable
Variable and new policy designs of Equitable and Equitable Variable bear such
expenses without adjustment. Although Equitable and Equitable Variable do not
expect the Trust to incur any federal income or excise tax liability (see
"Dividends, Distributions and Taxes" in the Prospectus), Equitable and
Equitable Variable reserve the right to exclude any such taxes from such
adjustments.
The expenses which the Trust will pay directly are set forth in the
Prospectus.
PURCHASE AND PRICING OF SECURITIES
As stated in the Prospectus, the Trust will offer and sell its shares at each
Portfolio's per share net asset value, which will be determined in the manner
set forth below.
The net asset value of the shares of each Portfolio of the Trust will be
determined once daily, immediately after the declaration of dividends, if
any, at the close of business on each business day. The net asset value per
share of each Portfolio will be computed by dividing the sum of the
investments held by that Portfolio, plus any cash or other assets, minus all
liabilities, by the total number of outstanding shares of that Portfolio at
such time. All expenses borne by the Trust, including the investment advisory
fee payable to Alliance, will be accrued daily.
The net asset value per share of any series (i.e., Portfolio) will be
determined and computed as follows, in accordance with generally accepted
accounting principles, and consistent with the Investment Company Act:
o The assets belonging to each series will include (a) all consideration
received by the Trust for the issue or sale of shares of that particular
series, together with all assets in which such consideration is invested or
reinvested, (b) all income, earnings, profits, and proceeds thereof,
including any
31
<PAGE>
proceeds derived from the sale, exchange or liquidation of such assets, (c)
any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be and (d) General Items, if any, allocated to
that series. General Items includes any assets, income, earnings, profits,
and proceeds thereof, funds, or payments which are not readily identifiable
as belonging to any particular series. General Items will be allocated as the
Trust's Board of Trustees considers fair and equitable.
o The liabilities belonging to each series will include (a) the
liabilities of the Trust in respect of that series, (b) all expenses, costs,
charges and reserves attributable to that series, and (c) any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series which have been
allocated as the Trust's Board of Trustees considers fair and equitable.
The value of each Portfolio will be determined at the close of business on
each "business day," i.e., each day in which the degree of trading in the
Portfolio might materially affect the net asset value of such Portfolio.
Normally, this would be each day that the New York Stock Exchange is open and
would include some Federal holidays. For stocks and options, the close of
trading is the 4:00 p.m. and 4:15 p.m. close respectively of the New York
Stock Exchange and the Options Price Reporting Authority; for bonds it is the
close of business in New York City, and for foreign securities it is the
close of business in the applicable foreign country with exchange rates
determined at 2:00 p.m. New York City time.
Values are determined according to accepted accounting practices and all laws
and regulations that apply. The assets of each Portfolio are valued as
follows:
o Stocks listed on national securities exchanges and certain
over-the-counter issues traded on the NASDAQ national market system are
valued at the last sale price, or, if there is no sale, at the latest
available bid price. Other unlisted stocks are valued at their last sale
price or, if there is no reported sale during the day, at a bid price
estimated by a broker.
o Foreign securities not traded directly, or in American Depositary
Receipt or similar form in the United States, are valued at representative
quoted prices in the currency of the country of origin. Foreign currency is
converted into its U.S. dollar equivalent at current exchange rates.
o U.S. Treasury securities and other obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, are valued at
representative quoted prices.
o Long-term corporate bonds are valued at prices obtained from a bond
pricing service of a major dealer in bonds when such prices are available;
however, when such prices are not available, such bonds are valued at a bid
price estimated by a broker.
o Short-term debt securities in the Portfolios other than the Money
Market Portfolio which mature in 60 days or less are valued at amortized
cost, which approximates market value. Short-term debt securities in such
Portfolios which mature in more than 60 days are valued at representative
quoted prices. Securities held by the Money Market Portfolio are valued at
prices based on equivalent yields or yield spreads.
o Convertible preferred stocks listed on national securities exchanges
are valued as of their last sale price or, if there is no sale, at the latest
available bid price.
o Convertible bonds, and unlisted convertible preferred stocks, are
valued at bid prices obtained from one or more of the major dealers in such
bonds or stocks. Where there is a discrepancy between dealers, values may be
adjusted based on recent premium spreads to the underlying common stocks.
o Mortgage backed and asset backed securities are valued at prices
obtained from a bond pricing service where available, or at a bid price
obtained from one or more of the major dealers in such securities. If a
quoted price is unavailable, an equivalent yield or yield spread quotes will
be obtained from a broker and converted to a price.
32
<PAGE>
o Purchased options, including options on futures, are valued at their
last bid price. Written options are valued at their last asked price.
o Futures contracts are valued as of their last sale price or, if there
is no sale, at the latest available bid price.
o Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided are valued in good faith
by the valuation committee of the Board of Trustees using its best judgment.
The market value of a put or call option will usually reflect, among other
factors, the market price of the underlying security.
When the Trust writes a call option, an amount equal to the premium received
by the Trust is included in the Trust's financial statements as an asset and
an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option written.
When an option expires on its stipulated expiration date or the Trust enters
into a closing purchase or sale transaction, the Trust realizes a gain (or
loss) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. When an
option is exercised, the Trust realizes a gain or loss from the sale of the
underlying security, and the proceeds of sale are increased by the premium
originally received, or reduced by the price paid for the option.
Alliance may, from time to time, under the general supervision of the Board
of Trustees or its valuation committee, utilize the services of one or more
pricing services available in valuing the assets of the Trust. Alliance will
continuously monitor the performance of these services.
CERTAIN TAX CONSIDERATIONS
Each Portfolio is treated for Federal income tax purposes as a separate
taxpayer. The Trust intends that each Portfolio shall qualify each year and
elect to be treated as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986 (the Code). Such qualification does not
involve supervision of management or investment practices or policies by any
governmental agency or bureau.
As a regulated investment company, each Portfolio will not be subject to
federal income or excise tax on any of its net investment income or net
realized capital gains which are timely distributed to shareholders under the
Code. Under present law, as a Massachusetts business trust doing business in
New York, a Portfolio will also not be subject to any excise or income taxes
in Massachusetts or New York on such amounts. A number of technical rules are
prescribed for computing net investment income and net capital gains. For
example, dividends are generally treated as received on the ex-dividend date.
Also, certain foreign currency losses and capital losses arising after
October 31 of a given year may be treated as if they arise on the first day
of the next taxable year.
Portfolios investing in foreign securities or currencies may be subject to
foreign taxes which could reduce the investment performance of such
Portfolios. However, if foreign securities comprise more than 50% of the
year-end value of any Portfolio, the Portfolio may elect to pass through such
foreign taxes as a deemed dividend to shareholders. In such a case the
shareholder and not the Portfolio would be entitled to claim a Federal tax
deduction or credit for foreign taxes, as appropriate. As of December 31,
1994 only the Global Portfolio qualified to pass through foreign tax paid to
its shareholders.
To qualify for treatment as a regulated investment company, a Portfolio must,
among other things, derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies, or other income derived with respect to its business of
investing. A Portfolio must also derive less than 30% of its gross income in
each taxable year from gains from the sale or other disposition of stock or
securities held for less than three months. Other investments subject to this
three-month limit are options, futures or forward contracts (other than those
relating to foreign currency), or in certain circumstances, foreign
currencies and related options, futures and forward contracts the gains on
which are not directly related
33
<PAGE>
to the Portfolio's business of investing in stock or securities. This 30%
rule may be inapplicable in the context of certain abnormal redemptions of
Portfolio shares. For purposes of these tests, gross income is determined
without regard to losses from the sale or other disposition of stock or
securities.
In addition, the Secretary of the Treasury has regulatory authority to
exclude from qualifying income described above foreign currency gains which
are not "directly related" to a regulated investment company's "principal
business of investing" in stock, securities or related options or futures.
The Secretary of the Treasury has not to date exercised this authority.
Generally, in order to avoid a 4% nondeductible excise tax, each Portfolio of
the Trust must distribute to its shareholders during the calendar year the
following amounts:
o 98% of the Portfolio's ordinary income for the calendar year;
o 98% of the Portfolio's capital gain net income (all capital gains, both
long-term and short-term, minus all such capital losses), all computed as if
the Portfolio were on a taxable year ending October 31 of the year in
question and beginning the previous November 1; and
o any undistributed ordinary income or capital gain net income for the
prior year.
The excise tax is inapplicable to any regulated investment company whose sole
shareholders are either tax-exempt pension trusts or separate accounts of
life insurance companies funding variable contracts. Although each Portfolio
believes that it is not subject to the excise tax, the Portfolios intend to
make the distributions required to avoid the imposition of such a tax.
Because the Trust is used to fund non-qualified Contracts each Portfolio must
meet the diversification requirements imposed by the Code or these policies
will fail to qualify as life insurance and annuities. In general, for a
Portfolio to meet the investment diversification requirements of Subchapter L
of the Code, Treasury regulations require that no more than 55% of the total
value of the assets of the Portfolio may be represented by any one
investment, no more than 70% by two investments, no more than 80% by three
investments and no more than 90% by four investments. Generally, for purposes
of the regulations, all securities of the same issuer are treated as a single
investment. In the context of United States Government securities (including
any security that is issued, guaranteed or insured by the United States or an
instrumentality of the United States) each U.S. Government agency or
instrumentality is treated as a separate issuer. Compliance with the
regulations is tested on the last day of each calendar year quarter. There is
a 30 day period after the end of each calendar year quarter in which to cure
any non-compliance.
PORTFOLIO PERFORMANCE
MONEY MARKET PORTFOLIO YIELD
The Money Market Portfolio calculates yield information for seven-day
periods. The seven-day current yield calculation is based on a hypothetical
shareholder account with one share at the beginning of the period. To
determine the seven-day rate of return, the net change in the share value is
computed by subtracting the share value at the beginning of the period from
the share value (exclusive of capital changes) at the end of the period. The
net change is divided by the share value at the beginning of the period to
obtain the base period rate of return. This seven-day base period return is
then multiplied by 365/7 to produce an annualized current yield figure
carried to the nearest one-hundredth of one percent.
Realized capital gains or losses and unrealized appreciation or depreciation
of the Portfolio are excluded from this calculation. The net change in share
values also reflects all accrued expenses of the Money Market Portfolio as
well as the value of additional shares purchased with dividends from the
original shares and any additional shares.
The effective yield is obtained by adjusting the current yield to give effect
to the compounding nature of the Money Market Portfolio's investments, as
follows: The unannualized base period return is compounded by adding one to
the base period return, raising the sum to a power equal to 365 divided by 7,
and subtracting one from the result--i.e., effective yield = [(base period
return +1)(365/7)] - 1.
34
<PAGE>
Money Market Portfolio yields will fluctuate daily. Accordingly, yields for
any given period are not necessarily representative of future results. Yield
is a function of the type and quality of the instruments in the Money Market
Portfolio, maturities and rates of return on investments, among other
factors. In addition, the value of shares of the Money Market Portfolio will
fluctuate and not remain constant.
The Money Market Portfolio yield may be compared with yields of other
investments. However, it should not be compared to the return on fixed rate
investments which guarantee rates of interest for specified periods. The
yield also should not be compared to the yield of money market funds made
available to the general public because their yields usually are calculated
on the basis of a constant $1 price per share and they pay out earnings in
dividends which accrue on a daily basis. Investment income of the Money
Market Portfolio, including any realized gains as well as accrued interest,
is not paid out in dividends but is reflected in the share value. The Money
Market Portfolio yield also does not reflect insurance company charges and
fees applicable to Contracts.
The seven-day current yield for the Money Market Portfolio was 5.59% for the
period ended December 31, 1994. The effective yield for that period was
5.69%.
QUALITY BOND, GOVERNMENT AND HIGH YIELD PORTFOLIO YIELDS
Yields of the Quality Bond, Government and High Yield Portfolios will be
computed by annualizing net investment income, as determined by the SEC's
formula, calculated on a per share basis for a recent 30-day period and
dividing that amount by a Portfolio share's net asset value (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the
last trading day of that period. Net investment income will reflect
amortization of any market value premium or discount of fixed income
securities (except for obligations backed by mortgages or other assets) over
such period and may include recognition of a pro rata portion of the stated
dividend rate of dividend paying portfolio securities. The Portfolios' yields
will vary from time to time depending upon market conditions, the
compostition of each Portfolio's portfolio and operating expenses of the
Trust allocated to each Portfolio. Yield should also be considered relative
to changes in the value of a Portfolio's shares and to the relative risks
associated with the investment objectives and policies of the Portfolios.
These yields do not reflect insurance company charges and fees applicable to
the Contracts.
At any time in the future, yields and total return may be higher or lower
than past yields and there can be no assurance that any historical results
will continue.
The 30 day yields for the Quality Bond, Government and High Yield Portfolios
for the period ended December 31, 1994 were 6.37%, 6.35% and 10.53%,
respectively.
TOTAL RETURN CALCULATIONS
Each Portfolio may provide average annual total return information calculated
according to a formula prescribed by the SEC. According to that formula,
average annual total return figures represent the average annual compounded
rate of return for the stated period. Average annual total return quotations
reflect the percentage change between the beginning value of a static account
in the Portfolio and the ending value of that account measured by the then
current net asset value of that Portfolio assuming that all dividends and
capital gains distributions during the stated period were invested in shares
of the Portfolio when paid. Total return is calculated by finding the average
annual compounded rates of return of a hypothetical investment that would
equate the initial amount invested to the ending redeemable value of such
investment, according to the following formula:
T = (ERV/P)(1/n) - 1
where T equals average annual total return; where ERV, the ending redeemable
value, is the value at the end of the applicable period of a hypothetical
$1,000 investment made at the beginning of the applicable period; where P
equals a hypothetical initial investment of $1,000; and where n equals the
number of years.
The average annual total returns through December 31, 1994 for the Common
Stock Portfolio for one year, five years, and 10 years were -2.14%, 9.82%,
and 15.25%, respectively.
35
<PAGE>
The average annual total returns through December 31, 1994 for the
Intermediate Government Securities Portfolio for one year and since inception
(on April 1, 1991) were -4.37%, and 6.16%, respectively.
The average annual total returns through December 31, 1994 for the High Yield
Portfolio for one year, five years, and since inception (on January 2, 1987)
were -2.79%, 10.60%, and 9.04%, respectively.
The average annual total returns through December 31, 1994 for the Balanced
Portfolio for one year, five years, and since inception (on January 27, 1986)
were -8.02%, 7.29%, and 11.25%, respectively.
The average annual total returns through December 31, 1994 for the Global
Portfolio for one year, five years, and since inception (on August 27, 1987)
were 5.23%, 11.15%, and 10.39%, respectively.
The average annual total returns through December 31, 1994 for the Aggressive
Stock Portfolio for one year, five years, and since inception (on January 27,
1986) were -3.81%, 17.06%, and 18.78%, respectively.
The average annual total returns through December 31, 1994 for the
Conservative Investors Portfolio for one year and since inception (on October
2, 1989) were -4.10%, and 7.71%, respectively.
The average annual total returns through December 31, 1994 for the Growth
Investors Portfolio for one year and since inception (on October 2, 1989)
were -3.15%, and 14.19%, respectively.
The average annual total returns through December 31, 1994 for the Quality
Bond Portfolio for one year and since inception (on October 1, 1993) were
-5.10% and -4.49%, respectively.
The average annual total returns through December 31, 1994 for the Growth and
Income Portfolio for one year and since inception (on October 1, 1993) were
-0.58% and -0.66%, respectively.
The average annual total return through December 31, 1994 (unannualized) for
the Equity Index Portfolio since inception (on March 1, 1994) was 1.08%.
No information is shown for the International Portfolio, which received its
initial funding on April 3, 1995.
Each Portfolio, from time to time, also may advertise its cumulative total
return figures. Cumulative total return is the compound rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of a Portfolio's shares
and assume that all dividends and capital gains distributions during the
period were reinvested in shares of that Portfolio. Cumulative total return
is calculated by finding the compound rates of return of a hypothetical
investment over such period, according to the following formula (cumulative
total return is then expressed as a percentage):
C = (ERV/P) - 1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value; ERV is the value, at the end of the applicable
period, of a hypothetical $1,000 investment made at the beginning of the
applicable period.
The cumulative total return, since the inception of each Portfolio through
December 31, 1994, for the Common Stock, Intermediate Government Securities,
High Yield, Balanced, Global, Aggressive Stock, Conservative Investors,
Growth Investors, Quality Bond, Growth and Income and Equity Index Portfolios
were 1,084.25%, 25.14%, 99.86%, 159.23%, 106.78%, 365.13%, 47.70%, 100.67%,
-5.58%, -0.83% and 1.08%, respectively.
OTHER SERVICES
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036,
serves as the Trust's independent accountants. The financial statements of
the Common Stock, Money Market, Balanced, Aggressive Stock, High Yield,
Global, Conservative Investors, Growth Investors, Intermediate Govern-
36
<PAGE>
ment Securities, Quality Bond and Growth and Income Portfolios for the year
ended December 31, 1994 and the Equity Index Portfolio for the period March
1, 1994 (commencement of operations) through December 31, 1994, which are
included in this SAI, have been audited by Price Waterhouse LLP, the Trust's
independent accountants for such periods, as stated in their report appearing
herein, and have been so included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
CUSTODIAN
The Chase Manhattan Bank, N.A., whose principal address is One Chase
Manhattan Plaza, New York, New York 10081, has been designated the Custodian
of the Trust's portfolio securities and other assets.
TRANSFER AGENT
Equitable serves as the transfer agent and dividend disbursing agent for the
Trust. For the year ended December 31, 1994, Equitable received no
compensation for providing such services for the Trust.
UNDERWRITER
Equico Securities, Inc. (Equico), a wholly-owned subsidiary of Equitable,
serves, without compensation from the Trust, as the principal underwriter of
the Trust, pursuant to an agreement with the Trust. Under the terms of the
agreement, Equico is not obligated to sell any specific number of shares. It
has authority, pursuant to the agreement, to enter into similar contracts
with other insurance companies and with other entities registered as
broker-dealers under the Securities Exchange Act of 1934.
As principal underwriter, Equico bears the Trust's marketing expenses.
However, Equico expects to be reimbursed for the portion of expenses
attributable to the marketing of other insurance companies' products by such
insurance companies. Equico has entered into sales agreements with Equitable,
Equitable Variable and each unaffiliated insurer under which shares of the
Trust are made available for the investment of net considerations which are
received under variable insurance contracts and are allocated to their
respective separate accounts.
37
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT
MONEY MARKET SECURITIES QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value (Cost:
Money Market Portfolio--$292,100,623;
Intermediate Government Securities
Portfolio--$44,352,222;
Quality Bond Portfolio--$132,724,283;
High Yield Portfolio--$76,923,394;
Balanced Portfolio--$1,341,079,638;
Growth and Income Portfolio--$32,144,919;
Equity Index Portfolio--$37,105,987;
Common Stock Portfolio--$3,306,081,825;
Global Portfolio--$409,862,422;
Aggressive Stock Portfolio--$1,574,401,795;
Conservative Investors Portfolio--$175,014,438;
Growth Investors Portfolio--$481,206,882) (Notes 1 and
3) ................................................. $292,120,778 $ 43,420,194 $ 126,547,025 $ 72,910,447
Cash ................................................... -- 3,840 24,217 2,482,454
Foreign cash ........................................... -- -- -- --
Receivable for securities sold ......................... -- 4,806,214 -- --
Receivable from Separate Accounts for Trust shares sold 33,051,117 138,278 54,300 215,843
Dividends, interest and other receivables .............. 518,659 181,443 1,025,940 1,895,068
-------------- -------------- -------------- -------------
Total assets ........................................ 325,690,554 48,549,969 127,651,482 77,503,812
-------------- -------------- -------------- -------------
LIABILITIES:
Options written at value (Premiums received: Common
Stock Portfolio--$4,512,479) (Notes 1 and 3) ......... -- -- -- --
Payable to custodian ................................... 165,714 -- -- --
Payable for securities purchased ....................... -- -- -- 3,564,750
Payable to Separate Accounts for Trust shares redeemed -- -- -- --
Unrealized depreciation of forward currency contracts
(Notes 1 and 3) ...................................... -- -- -- --
Investment advisory fees payable ....................... 94,118 19,869 57,764 32,737
Trustees' fees payable ................................. 17,752 3,387 695 2,279
Accrued expenses ....................................... 21,974 8,849 17,554 9,417
-------------- -------------- -------------- -------------
Total liabilities ................................... 299,558 32,105 76,013 3,609,183
-------------- -------------- -------------- -------------
NET ASSETS ............................................. $325,390,996 $ 48,517,864 $ 127,575,469 $ 73,894,629
============== ============== ============== =============
COMPONENTS OF NET ASSETS (NOTE 1):
Paid in capital ...................................... $325,385,472 $ 59,892,365 $ 143,140,240 $ 79,676,355
Accumulated undistributed (overdistributed) net
investment income .................................. (14,631) (3,387) 683,882 (6,358)
Accumulated net realized loss ........................ -- (10,439,086) (10,071,395) (1,762,421)
Unrealized appreciation (depreciation) of investments
and foreign currency denominated assets and
liabilities ........................................ 20,155 (932,028) (6,177,258) (4,012,947)
-------------- -------------- -------------- -------------
NET ASSETS ............................................. $325,390,996 $ 48,517,864 $ 127,575,469 $ 73,894,629
============== ============== ============== =============
Shares outstanding (Note 4) ............................ 32,095,980 5,471,948 14,634,796 8,292,776
============== ============== ============== =============
Net asset value, offering and redemption
price per share (Note 1) .............................. $10.14 $8.87 $8.72 $8.91
============== ============== ============== =============
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND AGGRESSIVE CONSERVATIVE GROWTH
BALANCED INCOME EQUITY INDEX COMMON STOCK GLOBAL STOCK INVESTORS INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$1,317,168,946 $31,904,867 $36,671,027 $3,448,933,932 $413,049,268 $1,824,867,284 $173,304,521 $484,679,989
28,941 10,767 10,285 791,300 2,679,160 6,397,293 -- 1,835,976
-- -- -- 21,165 3,874,659 -- -- 1,147,515
4,347,633 264,619 -- 21,904,373 4,032,588 6,485,362 74,858 3,812,138
2,667,957 658,336 1,678 8,468,218 3,057,021 -- 228,980 2,608,621
6,946,331 112,111 97,284 10,210,345 516,437 407,876 877,467 2,286,229
-------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
1,331,159,808 32,950,700 36,780,274 3,490,329,333 427,209,133 1,838,157,815 174,485,826 496,370,468
-------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- -- 3,724,900 -- -- -- --
-- -- -- -- -- -- 683,963 --
847,976 1,398,459 -- 18,963,737 4,851,870 2,921,828 -- 3,516,442
-- -- -- -- -- 2,223,640 -- --
-- -- -- -- 312,724 -- -- 54,822
401,320 13,035 10,190 1,007,126 179,403 675,903 77,703 211,986
25,315 70 113 98,704 2,684 23,162 1,524 3,602
65,585 16,765 21,763 290,005 164,169 149,002 31,326 106,067
-------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
1,340,196 1,428,329 32,066 24,084,472 5,510,850 5,993,535 794,516 3,892,919
-------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
$1,329,819,612 $31,522,371 $36,748,208 $3,466,244,861 $421,698,283 $1,832,164,280 $173,691,310 $492,477,549
============== ============= ============== ============== ============== ============== ============== ==============
$1,377,713,488 $32,182,728 $37,230,298 $3,334,534,285 $419,535,121 $1,632,506,050 $185,117,902 $497,121,365
(26,573) (69) (113) 3,552,516 215,631 12,105 (1,522) 146,879
(23,956,611) (420,236) (47,017) (15,481,358) (923,706) (50,819,364) (9,715,153) (8,208,832)
(23,910,692) (240,052) (434,960) 143,639,418 2,871,237 250,465,489 (1,709,917) 3,418,137
-------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
$1,329,819,612 $31,522,371 $36,748,208 $3,466,244,861 $421,698,283 $1,832,164,280 $173,691,310 $492,477,549
============== ============= ============== ============== ============== ============== ============== ==============
89,448,391 3,251,126 3,723,880 259,461,555 30,411,710 59,811,998 17,113,999 33,600,588
============== ============= ============== ============== ============== ============== ============== ==============
$14.87 $9.70 $9.87 $13.36 $13.87 $30.63 $10.15 $14.66
============== ============= ============== ============== ============== ============== ============== ==============
</TABLE>
39
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF OPERATIONS
Year Ended December 31, 1994
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT
MONEY MARKET SECURITIES QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income** (Note 1):
Dividends (including $4,959,800 and $30,507 from
affiliated companies for the Common Stock and
Aggressive Stock Portfolios, respectively) ..... $ -- $ -- $ 312,613 $ 37,004
Interest ......................................... 12,613,523 7,673,643 9,119,837 6,675,273
-------------- -------------- -------------- -------------
Total income .................................... 12,613,523 7,673,643 9,432,450 6,712,277
-------------- -------------- -------------- -------------
Expenses (Note 2):
Investment advisory fee .......................... 1,135,360 524,752 666,823 374,012
Custody fees ..................................... 26,289 17,045 17,064 25,943
Printing and mailing expenses .................... 3,410 1,510 1,482 836
Professional fees ................................ 16,252 36,215 9,777 7,607
SEC registration fees ............................ 9,901 -- 9,785 2,544
Trustees' fees ................................... 8,477 3,644 3,586 2,076
Miscellaneous .................................... 5,492 2,433 2,386 1,349
-------------- -------------- -------------- -------------
Total expenses .................................. 1,205,181 585,599 710,903 414,367
-------------- -------------- -------------- -------------
NET INVESTMENT INCOME ............................... 11,408,342 7,088,044 8,721,547 6,297,910
-------------- -------------- -------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) (NOTES 1 AND 3):
Realized Gain (Loss):
On securities (including $1,063,551 and
$(64,555,581) from affiliated companies for the
Common Stock and Aggressive Stock Portfolios,
respectively) ................................... -- (10,439,086) (9,794,399) (1,709,091)
On options written ............................... -- -- -- --
On foreign currency transactions ................. -- -- (376,632) --
-------------- -------------- -------------- -------------
Realized gain (loss)--net ....................... -- (10,439,086) (10,171,031) (1,709,091)
-------------- -------------- -------------- -------------
Change in Unrealized Appreciation/Depreciation:
On securities .................................... (9,847) (2,940,993) (4,533,902) (6,485,505)
On options written ............................... -- -- -- --
On foreign currency transactions ................. -- -- -- --
-------------- -------------- -------------- -------------
Unrealized appreciation/depreciation--net ....... (9,847) (2,940,993) (4,533,902) (6,485,505)
-------------- -------------- -------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)--NET ............ (9,847) (13,380,079) (14,704,933) (8,194,596)
-------------- -------------- -------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $11,398,495 $ (6,292,035) $ (5,983,386) $(1,896,686)
============== ============== ============== =============
<FN>
---------------
* For the Period from March 1, 1994 (Commencement of Operations) to
December 31, 1994.
** Net of foreign taxes withheld on dividends of $24,382, $4,589,
$1,347,683, $267,638, $107,123 and $64,523 for the Balanced, Equity
Index, Common Stock, Global, Aggressive Stock and Growth Investors
Portfolios, respectively, and on interest of $518 for the Global
Portfolio.
</TABLE>
See Notes to Financial Statements.
40
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND CONSERVATIVE GROWTH
BALANCED INCOME EQUITY INDEX COMMON STOCK GLOBAL AGGRESSIVE INVESTORS INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO* PORTFOLIO PORTFOLIO STOCK PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 11,848,552 $ 296,312 $ 745,647 $ 55,511,738 $ 3,291,522 $ 7,819,830 $ 385,532 $ 3,334,155
32,270,133 231,404 29,156 4,365,537 2,485,196 2,220,256 8,335,120 11,833,771
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
44,118,685 527,716 774,803 59,877,275 5,776,718 10,040,086 8,720,652 15,167,926
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
5,006,790 73,672 92,476 12,014,427 1,496,840 7,642,355 822,547 2,105,929
41,883 16,144 18,291 320,505 286,362 74,866 16,495 86,578
16,901 114 256 41,287 2,954 19,979 1,777 4,494
61,550 5,183 6,578 143,521 14,721 71,885 10,766 19,888
29,171 9,495 12,088 139,866 88,255 102,196 21,803 73,910
41,956 278 622 102,546 7,371 49,648 4,301 10,882
27,219 183 413 66,741 4,758 32,176 2,861 7,237
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
5,225,470 105,069 130,724 12,828,893 1,901,261 7,993,105 880,550 2,308,918
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
38,893,215 422,647 644,079 47,048,382 3,875,457 2,046,981 7,840,102 12,859,008
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
(18,710,641) (409,119) 110,383 136,828,879 8,116,643 (44,714,146) (9,714,278) (7,667,515)
-- -- -- 57,789,222 -- (12,446) -- --
-- -- -- (80,888) 141,065 -- -- 105,961
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
(18,710,641) (409,119) 110,383 194,537,213 8,257,708 (44,726,592) (9,714,278) (7,561,554)
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
(133,794,748) (250,229) (434,960) (325,019,251) (5,472,591) (7,375,377) (3,628,013) (17,183,742)
-- -- -- 7,902,160 -- (41,278) -- --
-- -- -- 133 (900,262) -- -- (217,398)
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
(133,794,748) (250,229) (434,960) (317,116,958) (6,372,853) (7,416,655) (3,628,013) (17,401,140)
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
(152,505,389) (659,348) (324,577) (122,579,745) 1,884,855 (52,143,247) (13,342,291) (24,962,694)
-------------- ------------ -------------- --------------- ------------- --------------- -------------- --------------
$(113,612,174) $(236,701) $ 319,502 $ (75,531,363) $ 5,760,312 $(50,096,266) $ (5,502,189) $(12,103,686)
============== ============ ============== =============== ============= =============== ============== ==============
</TABLE>
41
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET PORTFOLIO SECURITIES PORTFOLIO
-------------------------------- --------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ................................. $ 11,408,342 $ 8,029,237 $ 7,088,044 $ 14,027,927
Realized gain (loss)--net ............................. -- -- (10,439,086) 14,315,307
Change in unrealized appreciation/depreciation of
investments and foreign currency denominated assets
and liabilities--net ................................ (9,847) 43,630 (2,940,993) (405,824)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets from operations . 11,398,495 8,072,867 (6,292,035) 27,937,410
--------------- --------------- --------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1):
Dividends from net investment income .................. (11,411,476) (8,038,768) (7,088,604) (15,670,469)
Dividends in excess of net investment income .......... -- -- -- --
Distributions from realized gains ..................... -- -- -- (12,378,067)
Distributions in excess of realized gains ............. -- -- -- --
Tax return of capital distributions ................... -- -- -- --
--------------- --------------- --------------- ---------------
Decrease in net assets from dividends and distributions (11,411,476) (8,038,768) (7,088,604) (28,048,536)
--------------- --------------- --------------- ---------------
SHARE TRANSACTIONS (NOTES 1 AND 4):
Shares sold ........................................... 355,157,130 183,568,183 33,872,981 41,613,014
Shares issued in connection with the substitution of
the Short-Term World Income Portfolio ............... -- -- 2,582,814 --
Shares issued in reinvestment of dividends and
distributions ....................................... 11,411,476 8,038,768 7,088,604 28,048,536
Shares redeemed ....................................... (289,624,991) (211,765,184) (140,156,888) (204,626,298)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets derived from
share transactions .................................. 76,943,615 (20,158,233) (96,612,489) (134,964,748)
--------------- --------------- --------------- ---------------
INCREASE (DECREASE) IN NET ASSETS ....................... 76,930,634 (20,124,134) (109,993,128) (135,075,874)
NET ASSETS, BEGINNING OF PERIOD ......................... 248,460,362 268,584,496 158,510,992 293,586,866
--------------- --------------- --------------- ---------------
NET ASSETS, END OF PERIOD* .............................. $ 325,390,996 $ 248,460,362 $ 48,517,864 $ 158,510,992
=============== =============== =============== ===============
<FN>
---------------
* Including accumulated undistributed (overdistributed) net investment
income of $(14,631) and $(9,531) for the Money Market Portfolio and
$(3,387) and $(1,626,244) for the Intermediate Government Portfolio and
$683,882 and $4,973 for the Quality Bond Portfolio and $(6,358) and
$(7,794) for the High Yield Portfolio and $(26,573) and $1,783,854 for
the Balanced Portfolio and $(69) and $(2) for the Growth and Income
Portfolio, as of December 31, 1994 and December 31, 1993, respectively.
** Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
<TABLE>
<CAPTION>
QUALITY BOND PORTFOLIO HIGH YIELD PORTFOLIO BALANCED PORTFOLIO GROWTH AND INCOME PORTFOLIO
------------------------------ ------------------------------ ------------------------------ ------------------------------
OCTOBER 1, OCTOBER 1,
YEAR ENDED 1993** YEAR ENDED YEAR ENDED YEAR ENDED 1993**
DECEMBER 31, TO DECEMBER DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER
1994 31, 1993 1994 1993 1994 1993 1994 31, 1993
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$8,721,547 $1,226,813 $6,297,910 $5,427,097 $38,893,215 $36,056,358 $422,647 $3,295
(10,171,031) (117,287) (1,709,091) 3,774,041 (18,710,641) 73,049,628 (409,119) (11,117)
(4,533,902) (1,643,356) (6,485,505) 2,450,542 (133,794,748) 32,426,988 (250,229) 10,177
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(5,983,386) (533,830) (1,896,686) 11,651,680 (113,612,174) 141,532,974 (236,701) 2,355
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(7,694,742) (1,221,840) (6,297,910) (5,433,341) (38,893,215) (36,087,683) (422,714) (3,295)
-- -- (85,166) -- (2,417,748) -- -- (2)
-- -- -- (1,244,654) -- (73,049,628) -- --
-- (130,973) -- -- -- (2,537,264) -- --
(627,091) -- -- -- (202,506) -- -- (97)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(8,321,833) (1,352,813) (6,383,076) (6,677,995) (41,513,469) (111,674,575) (422,714) (3,394)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
33,996,457 106,082,587 30,003,628 31,092,722 163,763,699 198,602,703 31,788,696 1,475,225
-- -- -- -- -- -- -- --
8,321,833 1,352,813 6,383,076 6,677,995 41,513,469 111,674,575 422,714 3,394
(5,269,742) (716,617) (21,380,848) (23,262,567) (84,972,287) (52,165,797) (1,485,659) (21,545)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
37,048,548 106,718,783 15,005,856 14,508,150 120,304,881 258,111,481 30,725,751 1,457,074
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
22,743,329 104,832,140 6,726,094 19,481,835 (34,820,762) 287,969,880 30,066,336 1,456,035
104,832,140 -- 67,168,535 47,686,700 1,364,640,374 1,076,670,494 1,456,035 --
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$127,575,469 $104,832,140 $ 73,894,629 $ 67,168,535 $1,329,819,612 $1,364,640,374 $31,522,371 $1,456,035
============== ============== ============== ============== ============== ============== ============== ==============
</TABLE>
43
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF CHANGES IN NET ASSETS (Concluded)
<TABLE>
<CAPTION>
EQUITY INDEX
PORTFOLIO COMMON STOCK PORTFOLIO
--------------- -------------------------------
MARCH 1, 1994**
TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1994 1993
--------------- -------------- ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ......................................... $ 644,079 $ 47,048,382 $ 41,916,629
Realized gain (loss)--net ..................................... 110,383 194,537,213 370,949,140
Change in unrealized appreciation/depreciation of investments
and foreign currency denominated assets and liabilities--net (434,960) (317,116,958) 190,072,427
--------------- -------------- ---------------
Net increase (decrease) in net assets from operations ......... 319,502 (75,531,363) 602,938,196
--------------- -------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1):
Dividends from net investment income .......................... (644,216) (47,048,382) (41,916,629)
Dividends in excess of net investment income .................. -- (1,675,372) (11,493)
Distributions from realized gains ............................. (110,383) (187,473,461) (363,887,385)
Distributions in excess of realized gains ..................... (46,993) -- --
Tax return of capital distributions ........................... -- (1,707,109) --
--------------- -------------- ---------------
Decrease in net assets from dividends and distributions ....... (801,592) (237,904,324) (405,815,507)
--------------- -------------- ---------------
SHARE TRANSACTIONS (NOTES 1 AND 4):
Shares sold ..................................................... 39,737,348 520,896,037 397,726,692
Shares issued in reinvestment of dividends and distributions ... 801,592 237,904,324 405,815,507
Shares redeemed ................................................. (3,308,642) (104,247,444) (182,829,265)
--------------- -------------- ---------------
Net increase in net assets derived from share transactions ..... 37,230,298 654,552,917 620,712,934
--------------- -------------- ---------------
INCREASE IN NET ASSETS .......................................... 36,748,208 341,117,230 817,835,623
NET ASSETS, BEGINNING OF PERIOD ................................. -- 3,125,127,631 2,307,292,008
--------------- -------------- ---------------
NET ASSETS, END OF PERIOD* ...................................... $36,748,208 $3,466,244,861 $3,125,127,631
=============== ============== ===============
<FN>
---------------
* Including accumulated undistributed (overdistributed) net investment
income of $3,552,516 and $1,370,867 for the Common Stock Portfolio and
$215,631 and $314,631 for the Global Portfolio and $12,105 and $(11,917)
for the Aggressive Stock Portfolio and $(1,522) and $(829) for the
Conservative Investors Portfolio and $146,879 and $60,988 for the Growth
Investors Portfolio, as of December 31, 1994 and December 31, 1993,
respectively, and $(113) for the Equity Index Portfolio, as of December
31, 1994.
** Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
44
<PAGE>
<TABLE>
<CAPTION>
CONSERVATIVE INVESTORS
GLOBAL PORTFOLIO AGGRESSIVE STOCK PORTFOLIO PORTFOLIO GROWTH INVESTORS PORTFOLIO
------------------------------ ------------------------------ ------------------------------ ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994 1993 1994 1993
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,875,457 $ 510,146 $ 2,046,981 $ 3,657,426 $ 7,840,102 $ 4,134,257 $ 12,859,008 $ 5,732,204
8,257,708 12,252,578 (44,726,592) 123,157,103 (9,714,278) 4,834,934 (7,561,554) 14,903,894
(6,372,853) 6,344,597 (7,416,655) 84,157,305 (3,628,013) (416,361) (17,401,140) 7,849,673
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
5,760,312 19,107,321 (50,096,266) 210,971,834 (5,502,189) 8,552,830 (12,103,686) 28,485,771
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(3,755,996) (1,107,571) (2,006,386) (3,674,910) (7,847,155) (4,134,257) (12,859,008) (5,947,393)
-- -- -- -- -- (829) (323,341) --
(8,257,708) (12,211,997) -- (123,157,103) -- (4,783,178) -- (14,776,249)
(134,077) (5,595) -- (3,243,480) -- -- -- --
(395,364) -- (49,382) (562,661) -- -- -- --
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(12,543,145) (13,325,163) (2,055,768) (130,638,154) (7,847,155) (8,918,264) (13,182,349) (20,723,642)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
302,129,663 88,394,115 691,803,895 466,941,435 72,545,380 44,645,437 240,852,053 102,925,614
12,543,145 13,325,163 2,055,768 130,638,154 7,847,155 8,918,264 13,182,349 20,723,642
(27,448,676) (15,415,668) (366,875,063) (331,157,828) (7,769,739) (9,455,081) (14,738,042) (1,593,716)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
287,224,132 86,303,610 326,984,600 266,421,761 72,622,796 44,108,620 239,296,360 122,055,540
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
280,441,299 92,085,768 274,832,566 346,755,441 59,273,452 43,743,186 214,010,325 129,817,669
141,256,984 49,171,216 1,557,331,714 1,210,576,273 114,417,858 70,674,672 278,467,224 148,649,555
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$421,698,283 $141,256,984 $1,832,164,280 $1,557,331,714 $173,691,310 $114,417,858 $492,477,549 $278,467,224
============== ============== ============== ============== ============== ============== ============== ==============
</TABLE>
45
<PAGE>
THE HUDSON RIVER TRUST
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
EFFECTIVE
PRINCIPAL VALUE ANNUAL
AMOUNT (NOTE 1) YIELD*
------------- -------------- -----------
<S> <C> <C> <C>
SHORT-TERM DEBT SECURITIES:
BANK NOTES
Nationsbank Corp.
Due 01/30/95 ............................... $10,000,000 $ 9,999,332 6.34%
Republic National Bank--N.Y.
Due 03/08/95 ............................... 5,000,000 4,980,206 6.48
--------------
TOTAL BANK NOTES (4.6%) ................... 14,979,538
--------------
COMMERCIAL PAPER
ABS Commercial Paper, Inc.
Due 02/10/95 ............................... 8,000,000 7,946,244 6.19
AGA Capital Corp.
Due 01/13/95 ............................... 12,300,000 12,274,372 6.03
Allomon Funding Corp.
Due 02/10/95 ............................... 8,400,000 8,343,557 6.19
ASI Funding Corp.
Due 02/01/95 ............................... 4,438,000 4,414,725 6.18
Barton Capital Corp.
Due 01/25/95 ............................... 7,000,000 6,971,806 6.07
Berkley Funding Corp.
Due 01/18/95 ............................... 3,025,000 3,016,228 6.07
Ciesco LP
Due 02/08/95 ............................... 5,000,000 4,967,771 6.24
Communications Satellite Corp.
Due 02/06/95 ............................... 3,200,000 3,180,431 6.24
Copley Financing Corp.:
Due 01/12/95 ............................... 6,356,000 6,343,775 6.03
Due 01/24/95 ............................... 5,000,000 4,980,667 6.07
C.S. First Boston, Inc.
Due 02/03/95 ............................... 5,000,000 4,971,903 6.24
Walt Disney Co.
Due 01/03/95 ............................... 9,200,000 9,195,630 5.95
Equipment Funding, Inc.:
Due 01/09/95 ............................... 5,000,000 4,992,788 6.03
Due 02/07/95 ............................... 7,000,000 6,956,258 6.21
ESC Securitization, Inc.
Due 03/15/95 ............................... 10,000,000 9,874,611 6.42
Ford Motor Credit Co.
Due 01/11/95 ............................... 7,900,000 7,885,927 6.10
General Electric Capital Corp.
Due 02/07/95 ............................... 5,000,000 4,968,861 6.18
Goldman Sachs & Co.
Due 02/02/95 ............................... 7,000,000 6,961,821 6.24
International Lease Finance Corp.
Due 02/07/95 ............................... 7,000,000 6,956,036 6.24
International Securitization
Due 01/20/95 ............................... 8,775,000 8,746,628 6.09
Merrill Lynch & Co., Inc.
Due 01/25/95 ............................... 7,000,000 6,971,563 6.12
Morgan Stanley Group, Inc.
Due 01/12/95 ............................... 10,000,000 9,980,567 6.10
Nicollet Funding Corp.
Due 01/23/95 ............................... 10,000,000 9,962,944 6.07
October Corp.
Due 01/27/95 ............................... 8,000,000 7,965,200 6.07
47
</TABLE>
<PAGE>
THE HUDSON RIVER TRUST
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1994
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EFFECTIVE
PRINCIPAL VALUE ANNUAL
AMOUNT (NOTE 1) YIELD*
------------- -------------- -----------
<S> <C> <C> <C>
SHORT-TERM DEBT SECURITIES (Continued):
Preferred Receivables Funding:
Due 01/19/95 ............................... $ 5,000,000 $ 4,984,563 6.12%
Due 02/14/95 ............................... 6,370,000 6,322,623 6.24
Premium Funding
Due 01/26/95 ............................... 6,722,000 6,693,600 6.12
Progress Receivables Funding
Due 01/20/95 ............................... 5,000,000 4,983,889 6.07
Sheffield Receivables Corp.
Due 02/21/95 ............................... 3,000,000 2,974,433 6.19
Sumitomo Corp. of America
Due 03/28/95 ............................... 8,800,000 8,669,210 6.48
Three River Funding
Due 01/20/95 ............................... 8,000,000 7,974,222 6.07
U.S. Leasing Corp.
Due 01/31/95 ............................... 8,300,000 8,257,688 6.20
Weyerhaueser Mortgage Co.
Due 01/17/95 ............................... 5,000,000 4,986,188 6.12
WMC Finance
Due 01/30/95 ............................... 7,000,000 6,965,581 6.18
Working Capital Management Corp.
Due 01/17/95 ............................... 7,019,000 6,999,776 6.07
--------------
TOTAL COMMERCIAL PAPER (73.3%) ............ 238,642,086
--------------
TIME DEPOSITS (2.8%)
Industrial Bank of Japan-N.Y.
Due 01/03/95 ............................... 8,997,000 8,996,718 6.54
--------------
VARIABLE RATE COMMERCIAL PAPER
ASCC Commercial Paper
Due 01/04/95 ............................... 9,500,000 9,501,496 4.57
PNC Bank N.A.
Due 01/04/95 ............................... 10,000,000 10,000,130 5.95
--------------
TOTAL VARIABLE RATE COMMERCIAL PAPER (6.0%) .............. 19,501,626
--------------
VARIABLE RATE LIBOR (3.1%)
American Express Centerian
Due 01/17/95 ............................... 10,000,000 10,000,810 6.26
--------------
TOTAL SHORT-TERM DEBT SECURITIES (89.8%)
(Amortized Cost $292,100,623) .............. 292,120,778
CASH AND RECEIVABLES LESS LIABILITIES (10.2%) .............. 33,270,218
--------------
NET ASSETS (100.0%) ......................... $325,390,996
==============
<FN>
---------------
* Based on market values at the close of business on December 31, 1994.
</TABLE>
See Notes to Financial Statements.
47
<PAGE>
THE HUDSON RIVER TRUST
INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES:
CREDIT SENSITIVE
MORTGAGE RELATED (46.1%)
Federal Home Loan
Mortgage Corp.:
8.0%, 06/01/02 ................. $17,600,804 $17,430,297
8.0%, 06/01/17 ................. 542,967 517,007
9.5%, 01/01/20 ................. 9,690 9,954
Government National Mortgage
Association: ...................
11.5%, 09/15/11 ................ 45,535 49,961
11.5%, 03/15/13 ................ 70,879 77,768
11.5%, 04/15/13 ................ 33,304 36,542
11.5%, 05/15/13 ................ 80,297 88,103
11.5%, 09/15/15 ................ 8,948 9,818
Federal Home Loan Mortgage Corp./
Government National Mortgage
Association
4.75% Series 23-PC, 07/25/11 .. 4,600,000 4,167,313
-------------
22,386,763
-------------
U.S. GOVERNMENT AGENCIES (16.3%)
Aid Israel
Zero Coupon, 09/15/03 .......... 4,052,000 2,022,353
Resolution Funding S.T.R.I.P.S.,
Zero Coupon Deb., 04/15/99 .... 5,000,000 3,584,350
U.S. Treasury
7.25% Note, 05/15/04 ........... 2,400,000 2,304,747
-------------
7,911,450
-------------
TOTAL CREDIT SENSITIVE (62.4%) 30,298,213
-------------
TOTAL LONG-TERM DEBT SECURITIES (62.4%)
(Amortized Cost $31,230,241) .. 30,298,213
-------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT
Federal Home Loan Bank:
5.75%, due 01/03/95 ............ $ 3,140,000 $ 3,138,495
5.84%, due 01/10/95 ............ 3,000,000 2,995,134
5.8%, due 01/25/95 ............. 2,000,000 1,991,944
Federal Home Loan Mortgage Corp.
5.91%, due 01/05/95 ............ 2,000,000 1,998,358
Federal National Mortgage
Association
5.85%, due 01/04/95 ............ 3,000,000 2,998,050
-------------
TOTAL U.S. GOVERNMENT (27.1%) 13,121,981
-------------
TOTAL SHORT-TERM DEBT SECURITIES (27.1%)
(Amortized Cost $13,121,981) .. 13,121,981
-------------
TOTAL INVESTMENTS (89.5%)
(Amortized Cost $44,352,222) .. 43,420,194
CASH AND RECEIVABLES LESS
LIABILITIES (10.5%) ............ 5,097,670
-------------
NET ASSETS (100.0%) ............. $48,517,864
=============
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
THE HUDSON RIVER TRUST
QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES:
BUSINESS SERVICES
PROFESSIONAL SERVICES (1.6%)
Health & Rehabilitation 5.34%
Floater, 07/13/99 (a) ......... $ 2,000,000 $ 1,981,390
-------------
CREDIT SENSITIVE
BANKS (3.1%)
Citicorp 5.0% Floater,
01/30/98 (a) .................. 4,000,000 3,965,000
-------------
FINANCIAL SERVICES (5.9%)
Lehman Brothers Holding, Inc.
Zero Coupon Medium Term Note,
02/10/96 ...................... 4,000,000 3,830,000
Navistar Finance 6.4% Series
94-B, 01/15/20 ................ 3,806,416 3,720,772
-------------
7,550,772
-------------
MORTGAGE RELATED (40.5%)
Federal Home Loan Mortgage
Corp.: 8.0%, 06/01/02 ......... 5,199,567 5,149,196
7.0% Series 1468-N (PAC
Interest Only), 12/15/15 ..... 13,306,152 1,605,055
Federal National Mortgage
Association: Zero Coupon,
10/09/19 ...................... 25,400,000 3,397,250
6.5% (PAC Interest Only),
09/25/08 ...................... 26,523,487 3,821,040
Government National Mortgage
Association:
7.0%, 09/15/23 ............... 9,546,685 8,562,183
7.5%, 11/15/23 ............... 8,213,761 7,615,701
8.0%, 10/15/23 ............... 4,563,568 4,361,060
7.5%, 02/15/24 ............... 9,681,266 8,976,354
9.0%, 09/15/24 ............... 8,124,189 8,195,276
-------------
51,683,115
-------------
FOREIGN GOVERNMENT (3.2%)
Republic of Colombia 7.25%,
02/23/04 ..................... 5,000,000 4,118,750
-------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES (Continued):
U.S. GOVERNMENT (10.1%)
U.S. Treasury:
8.125% Bond, 08/15/19 ......... $ 3,000,000 $ 3,037,500
6.25% Bond, 08/15/23 .......... 5,000,000 4,060,935
7.5% Bond, 11/15/24 ........... 5,900,000 5,640,028
-------------
12,738,463
-------------
TOTAL CREDIT SENSITIVE (62.8%) 80,056,100
-------------
TECHNOLOGY
TELECOMMUNICATIONS (2.7%)
TKR Cable, Inc. 10.5% Note,
10/30/07 ..................... 3,500,000 3,579,484
-------------
TOTAL LONG-TERM DEBT SECURITIES (67.1%)
(Amortized Cost $91,794,232) .. 85,616,974
-------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT
Federal Home Loan Bank: 5.75%,
due 01/03/95 ................. 8,380,000 8,375,985
5.65%, due 01/05/95 .......... 12,800,000 12,789,954
5.75%, due 01/10/95 .......... 4,530,000 4,522,765
5.84%, due 01/10/95 .......... 3,850,000 3,843,754
5.8%, due 01/25/95 ........... 910,000 906,335
Federal Home Loan Mortgage
Corp. 5.85%, due 01/05/95 .... 5,800,000 5,795,288
Federal National Mortgage
Association 5.85%, due
01/04/95 ..................... 1,700,000 1,698,895
Student Loan Marketing
Association 5.85%, due
01/06/95 ..................... 3,000,000 2,997,075
-------------
TOTAL U.S. GOVERNMENT (32.1%) . 40,930,051
-------------
TOTAL SHORT-TERM DEBT SECURITIES (32.1%)
(Amortized Cost $40,930,051) .. 40,930,051
-------------
TOTAL INVESTMENTS (99.2%)
(Amortized Cost $132,724,283) 126,547,025
CASH AND RECEIVABLES LESS
LIABILITIES (0.8%) ........... 1,028,444
-------------
NET ASSETS (100.0%) ............ $127,575,469
=============
</TABLE>
---------------
(a) Interest rate shown on floating rate securities represents the rate at
December 31, 1994.
See Notes to Financial Statements.
49
<PAGE>
THE HUDSON RIVER TRUST
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ------------
<S> <C> <C>
COMMON STOCKS:
BUSINESS SERVICES (0.0%)
ENVIRONMENTAL CONTROL
ICF Kaiser International, Inc--
Warrants* ..................... 4,800 $ 6,000
------------
PRINTING, PUBLISHING &
BROADCASTING (0.0%)
General Media, Inc.--Warrants* 1,750 26,250
------------
TOTAL BUSINESS SERVICES (0.0%) 32,250
------------
CONSUMER CYCLICALS (0.1%)
APPAREL, TEXTILE
Avi Holdings, Inc.--Warrants* . 1,000 45,000
------------
TOTAL COMMON STOCKS (0.1%)
(Cost $17) .................... 77,250
------------
<CAPTION>
PRINCIPAL
AMOUNT
------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES:
BASIC MATERIALS
CHEMICALS (7.5%)
Applied Extrusion 11.5%,
04/01/02 ....................... $1,000,000 990,000
Buckeye Cellulose 10.25%,
05/15/01 ....................... 1,000,000 935,000
G-I Holdings Zero Coupon Sr.
Disc. Note, 10/01/98 ........... 2,000,000 1,235,000
Rexene Corp. 11.75%, 12/01/04 .. 1,000,000 1,025,000
Trans Resources, Inc. 11.875%
Series B Sr. Sub. Note,
07/01/02 ....................... 1,500,000 1,365,000
------------
5,550,000
------------
METALS & MINING (6.6%)
Acme Metals 12.5%, 08/01/02 .... 1,500,000 1,440,000
Kaiser Aluminum 12.75%, 02/01/03 2,000,000 2,015,000
Renco Metals, Inc. 12.0%,
07/15/00 ....................... 1,500,000 1,426,875
------------
4,881,875
------------
PAPER (8.2%)
Domtar, Inc. 12.0%, 04/15/01 ... 1,300,000 1,352,000
Indah Kiat International Finance
11.875%, 06/15/02 .............. 1,500,000 1,455,000
Stone Container Corp. 9.875%,
02/01/01 ....................... 1,500,000 1,410,000
Sweetheart Cup 10.5%, 09/01/03 . 1,000,000 920,000
Williamhouse Regency of
Delaware, Inc. 11.5%, 06/15/05 1,000,000 920,000
------------
6,057,000
------------
TOTAL BASIC MATERIALS (22.3%) . 16,488,875
------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (1.2%)
ICF Kaiser International, Inc.
12.0% Note, 12/31/03 ........... 1,000,000 860,000
------------
PRINTING, PUBLISHING &
BROADCASTING (7.5%)
American Media Operation
11.625%, 11/15/04 .............. 1,500,000 1,537,500
General Media, Inc. 10.625%
Note, 12/31/00 ................. 1,750,000 1,645,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES
(CONTINUED):
United States Banknote Corp.
10.375% Sr. Note, 06/01/02 ..... $1,000,000 $ 850,000
Young Broadcasting 11.75%,
11/15/04 ........................ 1,500,000 1,515,000
------------
5,547,500
------------
TOTAL BUSINESS SERVICES (8.7%) . 6,407,500
------------
CAPITAL GOODS
AEROSPACE (2.0%)
Rohr, Inc. 11.625%, 05/15/03 .... 1,500,000 1,492,500
------------
BUILDING & CONSTRUCTION (2.7%)
American Standard Corp. 10.875%
Sr. Note, 05/15/99 .............. 1,000,000 1,012,500
Standard Pacific Corp. 10.5%,
03/01/00 ........................ 1,000,000 980,000
------------
1,992,500
------------
MACHINERY (2.6%)
Specialty Equipment 11.375%,
12/01/03 ........................ 2,000,000 1,940,000
------------
TOTAL CAPITAL GOODS (7.3%) ..... 5,425,000
------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (4.2%)
Apparel Ventures, Inc. 12.25%,
12/31/00+ ....................... 1,000,000 895,000
CMI Industries 9.5%, 10/01/03 ... 1,500,000 1,245,000
Hosiery Corp. of America 13.75%,
08/01/02+(a) .................... 1,000,000 967,500
------------
3,107,500
------------
HOUSEHOLD FURNITURE, APPLIANCES (1.2%)
Cort Furniture 12.0%, 09/01/00 .. 1,000,000 920,000
------------
RETAIL--GENERAL (2.1%)
FTD Acquisition 14.0%, 12/15/01+ 1,500,000 1,500,000
------------
TOTAL CONSUMER CYCLICALS (7.5%) 5,527,500
------------
CONSUMER NONCYCLICALS
CONTAINERS (6.0%)
Calmar Spray Systems 14.0%,
02/15/99 ........................ 2,000,000 1,990,000
Container Corp. 11.25%, 05/01/04 1,500,000 1,537,500
Seminole Kraft Corp. 13.5% Sub.
Note, 10/15/96 .................. 300,000 300,000
Silgan Corp. 11.75% Deb.,
06/15/02 ........................ 600,000 621,000
------------
4,448,500
------------
HOSPITAL SUPPLIES & SERVICES (2.0%)
Thermoscan 11.5% Floating Rate,
08/15/01+ (a)(c) ................ 1,500,000 1,470,000
</TABLE>
50
<PAGE>
THE HUDSON RIVER TRUST
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES (CONTINUED):
RETAIL--FOOD (4.7%)
Food for Less 10.45% Sr.
Unsecured Note, 04/15/00 ........ $1,500,000 $ 1,470,000
Grand Union Co. 12.25%,
07/15/02** ...................... 3,000,000 1,185,000
Pueblo Xtra International, Inc.
9.5%, 08/01/03 .................. 1,000,000 840,000
-----------
3,495,000
-----------
SOAPS & TOILETRIES (1.3%)
Renaissance Cosmetics 13.75%,
08/15/01 (a)+ ................... 1,000,000 955,000
-----------
TOTAL CONSUMER NONCYCLICALS (14.0%) 10,368,500
-----------
CREDIT SENSITIVE
BANKS (2.0%)
Dime Bancorp 10.5%, 11/15/05 .... 1,500,000 1,485,000
-----------
FINANCIAL SERVICES (4.8%)
Keystone Group, Inc. 9.75%,
09/01/03 ........................ 1,000,000 920,000
NL Industries 11.75%, 10/15/03 .. 1,500,000 1,509,375
Nextel Communications 9.75%,
08/15/04 (b) .................... 3,000,000 1,080,000
-----------
3,509,375
-----------
FOREIGN GOVERNMENT (7.1%)
Republic of Argentina 4.25%
Floating Rate, 03/31/23 (c) .... 3,000,000 1,271,250
Republic of Brazil 5.25% Floating
Rate, 04/15/12 (c) .............. 2,540,000 1,527,175
Kingdom of Morocco 4.312%
Floating Rate Participating
Loan, 01/01/09 (c) .............. 3,700,000 2,448,938
-----------
5,247,363
-----------
UTILITY--ELECTRIC (2.0%)
Texas New Mexico Power Co.
10.75%, 09/15/03 ................ 1,500,000 1,477,500
-----------
UTILITY--GAS (3.1%)
Midland Cogeneration Venture
11.75% Series A Deb., 07/23/05 . 2,500,000 2,283,575
-----------
TOTAL CREDIT SENSITIVE (19.0%) . 14,002,813
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES (CONTINUED):
ENERGY
COAL & GAS PIPELINES (1.8%)
Mesa Capital Corp. 12.75%,
06/30/98 (b) .................... $1,500,000 $ 1,293,750
-----------
OIL--DOMESTIC (2.0%)
Flores & Rucks 13.5%, 12/01/04 .. 1,500,000 1,511,250
-----------
TOTAL ENERGY (3.8%) ............. 2,805,000
-----------
TECHNOLOGY
ELECTRONICS (1.9%)
Panamsat L.P. 9.75% Sr. Secured
Notes, 08/01/00 ................. 1,500,000 1,413,750
-----------
TELECOMMUNICATIONS (4.7%)
Centennial Cellular 8.875%,
11/01/01 ........................ 1,000,000 890,000
Mobile Telecommunications 13.5%,
12/15/02 ........................ 1,500,000 1,520,625
USA Mobile Communications 14.0%,
11/01/04 ........................ 1,000,000 1,022,500
-----------
3,433,125
-----------
TOTAL TECHNOLOGY (6.6%) ......... 4,846,875
-----------
DIVERSIFIED (2.0%)
MISCELLANEOUS
Dade International, Inc. 13.0%,
02/01/05+ ....................... 1,500,000 1,503,750
-----------
TOTAL LONG-TERM DEBT SECURITIES (91.2%)
(Amortized Cost $71,465,993) ... 67,375,813
-----------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT (7.4%)
Federal Home Loan Bank 5.75%, Due
01/03/95 ........................ 5,460,000 5,457,384
-----------
TOTAL SHORT-TERM DEBT SECURITIES (7.4%)
(Amortized Cost $5,457,384) .... 5,457,384
-----------
TOTAL INVESTMENTS (98.7%) (Cost/Amortized Cost
$76,923,394) 72,910,447
CASH AND RECEIVABLES LESS
LIABILITIES (1.3%) .............. 984,182
-----------
NET ASSETS (100.0%) .............. $73,894,629
===========
<FN>
---------------
* Non-income producing.
** Non-income producing--issuer filed for protection under the Federal
Bankruptcy Code.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers.
(a) Consists of more than one class of securities traded together as a
unit; generally bonds with attached stocks or warrants.
(b) Debt security initially issued in zero coupon form which converts to
coupon form at a specific rate and date.
(c) Interest rate shown on floating rate securities represents the rate at
December 31, 1994.
</TABLE>
See Notes to Financial Statements.
51
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS
METALS & MINING (1.6%)
American Barrick Resources
Corp. ......................... 578,700 $12,876,075
Wolverine Tube, Inc. * ......... 326,400 7,752,000
---------------
TOTAL BASIC MATERIALS (1.6%) . 20,628,075
---------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (2.0%)
Air & Water Technologies Corp.
(Class A)* .................... 379,000 2,274,000
Thermo Instrument Systems, Inc.
* ............................. 751,300 23,853,775
---------------
26,127,775
---------------
PRINTING, PUBLISHING & BROADCASTING (2.1%)
Clear Channel Communications,
Inc. * ........................ 283,800 14,402,850
Infinity Broadcasting Corp.
