<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1997
REGISTRATION NO. 2-94996
REGISTRATION NO. 811-4185
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 29 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 30 [X]
THE HUDSON RIVER TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
JOHN D. CARIFA, PRESIDENT
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(NAME AND ADDRESS OF AGENT FOR SERVICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 221-5672
PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
EDMUND P. BERGAN, JR.
ALLIANCE CAPITAL MANAGEMENT L.P.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
J.B. KITTREDGE
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2624
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: CONTINUOUS.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
PURSUANT TO RULE 24F-2(A)(1) OF THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OR AMOUNT OF SECURITIES UNDER
THE SECURITIES ACT OF 1933.
THE REGISTRANT'S 24F-2 NOTICE FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
WAS FILED ON MARCH 5, 1997.
<PAGE>
THE HUDSON RIVER TRUST
CROSS-REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
<TABLE>
<CAPTION>
ITEM NUMBER IN PART A PROSPECTUS CAPTION
-------------------------------------------------------- ----------------------------
<S> <C> <C>
1. Cover Page ............................................. COVER PAGE
2. Synopsis ................................................ NOT APPLICABLE
3. Condensed Financial Information ........................ FINANCIAL HIGHLIGHTS
4. General Description of Registrant ...................... THE TRUST; INVESTMENT
OBJECTIVES AND POLICIES
5. Management of the Trust ................................ MANAGEMENT OF THE TRUST
5A. Management's Discussion of Fund Performance ............. NOT APPLICABLE
6. Capital Stock and Other Securities ..................... THE TRUST; DESCRIPTION OF THE
TRUST'S SHARES; DIVIDENDS,
DISTRIBUTIONS AND TAXES
7. Purchase of Securities Being Offered .................... DESCRIPTION OF THE TRUST'S
SHARES
8. Redemption or Repurchase ............................... DESCRIPTION OF THE TRUST'S
SHARES
9. Legal Proceedings ...................................... NOT APPLICABLE
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NUMBER IN PART B INFORMATION CAPTION
-------------------------------------------------------- ----------------------------
<S> <C> <C>
10. Cover Page .............................................. COVER PAGE
11. Table of Contents ....................................... TABLE OF CONTENTS
12. General Information and History ......................... GENERAL INFORMATION AND HISTORY
13. Investment Objectives and Policies ...................... INVESTMENT RESTRICTIONS OF THE
PORTFOLIOS; DESCRIPTION OF
CERTAIN SECURITIES IN WHICH THE
PORTFOLIOS MAY INVEST
14. Management of the Fund .................................. MANAGEMENT OF THE TRUST;
INVESTMENT ADVISORY AND OTHER
SERVICES
15. Control Persons and Principal Holders of Securities ..... GENERAL INFORMATION AND
HISTORY; DESCRIPTION OF THE
TRUST'S SHARES*
16. Investment Advisory and Other Services................... INVESTMENT ADVISORY AND OTHER
SERVICES; FINANCIAL STATEMENTS
<PAGE>
STATEMENT OF ADDITIONAL
ITEM NUMBER IN PART B INFORMATION CAPTION
-------------------------------------------------------- ----------------------------
17. Brokerage Allocation and Other Practices................. INVESTMENT ADVISORY AND OTHER
SERVICES
18. Capital Stock and Other Securities ...................... GENERAL INFORMATION AND
HISTORY; DESCRIPTION OF THE
TRUST'S SHARES*
19. Purchase, Redemption and Pricing of Securities Being Offered.
PURCHASE AND PRICING OF
SECURITIES; DESCRIPTION OF THE
TRUST'S SHARES*
20. Tax Status .............................................. CERTAIN TAX CONSIDERATIONS
21. Underwriters............................................. OTHER SERVICES
22. Calculation of Performance Data.......................... PORTFOLIO PERFORMANCE
23. Financial Statements..................................... FINANCIAL STATEMENTS
- ------------
</TABLE>
* Prospectus Caption
<PAGE>
THE HUDSON RIVER TRUST
Principal Office Located at
1345 Avenue of the Americas -- New York, New York 10105
The Hudson River Trust (the "Trust") is a mutual fund, currently issuing
fourteen series of shares of beneficial interest, each representing a
separate investment portfolio (each a "Portfolio"). The Portfolios are The
Asset Allocation Series: Alliance Conservative Investors, Alliance Balanced
and Alliance Growth Investors; The Equity Series: Alliance Growth and Income,
Alliance Equity Index, Alliance Common Stock, Alliance Global, Alliance
International, Alliance Aggressive Stock and Alliance Small Cap Growth; and
The Fixed Income Series: Alliance Money Market, Alliance Intermediate
Government Securities, Alliance Quality Bond and Alliance High Yield. An
investment in the Alliance Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government. Shares of each Portfolio are currently
divided into two classes: Class IA shares, offered hereby, and Class IB
shares, offered pursuant to another prospectus.
This prospectus sets forth concisely the investment objectives and policies
of the fourteen 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 relating to Class IA shares ("SAI")
dated May 1, 1997 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. California
residents may obtain the SAI at no charge by calling 1-800-999-3527.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Financial Highlights........................ 2
The Trust................................... 11
Investment Objectives and Policies.......... 11
Investment Techniques....................... 26
Certain Investment Restrictions............. 32
Management of the Trust..................... 32
Description of the Trust's Shares........... 36
Dividends, Distributions and Taxes.......... 37
Investment Performance...................... 38
Appendix A--Description of Bond Ratings .... A-1
Appendix B--Performance Information ........ 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS DATED MAY 1, 1997
- -----------------------------------------------------------------------------
HRT103 (5/97) Copyright 1996 The Hudson River Trust. All rights reserved.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the tables below for the fiscal years ended on
or after December 31, 1993 has been audited by Price Waterhouse LLP, the
Trust's independent accountants. Financial highlights for prior years have
been audited by another independent accounting firm. The December 31, 1996
audited financial statements of the Trust and the "Report of Independent
Accountants" appear in the SAI. The Trust's annual report, which contains
additional performance information, is available without charge upon request.
No shares of the Alliance Small Cap Growth Portfolio were outstanding as of
December 31, 1996.