(Class A)* .................... 450,000 14,175,000
---------------
28,577,850
---------------
PROFESSIONAL SERVICES (0.7%)
Loewen Group, Inc. ............. 331,000 8,771,500
---------------
TOTAL BUSINESS SERVICES (4.8%) 63,477,125
---------------
CAPITAL GOODS
MACHINERY (1.2%)
Deere & Co. .................... 130,000 8,612,500
Solectron Corp.* ............... 291,500 8,016,250
---------------
TOTAL CAPITAL GOODS (1.2%) ... 16,628,750
---------------
CONSUMER CYCLICALS
AUTOS & TRUCKS (1.4%)
Ek Chor China Motorcycle Co. .. 314,100 4,279,612
Paccar, Inc. ................... 323,900 14,332,575
---------------
18,612,187
---------------
FOOD SERVICES, LODGING (3.5%)
Brinker International, Inc. * . 866,400 15,703,500
Luby's Cafeterias, Inc. ........ 564,200 12,623,975
Outback Steakhouse, Inc. * .... 268,000 6,298,000
Spaghetti Warehouse, Inc.*++ .. 348,500 1,698,938
Taco Cabana (Class A)*++ ...... 1,087,450 9,922,981
---------------
46,247,394
---------------
HOUSEHOLD FURNITURE, APPLIANCES (2.4%)
Heilig Meyers Co. .............. 619,000 15,629,750
Leggett & Platt, Inc. .......... 454,400 15,904,000
---------------
31,533,750
---------------
LEISURE RELATED (4.7%)
Aldila*++ ...................... 901,700 10,369,550
Callaway Golf Company .......... 228,000 7,552,500
Coastcast Corp.* ............... 432,600 5,083,050
Cobra Golf, Inc. * ............. 147,000 5,255,250
Coleman Co., Inc. * ............ 377,400 13,256,175
Gaylord Entertainment Co.
(Class A) ..................... 909,600 20,693,400
---------------
62,209,925
---------------
RETAIL--GENERAL (2.3%)
Eckerd Corp.* .................. 272,000 8,126,000
May Department Stores Co. ..... 271,300 9,156,375
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Walgreen Co. ................... 320,000 $14,000,000
---------------
31,282,375
---------------
COMMON STOCKS :
TOTAL CONSUMER CYCLICALS (14.3%) 189,885,631
---------------
CONSUMER NONCYCLICALS
BEVERAGES (0.1%)
Celestial Seasonings, Inc. * .. 50,000 731,250
---------------
FOODS (2.3%)
McCormick & Co. ................ 622,000 11,351,500
Wrigley (Wm.), Jr. Co. ......... 388,700 19,192,062
---------------
30,543,562
---------------
CONTAINERS (0.6%)
Bemis, Inc. .................... 328,000 7,872,000
---------------
DRUGS (3.2%)
Merck & Co., Inc. .............. 565,200 21,548,250
Mylan Laboratories, Inc. ...... 759,000 20,493,000
---------------
42,041,250
---------------
HOSPITAL SUPPLIES & SERVICES (1.3%)
Surgical Care Affiliates, Inc. 864,000 17,496,000
---------------
RETAIL--FOOD (0.9%)
Sysco Corp. .................... 488,000 12,566,000
---------------
SOAPS & TOILETRIES (1.2%)
Clorox Co. ..................... 113,000 6,652,875
Gillette Corp. ................. 123,500 9,231,625
---------------
15,884,500
---------------
TOTAL CONSUMER NONCYCLICALS (9.6%) 127,134,562
---------------
CREDIT SENSITIVE
FINANCIAL SERVICES (1.2%)
Mercury Finance Co. ............ 1,204,000 15,652,000
---------------
INSURANCE (0.5%)
American International Group,
Inc. .......................... 70,000 6,860,000
---------------
REAL ESTATE (1.1%)
Irvine Apartment Communities .. 96,000 1,572,000
Oasis Residential, Inc. ........ 552,000 13,524,000
---------------
15,096,000
---------------
UTILITY--ELECTRIC (0.9%)
Duke Power Co. ................. 170,000 6,481,250
Southern Co. ................... 250,000 5,000,000
---------------
11,481,250
---------------
UTILITY--GAS (1.2%)
ENRON Corp. .................... 540,000 16,470,000
---------------
UTILITY--TELEPHONE (1.5%)
Telephone & Data Systems, Inc. 232,400 10,719,450
U.S. West, Inc. ................ 251,000 8,941,875
---------------
19,661,325
---------------
TOTAL CREDIT SENSITIVE (6.4%) 85,220,575
---------------
ENERGY
COAL & GAS PIPELINES (1.2%)
Questar Corp. .................. 603,800 16,604,500
---------------
OIL--DOMESTIC (3.4%)
Anadarko Petroleum Corp. ...... 379,400 14,606,900
</TABLE>
52
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Apache Corp. ................... 210,000 $ 5,250,000
Enron Oil and Gas Co. .......... 229,900 4,310,625
Phillips Petroleum Co. ......... 401,000 13,132,750
Valero Energy Corp. ............ 475,500 8,024,062
---------------
45,324,337
---------------
OIL--INTERNATIONAL (0.7%)
YPF Sociedad Anonima (ADR) .... 405,300 8,663,288
---------------
OIL--SUPPLIES & CONSTRUCTION (2.4%)
Seitel, Inc. * ................. 279,000 5,998,500
Smith International, Inc. * ... 605,000 7,562,500
Tidewater, Inc. ................ 439,000 8,121,500
Western Atlas, Inc. * .......... 276,000 10,384,500
---------------
32,067,000
---------------
RAILROADS (3.0%)
Illinois Central Corp. ......... 1,311,900 40,340,925
---------------
TOTAL ENERGY (10.7%) .......... 143,000,050
---------------
TECHNOLOGY
ELECTRONICS (3.5%)
Sensormatic Electronics Corp. . 1,187,450 42,748,200
Sun Television and Appliances . 475,200 3,979,800
---------------
46,728,000
---------------
TELECOMMUNICATIONS (2.0%)
AirTouch Communications, Inc.* 429,000 12,494,625
Vodafone Group PLC (ADR) ...... 420,500 14,139,313
---------------
26,633,938
---------------
TOTAL TECHNOLOGY (5.5%) ...... 73,361,938
---------------
TOTAL COMMON STOCKS (54.1%)
(Cost $732,328,995) ........... 719,336,706
---------------
<CAPTION>
PRINCIPAL
AMOUNT
--------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES:
CREDIT SENSITIVE (13.0%)
U.S. GOVERNMENT
U.S. Treasury 6.25% Bond,
08/15/23 ...................... $212,720,000 172,768,419
--------------
ENERGY (0.2%)
COAL & GAS PIPELINES
California Energy Co., Inc.
5.0% Conv. Sub. Deb.,
07/31/00 ..................... 3,680,000 3,109,600
--------------
TECHNOLOGY (1.7%)
ELECTRONICS
General Instrument Corp. 5.0%
Conv., 06/15/00 ............... 16,360,000 21,881,500
--------------
TOTAL LONG-TERM DEBT SECURITIES (14.9%)
(Amortized Cost $208,686,626) 197,759,519
--------------
SHORT-TERM DEBT SECURITIES:
COMMERCIAL PAPER (28.7%)
AGA Capital Corp:
5.95%, due 01/13/95 .......... 4,700,000 4,689,902
6.07%, due 01/13/95 .......... 12,700,000 12,672,162
Alamo Funding L.P.
6.05%, due 01/20/95 .......... 5,000,000 4,983,195
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
SHORT-TERM DEBT SECURITIES
(CONTINUED):
Allomon Funding Corp:
5.9%, due 01/27/95 ............ $11,247,000 $ 11,197,232
6.1%, due 01/23/95 ............ 11,000,000 10,957,131
ASCC Commercial Paper
6.12%, due 02/08/95 ........... 15,000,000 14,900,550
Barton Capital Corp. 6.08%,
due 01/05/95 ................... 15,000,000 14,987,332
Communications Satellite Corp.
5.9%, due 01/31/95 ............ 14,900,000 14,824,300
Copley Financing Corp. 6.05%,
due 01/24/95 ................... 10,000,000 9,959,667
Walt Disney Co. 5.75%, due
01/03/95 ....................... 3,928,000 3,926,118
Equipment Funding, Inc:
6.05%, due 01/09/95 ........... 6,628,000 6,617,975
6.125%, due 02/07/95 .......... 14,000,000 13,909,486
ESC Securitization, Inc. 6.3%,
due 03/15/95 ................... 15,000,000 14,811,917
Ford Motor Credit Co. 5.85%,
due 01/11/95 ................... 25,000,000 24,955,312
General Electric Capital Corp.
6.1%, due 02/28/95 ............ 15,000,000 14,850,042
Goldman Sachs & Co. 6.0%, due
02/02/95 ....................... 18,000,000 17,901,000
International Lease Finance Corp.
6.13%, due 02/07/95 ........... 10,000,000 9,935,295
Merrill Lynch & Co., Inc.
6.05%, due 01/23/95 ........... 10,000,000 9,961,347
6.05%, due 01/25/95 ........... 6,700,000 6,671,851
Morgan Stanley Group, Inc.
5.92%, due 01/12/95 ........... 18,300,000 18,263,887
October Corp:
6.0%, due 01/13/95 ............ 11,200,000 11,175,733
6.1%, due 01/27/95 ............ 7,961,000 7,924,578
PHH Group, Inc. 6.05%, due
01/18/95 ....................... 11,500,000 11,465,213
Preferred Receivables Funding
6.12%, due 02/14/95 ........... 10,000,000 9,923,500
Premium Funding:
6.0%, due 01/10/95 ............ 12,188,000 12,167,687
6.1%, due 01/19/95 ............ 10,054,000 10,021,632
Progress Receivables Funding
6.08%, due 01/20/95 ........... 6,750,000 6,727,200
Sheffield Receivables Corp:
6.05%, due 01/18/95 ........... 15,000,000 14,954,625
6.07%, due 02/21/95 ........... 11,300,000 11,200,924
Sumitomo Corp. of America
6.3%, due 03/28/95 ............ 7,000,000 6,895,963
Three River Funding 6.1%, due
01/20/95 ....................... 8,470,000 8,441,296
Weyerhaueser Mortgage Co.
6.0%, due 01/17/95 ............ 5,000,000 4,985,833
Working Capital Management Corp.
6.12%, due 01/13/95 ........... 15,000,000 14,966,850
Younkers Funding Corp. 6.05%,
due 01/25/95 ................... 10,000,000 9,957,986
-------------
TOTAL COMMERCIAL PAPER (28.7%) 381,784,721
-------------
</TABLE>
53
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- ---------------
<S> <C> <C>
SHORT-TERM DEBT SECURITIES (Continued):
TIME DEPOSITS (1.3%)
Industrial Bank of Japan--N.Y.
5.875%, due 01/03/95 ......... $18,288,000 $ 18,288,000
---------------
TOTAL SHORT-TERM DEBT SECURITIES (30.0%)
(Amortized Cost $400,064,017) 400,072,721
---------------
TOTAL INVESTMENTS (99.0%) (Cost/Amortized
Cost $1,341,079,638) 1,317,168,946
CASH AND RECEIVABLES LESS
LIABILITIES (1.0%) ............ 12,650,666
---------------
NET ASSETS (100.0%) ........... $1,329,819,612
===============
---------------
* Non-income producing.
++ Affiliated company as defined under the Investment Company Act of 1940
(see Note 5).
</TABLE>
See Notes to Financial Statements.
54
<PAGE>
THE HUDSON RIVER TRUST
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS (3.3%)
Avery Dennison Corp. ........... 10,000 $ 355,000
Dow Chemical Co. ............... 5,000 336,250
Union Carbide Corp. ............ 12,000 352,500
----------
1,043,750
----------
PAPER (2.9%)
Kimberly Clark Corp. ........... 4,000 202,000
Union Camp Corp. ............... 15,000 706,875
----------
908,875
----------
TOTAL BASIC MATERIALS (6.2%) . 1,952,625
----------
BUSINESS SERVICES (0.7%)
PROFESSIONAL SERVICES
GATX Corp. ..................... 5,000 220,000
----------
CAPITAL GOODS
AEROSPACE (1.3%)
Northrop Grumman Corp. ......... 10,000 420,000
----------
ELECTRICAL EQUIPMENT (3.3%)
General Electric Co. ........... 10,000 510,000
Thomas & Betts Corp. ........... 8,000 537,000
----------
1,047,000
----------
TOTAL CAPITAL GOODS (4.6%) ... 1,467,000
----------
CONSUMER CYCLICALS
AUTO RELATED (0.8%)
Dana Corp. ..................... 4,000 93,500
Echlin, Inc. ................... 5,000 150,000
----------
243,500
----------
RETAIL--GENERAL (0.4%)
Penney (J.C.), Inc. ............ 3,000 133,875
----------
TOTAL CONSUMER CYCLICALS (1.2%) 377,375
----------
CONSUMER NONCYCLICALS
DRUGS (0.5%)
Schering Plough Corp. .......... 2,000 148,000
----------
HOSPITAL SUPPLIES & SERVICES (0.9%)
Baxter International, Inc. .... 10,000 282,500
----------
SOAPS & TOILETRIES (1.9%)
Clorox Co. ..................... 10,000 588,750
----------
TOBACCO (4.0%)
Philip Morris Cos., Inc. ...... 10,000 575,000
UST, Inc. ...................... 25,000 693,750
----------
1,268,750
----------
TOTAL CONSUMER NONCYCLICALS (7.3%) 2,288,000
----------
CREDIT SENSITIVE
BANKS (3.2%)
Bank of New York Co. ........... 25,000 725,000
Boatmen's Bancshares, Inc. .... 10,000 271,250
----------
996,250
----------
FINANCIAL SERVICES (2.5%)
American Express Co. ........... 10,000 295,000
Beneficial Corp. ............... 10,000 390,000
MBNA Corp. ..................... 5,000 116,875
----------
801,875
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
INSURANCE (2.3%)
Jefferson Pilot Corp. .......... 5,000 $ 259,375
Saint Paul Cos., Inc. .......... 10,000 447,500
-----------
706,875
-----------
UTILITY--ELECTRIC (4.0%)
Duke Power Co. ................. 15,000 571,875
Portland General Corp. ......... 15,000 288,750
Teco Energy Incorporated ...... 20,000 402,500
-----------
1,263,125
-----------
UTILITY--TELEPHONE (2.7%)
Alltel Corp. ................... 6,000 180,750
Ameritech Corp. ................ 8,000 323,000
Rochester Telephone Corp. ..... 6,000 126,750
Sprint Corp. ................... 8,000 221,000
-----------
851,500
-----------
TOTAL CREDIT SENSITIVE (14.7%) 4,619,625
-----------
ENERGY
COAL & GAS PIPELINES (1.5%)
MCN Corp. ...................... 10,000 181,250
Sonat, Inc. .................... 10,000 280,000
-----------
461,250
-----------
OIL--DOMESTIC (2.1%)
Phillips Petroleum Co. ......... 20,000 655,000
-----------
OIL--INTERNATIONAL (2.1%)
Mobil Corp. .................... 8,000 674,000
-----------
OIL--SUPPLIES & CONSTRUCTION (1.0%)
Halliburton Co. ................ 10,000 331,250
-----------
TOTAL ENERGY (6.7%) ........... 2,121,500
-----------
TECHNOLOGY
OFFICE EQUIPMENT (1.0%)
Diebold, Inc. .................. 3,000 123,375
Xerox Corp. .................... 2,000 198,000
-----------
TOTAL TECHNOLOGY (1.0%) ...... 321,375
-----------
DIVERSIFIED (1.4%)
MISCELLANEOUS
Minnesota Mining &
Manufacturing Co. ............. 8,000 427,000
-----------
TOTAL COMMON STOCKS (43.8%)
(Cost $14,091,558) ............ 13,794,500
-----------
PREFERRED STOCKS:
BASIC MATERIALS
PAPER (0.4%)
Bowater, Inc.
7.0% Conv. Series B ........... 4,500 109,125
-----------
STEEL (0.6%)
Bethlehem Steel Corp. $3.50
Conv.+ ........................ 2,600 128,700
WHX Corp. Series A Conv. ...... 1,300 61,750
-----------
190,450
-----------
TOTAL BASIC MATERIALS (1.0%) . 299,575
-----------
</TABLE>
55
<PAGE>
THE HUDSON RIVER TRUST
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
PREFERRED STOCKS (Continued):
BUSINESS SERVICES (0.5%)
PRINTING, PUBLISHING &
BROADCASTING
LCI International $5.00 Conv. . 4,800 $ 172,800
-----------
CONSUMER NONCYCLICALS
DRUGS (0.1%)
Gensia Pharmaceuticals, Inc.
$3.75 Conv.+ .................. 1,800 21,375
-----------
RETAIL--FOOD (0.6%)
Best Buy Capital L.P. 6.5%
Conv. ......................... 4,400 188,650
-----------
TOTAL CONSUMER NONCYCLICALS (0.7%) 210,025
-----------
CREDIT SENSITIVE
BANKS (0.5%)
Citicorp $5.375 Conv. .......... 1,300 148,362
-----------
FINANCIAL SERVICES (0.3%)
First USA $6.25 Conv. .......... 3,400 110,925
-----------
TOTAL CREDIT SENSITIVE (0.8%) 259,287
-----------
ENERGY
OIL--DOMESTIC (0.1%)
Snyder Oil Corp. $4.00 Conv. .. 300 24,638
-----------
OIL--SUPPLIES & CONSTRUCTION (0.9%)
Noble Drilling $2.25 Conv. .... 2,400 78,600
Offshore Pipeline, Inc. $2.25
Conv. ......................... 4,100 200,900
-----------
279,500
-----------
TOTAL ENERGY (1.0%) ........... 304,138
-----------
TECHNOLOGY
OFFICE EQUIPMENT (0.7%)
Dell Computer Corp. 7.0% Conv.+ 1,300 223,600
-----------
ELECTRONICS (0.6%)
National Semiconductor Corp.
$3.25 Conv. ................... 2,800 203,000
-----------
TOTAL TECHNOLOGY (1.3%) ...... 426,600
-----------
TOTAL PREFERRED STOCKS (5.3%)
(Cost $1,730,941) ............. 1,672,425
-----------
PRINCIPAL
AMOUNT
-----------
LONG-TERM DEBT SECURITIES:
BASIC MATERIALS (0.6%)
PAPER
Stone Container Corp. 8.875%
Conv. Sub. Deb., 07/15/00 .... $105,000 176,794
-----------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.5%)
Thermo Electron Corp. 4.625%
Conv. Sub. Deb., 08/01/97+ ... 100,000 142,875
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES (CONTINUED):
PROFESSIONAL SERVICES (0.6%) ...
First Financial Management Corp.
5.0% Conv., 12/15/99 ........... $185,000 $193,556
-----------
TOTAL BUSINESS SERVICES (1.1%) 336,431
-----------
CAPITAL GOODS
MACHINERY (1.2%)
Solectron Corp. Zero Coupon
Conv. Sub. Note, 05/05/12 ..... 360,000 206,550
Titan Wheel International 4.75%
Conv., 12/01/00 ................ 160,000 173,600
-----------
TOTAL CAPITAL GOODS (1.2%) .... 380,150
-----------
CONSUMER CYCLICALS
RETAIL--GENERAL (2.6%)
Home Depot, Inc. 4.5% Conv. Sub.
Deb., 02/15/97 ................. 165,000 196,968
Lowes Companies, Inc. 3.0%
Conv., 07/22/03 ................ 120,000 162,900
Office Depot, Inc. Zero Coupon
Conv., 11/01/08 ................ 415,000 230,325
Sports & Recreation, Inc. 4.25%
Conv., 11/01/00 ................ 220,000 238,150
-----------
TOTAL CONSUMER CYCLICALS (2.6%) 828,343
-----------
CONSUMER NONCYCLICALS
DRUGS (0.5%)
Chiron Corp. 1.9% Conv.,
11/17/00+ ...................... 200,000 142,000
-----------
HOSPITAL SUPPLIES & SERVICES (2.5%)
Integrated Health Services, Inc.
5.75% Conv., 01/01/01 .......... 175,000 226,844
Pacific Physician Services 5.5%
Conv., 12/15/03 ................ 85,000 67,575
Phycor, Inc. 6.5% Conv.,
01/15/03 ....................... 85,000 171,275
Quantum Health Resources, Inc.
4.75% Conv., 10/01/00 .......... 130,000 137,150
Sun Healthcare Group 6.0% Conv.,
03/01/04 ....................... 155,000 191,425
-----------
794,269
-----------
RETAIL--FOOD (0.8%)
Kroger Co. 6.375% Jr. Sub. Conv.
Note, 12/01/99 ................. 205,000 272,394
-----------
TOTAL CONSUMER NONCYCLICALS (3.8%) 1,208,663
-----------
CREDIT SENSITIVE (0.6%)
BANKS
Bank of New York Co. 7.5% Conv.,
08/15/01 ....................... 135,000 199,463
-----------
ENERGY
OIL--DOMESTIC (0.5%)
Apache Corp. 6.0% Conv.,
01/15/02+ ...................... 150,000 153,375
-----------
</TABLE>
56
<PAGE>
THE HUDSON RIVER TRUST
GROWTH AND INCOME PORTFOLIO (Concluded)
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES (CONTINUED):
OIL--SUPPLIES & CONSTRUCTION (0.4%)
Amoco Canada 7.375% Conv. Sub.
Deb., 09/01/13 ................. $ 125,000 $ 143,750
-----------
TOTAL ENERGY (0.9%) ............ 297,125
-----------
TECHNOLOGY
ELECTRONICS (6.8%)
Arrow Electronics, Inc. 5.75%
Conv., 10/15/02 ................ 180,000 206,775
Cypress Semiconductor 3.15%
Conv., 03/15/01+ ............... 225,000 208,125
EMC Corp: 4.25% Conv., 01/01/01 540,000 639,900
6.25% Conv., 04/01/02 .......... 5,000 35,494
General Instrument Corp. 5.0%
Conv., 06/15/00 ................ 175,000 234,062
LSI Logic Corp. 5.5% Conv.,
03/15/01+ ...................... 160,000 280,000
Lam Research Corp. 6.0% Conv.
Sub. Deb., 05/01/03 ............ 205,000 319,800
Motorola, Inc. Zero Coupon
Conv., 09/27/13 ................ 320,000 220,800
-----------
TOTAL TECHNOLOGY (6.8%) ........ 2,144,956
-----------
TOTAL LONG-TERM DEBT SECURITIES (17.6%)
(Amortized Cost $5,456,403) ... 5,571,925
SHORT-TERM DEBT SECURITIES:
-----------
U.S. GOVERNMENT
Federal Home Loan Bank: 5.75%,
due 01/03/95 ................... $3,580,000 $ 3,578,285
5.8%, due 01/25/95 ............. 1,900,000 1,892,347
Federal Home Loan Mortgage Corp.
5.85%, due 01/05/95 ............ 4,000,000 3,996,750
Student Loan Marketing
Association 5.85%, due 01/06/95 1,400,000 1,398,635
-----------
TOTAL U.S. GOVERNMENT (34.5%) 10,866,017
-----------
TOTAL SHORT-TERM DEBT SECURITIES (34.5%)
(Amortized Cost $10,866,017) .. 10,866,017
-----------
TOTAL INVESTMENTS (101.2%) (Cost/Amortized
Cost $32,144,919) 31,904,867
CASH AND RECEIVABLES LESS
LIABILITIES (-1.2%) ............ (382,496)
-----------
NET ASSETS (100.0%) ............. $31,522,371
===========
<FN>
---------------
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers.
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS (3.0%)
Air Products & Chemicals, Inc. .. 1,200 $ 53,550
Avery Dennison Corp. ............. 600 21,300
Dow Chemical Co. ................. 3,000 201,750
Dupont (E.I.) de Nemours & Co. .. 7,400 416,250
Eastman Chemical Company ......... 900 45,450
Ecolab, Inc. ..................... 700 14,700
FMC Corp.* ....................... 400 23,100
Goodrich (B.F.) Co. .............. 300 13,013
Grace (W.R.) & Co. ............... 1,000 38,625
Hercules, Inc. ................... 400 46,150
Millipore Corp. .................. 300 14,513
Monsanto Co. ..................... 1,300 91,650
Nalco Chemical Co. ............... 700 23,450
Rohm & Haas Co. .................. 700 39,988
Union Carbide Corp. .............. 1,600 47,000
------------
1,090,489
------------
METALS & MINING (1.5%)
Alcan Aluminium Ltd. ............. 2,400 60,900
Aluminum Co. of America .......... 1,000 86,625
American Barrick Resources Corp. 3,700 82,325
Asarco, Inc. ..................... 400 11,400
Cyprus Amax Minerals Co. ......... 1,000 26,125
Echo Bay Mines Ltd. .............. 1,100 11,688
Engelhard Corp. .................. 1,000 22,250
Homestake Mining Co. ............. 1,300 22,263
Inco Ltd. ........................ 1,200 34,350
Newmont Mining Corp. ............. 948 34,128
Phelps Dodge Corp. ............... 700 43,313
Placer Dome, Inc. ................ 2,600 56,550
Reynolds Metals Co. .............. 700 34,300
Santa Fe Pacific Gold Corp.* .... 1,320 16,995
------------
543,212
------------
PAPER (1.5%)
Champion International Corp. .... 1,000 36,500
Federal Paper Board, Inc. ........ 500 14,500
Georgia Pacific Corp. ............ 1,000 71,500
International Paper Co. .......... 1,400 105,525
James River Corp. of Virginia ... 800 16,200
Kimberly Clark Corp. ............. 1,700 85,850
Mead Corp. ....................... 600 29,175
Moore Corp. Ltd. ................. 1,000 18,875
Potlatch Corp. ................... 400 14,900
Scott Paper Co. .................. 800 55,300
Stone Container Corp.* ........... 800 13,800
Temple Inland, Inc. .............. 600 27,075
Union Camp Corp. ................. 800 37,700
Westvaco Corp. ................... 700 27,475
------------
554,375
------------
CHEMICALS-SPECIALTY (0.3%)
Great Lakes Chemical Corp. ...... 800 45,600
Morton International, Inc. ...... 1,600 45,600
Raychem Corp. .................... 500 17,813
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Sigma Aldrich .................... 500 $ 16,500
------------
125,513
------------
STEEL (0.4%)
Bethlehem Steel Corp.* ........... 1,200 21,600
Inland Steel Industries, Inc.* .. 500 17,563
Nucor Corp. ...................... 1,000 55,500
USX--U.S. Steel .................. 800 28,400
Worthington Industries, Inc. .... 900 18,000
------------
141,063
------------
TOTAL BASIC MATERIALS (6.7%) ... 2,454,652
------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.6%)
Browning-Ferris Industries, Inc. 2,100 59,588
Johnson Controls, Inc. ........... 400 19,600
WMX Technologies, Inc. ........... 5,200 136,500
------------
215,688
------------
PRINTING, PUBLISHING &
BROADCASTING (3.1%)
CBS, Inc. ........................ 710 39,316
Capital Cities ABC, Inc. ......... 1,700 144,925
Comcast Corp. (Class A) .......... 2,600 40,788
Deluxe Corp. ..................... 900 23,850
Donnelley (R.R.) & Sons Co. ..... 1,600 47,200
Dow Jones & Co., Inc. ............ 1,000 31,000
Dun & Bradstreet Corp. ........... 1,800 99,000
Gannett Co. ...................... 1,500 79,875
John H. Harland Co. .............. 700 14,000
Jostens, Inc. .................... 800 14,900
King World Productions, Inc.* ... 400 13,800
Knight-Ridder, Inc. .............. 600 30,300
McGraw-Hill, Inc. ................ 500 33,438
New York Times Co. ............... 1,100 24,338
Tele-Communications, Inc. (Class
A)* ............................. 6,100 132,675
Time Warner, Inc. ................ 4,100 144,013
Times Mirror Co. ................. 1,400 43,925
Tribune Co. ...................... 700 38,325
Viacom, Inc. Class A* ............ 200 8,325
Viacom, Inc. Class B* ............ 3,700 150,313
------------
1,154,306
------------
PROFESSIONAL SERVICES (0.3%)
Block (H&R), Inc. ................ 1,100 40,838
Interpublic Group Cos., Inc. .... 800 25,700
Safety Kleen Corp. ............... 1,000 14,750
Service Corp. International ..... 1,000 27,750
------------
109,038
------------
TRUCKING, SHIPPING (0.3%)
Consolidated Freightways, Inc. .. 800 17,900
Federal Express Corp.* ........... 600 36,150
Roadway Services, Inc. ........... 400 22,700
Ryder System, Inc. ............... 700 15,400
------------
92,150
------------
TOTAL BUSINESS SERVICES (4.3%) . 1,571,182
</TABLE>
58
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO (Continued)
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
CAPITAL GOODS
AEROSPACE (2.0%)
Boeing Co. ....................... 3,700 $ 172,975
E Systems, Inc. .................. 400 16,650
General Dynamics Corp. ........... 700 30,450
Lockheed Corp. ................... 700 50,838
Loral Corp. ...................... 900 34,088
Martin Marietta Corp. ............ 1,000 44,375
McDonnell Douglas Corp. .......... 400 56,800
Northrop Grumman Corp. ........... 500 21,000
Raytheon Co. ..................... 1,400 89,425
Rockwell International Corp. .... 2,300 82,225
TRW, Inc. ........................ 700 46,200
United Technologies Corp. ........ 1,300 81,738
------------
726,764
------------
BUILDING MATERIALS & FOREST
PRODUCTS (0.8%)
Armstrong World Industries, Inc. 400 15,400
Crane Co. ........................ 500 13,438
Louisiana Pacific Corp. .......... 1,200 32,700
Masco Corp. ...................... 1,700 38,463
Owens Corning Fiberglass Corp.* . 400 12,800
PPG Industries, Inc. ............. 2,300 85,388
Sherwin Williams Co. ............. 900 29,813
Weyerhaeuser Co. ................. 2,200 82,500
------------
310,502
------------
BUILDING & CONSTRUCTION (0.0%)
Centex Corp. ..................... 600 13,650
------------
ELECTRICAL EQUIPMENT (3.2%)
Emerson Electric Co. ............. 2,400 150,000
General Electric Co. ............. 18,500 943,500
Grainger (W.W.), Inc. ............ 500 28,875
Thomas & Betts Corp. ............. 200 13,425
Westinghouse Electric Corp. ..... 3,800 46,550
------------
1,182,350
------------
MACHINERY (1.5%)
Briggs & Stratton ................ 500 16,375
Caterpillar, Inc. ................ 2,200 121,275
Clark Equipment Co.* ............. 300 16,275
Cooper Industries, Inc. .......... 1,200 40,950
Cummins Engine, Inc. ............. 400 18,100
Deere & Co. ...................... 900 59,625
Dover Corp. ...................... 600 30,975
Fluor Corp. ...................... 900 38,813
Foster Wheeler Corp. ............. 500 14,875
General Signal Corp. ............. 500 15,938
Illinois Tool Works, Inc. ........ 1,200 52,500
Ingersoll Rand Co. ............... 1,100 34,650
Pall Corp. ....................... 1,200 22,500
Parker Hannifin Corp. ............ 500 22,750
Timken Co. ....................... 400 14,100
Varity Corp.* .................... 500 18,125
------------
537,826
------------
TOTAL CAPITAL GOODS (7.5%) ..... 2,771,092
------------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
CONSUMER CYCLICALS
AIRLINES (0.3%)
AMR Corp.* ....................... 800 $ 42,600
Delta Air Lines, Inc. ............ 500 25,250
Southwest Airlines Co. ........... 1,600 26,800
------------
94,650
------------
APPAREL, TEXTILE (0.5%)
Liz Claiborne, Inc. .............. 900 15,188
National Service Industries, Inc. 500 12,813
Nike, Inc. ....................... 800 59,700
Reebok International, Ltd. ...... 900 35,550
Russell Corp. .................... 400 12,550
Springs Industries, Inc. ......... 400 14,800
VF Corp. ......................... 700 34,038
------------
184,639
------------
AUTOS & TRUCKS (2.4%)
Chrysler Corp. ................... 3,800 186,200
Ford Motor Co. ................... 11,100 310,800
General Motors Corp. ............. 8,200 346,450
Navistar International Corp.* ... 1,100 16,638
Paccar, Inc. ..................... 400 17,700
Trinova Corp. .................... 500 14,688
------------
892,476
------------
AUTO RELATED (0.6%)
Cooper Tire & Rubber Co. ......... 800 18,900
Dana Corp. ....................... 1,000 23,375
Eaton Corp. ...................... 800 39,600
Echlin, Inc. ..................... 600 18,000
Genuine Parts Co. ................ 1,300 46,800
Goodyear Tire & Rubber Co. ...... 1,600 53,800
Snap-On Tools Corp. .............. 500 16,625
------------
217,100
------------
FOOD SERVICES, LODGING (0.9%)
Marriott International, Inc. .... 1,300 36,563
McDonald's Corp. ................. 7,600 222,300
Promus Cos., Inc.* ............... 1,100 34,100
Shoneys, Inc.* ................... 1,100 14,025
Wendys International, Inc. ...... 1,000 14,375
------------
321,363
------------
HOUSEHOLD FURNITURE, APPLIANCES (0.7%)
Black & Decker Corp. ............. 800 19,000
Maytag Corp. ..................... 1,000 15,000
Newell Co. ....................... 1,600 33,600
Premark International, Inc. ..... 700 31,325
Rubbermaid, Inc. ................. 1,700 48,875
Stanley Works .................... 500 17,875
Whirlpool Corp. .................. 800 40,600
Zenith Electronics Corp.* ........ 1,300 15,113
------------
221,388
------------
LEISURE RELATED (1.2%)
American Greetings Corp. ......... 800 21,600
Brunswick Corp. .................. 900 16,988
Disney (Walt) Co. ................ 5,800 267,525
</TABLE>
59
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Fleetwood Enterprises, Inc. ..... 700 $ 13,125
Hasbro, Inc. ..................... 900 26,325
Hilton Hotels Corp. .............. 500 33,688
Mattel, Inc. ..................... 1,900 47,738
------------
426,989
------------
PHOTO & OPTICAL (0.6%)
Allergan, Inc. ................... 700 19,775
Bausch & Lomb, Inc. .............. 600 20,325
Eastman Kodak Co. ................ 3,700 176,675
Polaroid Corp. ................... 400 13,000
------------
229,775
------------
RETAIL--GENERAL (5.0%)
Charming Shoppes, Inc. ........... 1,900 12,588
Circuit City Stores, Inc. ........ 1,000 22,250
Dayton Hudson Corp. .............. 800 56,600
Dillard Department Stores ........ 1,200 32,100
Gap, Inc. ........................ 1,600 48,800
Home Depot, Inc. ................. 4,900 225,400
K-Mart Corp. ..................... 4,900 63,700
Limited, Inc. .................... 3,900 70,688
Lowes Cos., Inc. ................. 1,700 59,075
May Department Stores Co. ........ 2,700 91,125
Melville Corp. ................... 1,100 33,963
Mercantile Stores, Inc. .......... 400 15,800
Nordstrom, Inc. .................. 900 37,800
Penney (J.C.), Inc. .............. 2,500 111,563
Pep Boys Manny Moe & Jack ........ 700 21,700
Price/Costco, Inc.* .............. 2,300 29,613
Rite Aid Corp. ................... 900 21,038
Sears Roebuck & Co. .............. 3,800 174,800
Tandy Corp. ...................... 700 35,088
TJX Cos., Inc. ................... 900 14,063
Toys R Us, Inc.* ................. 3,100 94,550
Wal-Mart Stores, Inc. ............ 24,100 512,125
Walgreen Co. ..................... 1,300 56,875
Woolworth Corp. .................. 1,300 19,500
------------
1,860,804
------------
TOTAL CONSUMER CYCLICALS (12.2%) 4,449,184
------------
CONSUMER NONCYCLICALS
BEVERAGES (3.6%)
Anheuser Busch, Inc. ............. 2,900 147,538
Brown Forman Corp. (Class B) .... 600 18,300
Coca-Cola Co. .................... 13,900 715,850
Harcourt General, Inc. ........... 800 28,200
Pepsico, Inc. .................... 8,500 308,125
Seagram Ltd. ..................... 4,100 120,950
------------
1,338,963
------------
FOODS (3.0%)
Archer Daniels Midland Co. ...... 5,525 113,953
Campbell Soup Co. ................ 2,700 119,138
ConAgra, Inc. .................... 2,700 84,375
CPC International, Inc. .......... 1,600 85,200
General Mills, Inc. .............. 1,700 96,900
Heinz (H.J.) Co. ................. 2,700 99,225
Hershey Foods Corp. .............. 900 43,538
Kellogg Co. ...................... 2,400 139,500
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Pioneer Hi Bred International,
Inc. ............................ 900 $ 31,050
Quaker Oats Co. .................. 1,400 43,050
Ralston Purina Group ............. 1,100 49,088
Sara Lee Corp. ................... 5,200 131,300
Whitman Corp. .................... 1,100 18,975
Wrigley (Wm.), Jr. Co. ........... 1,200 59,250
------------
1,114,542
------------
CONTAINERS (0.2%)
Ball Corp. ....................... 400 12,600
Bemis, Inc. ...................... 600 14,400
Crown Cork & Seal, Inc.* ......... 800 30,200
------------
57,200
------------
DRUGS (5.2%)
ALZA Corp. (Class A)* ............ 800 14,400
American Home Products Corp. .... 3,300 207,075
Amgen, Inc.* ..................... 1,400 82,600
Bristol-Myers Squibb Co. ......... 5,500 318,313
Lilly (Eli) & Co. ................ 3,200 210,000
Merck & Co., Inc. ................ 13,600 518,500
Pfizer, Inc. ..................... 3,400 262,650
Schering Plough Corp. ............ 2,000 148,000
Upjohn Co. ....................... 1,900 58,425
Warner-Lambert Co. ............... 1,400 107,800
------------
1,927,763
------------
HOSPITAL SUPPLIES & SERVICES (3.5%)
Abbott Laboratories, Inc. ........ 8,700 283,838
Bard (C.R.), Inc. ................ 600 16,200
Baxter International, Inc. ...... 3,000 84,750
Becton Dickinson & Co. ........... 800 38,400
Beverly Enterprises, Inc.* ...... 1,000 14,375
Biomet, Inc.* .................... 1,100 15,400
Columbia HCA Healthcare Corp. ... 3,900 142,350
Johnson and Johnson .............. 7,000 383,250
Mallinckrodt Group, Inc. ......... 800 23,900
Manor Care, Inc. ................. 700 19,163
Medtronic, Inc. .................. 1,200 66,750
National Medical Enterprises,
Inc.* ........................... 1,800 25,425
Saint Jude Medical, Inc. ......... 500 19,875
United Healthcare Corp. .......... 1,900 85,738
U.S. Healthcare, Inc. ............ 1,700 70,125
U.S. Surgical Corp. .............. 700 13,300
------------
1,302,839
------------
RETAIL--FOOD (0.8%)
Albertsons, Inc. ................. 2,700 78,300
American Stores Co. .............. 1,500 40,313
Fleming Cos., Inc. ............... 600 13,950
Giant Food, Inc. (Class A) ...... 600 13,050
Great Atlantic & Pacific Tea,
Inc. ............................ 800 14,500
Kroger Co.* ...................... 1,200 28,950
Supervalu, Inc. .................. 700 17,150
Sysco Corp. ...................... 1,900 48,925
</TABLE>
60
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Winn Dixie Stores, Inc. .......... 800 $ 41,100
------------
296,238
------------
SOAPS & TOILETRIES (2.9%)
Alberto Culver Co. ............... 600 16,350
Avon Products, Inc. .............. 700 41,825
Clorox Co. ....................... 600 35,325
Colgate Palmolive Co. ............ 1,500 95,063
Gillette Corp. ................... 2,400 179,400
International Flavors &
Fragrances, Inc. ................ 1,200 55,500
Procter & Gamble Co. ............. 7,400 458,800
Unilever NV ...................... 1,700 198,050
------------
1,080,313
------------
TOBACCO (2.0%)
American Brands, Inc. ............ 2,200 82,500
Philip Morris Cos, Inc. .......... 9,300 534,750
UST, Inc. ........................ 2,100 58,275
------------
675,525
------------
TOTAL CONSUMER NONCYCLICALS (21.2%) 7,793,383
------------
CREDIT SENSITIVE
BANKS (5.2%)
Ahmanson (H.F.) & Co. ............ 1,200 19,350
Banc One Corp. ................... 4,400 111,650
Bank of Boston Corp. ............. 1,100 28,463
BankAmerica Corp. ................ 4,000 158,000
Bankers Trust New York Corp. .... 800 44,300
Barnett Banks, Inc. .............. 1,000 38,375
Boatmen's Bancshares, Inc. ...... 1,100 29,838
Chase Manhattan Corp. ............ 2,000 68,750
Chemical Banking Corp. ........... 2,600 93,275
Citicorp ......................... 4,300 177,913
CoreStates Financial Corp. ...... 1,500 39,000
First Chicago Corp. .............. 1,000 47,750
First Fidelity BankCorp. ......... 900 40,388
First Interstate Bancorp. ........ 800 54,100
First Union Corp. ................ 1,900 78,613
Golden West Financial Corp. ..... 700 24,675
Great Western Financial Corp. ... 1,400 22,400
KeyCorp. ......................... 2,600 65,000
Mellon Bank Corp. ................ 1,600 49,000
Morgan (J.P.) & Co., Inc. ........ 2,000 112,000
National City Corp. .............. 1,600 41,400
Nationsbank Corp. ................ 3,000 135,375
NBD Bancorp., Inc. ............... 1,700 46,538
Norwest Corp. .................... 3,300 77,138
PNC Financial Corp. .............. 2,500 52,813
Shawmut National Corp. ........... 1,300 21,288
Suntrust Banks, Inc. ............. 1,300 62,075
U.S. Bancorp. .................... 1,000 22,625
Wachovia Corp. ................... 1,800 58,050
Wells Fargo & Co. ................ 600 87,000
------------
1,907,142
------------
FINANCIAL SERVICES (1.4%)
American Express Co. ............. 5,500 162,250
Beneficial Corp. ................. 600 23,400
Dean Witter Discover & Co. ...... 1,800 60,975
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Fleet Financial Group, Inc. ..... 1,500 $ 48,750
Household International, Inc. ... 1,000 37,125
MBNA Corp. ....................... 1,600 37,400
Merrill Lynch & Co., Inc. ........ 2,100 75,075
Salomon, Inc. .................... 1,100 41,250
Transamerica Corp. ............... 700 34,825
------------
521,050
------------
INSURANCE (3.1%)
Aetna Life & Casualty Co. ........ 1,200 56,550
Alexander & Alexander Services,
Inc. ............................ 600 11,100
American General Corp. ........... 2,200 62,150
American International Group,
Inc. ............................ 3,400 333,200
CIGNA Corp. ...................... 800 50,900
Chubb Corp. ...................... 900 69,638
Continental Corp. ................ 1,000 19,000
General Re Corp. ................. 900 111,375
Jefferson Pilot Corp. ............ 500 25,938
Lincoln National Corp. Industries 1,000 35,000
Marsh & McLennan Cos., Inc. ..... 800 63,400
Providian Corp. .................. 1,000 30,875
Safeco Corp. ..................... 700 36,400
Saint Paul Cos., Inc. ............ 900 40,275
Torchmark Corp. .................. 700 24,413
Travelers, Inc. .................. 3,500 113,750
UNUM Corp. ....................... 800 30,200
USF&G Corp. ...................... 900 12,263
------------
1,126,427
------------
MORTGAGE RELATED (0.9%)
Federal Home Loan Mortgage Corp. 1,900 95,950
Federal National Mortgage
Association ..................... 3,000 218,625
------------
314,575
------------
UTILITY--ELECTRIC (3.9%)
American Electric Power, Inc. ... 2,000 65,750
Baltimore Gas & Electric Co. .... 1,600 35,400
Carolina Power & Light Co. ...... 1,700 45,263
Central & South West Corp. ...... 2,100 47,513
Cinergy Corp ..................... 1,613 37,704
Consolidated Edison Co. N.Y.,
Inc. ............................ 2,500 64,375
Detroit Edison Co. ............... 1,600 41,800
Dominion Resources, Inc. ......... 1,900 67,925
Duke Power Co. ................... 2,200 83,875
Entergy Corp. .................... 2,500 54,688
FPL Group, Inc. .................. 2,000 70,250
Houston Industries, Inc. ......... 1,400 49,875
Niagara Mohawk Power Co. ......... 1,500 21,375
Northern States Power Co. ........ 700 30,800
Ohio Edison Co. .................. 1,600 29,600
Peco Energy Co. .................. 2,400 58,800
Pacific Gas & Electric Co. ...... 4,700 114,563
Pacificorp. ...................... 3,100 56,188
Public Service Enterprise Group . 2,700 71,550
SCE Corp. ........................ 4,900 71,663
</TABLE>
61
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Southern Co. ..................... 7,000 $ 140,000
Texas Utilities Co. .............. 2,400 76,800
Unicom Corporation ............... 2,300 55,200
Union Electric Co. ............... 1,100 38,913
------------
1,429,870
------------
UTILITY--GAS (0.4%)
Consolidated Natural Gas Co. .... 1,000 35,500
ENRON Corp. ...................... 2,700 82,350
Nicor, Inc. ...................... 600 13,650
Peoples Energy Corp. ............. 600 15,675
------------
147,175
------------
UTILITY--TELEPHONE (7.6%)
Alltel Corp. ..................... 2,000 60,250
Ameritech Corp. .................. 5,900 238,213
AT&T Corp. ....................... 16,900 849,225
Bell Atlantic Corp. .............. 4,700 233,825
BellSouth Corp. .................. 5,400 292,275
GTE Corp. ........................ 10,400 315,900
NYNEX Corp. ...................... 4,500 165,375
Pacific Telesis Group ............ 4,600 131,100
Southwestern Bell Corp. .......... 6,400 258,400
Sprint Corp. ..................... 3,700 102,213
U.S. West, Inc. .................. 4,900 174,563
------------
2,821,339
------------
TOTAL CREDIT SENSITIVE (22.5%) . 8,267,578
------------
ENERGY
COAL & GAS PIPELINES (0.9%)
Burlington Resources, Inc. ...... 1,400 49,000
Coastal Corp. .................... 1,100 28,325
Enserch Corp. .................... 1,100 14,438
Nacco Industries, Inc. (Class A) 300 14,513
Pacific Enterprises, Ltd. ........ 900 19,125
Panhandle Eastern Corp. .......... 1,600 31,600
Pittston Services Group .......... 600 15,900
Praxair, Inc. .................... 1,400 28,700
Sonat, Inc. ...................... 900 25,200
Tenneco, Inc. .................... 1,800 76,500
Transco Energy Co. ............... 1,000 16,625
Williams Cos., Inc. .............. 1,100 27,638
------------
347,564
------------
OIL--DOMESTIC (2.6%)
Amerada Hess Corp. ............... 1,000 45,625
Amoco Corp. ...................... 5,400 319,275
Ashland Oil, Inc. ................ 600 20,700
Atlantic Richfield Co. ........... 1,700 172,975
Kerr McGee Corp. ................. 600 27,600
Louisiana Land & Exploration
Corp. ........................... 400 14,550
Occidental Petroleum Corp. ...... 3,300 63,525
Oryx Energy Co.* ................. 1,200 14,250
Pennzoil Co. ..................... 500 22,063
Phillips Petroleum Co. ........... 2,800 91,700
Santa Fe Energy Resources, Inc.* 1,600 12,800
Sun, Inc. ........................ 1,100 31,625
USX-Marathon Group ............... 2,900 47,488
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Unocal Corp. ..................... 2,600 $ 70,850
------------
955,026
------------
OIL--INTERNATIONAL (6.2%)
Chevron Corp. .................... 7,000 312,375
Exxon Corp. ...................... 13,300 807,975
Mobil Corp. ...................... 4,300 362,275
Royal Dutch Petroleum Co. (ADR) . 5,800 623,500
Texaco, Inc. ..................... 2,800 167,650
------------
2,273,775
------------
OIL--SUPPLIES & CONSTRUCTION (0.8%)
Baker Hughes, Inc. ............... 1,400 25,550
Dresser Industries, Inc. ......... 1,900 35,863
Halliburton Co. .................. 1,200 39,750
Helmerich & Payne, Inc. .......... 500 12,813
McDermott International, Inc. ... 500 12,375
Schlumberger, Ltd. ............... 2,600 130,975
Western Atlas, Inc.* ............. 600 22,575
------------
279,901
------------
RAILROADS (1.0%)
Burlington Northern Railroad
Industries ...................... 1,000 48,125
Conrail, Inc. .................... 800 40,400
CSX Corp. ........................ 1,100 76,588
Norfolk Southern Corp. ........... 1,500 90,938
Santa Fe Pacific Corp. ........... 2,000 35,000
Union Pacific Corp. .............. 2,200 100,375
------------
391,426
------------
TOTAL ENERGY (11.5%) ............ 4,247,692
------------
TECHNOLOGY
OFFICE EQUIPMENT (3.4%)
Amdahl Corp.* .................... 1,300 14,300
Apple Computer, Inc. ............. 1,300 50,700
Ceridian Corp.* .................. 600 16,125
Compaq Computer Corp.* ........... 2,800 110,600
Cray Research, Inc.* ............. 800 12,600
Digital Equipment Corp.* ......... 1,500 49,875
Hewlett-Packard Co. .............. 2,700 269,663
Honeywell, Inc. .................. 1,400 44,100
International Business Machines
Corp. ........................... 6,300 463,050
Pitney Bowes, Inc. ............... 1,700 53,975
Sun Microsystems, Inc.* .......... 1,000 35,500
Tandem Computers, Inc.* .......... 1,200 20,550
Unisys Corp.* .................... 1,700 14,663
Xerox Corp. ...................... 1,100 108,900
------------
1,264,601
------------
ELECTRONICS (3.0%)
Advanced Micro Devices, Inc.* ... 1,000 24,875
AMP, Inc. ........................ 1,100 80,025
Cisco Systems, Inc.* ............. 2,800 98,350
EG&G, Inc. ....................... 1,000 14,125
Harris Corp. ..................... 400 17,000
Intel Corp. ...................... 4,500 287,438
Micron Technology, Inc. .......... 1,100 48,538
</TABLE>
62
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Motorola, Inc. ................... 6,300 $ 364,613
National Semiconductor Corp.* ... 1,300 25,350
Perkin Elmer Corp. ............... 500 12,813
Texas Instruments, Inc. .......... 1,000 74,875
Tyco International, Ltd. ......... 800 38,000
------------
1,086,002
------------
OFFICE EQUIPMENT SERVICES (2.4%)
Autodesk, Inc. ................... 500 19,813
Automatic Data Processing, Inc. . 1,500 87,750
Computer Associates
International, Inc. ............. 1,700 82,450
Computer Sciences Corp.* ......... 500 25,500
First Data Corp. ................. 1,200 56,850
Lotus Development Corp.* ......... 500 20,500
Microsoft Corp.* ................. 6,300 385,088
Novell, Inc.* .................... 3,900 66,788
Oracle Systems Corp.* ............ 3,100 136,788
------------
881,527
------------
TELECOMMUNICATIONS (1.2%)
AirTouch Communications, Inc.* .. 5,300 154,363
Andrew Corp.* .................... 300 15,675
DSC Communications Corp.* ........ 1,200 43,050
MCI Communications Corp. ......... 7,200 132,300
Northern Telecommunications Ltd. 2,800 93,450
Scientific Atlanta, Inc. ......... 800 16,800
------------
455,638
------------
TOTAL TECHNOLOGY (10.0%) ........ 3,687,768
------------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
DIVERSIFIED
MISCELLANEOUS (1.9%)
Alco Standard Corp. .............. 600 $ 37,650
Allied Signal, Inc. .............. 3,100 105,400
Corning, Inc. .................... 2,400 71,700
Dial Corp. ....................... 1,000 21,250
ITT Corp. ........................ 1,200 106,350
Minnesota Mining & Manufacturing
Co. ............................. 4,500 240,188
Ogden Corp. ...................... 700 13,125
Pet, Inc. ........................ 1,000 19,750
Teledyne, Inc.* .................. 900 18,113
Textron, Inc. .................... 1,000 50,327
------------
TOTAL DIVERSIFIED (1.9%) ........ 683,853
------------
TOTAL COMMON STOCKS (97.8%) (Cost
$36,361,344) .................... 35,926,384
------------
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT (2.0%)
Federal Home Loan Bank 5.75%, due
01/03/95 ........................ $745,000 744,643
------------
TOTAL SHORT-TERM DEBT SECURITIES (2.0%)
(Amortized Cost $744,643) ...... 744,643
------------
TOTAL INVESTMENTS (99.8%) (Cost
$37,105,987) .................... 36,671,027
CASH AND RECEIVABLES LESS
LIABILITIES (0.2%) .............. 77,181
------------
NET ASSETS (100.0%) .............. $36,748,208
============
<FN>
---------------
* Non-income producing.
</TABLE>
See Notes to Financial Statements.
63
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS (0.8%)
Lubrizol Corp. .................. 713,300 $ 24,163,038
Union Carbide Corp. ............. 165,000 4,846,875
-----------
29,009,913
-----------
METALS & MINING (1.8%)
Newmont Mining Corp. ............ 1,695,572 61,040,592
-----------
CHEMICALS-SPECIALTY (1.4%)
Great Lakes Chemical Corp. ..... 826,000 47,082,000
-----------
STEEL (1.4%)
A.K. Steel Holding Corp.* ...... 268,400 8,253,300
Bethlehem Steel Corp.* .......... 1,613,200 29,037,600
USX-U.S. Steel Corp. ............ 385,000 13,667,500
-----------
50,958,400
-----------
TOTAL BASIC MATERIALS (5.4%) .. 188,090,905
-----------
BUSINESS SERVICES
PRINTING, PUBLISHING &
BROADCASTING (11.2%)
Chris Craft Industries, Inc.* .. 1,339 46,196
Chris Craft Industries, Inc.
(Class B)*++ ................... 1,188,092 40,989,174
Comcast Corp. (Class A) ......... 100,000 1,537,500
Comcast Corp. (Class A) SPL .... 275,000 4,314,063
Donnelley (R.R.) & Sons Co. .... 1,359,200 40,096,400
Grupo Televisa S.A. (GDR)+(a) .. 453,100 14,385,925
Tele-Communications, Inc. (Class
A)* ............................ 4,278,236 93,051,633
Time Warner, Inc. ............... 326,600 11,471,825
Viacom, Inc. (Class A)* ......... 45,776 1,905,426
Viacom, Inc. (Class B)* ......... 4,480,039 182,001,584
-----------
TOTAL BUSINESS SERVICES (11.2%) 389,799,726
-----------
CAPITAL GOODS ...................
BUILDING & CONSTRUCTION (0.0%)
Hopewell Holdings ............... 1,000,000 827,141
-----------
MACHINERY (1.1%)
Caterpillar, Inc. ............... 700,000 38,587,500
-----------
TOTAL CAPITAL GOODS (1.1%) .... 39,414,641
-----------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.8%)
Stride Rite Corp. ............... 2,343,300 26,069,213
-----------
AUTOS & TRUCKS (7.3%)
Chrysler Corp. .................. 2,879,900 141,115,100
General Motors Corp. ............ 2,644,700 111,738,575
-----------
252,853,675
-----------
LEISURE RELATED (0.1%)
QVC Network* .................... 43,600 1,836,650
-----------
PHOTO & OPTICAL (3.0%)
Eastman Kodak Co. ............... 2,194,700 104,796,925
-----------
RETAIL-GENERAL (4.7%)
Home Depot, Inc. ................ 200,000 9,200,000
Sears Roebuck & Co. ............. 3,426,000 157,596,000
-----------
166,796,000
-----------
TOTAL CONSUMER CYCLICALS (15.9%) 552,352,463
-----------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
CONSUMER NONCYCLICALS
FOODS (0.0%)
Dole Food Co., Inc. ............. 11,600 $ 266,800
-----------
DRUGS (2.0%)
Astra AB (Series A) ............. 1,250,000 32,298,994
Lilly (Eli) & Co. ............... 100,000 6,562,500
Merck & Co., Inc. ............... 565,000 21,540,625
Pfizer, Inc. .................... 100,000 7,725,000
-----------
68,127,119
-----------
HOSPITAL SUPPLIES & SERVICES (2.9%)
Abbott Laboratories, Inc. ...... 750,000 24,468,750
Columbia HCA Healthcare Corp. .. 760,320 27,751,680
Guidant Corp.* .................. 359,500 5,752,000
Maxxim Medical, Inc.* ........... 325,567 4,720,722
United Healthcare Corp. ......... 138,500 6,249,813
U.S. Healthcare, Inc. ........... 744,050 30,692,063
-----------
99,635,028
-----------
RETAIL-FOOD (1.0%)
Kroger Co.* ..................... 1,384,300 33,396,238
-----------
TOBACCO (3.1%)
Loews Corp. ..................... 700,550 60,860,281
Philip Morris Cos., Inc. ........ 877,700 50,467,750
-----------
111,328,031
-----------
TOTAL CONSUMER NONCYCLICALS (9.0%) 312,753,216
-----------
CREDIT SENSITIVE
BANKS (3.5%)
Citicorp ........................ 400,000 16,550,000
Grupo Financiero Banamex (Class
C)+ ............................ 8,392,000 24,796,462
Grupo Financiero Bancomer (ADR)
(Class C)+ ..................... 1,592,800 18,715,400
HSBC Holding PLC ................ 100,000 1,079,160
Nationsbank Corp. ............... 437,000 19,719,625
Shawmut National Corp. .......... 2,543,500 41,649,813
-----------
122,510,460
-----------
FINANCIAL SERVICES (2.5%)
American Express Co. ............ 1,595,000 47,052,500
Dean Witter Discover & Co. ..... 557,983 18,901,674
Franchise Finance Corp. of
America ........................ 100,000 1,737,500
Mercury Finance Co. ............. 34,800 452,400
Student Loan Marketing
Association .................... 545,000 17,712,500
-----------
85,856,574
-----------
INSURANCE (11.6%)
American International Group,
Inc. ........................... 1,901,700 186,366,600
Berkley (W.R.) Corp. ............ 748,143 28,055,363
Emphesys Financial Group, Inc. . 548,100 17,402,175
General Re Corp. ................ 33,800 4,182,750
MGIC Investment Corp. ........... 21,300 705,563
Progressive Corp. ............... 654,000 22,890,000
TIG Holdings, Inc. .............. 1,558,400 29,220,000
Travelers, Inc. ................. 3,432,966 111,571,395
</TABLE>
64
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
USF&G Corp. ..................... 127,500 $ 1,737,188
----------------
402,131,034
----------------
MORTGAGE RELATED (0.6%)
Federal National Mortgage
Association .................... 262,000 19,093,250
----------------
REAL ESTATE (4.9%)
AMLI Residential Property Trust 137,000 2,568,750
Associated Estates Realty Corp. 149,600 3,141,600
Avalon Properties, Inc. ......... 163,900 3,769,700
CBL & Associates Properties++ .. 1,056,700 21,794,438
Columbus Realty Trust ........... 360,000 6,660,000
DeBartolo Realty Corp. .......... 755,000 11,325,000
Essex Property Trust, Inc.++ ... 355,000 5,369,375
First Industrial Realty Trust .. 224,500 4,377,750
Gables Residential Trust ........ 250,000 5,375,000
Liberty Property Trust .......... 275,000 5,396,875
Macerich Co. .................... 350,000 7,481,250
Manufactured Home Communities .. 378,000 7,512,750
South Sea Development Co.* ..... 900 63
Paragon Group, Inc. ............. 237,800 4,518,200
Regency Realty Corp. ............ 768,700 12,875,725
Simon Property Group, Inc. ..... 1,373,000 33,295,250
Spieker Properties, Inc.++ ..... 1,317,200 26,837,950
Summit Properties ............... 205,000 3,946,250
Walden Residential Properties,
Inc. ........................... 185,000 3,306,875
----------------
169,552,801
----------------
UTILITY-GAS (0.1%)
ENRON Corp. ..................... 150,000 4,575,000
----------------
UTILITY-TELEPHONE (0.8%)
BellSouth Corp. ................. 5,412 292,925
Sprint Corp. .................... 1,005,000 27,763,125
----------------
28,056,050
----------------
TOTAL CREDIT SENSITIVE (24.0%) 831,775,169
----------------
ENERGY
OIL-DOMESTIC (0.6%)
Anadarko Petroleum Corp. ........ 187,500 7,218,750
Apache Corp. .................... 275,000 6,875,000
Enron Oil and Gas Co. ........... 353,400 6,626,250
----------------
20,720,000
----------------
OIL-INTERNATIONAL (0.4%)
YPF Sociedad Anonima (ADR) ..... 700,000 14,962,500
----------------
OIL-SUPPLIES & CONSTRUCTION (1.3%)
Baker Hughes, Inc. .............. 300,000 5,475,000
McDermott International, Inc. .. 190,000 4,702,500
Sonat Offshore Drilling, Inc. .. 100,000 1,775,000
Western Atlas, Inc.* ............ 887,300 33,384,663
----------------
45,337,163
----------------
UTILITY-GAS (0.1%)
Renaissance Energy Ltd.* ........ 100,000 1,933,702
----------------
TOTAL ENERGY (2.4%) ............ 82,953,365
----------------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
TECHNOLOGY
OFFICE EQUIPMENT (0.1%)
Dell Computer Corp.* ............ 83,000 $ 3,403,000
----------------
ELECTRONICS (15.3%)
Advanced Micro Devices, Inc.* .. 83,300 2,072,088
Cisco Systems, Inc.*(a) ......... 2,138,000 75,097,250
EMC Corp.* ...................... 2,777,700 60,067,763
General Instrument Corp.* ...... 2,496,600 74,898,000
Intel Corp. ..................... 1,790,900 114,393,738
Motorola, Inc. .................. 2,356,600 136,388,225
Murata Manufacturing Co. Ltd. .. 85,000 3,283,994
Texas Instruments, Inc.(a) ..... 858,000 64,242,750
----------------
530,443,808
----------------
OFFICE EQUIPMENT SERVICES (0.5%)
Microsoft Corp.*(a) ............. 100,000 6,112,500
Silicon Graphics, Inc.* ......... 410,000 12,658,750
----------------
18,771,250
----------------
TELECOMMUNICATIONS (8.7%)
AirTouch Communications, Inc.* . 772,100 22,487,413
DSC Communications Corp.*(a) ... 1,600,000 57,400,000
MCI Communications Corp. ........ 1,656,000 30,429,000
Mannesmann AG (ADR) ............. 664,700 180,133,700
Qualcomm, Inc.* ................. 40,800 979,200
Rogers Cantel Mobile
Commmunications, Inc. (Class B)
(ADR)* ......................... 300,000 8,746,875
----------------
300,176,188
----------------
TOTAL TECHNOLOGY (24.6%) ...... 852,794,246
----------------
DIVERSIFIED
MISCELLANEOUS (2.7%)
Corning, Inc. ................... 100,000 2,987,500
Hanson PLC (ADR)--Warrants Class
B* ............................. 49,096,600 15,342,688
India Fund ...................... 640,000 6,800,000
Itel Corp.*++ ................... 1,803,317 62,439,841
Hutchison Whampoa ............... 250,000 1,011,309
----------------
TOTAL DIVERSIFIED (2.7%) ...... 88,581,338
----------------
TOTAL COMMON STOCKS (96.3%)
(Cost $3,199,154,012) .......... 3,338,515,069
----------------
PREFERRED STOCKS:
BASIC MATERIALS (0.3%)
STEEL
Bethlehem Steel Corp. $3.50
Conv.+ ......................... 215,700 10,677,150
----------------
CONSUMER CYCLICALS (0.8%)
AUTOS & TRUCKS
Chrysler Corp. $4.625 Conv.