FINANCIAL HIGHLIGHTS
PER SHARE INCOME AND CAPITAL CHANGES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)(C)
ASSET ALLOCATION SERIES
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1996 1995 1994 1993*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (a) ..... $11.52 $10.15 $11.12 $10.94
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.50 0.60 0.55 0.52
Net realized and unrealized gain (loss) on
investments................................ 0.07 1.43 (1.00) 0.65
---------- ---------- ---------- ----------
Total from investment operations ............ 0.57 2.03 (0.45) 1.17
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.51) (0.59) (0.52) (0.50)
Distributions from realized gains .......... (0.27) (0.07) -- (0.49)
Distributions in excess of realized gains ... (0.02) -- -- --
---------- ---------- ---------- ----------
Total dividends and distributions .......... (0.80) (0.66) (0.52) (0.99)
---------- ---------- ---------- ----------
Net asset value, end of period................ $11.29 $11.52 $10.15 $11.12
========== ========== ========== ==========
Total return (d).............................. 5.21% 20.40% (4.10)% 10.76%
========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............. $282,402 $252,101 $173,691 $114,418
Ratio of expenses to average net assets ..... 0.61% 0.59% 0.59% 0.60%
Ratio of net investment income to average net
assets ...................................... 4.48% 5.48% 5.22% 4.49%
Portfolio turnover rate....................... 181% 287% 228% 178%
Average commission rate paid (f).............. $0.0488 -- -- --
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
OCTOBER 2,
1989 TO
DECEMBER 31,
1992 1991 1990 1989
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (a) ..... $11.29 $10.23 $10.26 $10.00
--------- --------- --------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.64 0.69 0.72 0.15
Net realized and unrealized gain (loss) on
investments................................ (0.01) 1.28 (0.09) 0.16
--------- --------- --------- --------------
Total from investment operations ............ 0.63 1.97 0.63 0.31
--------- --------- --------- --------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.62) (0.66) (0.66) (0.05)
Distributions from realized gains .......... (0.36) (0.25) -- --
Distributions in excess of realized gains ... -- -- -- --
--------- --------- --------- --------------
Total dividends and distributions .......... (0.98) (0.91) (0.66) (0.05)
--------- --------- --------- --------------
Net asset value, end of period................ $10.94 $11.29 $10.23 $10.26
========= ========= ========= ==============
Total return (d).............................. 5.64% 19.80% 6.30% 3.10%
========= ========= ========= ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............. $70,675 $50,279 $29,971 $13,984
Ratio of expenses to average net assets ..... 0.61% 0.64% 0.73% 0.26%
Ratio of net investment income to average net
assets ...................................... 5.77% 6.45% 7.06% 1.54%
Portfolio turnover rate....................... 136% 171% 88% 0%
Average commission rate paid (f).............. -- -- -- --
</TABLE>
- ------------
Footnotes appear on page 10.
2
<PAGE>
ALLIANCE BALANCED PORTFOLIO (H):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993* 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year (a)...................... $ 16.76 $ 14.87 $ 16.67 $ 16.19 $ 18.48
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income......... 0.53 0.54 0.45 0.50 0.56
Net realized and unrealized
gain (loss) on investments .. 1.31 2.36 (1.78) 1.46 (1.11)
------------ ------------ ------------ ------------ ------------
Total from investment
operations................... 1.84 2.90 (1.33) 1.96 (0.55)
------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS:
Dividends from net
investment income............ (0.53) (0.54) (0.44) (0.50) (0.55)
Dividends in excess of net
investment income............ -- -- (0.03) -- --
Distributions from realized
gains........................ (1.40) (0.47) -- (0.95) (1.19)
Distributions in excess of
realized gains............... (0.03) -- -- (0.03) --
Total dividends and
distributions................ (1.96) (1.01) (0.47) (1.48) (1.74)
------------ ------------ ------------ ------------ ------------
Net asset value, end of year .. $ 16.64 $ 16.76 $ 14.87 $ 16.67 $ 16.19
============ ============ ============ ============ ============
Total return (d)............... 11.68% 19.75% (8.02)% 12.28% (2.85)%
============ ============ ============ ============ ============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000's)....................... $1,637,856 $1,523,142 $1,329,820 $1,364,640 $1,076,670
Ratio of expenses to average
net assets.................... 0.41% 0.40% 0.39% 0.39% 0.40%
Ratio of net investment income
to average net assets......... 3.15% 3.33% 2.87% 2.99% 3.30%
Portfolio turnover rate (i) ... 177% 186% 115% 99% 91%
Average commission rate
paid (f)...................... $ 0.0516 -- -- -- --
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year (a)...................... $ 14.40 $ 15.16 $ 13.38 $ 12.39 $ 12.79
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income......... 0.60 0.78 0.85 0.67 0.41
Net realized and unrealized
gain (loss) on investments .. 5.23 (0.76) 2.53 0.95 (0.47)
---------- ---------- ---------- ---------- ----------
Total from investment
operations................... 5.83 0.02 3.38 1.62 (0.06)
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net
investment income............ (0.55) (0.78) (0.85) (0.63) (0.34)
Dividends in excess of net
investment income............ -- -- -- -- --
Distributions from realized
gains........................ (1.20) -- (0.75) -- --
Distributions in excess of
realized gains............... -- -- -- -- --
Total dividends and
distributions................ (1.75) (0.78) (1.60) (0.63) (0.34)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year .. $ 18.48 $ 14.40 $ 15.16 $ 13.38 $ 12.39
========== ========== ========== ========== ==========
Total return (d)............... 41.25% 0.25% 25.84% 13.27% (0.86)%
========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000's)....................... $964,262 $286,432 $241,910 $161,819 $108,913
Ratio of expenses to average
net assets.................... 0.41% 0.45% 0.45% 0.51% 0.47%
Ratio of net investment income
to average net assets......... 3.60% 5.35% 5.71% 5.15% 2.88%
Portfolio turnover rate (i) ... 159% 119% 132% 204% 197%
Average commission rate
paid (f)...................... -- -- -- -- --
</TABLE>
- ------------
Footnotes appear on page 10.