Series A+ ...................... 215,700 29,281,275
----------------
TECHNOLOGY (0.5%)
OFFICE EQUIPMENT
Dell Computer Corp. 7.0% Conv.+ 96,000 16,512,000
----------------
TOTAL PREFERRED STOCKS (1.6%)
(Cost $53,244,086) ............. 56,470,425
----------------
</TABLE>
65
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES:
BASIC MATERIALS (0.1%)
PAPER
Stone Container Corp. 8.875%
Conv. Sub. Deb., 07/15/00 .. $ 2,950,000 $ 4,967,063
--------------
TECHNOLOGY (1.1%)
ELECTRONICS
General Instrument Corp. 5.0%
Conv., 06/15/00 ............. 27,130,000 36,286,375
--------------
TOTAL LONG-TERM DEBT SECURITIES (1.2%)
(Amortized Cost $40,988,727) 41,253,438
--------------
SHORT-TERM DEBT SECURITIES:
TIME DEPOSITS (0.4%)
Industrial Bank of Japan-N.Y.
5.875%, due 01/03/95 ........ 12,695,000 12,695,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (0.4%)
(Amortized Cost $12,695,000) 12,695,000
--------------
TOTAL INVESTMENTS (99.5%) (Cost/Amortized
Cost $3,306,081,825) 3,448,933,932
--------------
<CAPTION>
NUMBER OF
CONTRACTS(B) VALUE (NOTE 1)
------------- -----------------
<S> <C> <C>
OPTIONS WRITTEN**:
Cisco Systems, Inc.
January 30.165 Call* ... 2,000 $ (1,040,000)
DSC Communications Corp.:
February 34.375 Call* .. 1,000 (325,000)
February 31.25 Call* ... 1,000 (525,000)
Microsoft Corp. February
64.625 Call* ............ 1,000 (120,000)
Grupo Televisa S.A. (GDR)
January 45 Calls* ....... 2,000 (12,400)
Texas Instruments, Inc.:
March 77.375 Call* ...... 1,000 (412,500)
March 74.25 Call* ....... 2,000 (1,020,000)
January 75 Call* ........ 1,000 (270,000)
------------------
TOTAL OPTIONS WRITTEN (-0.1%)
(Premiums Received $4,512,479) (3,724,900)
------------------
CASH AND RECEIVABLES
LESS LIABILITIES (0.6%) 21,035,829
------------------
NET ASSETS (100.0%) ..... $3,466,244,861
==================
<FN>
---------------
* Non-income producing.
** Covered call option contracts written in connection with securities held.
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may only be resold to qualified institutional buyers.
++ Affiliated company as defined under the Investment Company Act of 1940 (see
Note 5).
(a) Partially held as collateral on outstanding written call options.
(b) One contract relates to 100 shares.
</TABLE>
See Notes to Financial Statements.
66
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS (4.5%)
Akzo Nobel N.V. 25,000 $ 2,886,468
Bayer 8,000 1,853,322
Dainippon Ink & Chemical, Inc. 200,000 979,428
Denki Kagaku Kogyo * 97,000 401,044
European Vinyls Corp.
International N.V. * 17,500 775,342
Indo Gulf Fertilizers (GDR) 150,000 405,000
Lubrizol Corp. 24,300 823,163
Mitsui Petrochemical Industries 220,000 1,942,800
OM Group, Inc. 7,200 172,800
Riken Vinyl Industries Co. Ltd. 14,000 122,228
Sanyo Chemicals 57,000 606,322
Shin-Etsu Chemical Ltd. 100,000 1,986,954
Showa Denko * 250,000 875,564
Solvay Et Cie Societe Anonyme 5,000 2,379,092
Tessenderlo Chemie 4,800 1,609,302
Union Carbide Corp. 32,000 940,000
-----------
18,758,829
-----------
CHEMICALS -- SPECIALTY (0.3%)
Great Lakes Chemical Corp. 23,000 1,311,000
-----------
METALS & MINING (0.9%)
Biron Corp. 40,000 20,467
Eramet *+ 5,700 362,853
Hoganas AB, Series B *+ 25,000 386,915
Johnson Matthey 50,000 426,394
Kaiser Aluminium Corp. * 40,000 435,000
RTZ Corp. 180,000 2,329,287
-----------
3,960,916
-----------
PAPER (1.5%)
Chuoh Pack Industries Ltd. 6,000 72,253
Enso-Gutzeit, Series R 124,000 1,065,337
Grupo Industrial Durango (ADR) * 70,000 988,750
Jefferson Smurfit Corp. * 15,600 265,200
Mayr-Melnhof Karton Aktien *+ 35,000 2,057,539
Oji Paper 186,000 1,959,860
-----------
6,408,939
-----------
STEEL (2.6%)
Acerinox S.A. 11,000 1,148,943
Bethlehem Steel Corp. * 57,300 1,031,400
British Steel 1,300,000 3,127,544
Broken Hill Property 28,650 434,890
Co. Siderurgica de Tub (ADS) *+ 18,700 495,550
Friedrich Krupp AG * 4,300 593,812
Hanwa Co. -- Warrants * 60 3,000
Kawasaki Steel Corp.* 414,000 1,732,444
National Steel Corp. * 20,000 290,000
Nippon Steel Corp. 300,000 1,128,951
Nippon Yakin Kogyo Co. * 20,000 118,414
SSAB Svenskt Stal (Class B) 20,000 874,764
-----------
10,979,712
-----------
TOTAL BASIC MATERIALS (9.8%) 41,419,396
-----------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.5%)
Powerscreen International 410,000 $ 1,520,468
Tomra Systems 300,000 683,037
-----------
2,203,505
-----------
PRINTING, PUBLISHING
& BROADCASTING (4.4%)
Australian Provincial News 10,000 12,171
British Sky Broadcasting
(ADR) * 25,000 600,000
Chris Craft Industries, Inc. * 12,130 418,485
Comcast Corp. (Class A) 23,000 360,813
Donnelley (R.R.) & Sons Co. 65,700 1,938,150
Oriental Press Group 1,000,000 468,498
Reed International 40,000 499,468
Singapore Press Holdings 70,000 1,272,727
Sunshine Broadcasting Network 90,000 125,591
Tele-Communications, Inc.
(Class A) * 140,000 3,045,000
Time Warner, Inc. 16,300 572,538
Toppan Printing Co. 65,000 906,673
TVI Televisao Independente * 6,000 42,997
United Newspapers PLC 60,000 442,198
Ver Ned Uitgevers 6,000 622,924
Viacom, Inc. (Class A) * 3,040 126,540
Viacom, Inc. (Class B) * 133,633 5,428,841
Wolters Kluwer 23,151 1,712,631
-----------
18,596,245
-----------
PROFESSIONAL SERVICES (0.1%)
Automated Security Holdings * 153,125 155,742
Blenheim Exhibition Group 62,000 232,834
-----------
388,576
-----------
TRUCKING, SHIPPING (1.7%)
Autostrade Conc E Costr-Priv 210,000 266,108
Brambles Industries Ltd. 60,000 573,065
Frans Maas Groep * 13,500 420,007
Irish Continental Group 145,442 945,859
Kamigumi Co. Ltd. 41,000 436,126
Kawasaki Kisen Kaisho * 120,000 481,686
Nedlloyd Groep N.V. * 36,500 1,196,559
Unitor Ships Service 55,000 926,978
Western Bulk Shipping + 94,500 509,949
Yamato Transport 100,000 1,234,320
-----------
6,990,657
-----------
TOTAL BUSINESS SERVICES (6.7%) 28,178,983
-----------
CAPITAL GOODS
BUILDING MATERIALS &
FOREST PRODUCTS (0.8%)
BPB Industries 150,000 692,402
Carter Holt Harvey 30,000 61,454
CHG Industries 18,000 52,164
CHG Industries -- Warrants * 9,000 9,975
Fletcher Challenge 120,000 281,922
Lafarge Coppee 20,000 1,422,955
Lafarge Corp. 7,000 122,260
Macmillan Bloedel Ltd. 40,000 502,584
Nichiha 5,000 93,327
</TABLE>
67
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Pacific Chemicals Berhad 50,000 $ 211,474
-----------
3,450,517
-----------
BUILDING & CONSTRUCTION (3.0%)
Bam Groep Holdings 1,012 60,346
BBC Brown Boveri 1,800 1,549,733
Boskalis Westminster 5,000 101,977
Bufete Industrial S.A. (ADS) 20,000 590,000
C-Cube Corp. 13,000 123,934
Fomento de Construcciones Y
Contratas S.A. 1,200 117,409
Fukuda Corp. 60,000 740,592
Kanamoto Co. Ltd. 28,600 594,099
Kaneshita Construction 100,000 1,404,917
Kyosei Rentemu Co. Ltd. 19,000 524,335
Macmahon Holdings Ltd. * 2,000,000 914,795
Nichiei Construction 20,000 226,794
Paul Y.-ITC Construction 1,250,000 273,021
PS Corp. 47,400 899,007
Royal Plastics Group Ltd. *+ 136,400 1,069,613
Sacos Corp. 23,200 602,990
Sekisui House -- Warrants * 20 3,750
Sho Bond Construction 30,000 782,740
Sphinx 12,000 371,957
Suido Kiko Kaisha 51,000 685,800
Toda Construction * 77,000 687,707
Wesco, Inc. 12,000 411,841
-----------
12,737,357
-----------
ELECTRICAL EQUIPMENT (1.2%)
Alcatel Alsthom 1,000 85,377
Alcatel Cable S.A. * 20,000 1,644,636
Omron Corp. 85,000 1,569,493
Philips N.V. (ADR) 3,000 88,125
Toshiba Corp. 130,000 943,201
Vae Eisenbahnsys 4,183 475,698
-----------
4,806,530
-----------
MACHINERY (3.1%)
Caterpillar, Inc. 23,000 1,267,875
Construcciones Auxiliar Ferro 9,425 508,326
Fanuc Co. 36,500 1,717,863
Hitachi Zosen 115,000 101,784
Jurong Shipyard 18,000 138,319
Kalmar Industries AB *+ 70,000 786,615
Keppel Corp. 140,000 1,191,081
Keyence Corp. 23,000 2,608,128
Mitsubishi Heavy Industries 180,000 1,372,805
Namura Shipbuilding 15,000 122,077
Siebe * 160,000 1,395,757
SMC Corp. 28,200 1,604,556
THK Co. Ltd. 600 15,173
Unidare 35,000 140,906
-----------
12,971,265
-----------
TOTAL CAPITAL GOODS (8.1%) 33,965,669
-----------
CONSUMER CYCLICALS
AIRLINES (0.7%)
British Airways 150,000 837,924
KLM * 90,000 2,208,926
-----------
3,046,850
-----------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
APPAREL, TEXTILE (0.3%)
Chargeurs 4,000 $ 873,245
Tokyo Style Co. Ltd. 22,000 373,106
-----------
1,246,351
-----------
AUTO RELATED (1.4%)
Autoliv AB (ADS) *+ 11,850 454,744
Daikin Manufacturing 62,000 1,306,573
Kasai Kogyo Co. 29,000 175,193
Mabuchi Motors 30,200 2,272,955
Minebea Co. 160,000 1,348,721
Pacific Dunlop 63,500 168,853
-----------
5,727,039
-----------
AUTOS & TRUCKS (3.0%)
Chrysler Corp. 85,800 4,204,200
General Motors Corp. 83,000 3,506,750
Honda Motor Corp. 58,000 1,030,206
Kia Motors Corp. (GDS) *+ 16,800 285,600
M.A.N. AG 4,000 1,089,278
Mitsubishi Motors Corp. 160,000 1,568,690
Volvo AB, Series B 55,500 1,045,680
-----------
12,730,404
-----------
FOOD SERVICES, LODGING (0.4%)
AAPC Limited 1,500,000 883,785
ABR Holdings Ltd. 120,000 63,396
Cafe de Coral 250,000 61,389
Ciga Hotel * 1,000,000 576,552
International Fast Food Corp. *+ 8,000 18,000
International Pizza Corp. *+ 32,700 53,138
International Pizza Corp. --
Warrants *+ 32,700 8,175
Ryan Hotels PLC 500,000 205,165
-----------
1,869,600
-----------
HOUSEHOLD FURNITURE, APPLIANCES (1.5%)
Atag Holdings * 3,800 245,206
Industrie Natuzzi (ADR) 57,500 1,955,000
Morishita Co. Ltd. 13,000 166,984
Nippon Electric Glass * 69,000 1,370,998
Noritz Co. 31,600 589,824
Sharp Corp. 70,000 1,264,425
Shimachu Co. 17,000 612,444
Videocon International Ltd. (GDR)
* 20,000 97,600
-----------
6,302,481
-----------
LEISURE RELATED (0.8%)
Genting Berhad 44,000 377,364
Nelvana Limited *+ 100,000 1,069,328
Polygram 25,000 1,162,365
Skis Rossignol 400 149,036
Thorn EMI 25,000 404,879
-----------
3,162,972
-----------
PHOTO & OPTICAL (0.6%)
Eastman Kodak Co. 25,600 1,222,400
Luxottica Group (ADR) 36,000 1,228,500
-----------
2,450,900
-----------
</TABLE>
68
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
RETAIL -- GENERAL (3.6%)
Centros Comerciales Pryca SA * 8,000 $ 120,629
Centros Commerciales Continent * 22,500 452,930
Charle Co. 6,000 136,076
Eidensha Co. Ltd. 62,000 839,940
Elektra * 60,000 430,553
Fu Hui Jewellery * 900,000 53,506
Heiton Holdings PLC 581,428 612,198
Home Depot, Inc. 25,000 1,150,000
Home Wide Corp. 5,000 93,327
Ishiguro Homa 27,000 650,276
Matsuyadenki Co. Industries * 15,000 156,548
Mr. Max Corporation 300 7,737
Nissen Corp. Ltd. 39,480 1,220,255
Rinascente 200,000 1,124,740
Sato Corp. * 43,000 1,165,078
Sears Roebuck & Co. 92,600 4,259,600
Shimamura Co. Ltd. 32,000 1,605,620
Swank International Manufacturing 1,400,000 220,743
Swank International
Manufacturing -- Warrants * 120,000 4,653
Tsutsumi Jewelry Co. 3,000 273,959
Xebio Co. 18,000 711,691
-----------
15,290,059
-----------
TOTAL CONSUMER CYCLICALS (12.3%) 51,826,656
-----------
CONSUMER NONCYCLICALS
BEVERAGES (0.3%)
Panamerican Beverages 35,000 1,106,875
Whitbread Series A 30,000 265,225
-----------
1,372,100
-----------
DRUGS (1.4%)
Astra AB, Series A 60,000 1,550,352
Lilly (Eli) & Co. 4,000 262,500
Merck & Co., Inc. 32,000 1,220,000
Pfizer, Inc. 8,000 618,000
Roche Holdings AG Genusscheine 80 387,166
Santen Pharmaceutical Co. 31,000 855,494
Schering AG 1,800 1,178,976
-----------
6,072,488
-----------
FOODS (0.7%)
Burns, Philip & Co. Ltd. 140,000 331,032
Nestle AG -- Registered 500 476,318
Shriram Industrial
Enterprises Ltd. *+ 55,000 1,540,000
Viscofan Envoltura 30,000 455,779
-----------
2,803,129
-----------
HOSPITAL SUPPLIES & SERVICES (1.5%)
Abbott Laboratories, Inc. 31,000 1,011,375
Guidant Corp. * 40,000 640,000
Healthsource, Inc. * 64,000 2,616,000
International Reagents 3,000 27,095
Quest Medical, Inc. * 49,543 260,101
United Healthcare Corp. 26,500 1,195,813
U.S. Healthcare, Inc. 18,000 742,500
-----------
6,492,884
-----------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
RETAIL -- FOOD (0.6%)
Argyll Group 25,000 $ 104,838
Family Mart Co. 14,000 864,024
Kesko * 120,000 1,393,205
-----------
2,362,067
-----------
TOBACCO (1.0%)
Loews Corp. 25,800 2,241,375
Philip Morris Cos., Inc. 33,000 1,897,500
-----------
4,138,875
-----------
TOTAL CONSUMER NONCYCLICALS (5.5%) 23,241,543
-----------
CREDIT SENSITIVE
BANKS (2.5%)
ABN Amro Holdings 5,000 173,707
Akita Bank 58,000 462,720
Allied Irish Bank 320,000 1,337,830
Allied Irish Bank -- Warrants * 30,000 125,422
Australia & New Zealand Bank 150,000 494,222
Banco Latinoamericano
de Exportaciones S.A. 47,400 1,481,250
Banco Osorno Y La Union (ADR) * 15,000 161,250
Bancomer B Local 300,000 144,121
Bancomer C Local 995,000 540,000
Barclays Bank 80,000 764,224
Citicorp 13,500 558,562
Dao Heng Bank Group Ltd. 81,000 230,307
Grupo Financiero Banorte
(Class C) 143,000 347,799
Hachijuni Bank 40,000 473,658
Hock Hua Bank 150,000 452,320
HSBC Holding PLC 62,000 669,078
Lloyds Bank PLC 10,000 86,452
Overseas Union Bank 188,400 1,098,730
Schweiz Bankverein 500 138,273
Shawmut National Corp. 10,000 163,750
Toho Bank 40,000 283,392
Yamanashi Chuo Bank 24,000 267,336
-----------
10,454,403
-----------
FINANCIAL SERVICES (2.9%)
American Express Co. 41,000 1,209,500
Americredit Corp. * 326,700 1,960,200
Capital One Financial Corp. * 70,000 1,120,000
Credit Local de France 12,000 858,266
Dean Witter Discover & Co. 20,000 677,500
Franchise Finance Corp. of America 43,000 747,125
Govett & Co. 30,000 167,115
Hong Leong Finance 160,000 456,672
Invesco 460,000 1,180,447
JCG Holdings 142,000 73,868
Mercury Finance Co. 8,700 113,100
Nichiei Co. Ltd. 15,000 963,372
Nomura Securities Co. 7,000 145,409
Promise Co. Ltd. 25,000 1,276,969
SBSI Holding PLC 1,300 301,910
</TABLE>
69
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Student Loan Marketing Association 27,000 $ 877,500
Yamaichi Securities 59,000 446,422
-----------
12,575,375
-----------
INSURANCE (5.1%)
Acceptance Industries Cos.,
Inc. * 85,100 1,276,500
American International
Group, Inc. 57,500 5,635,000
CNA Financial Corp. * 700 45,413
Dai Tokyo Fire & Marine 25,000 182,137
General Re Corp. 1,400 173,250
John Alden Financial Corp. 99,200 2,852,000
MGIC Investment Corp. 4,900 162,313
PennCorp Financial Group, Inc. 75,700 993,563
Progressive Corp. 17,000 595,000
Pxre Corp. 32,100 906,825
TIG Holdings, Inc. 43,000 806,250
Transnational Re Corp. * 32,000 752,000
Travelers, Inc. 126,000 4,095,000
Twentieth Century Industries, Inc. 254,000 2,667,000
USF&G Corp. 25,500 347,438
-----------
21,489,689
-----------
MORTGAGE RELATED (0.2%)
Federal National
Mortgage Association 9,900 721,463
-----------
REAL ESTATE (3.4%)
AMLI Residential Property Trust 17,000 318,750
Associated Estates Realty Corp. 25,000 525,000
Avalon Properties, Inc. 9,700 223,100
CBL & Associates Properties 25,700 530,063
Cheung Kong Holdings 180,000 732,795
Chubu Sekiwa Real Estate 30,000 388,359
Columbus Realty Trust 19,000 351,500
DBS Land 110,000 327,547
Essex Property Trust, Inc. 32,800 496,100
First Capital Corp. 50,000 168,096
First Industrial Realty Trust 8,000 156,000
Gables Residential Trust 31,000 666,500
Highwoods Properties, Inc. 16,000 346,000
JDN Realty Corporation 13,000 260,000
JP Realty, Inc. 76,300 1,602,300
Liberty Property Trust 10,000 196,250
Macerich Co. 34,000 726,750
Manufactured Home Communities 30,000 596,250
Paragon Group, Inc. 20,000 380,000
Regency Realty Corp. 9,000 150,750
Saul Centers, Inc. 26,000 383,500
Simon Property Group, Inc. 14,000 339,500
Spieker Properties, Inc. 22,200 452,325
Storage USA, Inc. 35,000 962,500
Summit Properties 41,000 789,250
Sun Communities, Inc. 41,000 922,500
Tucker Properties, Corp. 54,900 699,975
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Walden Residential Properties,
Inc. 27,900 $ 498,712
-----------
14,190,372
-----------
UTILITY -- ELECTRIC (2.5%)
Chilectra S.A.+ 10,000 500,000
Enersis S.A. (ADR) 20,000 555,000
EVN 3,600 467,837
FECSA 80,000 424,786
Hidroelectrica del Cantabrico 8,000 218,774
Powergen PLC 800,000 6,697,130
Veba 5,000 1,732,004
-----------
10,595,531
-----------
UTILITY -- GAS (0.0%)
ENRON Corp. 5,000 152,500
-----------
UTILITY -- TELEPHONE (1.5%)
Atlantic Tele-Network * 15,000 128,438
Empresas Telex-Chile S.A. (ADR) 20,000 212,500
Kon PTT Nederland + 78,000 2,628,933
Philippine Long Distance
Telephone Co. 12,500 689,063
Sprint Corp. 41,000 1,132,625
Stet D Risp Port 120,000 284,515
Stet-Societa Finanziaria
Telefonica (ADR) 64,000 188,641
Telefonica de Espana S.A. 40,000 472,491
Telephone & Data Systems, Inc. 9,700 447,413
-----------
6,184,619
-----------
TOTAL CREDIT SENSITIVE (18.1%) 76,363,952
-----------
ENERGY
OIL -- DOMESTIC (0.4%)
Anadarko Petroleum Corp. 6,700 257,950
Apache Corp. 12,000 300,000
Enron Oil and Gas Co. 16,600 311,250
XCL Corp. * 850,000 690,625
-----------
1,559,825
-----------
OIL -- INTERNATIONAL (0.7%)
Ampolex Ltd. 312,000 841,735
Aran Energy PLC * 500,000 336,421
Canadian Occidental 5,000 112,500
Norsk Hydro AS 34,600 1,360,692
Yukong Ltd. (GDR) *+ 35,000 507,500
-----------
3,158,848
-----------
OIL -- SUPPLIES & CONSTRUCTION (1.0%)
Baker Hughes, Inc. 37,000 675,250
CHC Helicopter Corp. 30,000 136,339
Coflexip (ADR)+ 45,117 1,048,970
Energy Service, Inc. * 36,000 441,000
Seagull Energy Corp. * 25,000 478,125
Sonat Offshore Drilling, Inc. 10,000 177,500
Western Atlas, Inc. * 32,100 1,207,763
-----------
4,164,947
-----------
TOTAL ENERGY (2.1%) 8,883,620
-----------
ELECTRONICS (9.2%)
Alps Electric Co.* 80,000 1,051,681
Casio Computer Co. Ltd. 21,000 265,529
-----------
</TABLE>
70
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Cisco Systems, Inc. * 110,000 $ 3,863,750
Disco Co. 6,000 188,460
EMC Corp. * 174,000 3,762,750
Fuji Electronics Co. 39,000 1,084,094
Futaba Corp. 22,000 1,178,926
General Instrument Corp. * 106,000 3,180,000
GP Batteries International 50,000 137,500
Hirose Electric Co. Ltd. 12,000 735,775
Innotech Corp. * 2,100 91,460
Intel Corp. 60,000 3,832,500
Kokusai Electric 2,000 38,535
Kyocera Corp. 18,000 1,334,872
Lasertec Corp. 3,000 141,495
Motorola, Inc. 45,400 2,627,525
Murata Manufacturing Co. Ltd. 38,000 1,468,138
NEC Corp. 109,000 1,246,964
Nikon Corp. 149,000 1,448,881
Rohm Co. Ltd. 70,000 2,964,375
Sensonar AS * 150,000 931,414
TDK Corp. 55,000 2,665,830
Techno Ryowa 4,000 86,302
Texas Instruments, Inc. 5,500 411,813
Tokin Corp. 36,000 509,383
Tokyo Electron 70,000 2,177,622
Tokyo Ohka Kogyo 33,000 1,155,745
-----------
38,581,319
-----------
TECHNOLOGY
OFFICE EQUIPMENT (1.0%)
Canon Aptex, Inc. 19,400 595,725
Canon, Inc. 147,000 2,493,026
Fujitsu Ltd. 97,000 983,141
Ricoh Elemex Corp. 22,000 300,251
-----------
4,372,143
-----------
OFFICE EQUIPMENT SERVICES (0.5%)
Canon Sales 8,000 242,449
Computer Two Thousand 800 211,661
Getronics N.V. 20,333 741,539
Microsoft Corp. * 4,300 262,838
Sidus Systems, Inc. *+ 24,600 151,256
Silicon Graphics, Inc. * 16,000 494,000
-----------
2,103,743
-----------
TELECOMMUNICATIONS (5.0%)
AirTouch Communications, Inc. * 80,000 2,330,000
BCE Mobile
Communications, Inc. * 18,000 571,021
Bell Cablemedia PLC (ADR) * 49,300 998,325
Cellular Communications
Puerto Rico, Inc. * 7,600 254,600
DDI Corporation 210 1,812,343
DSC Communications Corp. * 53,600 1,922,900
Filtronic Comtek PLC * 1,778,000 4,729,613
Kinseki 4,000 73,457
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
Mannesmann AG 11,000 $ 2,981,318
Nihon Dempa Kogyo 55,000 1,893,126
Qualcomm, Inc. * 6,300 151,200
Rogers Cantel Mobile
Communications, Inc.
(Class B) * 20,000 588,130
Rogers Cantel Mobile
Communications, Inc.
(Class B) (ADR) * 63,900 1,863,084
United States Cellular Corp. * 27,600 903,900
-----------
21,073,017
-----------
TOTAL TECHNOLOGY (15.7%) 66,130,222
-----------
DIVERSIFIED
MISCELLANEOUS (1.0%)
Alba 9,300 394,203
Cie Generale des Eaux 1,000 97,173
Corning, Inc. 18,000 537,750
Hanson Trust 300,000 1,083,198
Indonesia Fund, Inc. * 25,000 306,250
International UNP Holdings *+ 450,000 304,759
International UNP Holdings --
Warrants *+ (a) 225,000 41,704
James Crean PLC 50,000 212,907
Renong Berhad 200,000 247,503
Taiwan Fund 32,200 929,775
Wembley Industries Holdings Berhad
* 100,000 151,165
-----------
TOTAL DIVERSIFIED (1.0%) 4,306,387
-----------
TOTAL COMMON STOCKS (79.3%)
(Cost $333,186,074) 334,316,428
-----------
PREFERRED STOCKS:
CAPITAL GOODS (0.1%)
MACHINERY
Gea AG * 1,280 408,041
-----------
CONSUMER CYCLICALS (0.2%)
AUTOS & TRUCKS
Bayer Moteren Werke AG 2,726 981,582
-----------
CREDIT SENSITIVE (0.2%)
INSURANCE
Marschollek Lauten Partners 1,600 856,968
-----------
TECHNOLOGY
OFFICE EQUIPMENT (0.2%)
Dell Computer Corp. +
7.00% Conv. 5,000 860,000
-----------
TELECOMMUNICATIONS (0.4%)
Nokia + 9,000 1,329,876
Nokia Oy Cum 2,000 294,684
-----------
1,624,560
-----------
TOTAL TECHNOLOGY (0.6%) 2,484,560
-----------
TOTAL PREFERRED STOCKS (1.1%)
(Cost $2,717,170) 4,731,151
-----------
</TABLE>
71
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES:
CREDIT SENSITIVE (0.0%)
UTILITY -- GAS
Natural Gas Holdings Corp.
10.5% Conv., 10/14/97 ......... $ 100,000 $ 89,621
--------------
DIVERSIFIED (0.0%)
MISCELLANEOUS
Brierley Investment
9.0% Conv. Sub. Note, 06/30/98 27,900 18,396
--------------
TOTAL LONG-TERM DEBT SECURITIES (0.0%)
(Amortized Cost $67,950) ..... 108,017
--------------
SHORT-TERM DEBT SECURITIES:
COMMERCIAL PAPER
Allomon Funding Corp:
5.98%, due 01/04/95 ........... 2,000,000 1,998,671
6.1%, due 01/23/95 ............ 4,000,000 3,984,411
Copley Financing Corp.
6.08%, due 01/31/95 ........... 8,270,000 8,226,702
Ford Motor Credit Co.
5.85%, due 01/11/95 ........... 7,000,000 6,987,488
General Electric Capital Corp.
6.1%, due 02/28/95 ............ 5,000,000 4,950,014
Merrill Lynch & Co., Inc.
6.05%, due 01/25/95 ........... 5,000,000 4,978,993
Morgan Stanley Group Inc.
5.92%, due 01/12/95 ........... 7,500,000 7,485,200
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
SHORT-TERM DEBT SECURITIES
(Continued):
Preferred Receivables Funding
6.07%, due 02/02/95 ........... $5,000,000 $ 4,972,179
Premium Funding
5.95%, due 01/13/95 ........... 7,000,000 6,984,960
Sheffield Receivables Corp.
6.05%, due 01/18/95 ........... 5,000,000 4,984,875
U. S. Leasing Corp.
6.05%, due 01/31/95 ........... 1,700,000 1,691,143
WMC Finance:
6.15%, due 01/30/95 ........... 3,000,000 2,984,625
6.3%, due 03/24/95 ............ 5,300,000 5,225,461
Working Capital Management Corp.
6.12%, due 01/13/95 ........... 5,000,000 4,988,950
--------------
TOTAL COMMERCIAL PAPER (16.7%) 70,443,672
--------------
TIME DEPOSITS (0.8%)
Industrial Bank of Japan-N.Y.
5.875%, due 01/03/95 .......... 3,450,000 3,450,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (17.5%)
(Amortized Cost $73,891,228) . 73,893,672
--------------
TOTAL INVESTMENTS (97.9%)
(Cost/Amortized Cost $409,862,422) 413,049,268
CASH AND RECEIVABLES
LESS LIABILITIES (2.1%) ...... 8,649,015
--------------
NET ASSETS (100.0%) ............ $421,698,283
==============
<FN>
---------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
1933. These securities may only be resold to qualified institutional buyers.
(a) Fair valued.
</TABLE>
See Notes to Financial Statements.
72
<PAGE>
THE HUDSON RIVER TRUST
AGGRESSIVE STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS (0.5%)
STEEL
A.K. Steel Holding Corp.* ...... 305,500 $ 9,394,118
-----------
BUSINESS SERVICES
PRINTING, PUBLISHING &
BROADCASTING (8.4%)
IVI Publishing, Inc.* ........... 230,900 2,655,350
Playboy Enterprises, Inc. (Class
B)* ............................ 434,100 4,558,050
Viacom, Inc. (Class B) * ........ 3,600,548 146,272,263
-----------
153,485,663
-----------
PROFESSIONAL SERVICES (4.1%)
ADT Ltd.* ....................... 3,636,600 39,093,450
ADVO Systems, Inc. .............. 941,175 16,235,269
Catalina Marketing Corp.* ...... 366,200 20,369,875
-----------
75,698,594
-----------
TRUCKING, SHIPPING (0.6%)
Airborne Freight Corp ........... 560,600 11,492,300
-----------
TOTAL BUSINESS SERVICES (13.1%) 240,676,557
-----------
CAPITAL GOODS (0.3%) ............
BUILDING MATERIALS & FOREST PRODUCTS
Universal Forest Products, Inc. 714,700 4,645,550
-----------
CONSUMER CYCLICALS
APPAREL, TEXTILE (4.1%)
Tommy Hilfiger Corp.* ........... 581,600 26,244,700
Nine West Group, Inc.* .......... 1,331,700 37,786,988
Phillips Van Heusen Corp. ...... 747,900 11,405,475
-----------
75,437,163
-----------
AUTO RELATED (1.1%)
Superior Industries
International, Inc. ............ 772,400 20,372,050
-----------
FOOD SERVICES, LODGING (1.7%)
Hospitality Franchise Systems,
Inc.* .......................... 831,700 22,040,050
Host Marriott Corp.* ............ 953,500 9,177,438
-----------
31,217,488
-----------
HOUSEHOLD FURNITURE, APPLIANCES (4.0%)
Ethan Allen Interiors, Inc.* ... 415,800 10,083,150
Heilig Meyers Co. ............... 884,187 22,325,722
Industrie Natuzzi (ADR) ......... 1,184,300 40,266,200
-----------
72,675,072
-----------
LEISURE RELATED (5.7%)
CUC International, Inc.* ........ 2,321,300 77,763,550
Heritage Media Corp. (Class
A)*++ .......................... 798,050 21,447,594
Marker International * .......... 279,500 2,096,250
Savoy Pictures Entertainment,
Inc.* .......................... 356,800 2,319,200
-----------
103,626,594
-----------
RETAIL-GENERAL (5.0%)
Bombay Co., Inc.*++ ............. 2,445,100 24,756,638
Home Shopping Network, Inc.* ... 1,194,700 11,947,000
Office Depot, Inc.* ............. 2,313,025 55,512,600
92,216,238
-----------
TOTAL CONSUMER CYCLICALS (21.6%) 395,544,605
-----------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
CONSUMER NONCYCLICALS ...........
HOSPITAL SUPPLIES & SERVICES (12.6%)
Bard (C.R.), Inc. ............... 655,700 $ 17,703,900
Boston Scientific Corp.* ........ 2,553,900 44,374,013
Coastal Healthcare Group* ...... 567,800 15,543,525
Guidant Corp.* .................. 751,000 12,016,000
Healthwise of America, Inc.*++ . 477,135 15,745,455
Incontrol, Inc.* ................ 385,000 3,946,250
National Health Laboratories
Holdings, Inc. ................. 4,032,000 53,424,000
Saint Jude Medical, Inc. ........ 518,900 20,626,275
Sun Healthcare Group, Inc.* .... 769,300 19,520,988
Surgical Care Affiliates, Inc. . 1,377,600 27,896,400
-----------
TOTAL CONSUMER NONCYCLICALS (12.6%) 230,796,806
-----------
CREDIT SENSITIVE
BANKS (3.9%)
Mellon Bank Corp. ............... 2,341,663 71,713,429
-----------
FINANCIAL SERVICES (0.5%)
Edwards (A.G.), Inc. ............ 545,725 9,823,050
-----------
INSURANCE (4.2%)
CNA Financial Corp.* ............ 1,174,900 76,221,638
-----------
TOTAL CREDIT SENSITIVE (8.6%) . 157,758,117
-----------
ENERGY
COAL & GAS PIPELINES (0.7%)
Cabot Oil and Gas Corp. (Class
A) ............................. 436,700 6,332,150
Questar Corp. ................... 259,800 7,144,500
-----------
13,476,650
-----------
OIL--DOMESTIC (4.4%)
Diamond Shamrock, Inc. .......... 1,391,800 36,012,825
Louisiana Land & Exploration
Corp. .......................... 366,200 13,320,525
Nuevo Energy Company*++ ......... 742,700 13,368,600
Snyder Oil Corp. ................ 464,100 6,903,488
Tosco Corp. ..................... 345,000 10,048,125
-----------
79,653,563
-----------
OIL--INTERNATIONAL (0.5%)
Arethusa Ltd.* .................. 740,800 8,287,700
-----------
OIL--SUPPLIES & CONSTRUCTION (6.9%)
BJ Services Co. ................. 317,200 5,352,750
Coflexip (ADR)+++ ............... 799,600 18,590,700
Global Marine, Inc.*++ .......... 10,118,700 36,680,287
Noble Drilling Corp.* ........... 2,603,300 15,294,388
Reading & Bates Corp.* .......... 1,122,800 6,736,800
Rowan Cos., Inc.*++ ............. 5,847,900 35,818,388
Sonat Offshore Drilling, Inc. .. 477,600 8,477,400
-----------
126,950,713
-----------
TOTAL ENERGY (12.5%) ........... 228,368,626
-----------
TECHNOLOGY
OFFICE EQUIPMENT (0.7%)
Symantec Corp* .................. 698,200 12,218,500
-----------
ELECTRONICS (11.1%)
Altera Corp.* ................... 185,400 7,763,625
American Superconductor Corp.*++ 605,700 14,991,075
Applied Materials, Inc.* ........ 386,100 16,312,725
</TABLE>
73
<PAGE>
THE HUDSON RIVER TRUST
AGGRESSIVE STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Bay Networks, Inc.* ............. 387,367 $ 11,427,327
Cisco Systems, Inc.* ............ 491,000 17,246,375
EMC Corp.* ...................... 2,624,800 56,761,300
Lam Research Corp.* ............. 376,300 14,017,175
LSI Logic Corp.* ................ 149,000 6,015,875
Sensormatic Electronics Corp. .. 1,641,850 59,106,600
--------------
203,642,077
--------------
OFFICE EQUIPMENT SERVICES (0.8%)
Informix Corp.* ................. 68,700 2,206,988
Lotus Development Corp.* ........ 312,600 12,816,600
--------------
15,023,588
--------------
TELECOMMUNICATIONS (14.5%)
American Satellite Network
--Warrants* .................... 49,450 0
BCE Mobile Communications, Inc.* 635,400 20,157,049
Cellular Communications, Inc.
(Class A)* ..................... 994,600 53,211,100
DSC Communications Corp.* ...... 382,300 13,715,013
MFS Communication, Inc.* ........ 302,600 9,910,150
Mannesmann AG (ADR) ............. 234,500 63,549,500
Millicom International Cellular
S.A.* .......................... 820,115 24,705,964
Qualcomm, Inc.* ................. 465,000 11,160,000
Scientific Atlanta, Inc. ........ 1,941,600 40,773,600
United States Cellular Corp.* .. 623,800 20,429,450
Vanguard Cellular Systems, Inc.
(Class A)* ..................... 336,150 8,655,863
--------------
266,267,689
--------------
TOTAL TECHNOLOGY (27.1%) ...... 497,151,854
--------------
TOTAL COMMON STOCKS (96.3%)
(Cost $1,513,870,744) .......... 1,764,336,233
--------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
SHORT-TERM DEBT SECURITIES:
COMMERCIAL PAPER
Berkley Funding Corp. 6.05%,
due 01/04/95 ................. $10,722,000 $ 10,714,793
Copley Financing Corp. 6.08%,
due 01/31/95 ................. 10,000,000 9,947,644
Morgan Stanley Group, Inc.
5.92%, due 01/12/95 .......... 10,000,000 9,980,267
Triple A Funding 6.00%, due
01/04/95 ..................... 5,500,000 5,496,333
---------------
TOTAL COMMERCIAL PAPER (2.0%) 36,139,037
---------------
TIME DEPOSITS (1.0%)
Industrial Bank of Japan--N.Y.
5.875%, due 01/03/95 ......... 19,400,000 19,400,000
---------------
U.S. GOVERNMENT (0.3%)
Federal Home Loan Bank 5.75%,
due 01/10/95 ................. 5,000,000 4,992,014
---------------
TOTAL SHORT-TERM DEBT SECURITIES (3.3%)
(Amortized Cost $60,531,051) 60,531,051
---------------
TOTAL INVESTMENTS (99.6%) (Cost/Amortized
Cost $1,574,401,795) 1,824,867,284
CASH AND RECEIVABLES LESS
LIABILITIES (0.4%) ........... 7,296,996
---------------
NET ASSETS (100.0%) ........... $1,832,164,280
===============
<FN>
---------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold to qualified institutional buyers.
++ Affiliated company as defined under the Investment Company Act of 1940
(see Note 5).
</TABLE>
See Notes to Financial Statements.
74
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS (0.5%)
Hercules, Inc. .................. 7,000 $ 807,625
METALS & MINING (0.4%)
Aluminum Co. of America ......... 8,000 693,000
-----------
PAPER (0.3%)
International Paper Co. ......... 8,000 603,000
-----------
CHEMICALS--SPECIALTY (0.1%)
Morton International, Inc. ..... 8,000 228,000
-----------
TOTAL BASIC MATERIALS (1.3%) .. 2,331,625
-----------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.1%)
WMX Technologies, Inc. .......... 5,000 131,250
-----------
PRINTING, PUBLISHING &
BROADCASTING (0.2%)
Capital Cities ABC, Inc. ........ 4,000 341,000
-----------
PROFESSIONAL SERVICES (0.7%)
First Financial Management Corp. 10,000 616,250
Reynolds & Reynolds Co. ......... 25,000 625,000
-----------
1,241,250
-----------
TOTAL BUSINESS SERVICES (1.0%) 1,713,500
-----------
CAPITAL GOODS
ELECTRICAL EQUIPMENT (0.7%)
General Electric Co. ............ 25,000 1,275,000
-----------
MACHINERY (0.6%)
Caterpillar, Inc. ............... 15,000 826,875
Deere & Co. ..................... 2,000 132,500
-----------
959,375
-----------
TOTAL CAPITAL GOODS (1.3%) .... 2,234,375
-----------
CONSUMER CYCLICALS
AUTO RELATED (0.2%)
Lancaster Colony Corp. .......... 9,333 274,157
-----------
RETAIL--GENERAL (0.3%)
Penney (J.C.), Inc. ............. 12,000 535,500
-----------
TOTAL CONSUMER CYCLICALS (0.5%) 809,657
-----------
CONSUMER NONCYCLICALS
BEVERAGES (0.3%)
Coca-Cola Co. ................... 10,000 515,000
-----------
FOODS (0.3%)
IBP, Inc. ....................... 18,000 544,500
-----------
HOSPITAL SUPPLIES & SERVICES (0.6%)
Columbia HCA Healthcare Corp. .. 8,000 292,000
Medtronic, Inc. ................. 12,000 667,500
-----------
959,500
-----------
SOAPS & TOILETRIES (0.7%)
Gillette Corp. .................. 16,000 1,196,000
-----------
TOBACCO (0.7%)
Philip Morris Cos., Inc. ........ 20,000 1,150,000
UST, Inc. ....................... 8,000 222,000
-----------
1,372,000
-----------
TOTAL CONSUMER NONCYCLICALS (2.6%) 4,587,000
-----------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
CREDIT SENSITIVE
BANKS (0.9%)
Bank of New York Co. ............ 35,000 $ 1,015,000
Citicorp ........................ 8,000 331,000
First Bank Systems .............. 5,000 166,250
-----------
1,512,250
-----------
FINANCIAL SERVICES (0.2%)
American Express Co. ............ 12,000 354,000
-----------
INSURANCE (0.5%)
AFLAC, Inc. ..................... 25,000 800,000
-----------
MORTGAGE RELATED (0.1%)
Federal Home Loan
Mortgage Corp. ................. 3,000 151,500
-----------
UTILITY--GAS (0.3%)
ENRON Corp. ..................... 18,000 549,000
-----------
UTILITY--TELEPHONE (0.4%)
Ameritech Corp. ................. 12,000 484,500
Sprint Corp. .................... 10,000 276,250
-----------
760,750
-----------
TOTAL CREDIT SENSITIVE (2.4%) . 4,127,500
-----------
ENERGY
COAL & GAS PIPELINES (0.2%)
Sonat, Inc. ..................... 15,000 420,000
-----------
OIL--DOMESTIC (0.4%)
Amoco Corp. ..................... 4,000 236,500
Phillips Petroleum Co. .......... 15,000 491,250
-----------
727,750
-----------
OIL--INTERNATIONAL (0.4%)
Mobil Corp. ..................... 6,000 505,500
-----------
TOTAL ENERGY (1.0%) ............ 1,653,250
-----------
TECHNOLOGY
ELECTRONICS (0.5%)
Molex, Inc. ..................... 12,000 414,000
Motorola, Inc. .................. 8,000 463,000
-----------
TOTAL TECHNOLOGY (0.5%) ........ 877,000
-----------
DIVERSIFIED (0.1%)
MISCELLANEOUS
Allied Signal, Inc. ............. 8,000 272,000
-----------
TOTAL COMMON STOCKS (10.7%)
(Cost $17,712,457) ............. 18,605,907
-----------
PRINCIPAL
AMOUNT
------------
LONG-TERM DEBT SECURITIES:
CREDIT SENSITIVE
BANKS (7.4%)
Abbey National Treasury Services
6.375% Floater, 03/10/99 ....... $4,800,000 4,786,560
BankAmerica Corp. 7.2%, 04/15/06 3,250,000 2,885,708
Chemical Banking Corp. 7.875%,
07/15/06 ....................... 3,500,000 3,284,190
Citicorp 8.0%, 02/01/03 ......... 2,000,000 1,928,320
-----------
12,884,778
-----------
</TABLE>
75
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES
(CONTINUED):
FINANCIAL SERVICES (3.6%)
Ford Credit Auto Loan
Master Trust
5.625% Series 92-3A, 10/15/95 .. $ 3,500,000 $ 3,449,670
Lehman Brothers Holdings, Inc.
Zero Coupon Medium Term Note,
02/10/96 ........................ 2,900,000 2,776,750
-----------
6,226,420
-----------
MORTGAGE RELATED (10.7%)
Government National Mortgage
Association:
7.5%, 09/15/22 .................. 4,909,581 4,552,105
7.0%, 05/15/23 .................. 994,472 891,918
7.0%, 10/15/23 .................. 808,863 725,449
7.0%, 11/15/23 .................. 181,645 162,913
7.5%, 01/15/24 .................. 4,850,557 4,497,379
7.0%, 02/15/24 .................. 3,942,768 3,536,170
8.0%, 03/15/24 .................. 4,408,834 4,213,192
-----------
18,579,126
-----------
UTILITY--ELECTRIC (1.4%)
Commonwealth Edison 8.125%,
06/01/07 ........................ 2,700,000 2,474,739
-----------
U.S. GOVERNMENT (22.8%)
U.S. Treasury 7.5% Bond, 11/15/24 41,470,000 39,642,707
-----------
TOTAL CREDIT SENSITIVE (45.9%) . 79,807,770
-----------
TOTAL LONG-TERM DEBT SECURITIES (45.9%)
(Amortized Cost $82,411,137) ... 79,807,770
-----------
SHORT-TERM DEBT SECURITIES:
COMMERCIAL PAPER
Allomon Funding Corp. 5.9%, due
01/27/95 ........................ 4,000,000 3,982,300
Barton Capital Corp. 6.05%, due
01/10/95 ........................ 3,015,000 3,009,933
Equipment Funding, Inc. 6.05%,
due 01/09/95 .................... 3,000,000 2,995,462
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
SHORT-TERM DEBT SECURITIES (Continued):
Ford Motor Credit Co. 5.85%, due
01/11/95 ........................ $ 4,700,000 $ 4,691,599
General Electric Capital Corp.
6.1%, due 02/28/95 .............. 5,000,000 4,950,014
Goldman Sachs & Co. 6.0%, due
02/02/95 ........................ 5,300,000 5,270,850
International Securitization
6.1%, due 01/17/95 .............. 6,175,000 6,157,213
Merrill Lynch & Co., Inc. 6.05%,
due 01/25/95 .................... 3,000,000 2,987,396
October Corp. 6.1%, due 01/27/95 2,500,000 2,488,562
Philip Morris Capital Corp.
5.85%, due 01/05/95 ............. 5,000,000 4,995,938
Preferred Receivables Funding
6.07%, due 02/02/95 ............. 5,000,000 4,972,179
Premium Funding 5.9%, due
01/10/95 ........................ 6,000,000 5,990,167
Sheffield Receivables Corp.
6.07%, due 02/21/95 ............. 3,700,000 3,667,559
Three River Funding 6.1%, due
01/20/95 ........................ 6,000,000 5,979,667
Working Capital Management Corp.
6.1%, due 01/18/95 .............. 5,900,000 5,882,005
-----------
TOTAL COMMERCIAL PAPER (39.2%) 68,020,844
-----------
TIME DEPOSITS (4.0%)
Industrial Bank of Japan--N.Y.
5.875%, due 01/03/95 ............ 6,870,000 6,870,000
-----------
TOTAL SHORT-TERM DEBT SECURITIES (43.2%)
(Amortized Cost $74,890,844) ... 74,890,844
-----------
TOTAL INVESTMENTS (99.8%) ........
(Cost/Amortized Cost $175,014,438) 173,304,521
CASH AND RECEIVABLES LESS
LIABILITIES (0.2%) .............. 386,789
-----------
NET ASSETS (100.0%) .............. $173,691,310
===========
</TABLE>
See Notes to Financial Statements.
76
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS (1.8%)
Akzo Nobel N.V. ................. 3,500 $ 404,106
Bayer ........................... 1,000 231,665
CNT Group ....................... 700,000 47,948
Dainippon Ink & Chemical, Inc. . 36,000 176,297
European Vinyls Corp.
International N.V.* ............ 6,100 270,262
Hercules, Inc. .................. 50,000 5,768,750
Indo Gulf Fertilizers (GDR) .... 50,000 135,000
Mitsui Petrochemical Industries 30,000 264,927
OM Group, Inc. .................. 3,500 84,000
Osaka Organic Chemical
Industries ..................... 1,000 12,042
Riken Vinyl Industries Co. Ltd. 7,000 61,114
Sanyo Chemicals ................. 14,000 148,921
Shin-Etsu Chemical Ltd. ......... 15,000 298,043
Showa Denko * ................... 35,000 122,579
Solvay Et Cie Societe Anonyme .. 600 285,491
Tessenderlo Chemie .............. 1,900 637,016
-----------
8,948,161
-----------
CHEMICALS--SPECIALTY (0.5%)
Morton International, Inc. ..... 80,000 2,280,000
-----------
METALS & MINING (1.6%)
Aluminum Co. of America ......... 80,000 6,930,000
Biron Corp. ..................... 80,000 40,933
Eramet*+ ........................ 1,050 66,841
Gwalia Consolidated ............. 95,800 131,456
Hoganas AB, Series B*+ .......... 15,000 232,149
Miramar Mining Corp.* ........... 26,000 111,210
Prime Resource Group* ........... 23,000 166,013
Renison Goldfields* ............. 38,000 144,352
RTZ Corp. ....................... 20,000 258,810
-----------
8,081,764
-----------
PAPER (1.4%)
Enso-Gutzeit, Series R .......... 30,000 257,743
Grupo Industrial Durango (ADR)* 12,000 169,500
International Paper Co. ......... 80,000 6,030,000
Mayr-Melnhof Karton Aktien*+ ... 6,000 352,721
Oji Paper ....................... 24,000 252,885
-----------
7,062,849
-----------
STEEL (0.8%)
Acerinox S.A. ................... 1,500 156,674
British Steel ................... 100,000 240,580
Co. Siderurgica de Tub (ADS)*+ . 4,000 106,000
Friedrich Krupp AG* ............. 300 41,429
Hanwa Co.--Warrants* ............ 40 2,000
Kawasaki Steel Corp.* ........... 70,000 292,925
Nippon Steel Corp. .............. 40,000 150,527
Nucor Corp. ..................... 40,000 2,220,000
SSAB Svenskt Stal (Class B) .... 5,000 218,691
-----------
3,428,826
-----------
TOTAL BASIC MATERIALS (6.1%) .. 29,801,600
-----------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.4%)
Powerscreen International ...... 65,000 $ 241,050
Tomra Systems ................... 120,000 273,215
WMX Technologies, Inc. .......... 50,000 1,312,500
-----------
1,826,765
-----------
PRINTING, PUBLISHING & BROADCASTING (0.9%)
Australian Provincial News ..... 10,000 12,171
Capital Cities ABC, Inc. ........ 40,000 3,410,000
Central European Media
Entertainment Ltd.* ............ 2,200 30,800
General Media, Inc.--Warrants* . 700 10,500
Oriental Press Group ............ 200,000 93,700
Reed International .............. 5,000 62,434
Singapore Press Holdings ........ 9,000 163,636
Sunshine Broadcasting Network .. 27,000 37,677
Toppan Printing Co. ............. 8,000 111,591
United Newspapers PLC ........... 15,000 110,550
Ver Ned Uitgevers ............... 1,000 103,821
Wolters Kluwer .................. 5,030 372,102
-----------
4,518,982
-----------
PROFESSIONAL SERVICES (1.8%)
Automated Security Holdings* ... 51,041 51,913
Blenheim Exhibition Group ...... 25,000 93,885
First Financial Management Corp. 60,000 3,697,500
Reynolds & Reynolds Co. ......... 200,000 5,000,000
-----------
8,843,298
-----------
TRUCKING, SHIPPING (0.2%)
Autostrade Conc E Costr-Priv. .. 105,000 133,054
Brambles Industries Ltd. ........ 15,000 143,266
Irish Continental Group ......... 24,000 156,080
Kawasaki Kisen Kaisho* .......... 20,000 80,281
Nedlloyd Groep N.V.* ............ 8,000 262,260
Unitor Ships Service ............ 7,000 117,979
Western Bulk Shipping+ .......... 31,500 169,983
Yamato Transport ................ 17,000 209,834
-----------
1,272,737
-----------
TOTAL BUSINESS SERVICES (3.3%) 16,461,782
-----------
CAPITAL GOODS ...................
BUILDING MATERIALS & FOREST PRODUCTS (0.1%)
Carter Holt Harvey .............. 20,000 40,970
C.I. Holdings BHD ............... 22,000 79,264
Fletcher Challenge .............. 30,000 70,481
Lafarge Coppee .................. 3,000 213,443
Lafarge Corp. ................... 3,000 52,397
Macmillan Bloedel Ltd. .......... 5,000 62,823
-----------
519,378
-----------
BUILDING & CONSTRUCTION (0.6%)
BBC Brown Boveri ................ 350 301,337
Bufete Industrial S.A. (ADS) ... 2,700 79,650
Chloride Group .................. 230,000 82,775
</TABLE>
77
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Fukuda Corp. .................... 16,000 $ 197,491
Kanamoto Co. Ltd. ............... 6,500 135,023
Kaneshita Construction .......... 20,000 280,983
Kyosei Rentemu Co. Ltd. ......... 3,000 82,790
Macmahon Holdings Ltd.* ......... 800,000 365,918
Ohmori .......................... 4,000 76,267
Paul Y.-ITC Construction ........ 450,000 98,288
PS Corp. ........................ 10,000 189,664
Royal Plastics Group Ltd.*+ .... 26,500 207,806
Sacos Corp. ..................... 5,700 148,149
Sho Bond Construction ........... 5,000 130,457
Sphinx .......................... 6,000 185,978
Suido Kiko Kaisha ............... 7,000 94,129
Toda Construction* .............. 6,000 53,588
Wesco, Inc. ..................... 4,000 137,280
-----------
2,847,573
-----------
ELECTRICAL EQUIPMENT (1.6%)
Alcatel Cable S.A.* ............. 2,000 164,464
General Electric Co. ............ 140,000 7,140,000
Omron Corp. ..................... 12,000 221,576
Philips N.V. (ADR) .............. 3,000 88,125
Toshiba Corp. ................... 10,000 72,554
Vae Eisenbahnsys ................ 1,633 185,708
-----------
7,872,427
-----------
MACHINERY (2.2%)
Caterpillar, Inc. ............... 140,000 7,717,500
Construcciones Auxiliar Ferro .. 3,000 161,802
Deere & Co. ..................... 20,000 1,325,000
Fanuc Co. ....................... 6,000 282,388
Kalmar Industries AB*+ .......... 12,000 134,848
Keppel Corp. .................... 23,000 195,678
Keyence Corp. ................... 3,600 408,229
Mitsubishi Heavy Industries .... 10,000 76,267
SMC Corp. ....................... 5,500 312,945
Van Der Horst * ................. 10,000 30,738
-----------
10,645,395
-----------
TOTAL CAPITAL GOODS (4.5%) .... 21,884,773
-----------
CONSUMER CYCLICALS
AIRLINES (0.1%)
British Airways ................. 25,000 139,654
KLM* ............................ 15,000 368,154
-----------
507,808
-----------
AUTO RELATED (0.6%)
Autoliv AB (ADS)*+ .............. 3,000 115,125
Daikin Manufacturing ............ 8,000 168,590
Lancaster Colony Corp. .......... 80,000 2,350,000
Mabuchi Motors .................. 4,500 338,685
Minebea Co. ..................... 20,000 168,590
Pacific Dunlop .................. 21,000 55,841
-----------
3,196,831
-----------
AUTOS & TRUCKS (1.3%)
Autozone, Inc.* ................. 50,000 1,212,500
Chrysler Corp. .................. 50,000 2,450,000
Harley Davidson, Inc. ........... 80,000 2,240,000
Honda Motor Corp. ............... 8,000 142,097
Kia Motors Corp. (GDS)*+ ........ 6,000 102,000
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Mitsubishi Motors Corp. ......... 25,000 $ 245,108
Volvo AB, Series B .............. 5,500 103,626
-----------
6,495,331
-----------
FOOD SERVICES, LODGING (0.1%)
AAPC Limited .................... 400,000 235,676
ABR Holdings Ltd. ............... 20,000 10,566
Ciga Hotel* ..................... 50,000 28,828
International Pizza Corp.*+ .... 16,400 26,650
International Pizza
Corp.--Warrants*+ .............. 16,400 4,100
-----------
305,820
-----------
HOUSEHOLD FURNITURE, APPLIANCES (0.3%)
Atag Holdings* .................. 1,300 83,886
Industrie Natuzzi (ADR) ......... 15,000 510,000
Maax, Inc.* ..................... 25,800 190,822
Morishita Co. Ltd. .............. 11,000 141,295
Nippon Electric Glass* .......... 9,000 178,826
Noritz Co. ...................... 1,400 26,131
Sharp Corp. ..................... 10,000 180,632
Shimachu Co. .................... 3,000 108,078
-----------
1,419,670
-----------
LEISURE RELATED (0.4%)
CUC International, Inc.* ........ 50,000 1,675,000
Genting Berhad .................. 15,000 128,647
Nelvana Limited*+ ............... 18,000 192,479
Skis Rossignol .................. 200 74,518
Thorn EMI ....................... 6,765 109,560
-----------
2,180,204
-----------
PHOTO & OPTICAL (0.0%)
Luxottica Group (ADR) ........... 7,000 238,875
-----------
RETAIL--GENERAL (3.8%)
Centros Commerciales Continent* 7,500 150,977
Dollar General Corp. ............ 140,000 4,200,000
Eidensha Co. Ltd. ............... 15,000 203,211
Elektra* ........................ 16,000 114,814
Fu Hui Jewellery* ............... 400,000 23,780
Hanshin Department Stores* ..... 2,000 14,150
Heiton Holdings PLC ............. 157,142 165,458
Ishiguro Homa ................... 7,000 168,590
Matsuyadenki Co. Industries* ... 7,000 73,056
Nissen Corp. Ltd. ............... 6,000 185,449
Nordstrom, Inc. ................. 80,000 3,360,000
Office Depot, Inc.* ............. 180,000 4,320,000
Penney (J.C.), Inc. ............. 100,000 4,462,500
Rinascente ...................... 35,000 196,829
Sato Corp.* ..................... 7,000 189,664
Shimamura Co. Ltd. .............. 5,000 250,878
Swank International
Manufacturing .................. 500,000 78,837
Swank International
Manufacturing--Warrants* ....... 80,000 3,102
Xebio Co. ....................... 2,800 110,707
-----------
18,272,002
-----------
TOTAL CONSUMER CYCLICALS (6.6%) 32,616,541
-----------
</TABLE>
78
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
BEVERAGES (1.1%)
Coca-Cola Co. ................... 100,000 $ 5,150,000
Panamerican Beverages ........... 2,000 63,250
Whitbread Series A .............. 5,000 44,204
-----------
5,257,454
-----------
CONTAINERS (0.0%)
Intertape Polymer ............... 3,000 47,585
-----------
DRUGS (0.1%)
Astra AB, Series A .............. 15,000 387,588
Roche Holdings AG Genusscheine . 20 96,791
Santen Pharmaceutical Co. ...... 6,000 165,580
Schering AG ..................... 90 58,949
-----------
708,908
-----------
FOODS (1.0%)
IBP, Inc. ....................... 160,000 4,840,000
Shriram Industrial Enterprises
Ltd.*+ ......................... 8,000 224,000
Viscofan Envoltura .............. 6,000 91,156
-----------
5,155,156
-----------
HOSPITAL SUPPLIES & SERVICES (2.6%)
Columbia HCA Healthcare Corp. .. 60,000 2,190,000
Medtronic, Inc. ................. 120,000 6,675,000
Tamro Group* .................... 20,000 92,880
United Healthcare Corp. ......... 80,000 3,610,000
-----------
12,567,880
-----------
RETAIL--FOOD (0.1%)
Argyll Group .................... 5,000 20,968
Family Mart Co. ................. 2,000 123,432
Kesko* .......................... 30,500 354,106
-----------
498,506
-----------
SOAPS & TOILETRIES (2.4%)
Gillette Corp. .................. 160,000 11,960,000
-----------
TOBACCO (2.6%)
Philip Morris Cos., Inc. ........ 180,000 10,350,000
UST, Inc. ....................... 80,000 2,220,000
-----------
12,570,000
-----------
TOTAL CONSUMER NONCYCLICALS (9.9%) 48,765,489
-----------
CREDIT SENSITIVE
BANKS (3.5%)
Akita Bank ...................... 6,000 47,868
Allied Irish Bank ............... 85,000 355,361
Australia & New Zealand Bank ... 50,000 164,741
Banco Latinoamericano de
Exportaciones S.A. ............. 9,500 296,875
Banco Osorno Y La Union (ADR)* . 16,200 174,150
Bancomer B Local ................ 50,000 24,020
Bank of New York Co. ............ 330,000 9,570,000
Barclays Bank ................... 15,000 143,292
Citicorp ........................ 100,000 4,137,500
Dao Heng Bank Group Ltd. ........ 68,000 193,344
First Bank Systems .............. 40,000 1,330,000
Grupo Financiero Banorte (Class
C) ............................. 18,000 43,779
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
Hock Hua Bank ................... 40,000 $ 120,619
HSBC Holding PLC ................ 12,000 129,499
International Bank of Asia ..... 270,000 95,089
Overseas Union Bank ............. 20,000 116,638
Schweiz Bankverein .............. 270 74,668
Toho Bank ....................... 7,000 49,594
Yamanashi Chuo Bank ............. 4,000 44,556
-----------
17,111,593
-----------
FINANCIAL SERVICES (0.6%)
American Express Co. ............ 60,000 1,770,000
Hong Leong Finance .............. 50,000 142,710
Invesco ......................... 100,000 256,619
JCG Holdings .................... 60,000 31,212
MBF Finance ..................... 10,000 10,495
Nichiei Co. Ltd. ................ 3,000 192,674
Nomura Securities Co. ........... 2,000 41,545
Promise Co. Ltd. ................ 6,000 306,473
SBSI Holding PLC ................ 300 69,672
-----------
2,821,400
-----------
INSURANCE (1.0%)
AFLAC, Inc. ..................... 160,000 5,120,000
-----------
MORTGAGE RELATED (0.3%)
Federal Home Loan Mortgage Corp. 30,000 1,515,000
-----------
REAL ESTATE (0.0%)
Cheung Kong Holdings ............ 40,000 162,843
Chubu Sekiwa Real Estate ........ 4,000 51,781
DBS Land ........................ 30,000 89,331
First Capital Corp. ............. 10,000 33,619
-----------
337,574
-----------
UTILITY--ELECTRIC (0.2%)
East Midlands Electricity ...... 40 526
Enersis S.A. (ADR) .............. 5,000 138,750
EVN ............................. 2,000 259,909
Hidroelectrica del Cantabrico .. 2,000 54,693
Powergen PLC .................... 15,000 125,571
Powergen PLC (ADR) .............. 500 42,000
Veba ............................ 900 311,761
-----------
933,210
-----------
UTILITY--GAS (1.1%)
ENRON Corp. ..................... 180,000 5,490,000
-----------
UTILITY--TELEPHONE (0.8%)
Atlantic Tele-Network* .......... 3,000 25,688
Kon PTT Nederland+ .............. 20,000 674,085
Sprint Corp. .................... 100,000 2,762,500
Stet D Risp Port ................ 30,000 71,129
Stet-Societa Finanziaria
Telefonica (ADR) ............... 30,000 88,425
Telefonica de Espana S.A. ...... 8,000 94,498
-----------
3,716,325
-----------
TOTAL CREDIT SENSITIVE (7.5%) . 37,045,102
-----------
ENERGY
COAL & GAS PIPELINES (0.6%)
Sonat, Inc. ..................... 100,000 2,800,000
-----------
</TABLE>
79
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
OIL--DOMESTIC (1.4%)
Amoco Corp. ..................... 40,000 $ 2,365,000
Orbit Oil and Gas* .............. 30,000 25,022
Phillips Petroleum Co. .......... 140,000 4,585,000
Renaissance Energy*+ ............ 4,000 77,348
XCL Corp.* ...................... 200,000 162,500
-----------
7,214,870
-----------
OIL--INTERNATIONAL (0.1%)
Ampolex Ltd. .................... 42,000 113,311
Canadian Occidental ............. 3,000 67,500
Norsk Hydro AS .................. 6,000 235,958
Yukong Ltd. (GDR)*+ ............. 7,000 101,500
-----------
518,269
-----------
OIL--SUPPLIES & CONSTRUCTION (0.1%)
CHC Helicopter Corp. ............ 28,000 127,250
Coflexip+ ....................... 11,000 255,750
-----------
383,000
-----------
TOTAL ENERGY (2.2%) ............ 10,916,139
-----------
TECHNOLOGY
ELECTRONICS (4.5%)
Applied Materials, Inc.* ........ 60,000 2,535,000
Austria Mikro Systeme
International AG*+ ............. 4,500 339,239
Casio Computer Co. Ltd. ......... 8,000 101,154
Disco Co. ....................... 2,000 62,820
Fuji Electronics Co. ............ 9,000 250,176
Futaba Corp. .................... 4,000 214,350
GP Batteries International ..... 34,000 93,500
Hirose Electric Co. Ltd. ........ 3,000 183,944
Kyocera Corp. ................... 4,000 296,638
Linear Technology Corp. ......... 70,000 3,465,000
Molex, Inc. ..................... 120,000 4,140,000
Motorola, Inc. .................. 120,000 6,945,000
Murata Manufacturing Co. Ltd. .. 5,000 193,176
NEC Corp. ....................... 15,000 171,601
Nikon Corp. ..................... 26,000 252,825
Rohm Co. Ltd. ................... 10,000 423,482
Sensonar AS* .................... 30,000 186,283
Sensormatic Electronics Corp. .. 40,000 1,440,000
TDK Corp. ....................... 12,000 581,636
Tokin Corp. ..................... 6,000 84,897
Tokyo Electron .................. 10,000 311,089
Tokyo Ohka Kogyo ................ 8,000 280,181
-----------
22,551,991
-----------
OFFICE EQUIPMENT (0.1%)
Canon, Inc. ..................... 23,000 390,065
Fujitsu Ltd. .................... 18,000 182,439
Ricoh Elemex Corp. .............. 12,000 163,773
-----------
736,277
-----------
OFFICE EQUIPMENT SERVICES (1.2%)
Enator 'B' Free* ................ 20,000 148,037
Getronics N.V. .................. 6,099 222,429
Oracle Systems Corp.* ........... 90,000 3,971,250
Paychex, Inc. ................... 40,000 1,620,000
Sidus Systems, Inc.*+ ........... 8,100 49,804
-----------
6,011,520
-----------
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 1)
----------- ---------------
<S> <C> <C>
COMMON STOCKS (Continued):
TELECOMMUNICATIONS (1.3%)
Andrew Corp.* ................... 70,000 $ 3,657,500
BCE Mobile Communications, Inc.* 4,500 142,755
Bell Cablemedia PLC (ADR)* ..... 7,000 141,750
Cellular Communications Puerto
Rico, Inc.* .................... 3,600 120,600
DDI Corporation ................. 38 327,948
Filtronic Comtek PLC* ........... 296,000 787,382
Mannesmann AG ................... 1,600 433,646
Nihon Dempa Kogyo ............... 8,000 275,364
Rogers Cantel Mobile
Communications, Inc. (Class B)* 6,000 176,439
-----------
6,063,384
-----------
TOTAL TECHNOLOGY (7.1%) ........ 35,363,172
-----------
DIVERSIFIED
MISCELLANEOUS (0.6%)
Alba ............................ 2,000 84,775
Allied Signal, Inc. ............. 60,000 2,040,000
Hanson Trust .................... 50,000 180,533
Indonesia Fund, Inc.* ........... 9,000 110,250
International UNP Holdings*+ ... 143,000 96,845
International UNP Holdings--
Warrants* (a)+ ................. 125,000 23,167
Taiwan Fund ..................... 8,000 231,000
-----------
TOTAL DIVERSIFIED (0.6%) ...... 2,766,570
-----------
TOTAL COMMON STOCKS (47.8%)
(Cost $228,904,471) ............ 235,621,168
-----------
PREFERRED STOCKS:
CAPITAL GOODS (0.0%)
MACHINERY
Gea AG* ......................... 120 38,254
-----------
CONSUMER CYCLICALS
AUTOS & TRUCKS (0.0%)
Bayer Moteren Werke AG .......... 545 196,244
-----------
RETAIL--GENERAL (0.0%)
Hach AG ......................... 50 22,263
-----------
TOTAL CONSUMER CYCLICALS (0.0%) 218,507
-----------
CREDIT SENSITIVE (0.1%)
INSURANCE
Marschollek Lauten Partners .... 500 267,802
-----------
TECHNOLOGY (0.1%)
TELECOMMUNICATIONS
Nokia+ .......................... 3,000 443,293
-----------
TOTAL PREFERRED STOCKS (0.2%)
(Cost $438,659) ................ 967,856
-----------
PRINCIPAL
AMOUNT
------------
LONG-TERM DEBT SECURITIES:
BASIC MATERIALS
CHEMICALS (0.6%)
Applied Extrusion 11.5%,
04/01/02 ....................... $1,000,000 990,000
</TABLE>
80
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO (Continued)
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
Buckeye Cellulose 10.25%,
05/15/01 ...................... $ 500,000 $ 467,500
G-I Holdings Zero Coupon Sr.