3
<PAGE>
ALLIANCE GROWTH INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
--------------- ----------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period (a) . $ 17.68 $14.66 $15.61
--------------- ----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................. 0.40 0.57 0.50
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .......................... 1.66 3.24 (0.98)
--------------- ----------- ----------
Total from investment operations ........ 2.06 3.81 (0.48)
--------------- ----------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income .... (0.40) (0.54) (0.46)
Dividends in excess of net investment
income................................. (0.03) (0.01) (0.01)
Distributions from realized gains ...... (2.10) (0.24) --
Distributions in excess of realized
gains.................................. (0.01) -- --
--------------- ----------- ----------
Total dividends and distributions ...... (2.54) (0.79) (0.47)
--------------- ----------- ----------
Net asset value, end of period............ $ 17.20 $17.68 $14.66
=============== =========== ==========
Total return (d) ......................... 12.61% 26.37% (3.15)%
=============== =========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net asset, end of period (000's).......... $1,301,643 $896,134 $492,478
Ratio of expenses to average net assets . 0.57% 0.56% 0.59%
Ratio of net investment income to average
net assets .............................. 2.31% 3.43% 3.32%
Portfolio turnover rate................... 190% 107% 131%
Average commission rate paid (f).......... $ 0.0495 -- --
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
OCTOBER 2,
1989 TO
DECEMBER 31,
1993* 1992 1991 1990 1989
---------- ---------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) . $ 14.69 $ 15.17 $ 11.03 $ 10.33 $10.00
---------- ---------- --------- --------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................. 0.43 0.44 0.41 0.44 0.11
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .......................... 1.79 0.28 4.93 0.64 0.29
---------- ---------- --------- --------- --------------
Total from investment operations ........ 2.22 0.72 5.34 1.08 0.40
---------- ---------- --------- --------- --------------
LESS DISTRIBUTIONS:
Dividends from net investment income .... (0.42) (0.41) (0.37) (0.38) (0.06)
Dividends in excess of net investment
income................................. -- -- -- -- --
Distributions from realized gains ...... (0.88) (0.79) (0.83) -- (0.01)
Distributions in excess of realized
gains.................................. -- -- -- -- --
---------- ---------- --------- --------- --------------
Total dividends and distributions ...... (1.30) (1.20) (1.20) (0.38) (0.07)
---------- ---------- --------- --------- --------------
Net asset value, end of period............ $ 15.61 $ 14.69 $ 15.17 $ 11.03 $10.33
========== ========== ========= ========= ==============
Total return (d) ......................... 15.26% 4.85% 48.83% 10.70% 4.00%
========== ========== ========= ========= ==============
RATIOS/SUPPLEMENTAL DATA:
Net asset, end of period (000's).......... $278,467 $148,650 $84,338 $24,539 $6,018
Ratio of expenses to average net assets . 0.62% 0.60% 0.66% 0.78% 0.29%
Ratio of net investment income to average
net assets .............................. 2.71% 3.00% 3.03% 4.11% 1.01%
Portfolio turnover rate................... 118% 129% 139% 92% 6%
Average commission rate paid (f).......... -- -- -- -- --
</TABLE>
<PAGE>
EQUITY SERIES
ALLIANCE GROWTH AND INCOME PORTFOLIO:
<TABLE>
<CAPTION>
OCTOBER 1, 1993
YEAR ENDED TO
DECEMBER 31, DECEMBER 31, 1993
-------------------------------- -----------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (a)............... $ 11.70 $ 9.70 $ 9.95 $10.00
---------- --------- --------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................. 0.24 0.33 0.31 0.03
Net realized and unrealized gain (loss) on
investments........................................... 2.05 1.97 (0.36) (0.06)
---------- --------- --------- -----------------
Total from investment operations...................... 2.29 2.30 (0.05) (0.03)
---------- --------- --------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income.................. (0.23) (0.30) (0.20) (0.02)
Dividends in excess of net investment income ......... -- -- -- (0.00)
Distributions from realized gains .................... (0.75) -- -- --
---------- --------- --------- -----------------
Tax return of capital distribution.................... -- -- -- (0.00)
---------- --------- --------- -----------------
Total dividends and distributions..................... (0.98) (0.30) (0.20) (0.02)
---------- --------- --------- -----------------
Net asset value, end of period......................... $ 13.01 $ 11.70 $ 9.70 $ 9.95
========== ========= ========= =================
Total return (d)....................................... 20.09% 24.07% (0.58)% (0.25)%
========== ========= ========= =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)...................... $232,080 $98,053 $31,522 $1,456
Ratio of expenses to average net assets................ 0.58% 0.60% 0.78% 2.70%(b)
Ratio of net investment income to average net assets .. 1.94% 3.11% 3.13% 1.12%(b)
Portfolio turnover rate................................ 88% 65% 52% 48%
Average commission rate paid (f)....................... $ 0.0604 -- -- --
</TABLE>
- ------------
Footnotes appear on page 10.
4
<PAGE>
ALLIANCE EQUITY INDEX PORTFOLIO:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 1, 1994
DECEMBER 31, TO DECEMBER 31, 1994
---------------------- --------------------
1996 1995
---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period (a)................ $ 13.13 $ 9.87 $10.00
---------- ---------- --------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.27 0.26 0.20
Net realized and unrealized gain (loss) on investments 2.65 3.32 (0.09)
---------- ---------- --------------------
Total from investment operations ...................... 2.92 3.58 0.11
---------- ---------- --------------------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.25) (0.22) (0.20)
Distributions of realized gains........................ (0.64) (0.09) (0.03)
Distributions in excess of realized gains.............. -- (0.01) (0.01)
---------- ---------- --------------------
Total dividends and distributions...................... (0.89) (0.32) (0.24)
---------- ---------- --------------------
Net asset value, end of period ......................... $ 15.16 $ 13.13 $ 9.87
========== ========== ====================
Total return (d) ....................................... 22.39% 36.48% 1.08%
========== ========== ====================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...................... $386,249 $165,785 $36,748
Ratio of expenses to average net assets................. 0.39% 0.48% 0.49%(b)
Ratio of net investment income to average net assets ... 1.91% 2.16% 2.42%(b)
Portfolio turnover rate ................................ 15% 9% 7%
Average commission rate paid (f)........................ $ 0.0306 -- --
</TABLE>
ALLIANCE COMMON STOCK PORTFOLIO (G)(H):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993* 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year (a)........ $16.48 $13.36 $14.65 $13.49 $14.18
------------ ------------ ------------ ------------ ------------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income................. 0.15 0.20 0.20 0.23 0.24
Net realized and
unrealized gain
(loss) on invest-
ments and
foreign currency
transactions........... $3.73 4.12 (0.51) 3.10 0.20
------------ ------------ ------------ ------------ ------------
Total from invest-
ment operations........ 3.88 4.32 (0.31) 3.33 0.44
------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS:
Dividends from net
investment
income................. (0.15) (0.20) (0.19) (0.23) (0.24)
Dividends in
excess of net
investment
income................. -- (0.02) (0.01) (0.00) --
Distributions from
realized gains......... (1.76) (0.95) (0.77) (1.94) (0.89)
Distributions in excess
of realized gains...... (0.22) (0.03) -- -- --
Tax return of capital
distributions.......... -- -- (0.01) -- --
------------ ------------ ------------ ------------ ------------
Total dividends
and distributions...... (2.13) (1.20) (0.98) (2.17) (1.13)
------------ ------------ ------------ ------------ ------------
Net asset value, end
of year................. $18.23 $16.48 $13.36 $14.65 $13.49
============ ============ ============ ============ ============
Total return (d)......... 24.28% 32.45% (2.14)% 24.84% 3.22%
============ ============ ============ ============ ============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's)............ $6,625,390 $4,879,677 $3,466,245 $3,125,128 $2,307,292
Ratio of expenses to
average net assets...... 0.38% 0.38% 0.38% 0.38% 0.38%
Ratio of net invest-
ment income to
average net assets...... 0.85% 1.27% 1.40% 1.55% 1.73%
Portfolio turnover rate 55% 61% 52% 82% 71%
Average commission rate
paid (f)................ $0.0565 -- -- -- --
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year (a)........ $11.22 $12.87 $12.19 $10.15 $11.34
------------ ---------- ---------- ---------- ----------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income................. 0.32 0.21 0.27 0.23 0.17
Net realized and
unrealized gain
(loss) on invest-
ments and
foreign currency
transactions........... 3.91 (1.25) 2.84 2.04 0.72
------------ ---------- ---------- ---------- ----------
Total from invest-
ment operations........ 4.23 (1.04) 3.11 2.27 0.89
------------ ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net
investment
income................. (0.29) (0.22) (0.26) (0.23) (0.17)
Dividends in
excess of net
investment
income................. -- -- -- -- --
Distributions from
realized gains......... (0.98) (0.39) (2.17) -- (1.91)
Distributions in excess
of realized gains...... -- -- -- -- --
------------ ---------- ---------- ---------- ----------
Tax return of capital
distributions.......... -- -- -- -- --
------------ ---------- ---------- ---------- ----------
Total dividends
and distributions...... (1.27) (0.61) (2.43) (0.23) (2.08)
------------ ---------- ---------- ---------- ----------
Net asset value, end
of year................. $ 14.18 $ 11.22 $ 12.87 $ 12.19 $ 10.15
============ ========== ========== ========== ==========
Total return (d)......... 37.90% (8.11)% 25.59% 22.44% 7.49%
============ ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's)............ $2,126,402 $673,476 $725,627 $537,827 $434,558
Ratio of expenses to
average net assets...... 0.40% 0.44% 0.43% 0.46% 0.46%
Ratio of net invest-
ment income to
average net assets...... 2.32% 1.72% 1.87% 2.02% 1.21%
Portfolio turnover rate 90% 82% 90% 71% 86%
Average commission rate
paid (f)................ -- -- -- -- --
</TABLE>
- ------------
Footnotes appear on page 10.
5
<PAGE>
ALLIANCE GLOBAL PORTFOLIO (H):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (a)....................... $15.74 $13.87 $13.62 $11.41 $11.64
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.21 0.26 0.20 0.08 0.14
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions.. 2.05 2.32 0.52 3.58 (0.20)
------ ------ ------ ------ ------
Total from investment
operations..................... 2.26 2.58 0.72 3.66 (0.06)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income......................... (0.21) (0.25) (0.17) (0.15) (0.11)
Dividends in excess of net
investment income.............. (0.08) -- -- -- --
Distributions from realized
gains.......................... (0.79) (0.42) (0.28) (1.30) (0.06)
Distributions in excess of
realized gains................. -- (0.03) (0.00) (0.00) --
Tax return of capital
distributions ................. (0.00) (0.01) (0.02) -- --
------ ------ ------ ------ ------
Total dividends and
distributions.................. (1.08) (0.71) (0.47) (1.45) (0.17)
------ ------ ------ ------ ------
Net asset value, end of period ... $16.92 $15.74 $13.87 $13.62 $11.41
====== ====== ====== ====== ======
Total return (d) ................. 14.60% 18.81% 5.23% 32.09% (0.50)%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $997,041 $686,140 $421,698 $141,257 $49,171
Ratio of expenses to average net
assets .......................... 0.60% 0.61% 0.69% 0.84% 0.70%
Ratio of net investment income to
average net assets .............. 1.28% 1.76% 1.41% 0.62% 1.20%
Portfolio turnover rate........... 59% 67% 71% 150% 216%
Average commission rate paid (f) . $ 0.0418 -- -- -- --
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
AUGUST 27,
YEAR ENDED DECEMBER 31, 1987 TO
------------------------------ DECEMBER 31,
1991 1990 1989 1988 1987
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (a)....................... $ 9.76 $ 10.74 $ 9.57 $ 8.67 $ 10.00
------- ------- ------- ------ --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........... 0.22 0.38 0.17 0.13 0.01
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions.. 2.74 (1.03) 2.38 0.82 (1.34)
------- ------- ------- ------ --------
Total from investment
operations..................... 2.96 (0.65) 2.55 0.95 (1.33)
------- ------- ------- ------ --------
LESS DISTRIBUTIONS:
Dividends from net investment
income......................... (0.23) (0.33) (0.14) (0.05) --
Dividends in excess of net
investment income.............. -- -- -- -- --
Distributions from realized
gains.......................... (0.85) -- (1.24) -- --
Distributions in excess of
realized gains................. -- -- -- -- --
Tax return of capital
distributions ................. -- -- -- -- --
------- ------- ------- ------ --------
Total dividends and
distributions.................. (1.08) (0.33) (1.38) (0.05) --
------- ------- ------- ------ --------
Net asset value, end of period ... $ 11.64 $ 9.76 $ 10.74 $ 9.57 $ 8.67
======= ======= ======= ====== ========
Total return (d) ................. 30.54% (6.06)% 26.73% 10.88% (13.30)%
======= ======= ======= ====== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ......................... $39,487 $24,097 $15,409 $9,212 $6,030
Ratio of expenses to average net
assets .......................... 0.75% 0.75% 0.80% 1.06% 0.40%
Ratio of net investment income to
average net assets .............. 1.94% 3.67% 1.49% 1.30% 0.19%
Portfolio turnover rate........... 267% 502% 399% 235% 11%
Average commission rate paid (f) . -- -- -- -- --
</TABLE>
ALLIANCE INTERNATIONAL PORTFOLIO:
<TABLE>
<CAPTION>
APRIL 3,
YEAR ENDED 1995 TO
DECEMBER 31, DECEMBER 31,
1996 1995
- ---------------------------------------------------- -------------- ------------
<S> <C> <C>
Net asset value, beginning of period (a)............. $10.87 $10.00
------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................... 0.13 0.14
Net realized and unrealized gain on investments .... 0.94 0.98
------- --------------
Total from investment operations.................... 1.07 1.12
------- --------------
LESS DISTRIBUTIONS:
Dividends from net investment income................ (0.10) (0.07)
Dividends in excess of net investment income ....... (0.09) (0.13)
Distributions of realized gains..................... (0.25) (0.05)
------- --------------
Total dividends and distributions................... (0.44) (0.25)
------- --------------
Net asset value, end of period....................... $11.50 $10.87
======= ==============
Total return (d)..................................... 9.82% 11.29%
======= ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).................... $151,907 $28,684
Ratio of expenses to average net assets.............. 1.06% 1.03%(b)
Ratio of net investment income to average net
assets.............................................. 1.10% 1.71%(b)
Portfolio turnover rate.............................. 48% 56%
Average commission rate paid (f)..................... $ 0.0251 --
</TABLE>
- ------------
Footnotes appear on page 10.
6
<PAGE>
ALLIANCE AGGRESSIVE STOCK PORTFOLIO (H):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1995 1994 1993* 1992
----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year (a) ....................... $ 35.68 $30.63 $31.89 $29.81 $33.82
------------ ---------- ------------ ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .......... 0.09 0.10 0.04 0.09 0.17
Net realized and unrealized
gain (loss) on investments.... 7.52 9.54 (1.26) 4.91 (1.25)
------------ ---------- ------------ ---------- ----------
Total from investment
operations ................... 7.61 9.64 (1.22) 5.00 (1.08)
------------ ---------- ------------ ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment
income........................ (0.09) (0.10) (0.04) (0.09) (0.18)
Dividends in excess of net
investment income............. (0.00) -- -- -- --
Distributions from realized
gains......................... (7.33) (4.49) -- (2.75) (2.75)
Distributions in excess of
realized gains................ (0.02) -- -- (0.07) --
Tax return of capital
distribution.................. -- -- (0.00) (0.01) --
------------ ---------- ------------ ---------- ----------
Total dividends and
distributions................. (7.44) (4.59) (0.04) (2.92) (2.93)
------------ ---------- ------------ ---------- ----------
Net asset value, end of year ... $ 35.85 $35.68 $30.63 $31.89 $29.81
============ ========== ============ ========== ==========
Total return (d)................. 22.20% 31.63% (3.81)% 16.77% (3.16)%
============ ========== ============ ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) . $3,865,256 $2,700,515 $1,832,164 $1,557,332 $1,210,576
Ratio of expenses to average net
assets ......................... 0.48% 0.49% 0.49% 0.49% 0.50%
Ratio of net investment income
to average net assets .......... 0.24% 0.28% 0.12% 0.28% 0.57%
Portfolio turnover rate ......... 108% 127% 92% 89% 68%
Average commission rate
paid (f) ....................... $0.0263 -- -- -- --
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year (a) ....................... $ 19.37 $ 19.90 $ 14.07 $ 14.09 $ 13.35
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .......... 0.12 0.16 0.23 0.20 0.20
Net realized and unrealized
gain (loss) on investments.... 16.68 1.46 5.87 (0.03) 0.79
-------- -------- ------- ------- -------
Total from investment
operations ................... 16.80 1.62 6.10 0.17 0.99
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment
income........................ (0.10) (0.16) (0.23) (0.19) (0.13)
Dividends in excess of net
investment income............. -- -- -- -- --
Distributions from realized
gains......................... (2.25) (1.99) (0.04) -- (0.12)
Distributions in excess of
realized gains................ -- -- -- -- --
Tax return of capital
distribution.................. -- -- -- -- --
-------- -------- ------- ------- -------
Total dividends and
distributions................. (2.35) (2.15) (0.27) (0.19) (0.25)
-------- -------- ------- ------- -------
Net asset value, end of year ... $ 33.82 $ 19.37 $ 19.90 $ 14.07 $ 14.09
======== ======== ======= ======= =======
Total return (d)................. 86.87% 8.16% 43.50% 1.13% 7.30%
======== ======== ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) . $959,257 $120,960 $99,459 $62,116 $47,776
Ratio of expenses to average net
assets ......................... 0.51% 0.55% 0.55% 0.65% 0.58%
Ratio of net investment income
to average net assets .......... 0.40% 0.78% 1.29% 1.35% 1.19%
Portfolio turnover rate ......... 117% 54% 89% 70% 134%
Average commission rate
paid (f) ....................... -- -- -- -- --
</TABLE>
- ------------
Footnotes appear on page 10.
7
<PAGE>
FIXED INCOME SERIES
ALLIANCE MONEY MARKET PORTFOLIO (G)(H):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993* 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year(a)..................... $10.16 $10.14 $10.12 $10.11 $10.13
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......... 0.54 0.57 0.41 0.30 0.37
Net realized and
unrealized gain (loss)
on investments................ (0.01) -- -- -- (0.01)
------ ------ ------ ------ ------
Total from investment
operations.................... 0.53 0.57 0.41 0.30 0.36
------ ------ ------ ------ ------
LESS DIVIDENDS:
Dividends from net
investment income............. (0.52) (0.55) (0.39) (0.29) (0.38)
------ ------ ------ ------ ------
Total dividends................ (0.52) (0.55) (0.39) (0.29) (0.38)
------ ---------- ---------- ---------- ----------
Net asset value, end of year .. $10.17 $10.16 $10.14 $10.12 $10.11
====== ========== ========== ========== ==========
Total return (d)................ 5.33% 5.74% 4.02% 3.00% 3.57%
====== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $463,422 $386,691 $325,391 $248,460 $268,584
Ratio of expenses to average
net assets..................... 0.43% 0.44% 0.42% 0.42% 0.43%
Ratio of net investment
income to average net
assets......................... 5.17% 5.53% 4.01% 2.91% 3.63%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year(a)..................... $10.17 $10.14 $10.13 $10.09 $10.02
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......... 0.61 0.81 0.89 0.73 0.64
Net realized and
unrealized gain (loss)
on investments................ -- 0.01 0.01 (0.01) 0.01
---------- ---------- ---------- ---------- ----------
Total from investment
operations.................... 0.61 0.82 0.90 0.72 0.65
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS:
Dividends from net
investment income............. (0.65) (0.79) (0.89) (0.68) (0.58)
---------- ---------- ---------- ---------- ----------
Total dividends................ (0.65) (0.79) (0.89) (0.68) (0.58)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year .. $10.13 $10.17 $10.14 $10.13 $10.09
========== ========== ========== ========== ==========
Total return (d)................ 6.20% 8.22% 9.18% 7.32% 6.63%
========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $302,395 $359,426 $289,338 $234,378 $154,606
Ratio of expenses to average
net assets..................... 0.43% 0.44% 0.44% 0.48% 0.46%
Ratio of net investment
income to average net
assets......................... 5.96% 7.85% 8.70% 7.14% 6.29%
</TABLE>
<PAGE>
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO (E):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------------------- APRIL 1, 1991 TO
1996 1995 1994 1993* 1992 DECEMBER 31, 1991
--------- --------- --------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (a) ........................ $ 9.47 $ 8.87 $10.08 $10.53 $10.73 $10.00
----- --------- --------- ---------- ---------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............. 0.54 0.58 0.65 0.59 0.60 0.52
Net realized and unrealized gain
(loss) on investments ............ (0.19) 0.57 (1.08) 0.51 (0.02) 0.66
----- --------- --------- ---------- ---------- ------
Total from investment operations .. 0.35 1.15 (0.43) 1.10 0.58 1.18
----- --------- --------- ---------- ---------- ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ............................ (0.53) (0.55) (0.78) (0.68) (0.60) (0.34)
Distributions from realized gains . -- -- -- (0.87) (0.18) (0.11)
----- --------- --------- ---------- ---------- ------
Total dividends and distributions . (0.53) (0.55) (0.78) (1.55) (0.78) (0.45)
----- --------- --------- ---------- ---------- ------
Net asset value, end of period ..... $ 9.29 $ 9.47 $ 8.87 $10.08 $10.53 $10.73
===== ========= ========= ========== ========== ======
Total return (d) ................... 3.78% 13.33% (4.37)% 10.58% 5.53% 12.10%
===== ========= ========= ========== ========== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .. $88,384 $71,780 $48,518 $158,511 $293,587 $241,290
Ratio of expenses to average net
assets ............................ 0.56% 0.57% 0.56% 0.53% 0.52% 0.43%
Ratio of net investment income to
average net assets ................ 5.73% 6.15% 6.75% 5.43% 5.63% 4.88%
Portfolio turnover rate ............ 318% 255% 133% 254% 316% 174%
</TABLE>
- ------------
Footnotes appear on page 10.
8
<PAGE>
ALLIANCE QUALITY BOND PORTFOLIO:
<TABLE>
<CAPTION>
OCTOBER 1, 1993
YEAR ENDED TO
DECEMBER 31, DECEMBER 31, 1993
---------------------------------- -----------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (a)............. $ 9.61 $ 8.72 $ 9.82 $ 10.00
---------- ---------- ---------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................... 0.57 0.57 0.66 0.11
Net realized and unrealized gain (loss) on
investments and foreign currency transactions...... (0.07) 0.88 (1.16) (0.16)
---------- ---------- ---------- -----------------
Total from investment operations.................... 0.50 1.45 (0.50) (0.05)
---------- ---------- ---------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income................ (0.60) (0.56) (0.55) (0.12)
Dividends in excess of net investment income........ (0.02) -- -- --
Distributions in excess of realized gains........... -- -- -- (0.01)
Tax return of capital distributions................. -- -- (0.05) --
---------- ---------- ---------- -----------------
Total dividends and distributions................... (0.62) (0.56) (0.60) (0.13)
---------- ---------- ---------- -----------------
Net asset value, end of period....................... $ 9.49 $ 9.61 $ 8.72 $ 9.82
========== ========== ========== =================
Total return (d)..................................... 5.36% 17.02% (5.10)% (0.51)%
========== ========== ========== =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).................... $155,023 $157,443 $127,575 $104,832
Ratio of expenses to average net assets.............. 0.59% 0.59% 0.59% 0.69%(b)
Ratio of net investment income to average net assets. 6.06% 6.13% 7.17% 4.62%(b)
Portfolio turnover rate.............................. 431% 411% 222% 77%
</TABLE>
ALLIANCE HIGH YIELD PORTFOLIO (H):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993* 1992
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period
(a)...................................... $ 9.64 $ 8.91 $10.08 $ 9.15 $ 8.96
---------- ---------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................. 1.02 0.98 0.89 0.94 0.89
Net realized and unrealized gain (loss)
on investments ....................... 1.07 0.73 (1.17) 1.10 0.19
---------- ---------- --------- --------- ---------
Total from investment operations ....... 2.09 1.71 (0.28) 2.04 1.08
---------- ---------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income .. (0.98) (0.94) (0.88) (0.92) (0.89)
Dividends in excess of net investment
income................................ (0.03) (0.04) (0.01) -- --
Distributions from realized gains ...... (0.70) -- -- (0.19) --
---------- ---------- --------- --------- ---------
Total dividends and distributions ...... (1.71) (0.98) (0.89) (1.11) (0.89)
---------- ---------- --------- --------- ---------
Net asset value, end of period........... $ 10.02 $ 9.64 $ 8.91 $10.08 $ 9.15
========== ========== ========= ========= =========
Total return (d)......................... 22.89% 19.92% (2.79)% 23.15% 12.31%
========== ========== ========= ========= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ....... $199,360 $118,129 $73,895 $67,169 $47,687
Ratio of expenses to average net assets . 0.59% 0.60% 0.61% 0.63% 0.60%
Ratio of net investment income to
average net assets ..................... 9.93% 10.34% 9.23% 9.52% 9.58%
Portfolio turnover rate ................. 485% 350% 248% 280% 177%
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
JANUARY 2,
1987 TO
DECEMBER 31,
1991 1990 1989 1988 1987
--------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period
(a)...................................... $ 7.97 $ 9.14 $ 9.72 $ 9.67 $10.00
--------- --------- --------- --------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................. 0.89 1.04 1.09 1.00 1.06
Net realized and unrealized gain (loss)
on investments ....................... 0.99 (1.14) (0.60) (0.08) (0.60)
--------- --------- --------- --------- --------------
Total from investment operations ....... 1.88 (0.10) 0.49 0.92 0.46
--------- --------- --------- --------- --------------
LESS DISTRIBUTIONS:
Dividends from net investment income .. (0.89) (1.07) (1.07) (0.87) (0.79)
Dividends in excess of net investment
income................................ -- -- -- -- --
Distributions from realized gains ...... -- -- -- -- --
--------- --------- --------- --------- --------------
Total dividends and distributions ...... (0.89) (1.07) (1.07) (0.87) (0.79)
--------- --------- --------- --------- --------------
Net asset value, end of period........... $ 8.96 $ 7.97 $ 9.14 $ 9.72 $ 9.67
========= ========= ========= ========= ==============
Total return (d)......................... 24.46% (1.10)% 5.14% 9.73% 4.68%
========= ========= ========= ========= ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ....... $45,066 $36,569 $41,280 $34,810 $10,687
Ratio of expenses to average net assets . 0.61% 0.62% 0.62% 0.73% 0.98%
Ratio of net investment income to
average net assets ..................... 10.31% 12.04% 11.22% 10.05% 10.62%
Portfolio turnover rate ................. 187% 53% 116% 209% 235%
</TABLE>
- ------------
Footnotes appear on page 10.
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. ("Alliance") acquired
the business and substantially all of the assets of Equitable Capital
and became the investment adviser to the Trust.
(a) Date as of which funds were first allocated to the Portfolios are as
follows:
Alliance Common Stock Portfolio -- June 16, 1975
Alliance Money Market Portfolio -- July 13, 1981
Alliance Balanced Portfolio -- January 27, 1986
Alliance Aggressive Stock Portfolio -- January 27, 1986
Alliance High Yield Portfolio -- January 2, 1987
Alliance Global Portfolio -- August 27, 1987
Alliance Conservative Investors Portfolio -- October 2, 1989
Alliance Growth Investors Portfolio -- October 2, 1989
Alliance Intermediate Government Securities Portfolio -- April 1, 1991
Alliance Quality Bond Portfolio -- October 1, 1993
Alliance Growth and Income Portfolio -- October 1, 1993
Alliance Equity Index Portfolio -- March 1, 1994
Alliance International Portfolio -- April 3, 1995
(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 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.
(f) For fiscal years beginning on or after September 1, 1995, a portfolio
is required to disclose its average commission rate paid per share for
security trades on which commissions are charged.
(g) Information shown for the Alliance Common Stock and Alliance Money
Market Portfolios is 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.
(h) On December 16, 1992, the Trust's Board of Trustees declared a 10-for-1
stock split of the outstanding shares of the Alliance Money Market,
Alliance High Yield, Alliance Balanced, Alliance Common Stock, Alliance
Global and Alliance Aggressive Stock Portfolios ("Split Portfolios").
The split was effected on January 1, 1993 for shareholders of record on
that date. Consequently, the information presented in the tables above
for each Split Portfolio share outstanding throughout each period
(other than the periods ended prior to January 1, 1993), and the shares
outstanding at the end of such periods presented for the Split
Portfolios, has been restated.
(i) The Alliance Balanced Portfolio's portfolio turnover rates in 1996 and
1995 were 139% and 152%, respectively, for the equity component and
were 221% and 233%, respectively, for the fixed income component.
10
<PAGE>
THE TRUST
The Trust is an open-end management investment company under the Investment
Company Act of 1940 (the "Investment Company Act"). As a "series" investment
company, the Trust issues shares of beneficial interest that are currently
divided into fourteen Portfolios, although the Trust may, from time to time,
establish additional Portfolios. Each Portfolio is a separate diversified
series of the Trust, and the Trust's assets and liabilities are divided among
the Portfolios. Originally organized as a Maryland corporation which
commenced operations on March 22, 1985, the Trust was reorganized as a
Massachusetts business trust on July 10, 1987.
Shares of each Portfolio are currently divided into two classes: Class IA
shares are offered pursuant to this prospectus at net asset value and are not
subject to fees imposed pursuant to a distribution plan. Class IB shares are
offered pursuant to another prospectus at net asset value and are subject to
distribution fees imposed pursuant to a distribution plan (the "Distribution
Plan") adopted under Rule 12b-1 under the Investment Company Act. Class IB
shares are sold to an insurance company separate account of Equitable.
Inquiries regarding Class IB shares should be addressed to Equitable, Income
Management Group, at 200 Plaza Drive, Secaucus, NJ 07096 (toll-free:
1-800-789-7771).
The two classes of shares are offered under the Trust's multiple class
distribution system approved by the Trust's Board of Trustees, and are
designed to allow promotion of insurance products investing in the Trust
through alternative distribution channels. Under the Trust's multi-class
system, shares of each class of a Portfolio represent an equal pro rata
interest in the assets of that Portfolio and, generally, have identical
voting, dividend, liquidation, and other rights, other than with respect to
the payment of distribution fees under the Distribution Plan.
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") and
certain insurance companies unaffiliated with Equitable. Equitable was the
record owner of approximately 99.7% and 100% of the Trust's Class IA and
Class IB shares, respectively, as of March 31, 1997, and consequently may be
deemed to control the Trust.
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 could 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 Alliance 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 Alliance Balanced Portfolio's fundamental investment objective
is to achieve a high return through both appreciation of capital
and current income. The Alliance 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 Alliance 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
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income securities, including at times common stocks issued by
intermediate and small-sized companies and at times lower quality
fixed income securities commonly known as "junk bonds."
THE EQUITY SERIES
o The Alliance 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.
o The Alliance 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
("S&P") 500 Composite Stock Price Index, including reinvestment of
dividends, at a risk level consistent with that of the Index.
o The Alliance 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 Alliance Global Portfolio's fundamental investment objective is
to achieve long-term growth of capital. The Alliance Global
Portfolio will pursue this objective by investing primarily in
equity securities of non-U.S. companies as well as U.S. issuers.
o The Alliance 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-U.S. companies with
prospects for growth.
o The Alliance Aggressive Stock Portfolio's fundamental investment
objective is to achieve long-term growth of capital. The Alliance
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 that, in the
opinion of Alliance, have strong growth prospects and in covered
options on those securities.
o The Alliance Small Cap Growth Portfolio's fundamental investment
objective is to achieve long-term growth of capital. The Alliance
Small Cap Growth Portfolio will pursue this objective by investing
primarily in U.S. common stocks and other equity-type securities
issued by smaller companies that, in the opinion of Alliance, have
favorable growth prospects.
THE FIXED INCOME SERIES
o The Alliance Money Market Portfolio's fundamental investment
objective is to obtain a high level of current income, preserve its
assets and maintain liquidity. The Alliance Money Market Portfolio
will pursue this objective by investing in primarily high quality
U.S. dollar-denominated money market instruments.
o The Alliance 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 Alliance Intermediate Government Securities
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 Alliance 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 Alliance Quality Bond Portfolio
reserves the right to invest in convertible debt securities,
preferred stocks and dividend-paying common stocks.
o The Alliance 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 Alliance High Yield Portfolio will pursue this
objective by investing primarily
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in a diversified mix of high yield, fixed income securities, which
generally involve greater volatility of price and risk of principal
and income than higher quality fixed income securities. Lower
quality debt securities are commonly 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 SAI.
THE ASSET ALLOCATION SERIES
The Alliance Conservative Investors Portfolio, the Alliance Balanced
Portfolio and the Alliance 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 an
effort to reduce risk while producing desired return objectives. Portfolio
management, therefore, will consist not only of selecting specific securities
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
equity market strength. Consequently, the asset mix for the Alliance
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 Alliance
Growth Investors Portfolio attempts to provide for upside potential without
excessive volatility.
The "balanced investor" is somewhat less aggressive than the growth investor
and has a medium-to long-term investment horizon. 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 Alliance Balanced Portfolio attempts to
capture a sizable portion of the market's upside while diversifying risk
among asset classes.
Alliance Capital Management L.P., the Trust's investment adviser
("Alliance"), has established an asset allocation committee (the
"Committee"), all the members of which are employees of Alliance, 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 Alliance
Conservative Investors Portfolio particularly emphasize risk assessment of
each asset class viewed over the shorter term, while decisions for the
Alliance 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 it appears that cash flow will, in the
opinion of Alliance, be insufficient to achieve the desired asset mix, the
Portfolios will sell securities and reinvest the proceeds in the appropriate
asset class.
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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 the securities
in which the Portfolios in the Asset Allocation Series may invest, these
Portfolios bear the risk that Alliance will not accurately assess and respond
to changing market conditions. While Alliance 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, these
Portfolios may incur additional operating expenses during periods of
frequently changing asset mix ranges.
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO--INVESTMENT POLICIES
The Alliance 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
instruments and cash) and publicly traded common stocks and other equity
securities of U.S. and non-U.S. 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"). The Portfolio may invest in the types of equity
securities in which the Alliance Common Stock Portfolio may invest, including
convertible securities. No more than 15% of the Portfolio's assets will be
invested in securities of non-U.S. 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, as determined by
Alliance, that is 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. In
some cases, Alliance's calculation of duration will be based on certain
assumptions (including assumptions regarding prepayment rates, in the case of
mortgage-backed or asset-backed securities, and foreign and domestic interest
rates). As of December 31, 1996, the duration of a 10-year Treasury bond was
considered by Alliance to be 7.2 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.
ALLIANCE BALANCED PORTFOLIO--INVESTMENT POLICIES
The Alliance 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 Alliance 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 Alliance 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
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relevant considerations, including the risks associated with each investment
medium. Although the Alliance Balanced Portfolio will seek to reduce the
risks associated with any one investment medium by utilizing a variety of
investments, performance will depend upon Alliance's ability to assess
accurately and react to changing market conditions.
The Alliance 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, as well
as money market instruments). 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 Alliance Balanced Portfolio will
consist of the types of securities in which the Alliance Common Stock
Portfolio may invest. The money market securities will consist of the types
of securities and credit quality in which the Alliance 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 Alliance considers them appropriate investments under the
circumstances. In addition, the Alliance Balanced Portfolio may at times hold
some of its assets in cash. The Portfolio may invest up to 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 Alliance 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 Alliance 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.
ALLIANCE GROWTH INVESTORS PORTFOLIO--INVESTMENT POLICIES
The Alliance 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 both exchange-traded and
over-the-counter common stocks and equity-type securities, which may include
preferred stock and convertible securities, and may include securities issued
by intermediateand small-sized companies that, in the opinion of Alliance,
have favorable growth prospects. More risk is associated with investment in
intermediate and small-sized companies because they are often dependent on
limited product lines, financial resources or management groups. They may be
more vulnerable to competition from larger companies with greater resources
and to economic conditions affecting their market sector. Intermediateand
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, and may trade
infrequently or in limited volume. The prices of these stocks often fluctuate
more than those of larger, more established companies. 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"; and "Investment
Techniques--Risk Factors of Lower Rated Fixed Income Securities," below. For
the fiscal year ended December 31,
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1996, approximately 19% of the Portfolio was invested in fixed income
securities, all rated AAA or its equivalent. No more than 30% of the
Portfolio's assets will be invested in securities of non-U.S. 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
Alliance 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
ALLIANCE GROWTH AND INCOME PORTFOLIO--INVESTMENT POLICIES
The Alliance 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 Alliance 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 Alliance. 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.
The Alliance Growth and Income Portfolio may invest without limit in
securities convertible into common stocks, which include convertible bonds,
convertible preferred stocks and convertible warrants. The Alliance 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 yield that is higher than that of
the underlying stock but lower than that of 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 Alliance 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 Alliance 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 Alliance 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 Alliance Growth and Income Portfolio
may invest in certain money market instruments. See "Investment
Techniques--Certain Money