Disc. Note, 10/01/98 .......... 1,500,000 926,250
Trans Resources, Inc. 11.875%
Series B Sr. Sub. Note,
07/01/02 ...................... 500,000 455,000
-----------
2,838,750
-----------
METALS & MINING (0.2%)
Kaiser Aluminum 12.75%,
02/01/03 ...................... 1,000,000 1,007,500
-----------
PAPER (0.5%)
Domtar, Inc. 12.0%, 04/15/01 .. 750,000 780,000
Stone Container Corp. 9.875%,
02/01/01 ...................... 1,000,000 940,000
Sweetheart Cup 10.5%, 09/01/03 500,000 460,000
Williamhouse Regency of
Delaware, Inc. 11.5%, 06/15/05 500,000 460,000
-----------
2,640,000
-----------
STEEL (0.2%)
A.K. Steel Corp. 10.75%,
04/01/04 ...................... 1,000,000 990,000
-----------
TOTAL BASIC MATERIALS (1.5%) . 7,476,250
-----------
BUSINESS SERVICES ..............
PRINTING, PUBLISHING & BROADCASTING (1.2%)
American Media Operation
11.625%, 11/15/04 ............. 500,000 512,500
General Media, Inc. 10.625%
Note, 12/31/00 ................ 700,000 658,000
Time Warner Entertainment
8.375%, 03/15/23 .............. 4,300,000 3,570,032
United States Banknote Corp.
11.625%, 8/01/02 .............. 1,000,000 880,000
Young Broadcasting 11.75%,
11/15/04 ...................... 500,000 505,000
-----------
TOTAL BUSINESS SERVICES (1.2%) 6,125,532
-----------
CAPITAL GOODS
AEROSPACE (0.1%)
Rohr, Inc. 11.625%, 05/15/03 .. 500,000 497,500
-----------
MACHINERY (0.2%)
Specialty Equipment 11.375%,
12/01/03 ...................... 1,000,000 970,000
-----------
TOTAL CAPITAL GOODS (0.3%) ... 1,467,500
-----------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.2%)
CMI Industries 9.5%, 10/01/03 . 1,000,000 830,000
-----------
RETAIL--GENERAL (0.8%)
Lowe's Companies, Inc. 3.0%
Conv., 07/22/03 ............... 3,000,000 4,072,500
-----------
TOTAL CONSUMER CYCLICALS (1.0%) 4,902,500
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES
(Continued):
CONSUMER NONCYCLICALS
CONTAINERS (0.4%)
Calmar Spray Systems 14.0%,
02/15/99 ...................... $1,000,000 $ 995,000
Container Corp. 11.25%,
05/01/04 ...................... 500,000 512,500
Silgan Corp. 11.75% Deb.,
06/15/02 ...................... 400,000 414,000
-----------
1,921,500
-----------
RETAIL--FOOD (0.3%)
Food for Less 10.45% Sr.
Unsecured Note, 04/15/00 ..... 500,000 490,000
Grand Union Co. 12.25%,
07/15/02** .................... 2,000,000 790,000
-----------
1,280,000
-----------
TOTAL CONSUMER NONCYCLICALS (0.7%) 3,201,500
-----------
CREDIT SENSITIVE
BANKS (1.3%)
BankAmerica Corp. 7.2%,
04/15/06 ...................... 3,000,000 2,663,730
Chemical Banking Corp. 7.875%,
07/15/06 ...................... 3,000,000 2,815,020
Dime Bancorp 10.5%, 11/15/05 .. 750,000 742,500
-----------
6,221,250
-----------
FINANCIAL SERVICES (0.2%)
Keystone Group, Inc. 9.75%,
09/01/03 ...................... 500,000 460,000
NL Industries 11.75%, 10/15/03 700,000 704,375
-----------
1,164,375
-----------
MORTGAGE RELATED (2.6%)
Government National Mortgage
Association:
7.0%, 12/15/23 ................ 6,721,682 6,028,509
7.5%, 01/15/24 ................ 7,081,813 6,566,173
-----------
12,594,682
-----------
FOREIGN GOVERNMENT (0.6%)
Province of Ontario 5.812%
Floating Rate,
08/17/99 (b) .................. 3,100,000 3,078,300
-----------
REAL ESTATE (0.2%)
Scotsman Group 9.5%, 12/15/00 . 1,000,000 905,000
-----------
UTILITY--ELECTRIC (0.7%)
Commonwealth Edison 8.375%,
02/15/23 ...................... 3,500,000 3,146,220
Texas New Mexico Power Co.
10.75%, 09/15/03 .............. 500,000 492,500
-----------
3,638,720
-----------
UTILITY--GAS (0.2%)
Midland Cogeneration Venture
11.75% Deb. Series A, 07/23/05 1,000,000 913,430
Natural Gas Holdings Corp.
10.5% Conv., 10/14/97 ......... 100,000 89,621
-----------
1,003,051
-----------
</TABLE>
81
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO (Continued)
PORTFOLIO OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES
(CONTINUED):
U.S. GOVERNMENT (8.6%)
U.S. Treasury: 6.25%, 08/15/23 $14,905,000 $ 12,105,647
7.5%, 11/15/24 ................ 31,665,000 30,269,745
-----------
42,375,392
-----------
TOTAL CREDIT SENSITIVE (14.4%) 70,980,770
-----------
ENERGY
COAL & GAS PIPELINES (0.2%)
Mesa Capital Corp. 12.75%,
06/30/98 ...................... 1,000,000 862,500
-----------
OIL--DOMESTIC (0.3%)
Flores & Rucks 13.5%, 12/01/04 500,000 503,750
Gerrity Oil Corp. 11.75%,
07/15/04 ...................... 1,000,000 880,000
-----------
1,383,750
-----------
TOTAL ENERGY (0.5%) ........... 2,246,250
-----------
TECHNOLOGY
ELECTRONICS (0.4%)
General Instrument Corp. 5.0%
Conv., 06/15/00 ............... 1,000,000 1,337,500
Panamsat L.P. 9.75% Sr. Secured
Notes, 08/01/00 ............... 1,000,000 942,500
-----------
2,280,000
-----------
TELECOMMUNICATIONS (0.3%)
Centennial Cellular 8.875%,
11/01/01 ...................... 500,000 445,000
Mobile Telecommunications
13.5%, 12/15/02 ............... 500,000 506,875
USA Mobile Communications
14.0%, 11/01/04 ............... 500,000 511,250
-----------
1,463,125
-----------
TOTAL TECHNOLOGY (0.7%) ...... 3,743,125
-----------
DIVERSIFIED
MISCELLANEOUS (0.1%)
Brierley Investment 9.0% Conv.
Sub. Note, 06/30/98 ........... 14,000 9,231
Dade International, Inc. 13.0%,
02/01/05 ...................... 500,000 501,250
-----------
TOTAL DIVERSIFIED (0.1%) ..... 510,481
-----------
TOTAL LONG-TERM DEBT SECURITIES (20.4%)
(Amortized Cost $104,428,218). 100,653,908
-----------
SHORT-TERM DEBT SECURITIES:
COMMERCIAL PAPER
AGA Capital Corp. 5.95%, due
01/13/95 ...................... 6,300,000 6,286,464
Allomon Funding Corp. 5.9%, due
01/27/95 ...................... 7,000,000 6,969,025
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------- -------------
<S> <C> <C>
SHORT-TERM DEBT SECURITIES
(Continued):
Barton Capital Corp. 6.1%, due
01/25/95 ...................... $5,906,000 $ 5,880,982
Ciesco LP 6.1%, due 02/08/95 .. 6,400,000 6,357,707
Equipment Funding, Inc.: 6.05%,
due 01/09/95 .................. 4,000,000 3,993,950
6.125%, due 02/07/95 .......... 4,000,000 3,974,139
Ford Motor Credit Co. 5.85%,
due 01/11/95 .................. 7,000,000 6,987,488
General Electric Capital Corp.:
6.1%, due 02/28/95 ............ 5,000,000 4,950,014
6.13%, due 02/07/95 ........... 6,400,000 6,358,588
Goldman Sachs & Co. 6.0%, due
02/02/95 ...................... 4,470,000 4,445,415
International Securitization
6.1%, due 01/17/95 ............ 3,500,000 3,489,918
Morgan Stanley Group, Inc.
5.92%, due 01/12/95 ........... 7,000,000 6,986,187
October Corp. 6.1%, due
01/27/95 ...................... 4,750,000 4,728,269
Potomac Electric Power Co.
6.05%, due 01/19/95 ........... 7,950,000 7,924,615
Philip Morris Capital Corp.
5.85%, due 01/05/95 ........... 8,000,000 7,993,500
Progress Receivables Funding
6.08%, due 01/20/95 ........... 7,450,000 7,424,836
Preferred Receivables Funding
6.12%, due 02/14/95 ........... 7,105,000 7,050,647
Premium Funding: 5.92%, due
01/17/95 ...................... 7,000,000 6,980,431
6.0%, due 01/26/95 ............ 3,375,000 3,360,375
Sheffield Receivables Corp.
6.05%, due 01/18/95 ........... 5,000,000 4,984,875
Sumitomo Corp. of America 6.3%,
due 03/28/95 .................. 4,200,000 4,137,578
Three River Funding 6.1%, due
01/20/95 ...................... 7,500,000 7,474,583
Working Capital Management Corp.
6.12%, due 01/13/95 ........... 7,000,000 6,984,530
Younkers Funding Corp. 6.05%,
due 01/25/95 .................. 6,440,000 6,412,941
-----------
TOTAL COMMERCIAL PAPER (28.9%) 142,137,057
-----------
TIME DEPOSITS (1.1%)
Industrial Bank of Japan--N.Y.
5.875%, due 01/03/95 .......... 5,300,000 5,300,000
-----------
TOTAL SHORT-TERM DEBT SECURITIES (30.0%)
(Amortized Cost $147,435,534) 147,437,057
-----------
TOTAL INVESTMENTS (98.4%) (Cost/Amortized Cost
$481,206,882) 484,679,989
CASH AND RECEIVABLES LESS
LIABILITIES (1.6%) ............ 7,797,560
-----------
NET ASSETS (100.0%) ............ $492,477,549
===========
<FN>
---------------
* Non-income producing.
** Non-income producing--issuer filed for protection under the Federal
Bankruptcy Code.
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may only be resold to qualified institutional buyers.
(a) Fair valued.
(b) Interest rate shown on floating rate securities represents the rate at
December 31, 1994.
</TABLE>
See Notes to Financial Statements.
82
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
1. Organization and Significant Accounting Policies
The Hudson River Trust (Trust) (successor to The Hudson River Fund, Inc.,
a Maryland corporation organized in 1984) was formed as a Massachusetts
business trust on July 10, 1987 and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company. The Trust has twelve Portfolios (Portfolios) currently in operation:
Money Market, Intermediate Government Securities, Quality Bond, High Yield,
Balanced, Growth and Income, Equity Index, Common Stock, Global, Aggressive
Stock, Conservative Investors and Growth Investors. Shares of the Trust are
offered to separate accounts of The Equitable Life Assurance Society of the
United States (Equitable), a wholly-owned subsidiary of The Equitable
Companies Incorporated, Equitable Variable Life Insurance Company (Equitable
Variable), a wholly-owned subsidiary of the Equitable, and to separate
accounts of other insurance companies unaffiliated with Equitable and
Equitable Variable. Effective December 10, 1993 and December 14, 1994, the
Trust's Board of Trustees approved the establishment of the Equity Index and
International Portfolios, respectively. The Equity Index Portfolio commenced
operations on March 1, 1994 at an initial share value of $10. The
International Portfolio has not yet commenced operations.
On September 15, 1993, the Trustees approved an application for an order
of approval and exemption under the Investment Company Act of 1940 for filing
with the Securities and Exchange Commission (SEC) for the substitution of
shares of the Intermediate Government Securities Portfolio for shares of the
Short-Term World Income Portfolio (STWIP) (Substitution). On February 22,
1994, 289,703 shares of STWIP with a value of $2,582,814 (including no
unrealized appreciation or depreciation) were substituted for 254,893 shares
of Intermediate Government Securities Portfolio with a net asset value at the
date of substitution of $10.13 per share.
The following is a summary of the significant accounting policies of the
Trust:
Stocks listed on national securities exchanges and certain
over-the-counter issues traded on the NASDAQ national market system are
valued at the last sale price, or, if there is no sale, at the latest
available bid price. Other unlisted stocks are valued at their last sale
price or, if no reported sale during the day, at a bid price estimated by a
broker.
Convertible preferred stocks listed on national securities exchanges are
valued as of their last sale price or, if there is no sale, at the latest
available bid price.
Convertible bonds and unlisted convertible preferred stocks are valued at
bid prices obtained from one or more of the major dealers in such securities.
Where there is a discrepancy between dealers, values may be adjusted based on
recent premium spreads to the underlying common stocks.
Mortgage backed and asset backed securities are valued at prices obtained
from a bond pricing service where available, or at a bid price obtained from
one or more of the major dealers in such securities. If a quoted price is
unavailable, an equivalent yield or yield spread quotes will be obtained from
a broker and converted to a price.
Purchased options, including options on futures, are valued at their last
bid price. Written options are valued at their last asked price.
Long-term corporate bonds are valued at prices obtained from a bond
pricing service of a major dealer in bonds when such prices are available;
however, when such prices are not available, such bonds are valued at a bid
price estimated by a broker.
U.S. Treasury securities and other obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities are valued at
representative quoted prices.
Foreign securities not traded directly, or in American Depository Receipt
(ADR) or similar form in the United States, are valued at representative
quoted prices in the currency of the country of origin.
83
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1994
Except for the Money Market Portfolio, short-term debt securities which
mature in 60 days or less are valued at amortized cost, which approximates
market value. Short-term debt securities which mature in more than 60 days
are valued at representative quoted prices. Short-term debt securities held
in the Money Market Portfolio are valued at representative quoted prices
regardless of the length of maturity.
Futures and forward contracts are valued at their last sale price or, if
there is no sale, at the latest available bid price.
Other securities, including restricted securities, and assets for which
market quotations are not readily available or for which valuation cannot be
provided, are valued at "fair value" as determined in good faith by the
Valuation Committee of the Board of Trustees.
Securities transactions are recorded on the trade date net of brokerage
fees, commissions, and transfer fees.
Interest income (including amortization of premium and discount on
securities using the effective yield method) is accrued daily. Dividend
income is recorded on the ex-dividend date.
Realized gains and losses on the sale of investments are computed on the
basis of the identified cost of the related investments sold.
The books and records of the Trust are kept in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars at the bid price last
quoted by a composite list of major U.S. banks at the following dates:
(i) market value of investment securities, other assets and
liabilities--at the valuation date.
(ii) purchase and sales of investment securities, income and expenses--at
the date of such transactions.
Net currency gains or losses realized and unrealized as a result of
differences between interest or dividends and withholding taxes recorded on
the Portfolio's books and the U.S. dollar equivalent amount actually received
or paid are presented under foreign currency transactions in the realized and
unrealized gains and losses section of the Statements of Operations.
The Trust intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its net investment income and net realized capital gains
to shareholders of each Portfolio. Therefore, no Federal income tax provision
is required. Dividends from net investment income are declared and
distributed quarterly; dividends from net realized short-term and long-term
capital gains are declared and distributed annually to the shareholders of
the Portfolios to which such gains are attributable. All dividends are
reinvested in additional full and fractional Shares of the related
Portfolios. All dividends are distributed on a tax basis and as such, the
amounts may differ from financial statement investment income and realized
capital gains.
Options Written:
All Portfolios (except for the Money Market and Equity Index Portfolios)
may write (sell) covered options as a hedge to provide protection against
adverse movements in the price of securities in the portfolio or to enhance
investment performance. When a Portfolio writes an option, an amount equal to
the premium received by the Portfolio is recorded as a liability and is
subsequently adjusted on a daily basis to the current market price of the
option written. Premiums received from writing options which expire
unexercised are recognized as gains on the expiration date. In writing
options, a Portfolio must assume that the option may be exercised at any time
prior to the expiration of its obligation as a writer, and that in such
circumstances the net proceeds of the sale or cost of purchase of the
underlying securities pursuant to the call or put option may be substantially
below or above the prevailing market price. A Portfolio also has the
additional risk of not being able to enter into a closing purchase
transaction if a liquid secondary market does not exist and bears the risk of
unfavorable changes in the price of the financial instruments underlying the
options.
84
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1994
Futures and Forward Contracts:
Futures and forward contracts are agreements to buy or sell a security for
a set price in the future. A Portfolio may buy or sell futures and forward
contracts for the purpose of protecting its portfolio securities against
future changes in interest rates which might adversely affect the value of
the Portfolio's securities or the price of securities that it intends to
purchase at a later date. Initial margin deposits are made upon entering into
futures contracts and can be either in cash or treasury securities. During
the period the futures and forward contracts are open, changes in the market
price of the contract are recognized as unrealized gains or losses by
"marking-to-market" at the end of each trading day. Variation margin payments
on futures contracts are received or made, depending upon whether unrealized
gains or losses are incurred. When the contract is closed, the Portfolio
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transactions and the Portfolio's basis in the
contract. Should interest rates move unexpectedly, the Portfolio may not
achieve the anticipated benefits of the futures and forward contracts and may
incur a loss. The use of futures and forward contracts transactions involves
the risk of imperfect correlation in movements in the price of futures and
forward contracts, interest rates and the underlying hedged assets.
Limitations on Market and Credit Risk:
Written options, futures and forward contracts involve elements of both
market and credit risk in excess of the amounts reflected in the Statements
of Assets and Liabilities. The contract amounts of these written options,
futures and forward contracts reflect the extent of the Portfolio's exposure
to off-balance sheet risk. The Portfolio bears the market risk which arises
from any changes in security values. The credit risk for futures contracts is
limited to failure of the exchange or board of trade which acts as the
counterparty to the Portfolio's futures transactions. Forward contracts are
done directly with the counterparty and not through an exchange and can be
terminated only by agreement of both parties to the contract. There is no
daily margin settlement and the Portfolio is exposed to the risk of default
by the counterparty.
Statement of Position 93-2:
During the year ended December 31, 1993, the Trust adopted Statement of
Position 93-2 Determination, Disclosure and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. The Financial Highlights for periods prior to 1993 have not been
restated to reflect this change in presentation. For the year ended December
31, 1994, the reclassification arising from current book/tax differences
resulted in increases (decreases) to the components of net assets as follows:
<TABLE>
<CAPTION>
INTERMEDIATE
MONEY GOVERNMENT EQUITY
MARKET SECURITIES QUALITY BOND HIGH YIELD BALANCED INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- -------------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Paid-in capital .................... $ 1,966 $ 1,920,941 $(627,091) $ 16,377 $ 1,880,498 $ --
Undistributed (overdistributed) net
investment income ................. (1,966) 1,623,417 279,195 86,602 809,827 24
Accumulated net realized gain
(loss) ............................ -- (3,544,358) 347,896 (102,979) (2,690,325) (24)
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
COMMON STOCK GLOBAL STOCK INVESTORS INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Paid-in capital .................... $ 6,286,555 $(193,169) $ 5,068,852 $ 2,293 $ 83,015
Undistributed (overdistributed) net
investment income ................. 5,564,130 176,903 32,809 6,360 409,232
Accumulated net realized gain
(loss) ............................ (11,850,337) 20,126 (5,101,661) (8,653) (491,669)
Unrealized depreciation ............ (348) (3,860) -- -- (578)
</TABLE>
85
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1994
2. Management of the Trust
Prior to July 22, 1993, Equitable Capital Management Corporation
(Equitable Capital) served as the investment adviser to the Trust. On July
22, 1993, Alliance Capital Management L.P. (Alliance) acquired the business
and substantially all of the assets of Equitable Capital and became the
investment adviser to the Trust. Alliance, a publicly traded limited
partnership, is indirectly majority-owned by Equitable. The investment
advisory fees are as follows:
<TABLE>
<CAPTION>
DAILY AVERAGE NET ASSETS
----------------------------------------------------
FIRST NEXT OVER
$350 MILLION $400 MILLION $750 MILLION
---------------- ---------------- ----------------
<S> <C> <C> <C>
Common Stock, Money Market and Balanced Portfolios ....... .40% .375% .35%
Aggressive Stock and Intermediate Government Securities ..
Portfolios ............................................... .50% .475% .45%
High Yield, Global, Conservative Investors and Growth
Investors Portfolios ..................................... .55% .525% .50%
FIRST NEXT OVER
$500 MILLION $500 MILLION $1 BILLION
---------------- ---------------- ----------------
Quality Bond and Growth and Income Portfolios ............. .55% .525% .50%
FIRST NEXT OVER
$750 MILLION $750 MILLION $1.5 BILLION
---------------- ---------------- ----------------
Equity Index Portfolio .................................... .35% .30% .25%
</TABLE>
3. Investment Transactions
Investment security transactions, excluding short-term debt securities,
for the Intermediate Government Securities, Quality Bond, High Yield,
Balanced, Growth and Income, Common Stock, Global, Aggressive Stock,
Conservative Investors and Growth Investors Portfolios for the year ended
December 31, 1994 and for the Equity Index Portfolio for the period from
March 1, 1994 (commencement of operations) through December 31, 1994, were as
follows:
<TABLE>
<CAPTION>
INTER-
MEDIATE
GOVERNMENT QUALITY
SECURITIES BOND HIGH YIELD BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
COST OF PURCHASES:
Stocks and long-term corporate debt
securities ........................... $ -- $134,633,305 $167,359,906 $701,342,556
U.S. Government securities ............ 94,380,590 93,270,874 -- 477,346,230
NET PROCEEDS OF SALES AND REDEMPTIONS:
Stocks and long-term corporate debt
securities ........................... -- 141,178,435 156,633,974 700,154,938
U.S. Government securities ............ 193,037,272 83,310,560 -- 599,479,317
</TABLE>
<TABLE>
<CAPTION>
GROWTH
AND EQUITY COMMON
INCOME INDEX STOCK GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
COST OF PURCHASES:
Stocks and long-term corporate debt
securities ........................... $25,677,993 $38,376,103 $2,226,943,788 $372,472,585
U.S. Government securities ............ -- -- -- --
NET PROCEEDS OF SALES AND REDEMPTIONS:
Stocks and long-term corporate debt
securities ........................... 5,046,500 2,125,119 1,716,672,550 155,242,095
U.S. Government securities ............ -- -- -- --
</TABLE>
86
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1994
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
STOCK INVESTORS INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- --------------
<S> <C> <C> <C>
COST OF PURCHASES:
Stocks and long-term corporate debt
securities ........................... $1,799,422,407 $ 84,713,505 $345,726,710
U.S. Government securities ............ -- 193,764,564 184,082,818
NET PROCEEDS OF SALES AND REDEMPTIONS:
Stocks and long-term corporate debt
securities ........................... 1,469,648,907 79,812,161 215,006,262
U.S. Government securities ............ -- 175,020,009 186,086,343
</TABLE>
No activity is shown for the Money Market Portfolio since it trades
exclusively in short-term debt securities.
Transactions in options written for the year ended December 31, 1994 are
summarized as follows:
<TABLE>
<CAPTION>
AGGRESSIVE STOCK
COMMON STOCK PORTFOLIO PORTFOLIO
------------------------- ----------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
----------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Options outstanding--January 1, 1994 ... 101,169 $ 33,311,154 200 $ 73,148
Options written ......................... 271,856 78,739,546 365 75,652
Options terminated in closing purchase
transactions ........................... (127,236) (45,145,314) (565) (148,800)
Options expired ......................... (157,578) (40,656,762) -- --
Options exercised ....................... (77,211) (21,736,145) -- --
----------- -------------- ----------- -----------
Options outstanding -- December 31, 1994 11,000 $ 4,512,479 -- $ --
=========== ============== =========== ===========
</TABLE>
The Portfolios (except for the Money Market, Intermediate Government
Securities and Equity Index Portfolios) may enter into forward currency
contracts in order to hedge their exposure to changes in foreign currency
exchange rates on its foreign securities holdings. A forward contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference between
the original contracts and the closing of such contracts is included in
realized gains or losses from foreign currency transactions. At December 31,
1994, the Global and Growth Investors Portfolios had outstanding forward
currency contracts to buy/sell foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT COST ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
GLOBAL PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
----------- ---------- ------------- ------------ --------------- ----------- ----------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
British Pounds, expiring 01/03/95-04/03/95 3,805 $ 5,948,934 $ 5,953,560 $ 4,626
French Francs, expiring 01/03/95 .......... 305 57,134 57,105 (29)
Netherland Guilders, expiring 01/03/95 ... 431 248,616 248,317 (299)
Spanish Pesetas, expiring 01/03/95 ....... 55,138 418,785 418,846 61
FOREIGN CURRENCY SALE CONTRACTS
British Pounds, expiring 01/17/95-04/03/95 8,993 14,066,610 14,072,162 (5,552)
Deutsche Marks, expiring 01/17/95-04/03/95 16,317 10,394,709 10,529,301 (134,592)
French Francs, expiring 01/03/95 .......... 5,253 970,104 983,454 (13,350)
Irish Punt, expiring 04/03/95 ............. 342 531,954 530,042 1,912
Netherland Guilders, expiring 04/03/95 ... 23,143 13,167,909 13,333,410 (165,501)
----------
$(312,724)
==========
</TABLE>
87
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1994
<TABLE>
<CAPTION>
CONTRACT COST ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
GROWTH INVESTORS PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
--------------------------- ---------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
British Pounds, expiring 01/03/95-04/03/95 559 $ 873,117 $ 874,382 $ 1,265
French Francs, expiring 01/03/95 .......... 5 880 880 --
Netherland Guilders, expiring 01/03/95 ... 215 124,019 123,870 (149)
FOREIGN CURRENCY SALE CONTRACTS
British Pounds, expiring 01/17/95-04/03/95 1,072 1,677,793 1,676,943 850
Deutsche Marks, expiring 01/17/95-04/03/95 2,531 1,613,029 1,633,484 (20,455)
French Francs, expiring 01/03/95 .......... 803 148,281 150,322 (2,041)
Netherland Guilders, expiring 04/03/95 ... 4,795 2,728,421 2,762,713 (34,292)
---------
$(54,822)
=========
</TABLE>
As of December 31, 1994, the gross unrealized appreciation (depreciation)
of investments based on the aggregate cost of investments for Federal income
tax purposes was as follows:
<TABLE>
<CAPTION>
INTER-
MEDIATE
GOVERNMENT
MONEY MARKET SECURITIES QUALITY HIGH YIELD
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation .. $ 42,874 $ -- $ 182,924 $ 372,184
Aggregate gross unrealized depreciation .. (22,719) (932,028) (5,575,988) (4,429,369)
-------------- ------------- -------------- --------------
Net unrealized appreciation (depreciation) $ 20,155 $ (932,028) $ (5,393,064) $(4,057,185)
============== ============= ============== ==============
Federal income tax cost of investments ... $292,100,623 $44,352,222 $131,940,089 $76,967,632
============== ============= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
GROWTH EQUITY COMMON
BALANCED AND INCOME INDEX STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation .. $ 58,115,371 $ 464,112 $ 1,637,492 $ 355,407,358
Aggregate gross unrealized depreciation .. (82,209,097) (727,435) (2,119,469) (220,027,248)
-------------- ------------- ------------- ---------------
Net unrealized appreciation (depreciation) $ (24,093,726) $ (263,323) $ (481,977) $ 135,380,110
============== ============= ============= ===============
Federal income tax cost of investments ... $1,341,262,672 $32,168,190 $37,153,004 $3,313,553,822
============== ============= ============= ===============
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
GLOBAL STOCK INVESTORS INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation .. $ 21,585,616 $ 317,750,271 $ 1,387,744 $ 16,725,079
Aggregate gross unrealized depreciation .. (18,857,905) (71,441,731) (3,097,661) (14,654,787)
-------------- -------------- -------------- ---------------
Net unrealized appreciation (depreciation) $ 2,727,711 $ 246,308,540 $ (1,709,917) $ 2,070,292
============== ============== ============== ===============
Federal income tax cost of investments ... $410,321,557 $1,578,558,744 $175,014,438 $482,609,697
============== ============== ============== ===============
</TABLE>
88
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1994
At December 31, 1994, the Growth and Income Portfolio had net capital loss
carryforwards of $284,490 (of which $2,753 expires in the year 2001 and
$281,737 expires in the year 2002), and the Intermediate Government
Securities, Quality Bond, High Yield, Balanced, Aggressive Stock,
Conservative Investors and Growth Investors Portfolios had net capital loss
carryforwards of $9,469,908, $6,513,805, $1,059,564, $19,919,410,
$41,137,196, $6,422,411 and $3,699,317, respectively, which all expire in the
year 2002. To the extent the above losses are used to offset future capital
gains, it is probable that the gains so offset will not be distributed to
shareholders.
4. Capital Share Transactions
At December 31, 1994, there was an unlimited number of shares of
beneficial interest (Shares), without par value, available for issuance by
the Board of Trustees. Shares are divided into twelve classes, one class for
each Portfolio.
Transactions in Shares were as follows:
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT
MONEY MARKET SECURITIES
PORTFOLIO PORTFOLIO
-------------------------- --------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold ..... 34,864,688 18,059,290 3,505,801 3,857,622
Shares issued in
connection with
the substitution of
the Short-Term
World Income
Portfolio ...... -- -- 254,893 --
Shares issued in
reinvestment of
dividends and
distributions . 1,126,391 794,237 764,978 2,679,247
-------------- ------------ ------------ ------------
Total shares
issued ......... 35,991,079 18,853,527 4,525,672 6,536,869
Shares redeemed (28,439,024) (20,867,335) (14,777,456) (18,684,343)
-------------- ------------ ------------ ------------
Net increase
(decrease) ..... 7,552,055 (2,013,808) (10,251,784) (12,147,474)
============== ============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO
-------------------------------- -----------------
YEAR ENDED FOR THE PERIOD FROM YEAR ENDED
DECEMBER 31, OCTOBER 1, 1993* TO DECEMBER 31,
1994 DECEMBER 31, 1993 1994 1993
----------- ------------------ --------- ---------
<S> <C> <C> <C>
3,600,969 10,608,292 3,096,529 3,126,793
-- -- -- --
931,997 137,748 687,436 674,383
----------- ----------- ----------- -----------
4,532,966 10,746,040 3,783,965 3,801,176
(572,547) (71,663) (2,156,031) 2,349,883)
----------- ----------- ----------- -----------
3,960,419 10,674,377 1,627,934 1,451,293
=========== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND
BALANCED INCOME
PORTFOLIO PORTFOLIO
----------------------------- ----------------------------------
YEAR ENDED YEAR ENDED FOR THE PERIOD FROM
DECEMBER 31, DECEMBER 31, OCTOBER 1, 1993* TO
1994 1993 1994 DECEMBER 31, 1993
------------- ------------- -------------- -------------------
<S> <C> <C> <C> <C>
Shares sold ..... 10,355,446 11,752,209 3,211,395 148,118
Shares issued in
reinvestment of
dividends and
distributions . 2,742,085 6,673,429 43,243 341
------------- ------------- -------------- -----------
Total shares
issued ......... 13,097,531 18,425,638 3,254,638 148,459
Shares redeemed (5,497,701) (3,093,436) (149,828) (2,143)
------------- ------------- -------------- -----------
Net increase ... 7,599,830 15,332,202 3,104,810 146,316
============= ============= ============== ===========
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX COMMON STOCK
PORTFOLIO PORTFOLIO
------------------- --------------------------
FOR THE PERIOD FROM YEAR ENDED
MARCH 1, 1994* TO DECEMBER 31,
DECEMBER 31, 1994 1994 1993
------------------- ------------- -----------
<S> <C> <C>
3,972,324 35,758,326 26,722,829
81,699 17,645,138 27,625,345
------------ ------------ -----------
4,054,023 53,403,464 54,348,174
(330,143) (7,202,598) (12,113,013)
------------ ------------- ------------
3,723,880 46,200,866 42,235,161
============ ============= ===========
</TABLE>
----------
* Commencement of operations.
89
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1994
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE
PORTFOLIO STOCK PORTFOLIO
-------------------------- ------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Shares sold ........ 21,053,323 6,306,138 23,071,977 14,845,578
Shares issued in
reinvestment of
dividends and
distributions ..... 898,514 978,012 69,084 4,097,189
------------- ------------- -------------- --------------
Total shares issued 21,951,837 7,284,150 23,141,061 18,942,767
Shares redeemed ... (1,911,754) (1,222,905) (12,173,721) (10,702,747)
------------- ------------- -------------- --------------
Net increase ....... 20,040,083 6,061,245 10,967,340 8,240,020
============= ============= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH
INVESTORS INVESTORS
PORTFOLIO PORTFOLIO
------------------------- -----------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993
----------- ----------- ----------- ----------
<S> <C> <C> <C>
6,795,540 3,854,672 15,839,742 6,494,618
760,857 791,593 886,613 1,321,388
----------- ----------- ----------- ----------
7,556,397 4,646,265 16,726,355 7,816,006
(730,909) (820,799) (960,533) (101,336)
----------- ----------- ------------ ---------
6,825,488 3,825,466 15,765,822 7,714,670
=========== =========== ============ =========
</TABLE>
5. Transactions with Affiliated Companies
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Investments in companies which are
affiliates as of December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
MARKET
PORTFOLIO AFFILIATES COST VALUE
------------ -------------------------------------- -------------- --------------
<S> <C> <C> <C>
Balanced Aldila ................................ $ 11,724,095 $ 10,369,550
Spaghetti Warehouse, Inc. ............. 7,457,903 1,698,938
Taco Cabana (Class A) ................. 15,582,766 9,922,981
-------------- --------------
$ 34,764,764 $ 21,991,469
============== ==============
Common CBL & Associates ...................... $ 20,591,544 $ 21,794,438
Stock Chris Craft Industries, Inc. (Class B) 13,002,933 40,989,174
Essex Properties ...................... 6,922,500 5,369,375
Itel Corp. ............................ 32,070,138 62,439,841
Spieker Properties, Inc. .............. 27,033,088 26,837,950
-------------- --------------
$ 99,620,203 $157,430,778
============== ==============
Aggressive American Superconductor Corp. ......... $ 8,408,502 $ 14,991,075
Stock Bombay Co., Inc. ...................... 31,871,510 24,756,638
Coflexip .............................. 17,343,750 18,590,700
Global Marine, Inc. ................... 39,034,036 36,680,287
Healthwise of America, Inc. ........... 7,637,594 15,745,455
Heritage Media Corp. (Class A) ....... 11,365,125 21,447,594
Nuevo Energy Company .................. 14,736,639 13,368,600
Rowan Cos., Inc. ...................... 50,087,831 35,818,388
-------------- --------------
$180,484,987 $181,398,737
============== ==============
</TABLE>
90
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1994
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS
December 31, 1994
SELECTED DATA FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD(C)
MONEY MARKET PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1994 1993* 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year (a) ...... $10.12 $10.11 $10.13 $10.17 $10.14
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.41 0.30 0.37 0.61 0.81
Net realized and unrealized gain (loss) on
investments ................................ -- -- (0.01) -- 0.01
---------- ---------- ---------- ---------- ----------
Total from investment operations ............ 0.41 0.30 0.36 0.61 0.82
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS:
Dividends from net investment income ....... (0.39) (0.29) (0.38) (0.65) (0.79)
---------- ---------- ---------- ---------- ----------
Total dividends ............................. (0.39) (0.29) (0.38) (0.65) (0.79)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ................. $10.14 $10.12 $10.11 $10.13 $10.17
========== ========== ========== ========== ==========
Total return (d) ............................. 4.02% 3.00% 3.57% 6.20% 8.22%
========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) .............. $325,391 $248,460 $268,584 $302,395 $359,426
Ratio of expenses to average net assets ..... 0.42% 0.42% 0.43% 0.43% 0.44%
Ratio of net investment income to average net
assets ...................................... 4.01% 2.91% 3.63% 5.96% 7.85%
</TABLE>
INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO(E):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, APRIL 1, 1991 TO
------------------------------------- DECEMBER 31,
1994 1993* 1992 1991
--------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (a) .............. $ 10.08 $ 10.53 $ 10.73 $ 10.00
--------- ---------- ---------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.65 0.59 0.60 0.52
Net realized and unrealized gain (loss) on
investments .......................................... (1.08) 0.51 (0.02) 0.66
--------- ---------- ---------- -----------
Total from investment operations ..................... (0.43) 1.10 0.58 1.18
--------- ---------- ---------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment income ................. (0.78) (0.68) (0.60) (0.34)
Distributions from realized gains .................... -- (0.87) (0.18) (0.11)
--------- ---------- ---------- -----------
Total dividends and distributions .................... (0.78) (1.55) (0.78) (0.45)
--------- ---------- ---------- -----------
Net asset value, end of period ........................ $ 8.87 $ 10.08 $ 10.53 $ 10.73
========= ========== ========== ===========
Total return (d) ...................................... (4.37)% 10.58% 5.53% 12.10%
========= ========== ========== ===========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ..................... $48,518 $158,511 $293,587 $241,290
Ratio of expenses to average net assets ............... 0.56% 0.53% 0.52% 0.43%
Ratio of net investment income to average net assets . 6.75% 5.43% 5.63% 4.88%
Portfolio turnover rate ............................... 133 % 254 % 316 % 174 %
</TABLE>
91
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1994
QUALITY BOND PORTFOLIO:
<TABLE>
<CAPTION>
OCTOBER 1, 1993
YEAR ENDED TO
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period (a) ......................................... $9.82 $ 10.00
----------------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................................................... 0.66 0.11
Net realized and unrealized loss on investments and foreign currency
transactions .................................................................... (1.16) (0.16)
----------------- -----------------
Total from investment operations ................................................ (0.50) (0.05)
----------------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............................................ (0.55) (0.12)
Distributions in excess of realized gains ....................................... -- (0.01)
Tax return of capital distributions ............................................. (0.05) --
----------------- -----------------
Total dividends and distributions ............................................... (0.60) (0.13)
----------------- -----------------
Net asset value, end of period ................................................... $8.72 $ 9.82
================= =================
Total return (d) ................................................................. (5.10)% (0.51)%
================= =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ................................................ $127,575 $104,832
Ratio of expenses to average net assets .......................................... 0.59% 0.69%(b)
Ratio of net investment income to average net assets ............................. 7.17% 4.62%(b)
Portfolio turnover rate .......................................................... 222% 77%
</TABLE>
HIGH YIELD PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1994 1993* 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year (a) ...... $10.08 $ 9.15 $ 8.96 $ 7.97 $ 9.14
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.89 0.94 0.89 0.89 1.04
Net realized and unrealized gain (loss) on
investments ................................ (1.17) 1.10 0.19 0.99 (1.14)
--------- --------- --------- --------- ---------
Total from investment operations ............ (0.28) 2.04 1.08 1.88 (0.10)
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income ....... (0.88) (0.92) (0.89) (0.89) (1.07)
Dividends in excess of net investment income (0.01) -- -- -- --
Distributions from realized gains ........... -- (0.19) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions ........... (0.89) (1.11) (0.89) (0.89) (1.07)
--------- --------- --------- --------- ---------
Net asset value, end of year ................. $8.91 $10.08 $ 9.15 $ 8.96 $ 7.97
========= ========= ========= ========= =========
Total return (d) ............................. (2.79)% 23.15% 12.31% 24.46% (1.10)%
========= ========= ========= ========= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) .............. $73,895 $67,169 $47,687 $45,066 $36,569
Ratio of expenses to average net assets ..... 0.61% 0.63% 0.60% 0.61% 0.62%
Ratio of net investment income to average net
assets ...................................... 9.23% 9.52% 9.58% 10.31% 12.04%
Portfolio turnover rate ...................... 248% 280% 177% 187% 53%
</TABLE>
92
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1994
BALANCED PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1994 1993* 1992 1991 1990
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year (a) .... $16.67 $16.19 $18.48 $14.40 $15.16
--------- -------- --------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................... 0.45 0.50 0.56 0.60 0.78
Net realized and unrealized gain (loss) on
investments .............................. (1.78) 1.46 (1.11) 5.23 (0.76)
--------- -------- --------- -------- --------
Total from investment operations .......... (1.33) 1.96 (0.55) 5.83 0.02
--------- -------- --------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ..... (0.44) (0.50) (0.55) (0.55) (0.78)
Dividends in excess of net investment
income ................................... (0.03) -- -- -- --
Distributions from realized gains ........ -- (0.95) (1.19) (1.20) --
Distributions in excess of realized gains -- (0.03) -- -- --
Tax return of capital distributions ...... (0.00) -- -- -- --
--------- -------- --------- -------- --------
Total dividends and distributions ........ (0.47) (1.48) (1.74) (1.75) (0.78)
--------- -------- --------- -------- --------
Net asset value, end of year ............... $14.87 $16.67 $16.19 $18.48 $14.40
========= ======== ========= ======== ========
Total return (d) ........................... (8.02)% 12.28% (2.85)% 41.25% 0.25%
========= ======== ========= ======== ========
</TABLE>
RATIOS/SUPPLEMENTAL DATA:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000's) ..............$1,329,820 $1,364,640 $1,076,670 $964,262 $286,432
Ratio of expenses to average net assets ..... 0.39% 0.39% 0.40% 0.41% 0.45%
Ratio of net investment income to average net
assets ...................................... 2.87% 2.99% 3.30% 3.60% 5.35%
Portfolio turnover rate ...................... 115% 99% 91% 159% 119%
</TABLE>
GROWTH AND INCOME PORTFOLIO:
<TABLE>
<CAPTION>
OCTOBER 1, 1993
YEAR ENDED TO
DECEMBER 31, 1994 DECEMBER 31, 1993**
----------------- -------------------
<S> <C> <C>
Net asset value, beginning of period (a) ............... $ 9.95 $ 10.00
----------------- -------------------
INCOME FROM INVESTMENT OPERATIONS: Net investment
income ................................................ 0.31 0.03
Net realized and unrealized gain (loss) on investments (0.36) (0.06)
----------------- -------------------
Total from investment operations ...................... (0.05) (0.03)
----------------- -------------------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.20) (0.02)
Dividends in excess of net investment income ......... -- (0.00)
Tax return of capital distributions ................... -- (0.00)
----------------- -------------------
Total dividends and distributions ..................... (0.20) (0.02)
----------------- -------------------
Net asset value, end of period ......................... $ 9.70 $ 9.95
================= ===================
Total return (d) ....................................... (0.58)% (0.25)%
================= ===================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...................... $31,522 $1,456
Ratio of expenses to average net assets ................ 0.78% 2.70%(b)
Ratio of net investment income to average net asset ... 3.13% 1.12%(b)
Portfolio turnover rate ................................ 52 % 48 %
</TABLE>
93
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1994
EQUITY INDEX PORTFOLIO:
<TABLE>
<CAPTION>
MARCH 1, 1994
TO
DECEMBER 31, 1994
-----------------
<S> <C>
Net asset value, beginning of period (a) ............. $ 10.00
-----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .............................. 0.20
Net realized and unrealized loss on investments .... (0.09)
-----------------
Total from investment operations ................... 0.11
-----------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............... (0.20)
Distributions of realized gains .................... (0.03)
Distributions in excess of realized gains .......... (0.01)
-----------------
Total dividends and distributions .................. (0.24)
-----------------
Net asset value, end of period ....................... $ 9.87
-----------------
Total return (d) ..................................... (1.08)%
=================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .................... $36,748
Ratio of expenses to average net assets .............. 0.49 %(b)
Ratio of net investment income to average net assets 2.42 %(b)
Portfolio turnover rate .............................. 7 %
</TABLE>
COMMON STOCK PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1994 1993* 1992 1991 1990
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year (a) ... $14.65 $13.49 $14.18 $11.22 $12.87
--------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................... 0.20 0.23 0.24 0.32 0.21
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .......................... (0.51) 3.10 0.20 3.91 (1.25)
--------- -------- -------- -------- --------
Total from investment operations ........ (0.31) 3.33 0.44 4.23 (1.04)
--------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .... (0.19) (0.23) (0.24) (0.29) (0.22)
Dividends in excess of net investment
income ................................ (0.01) (0.00) -- -- --
Distribution from realized gains ........ (0.77) (1.94) (0.89) (0.98) (0.39)
Tax return of capital distributions ..... (0.01) -- -- -- --
--------- -------- -------- -------- --------
Total dividends and distributions ....... (0.98) (2.17) (1.13) (1.27) (0.61)
--------- -------- -------- -------- --------
Net asset value, end of year .............. $13.36 $14.65 $13.49 $14.18 $11.22
========= ======== ======== ======== ========
Total return (d) .......................... (2.14)% 24.84% 3.22% 37.90% (8.11)%
========= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) .............. $3,466,245 $3,125,128 $2,307,292 $2,126,402 $673,476
Ratio of expenses to average net assets ..... 0.38% 0.38% 0.38% 0.40% 0.44%
Ratio of net investment income to average net
assets ...................................... 1.40% 1.55% 1.73% 2.32% 1.72%
Portfolio turnover rate ...................... 52 % 82 % 71 % 90 % 82 %
</TABLE>
94
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1994
GLOBAL PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1994 1993* 1992 1991 1990
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year (a) ....... $13.62 $11.41 $11.64 $ 9.76 $10.74
-------- -------- --------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................ 0.20 0.08 0.14 0.22 0.38
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions ................................. 0.52 3.58 (0.20) 2.74 (1.03)
-------- -------- --------- -------- --------
Total from investment operations ............. 0.72 3.66 (0.06) 2.96 (0.65)
-------- -------- --------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.17) (0.15) (0.11) (0.23) (0.33)
Distributions from realized gains ............ (0.28) (1.30) (0.06) (0.85) --
Distributions in excess of realized gains ... (0.00) (0.00) -- -- --
Tax return of capital distributions ......... (0.02) -- -- -- --
-------- -------- --------- -------- --------
Total dividends and distributions ............ (0.47) (1.45) (0.17) (1.08) (0.33)
-------- -------- --------- -------- --------
Net asset value, end of year .................. $13.87 $13.62 $11.41 $11.64 $ 9.76
======== ======== ========= ======== ========
Total return (d) .............................. 5.23% 32.09% (0.50)% 30.54% (6.06)%
======== ======== ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) ..................... $421,698 $141,257 $49,171 $39,487 $24,097
Ratio of expenses to average net assets ............. 0.69% 0.84% 0.70% 0.75% 0.75%
Ratio of net investment income to average net assets 1.41% 0.62% 1.20% 1.94% 3.67%
Portfolio turnover rate ............................. 71 % 150 % 216 % 267 % 502 %
</TABLE>
AGGRESSIVE STOCK PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1994 1993* 1992 1991 1990
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year (a) .... $ 31.89 $ 29.81 $33.82 $19.37 $19.90
--------- --------- --------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................... 0.04 0.09 0.17 0.12 0.16
Net realized and unrealized gain (loss) on
investments .............................. (1.26) 4.91 (1.25) 16.68 1.46
--------- --------- --------- -------- --------
Total from investment operations .......... (1.22) 5.00 (1.08) 16.80 1.62
--------- --------- --------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ..... (0.04) (0.09) (0.18) (0.10) (0.16)
Distributions from realized gains ........ -- (2.75) (2.75) (2.25) (1.99)
Distributions in excess of realized gains -- (0.07) -- -- --
Tax return of capital distributions ...... (0.00) (0.01) -- -- --
--------- --------- --------- -------- --------
Total dividends and distributions. ....... (0.04) (2.92) (2.93) (2.35) (2.15)
--------- --------- --------- -------- --------
Net asset value, end of year ............... $30.63 $31.89 $29.81 $33.82 $19.37
========= ========= ========= ======== ========
Total return (d) ........................... (3.81)% 16.77% (3.16)% 86.87% 8.16%
========= ========= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) .............. $1,832,164 $1,557,332 $1,210,576 $959,257 $120,960
Ratio of expenses to average net assets ..... 0.49% 0.49% 0.50% 0.51% 0.55%
Ratio of net investment income to average net
assets ...................................... 0.12% 0.28% 0.57% 0.40% 0.78%
Portfolio turnover rate ...................... 92 % 89 % 68 % 117 % 54 %
</TABLE>
95
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1994
CONSERVATIVE INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1994 1993* 1992 1991 1990
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year (a) .... $11.12 $10.94 $11.29 $10.23 $10.26
--------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................... 0.55 0.52 0.64 0.69 0.72
Net realized and unrealized gain (loss) on
investments .............................. (1.00) 0.65 (0.01 ) 1.28 (0.09 )
--------- -------- -------- -------- --------
Total from investment operations .......... (0.45) 1.17 0.63 1.97 0.63
--------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ..... (0.52) (0.50) (0.62 ) (0.66) (0.66 )
Dividends in excess of net investment
income ................................... -- (0.00) -- -- --
Distributions from realized gains ........ -- (0.49) (0.36 ) (0.25) --
--------- -------- -------- -------- --------
Total dividends and distributions ........ (0.52) (0.99) (0.98 ) (0.91) (0.66 )
--------- -------- -------- -------- --------
Net asset value, end of year ............... $10.15 $11.12 $10.94 $11.29 $10.23
========= ======== ======== ======== ========
Total return (d) ........................... (4.10)% 10.76% 5.64 % 19.80% 6.30 %
========= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) .............. $173,691 $114,418 $70,675 $50,279 $29,971
Ratio of expenses to average net assets ..... 0.59% 0.60% 0.61% 0.64% 0.73%
Ratio of net investment income to average net
assets ...................................... 5.22% 4.49% 5.77% 6.45% 7.06%
Portfolio turnover rate ...................... 228 % 178 % 136 % 171 % 88 %
</TABLE>
GROWTH INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1994 1993* 1992 1991 1990
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year (a) ..... $15.61 $14.69 $15.17 $11.03 $10.33
--------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................... 0.50 0.43 0.44 0.41 0.44
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions ............................ (0.98) 1.79 0.28 4.93 0.64
--------- -------- -------- -------- --------
Total from investment operations .......... (0.48) 2.22 0.72 5.34 1.08
--------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ...... (0.46) (0.42) (0.41) (0.37) (0.38)
Dividends in excess of net investment
income .................................. (0.01) -- -- -- --
Distributions from realized gains ......... -- (0.88) (0.79) (0.83) --
--------- -------- -------- -------- --------
Total dividends and distributions ......... (0.47) (1.30) (1.20) (1.20) (0.38)
--------- -------- -------- -------- --------
Net asset value, end of year ................ $14.66 $15.61 $14.69 $15.17 $11.03
========= ======== ======== ======== ========
Total return (d) ............................ (3.15)% 15.26% 4.85% 48.83% 10.70%
========= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) .............. $492,478 $278,467 $148,650 $84,338 $24,539
Ratio of expenses to average net assets ..... 0.59% 0.62% 0.60% 0.66% 0.78%
Ratio of net investment income to average net
assets ...................................... 3.32% 2.71% 3.00% 3.03% 4.11%
Portfolio turnover rate ...................... 131 % 118 % 129 % 139 % 92 %
</TABLE>
96
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Concluded)
December 31, 1994
* Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable
Capital) served as the investment adviser to the Trust. On July 22, 1993,
Alliance Capital Management L.P. acquired the business and substantialy all
of the assets of Equitable Capital and became the investment adviser to the
Trust.
** Restated.
(a) Date as of which funds were first allocated to the Portfolios are as
follows:
Common Stock Portfolio--June 16, 1975
Money Market Portfolio--July 13, 1981
Balanced Portfolio--January 27, 1986
Aggressive Stock Portfolio--January 27, 1986
High Yield Portfolio--January 2, 1987
Global Portfolio--August 27, 1987
Conservative Investors Portfolio--October 2, 1989
Growth Investors Portfolio--October 2, 1989
Intermediate Government Securities Portfolio--April 1, 1991
Quality Bond Portfolio--October 1, 1993
Growth and Income Portfolio--October 1, 1993
Equity Index Portfolio--March 1, 1994
(b) Annualized.
(c) Net investment income and capital changes per share are based upon
monthly average shares outstanding.
(d) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividends
and distributions at net asset value during the period, and redemption on
the last day of the period. Total return calculated for a period of less
than one year is not annualized.
(e) On February 22, 1994, shares of the Intermediate Government Securities
Portfolio of the Trust were substituted for shares of the Trust's
Short-Term World Income Portfolio.
97
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Hudson River Trust
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and financial highlights present
fairly, in all material respects, the financial position of the Money Market
Portfolio, Intermediate Government Securities Portfolio, Quality Bond
Portfolio, High Yield Portfolio, Balanced Portfolio, Growth and Income
Portfolio, Equity Index Portfolio, Common Stock Portfolio, Global Portfolio,
Aggressive Stock Portfolio, Conservative Investors Portfolio and Growth
Investors Portfolio (constituting The Hudson River Trust, hereafter referred
to as the "Trust") at December 31, 1994, the results of each of their
operations for the year then ended (for Equity Index Portfolio for the period
from March 1, 1994 (commencement of operations) through December 31, 1994)
and the changes in each of their net assets and financial highlights for each
of the two years in the period then ended for the Money Market Portfolio,
Intermediate Government Securities Portfolio, High Yield Portfolio, Balanced
Portfolio, Common Stock Portfolio, Global Portfolio, Aggressive Stock
Portfolio, Conservative Investors Portfolio and Growth Investors Portfolio
and for the year then ended and for the period October 1, 1993 (commencement
of operations) through December 31, 1993 for the Quality Bond Portfolio and
Growth and Income Portfolio and for the period from March 1, 1994
(commencement of operations) through December 31, 1994 for the Equity Index
Portfolio, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1994 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above. The financial highlights for the year
ended December 31, 1992 and for each of the periods indicated prior thereto,
were audited by other independent accountants whose report dated February 10,
1993, expressed an unqualified opinion on those financial statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 8, 1995
98
<PAGE>
APPENDIX A
DESCRIPTION OF COMMERCIAL PAPER RATINGS
A-1 AND PRIME-1 COMMERCIAL PAPER RATINGS
The rating A-1 (including A-1+) is the highest commercial paper rating
assigned by S&P. Commercial paper rated A-1 by S&P has the following
characteristics:
o liquidity ratios are adequate to meet cash requirements;
o long-term senior debt is rated "A" or better;
o the issuer has access to at least two additional channels of borrowing;
o basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances;
o typically, the issuer's industry is well established and the issuer has
a strong position within the industry; and
o the reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3. Issues rated A-1 that are
determined by S&P to have overwhelming safety characteristics are designated
A-1+.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following:
o evaluation of the management of the issuer;
o economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas;
o evaluation of the issuer's products in relation to competition and
customer acceptance;
o liquidity;
o amount and quality of long-term debt;
o trend of earnings over a period of ten years;
o financial strength of parent company and the relationships which exist
with the issuer; and
o recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations.
A-1
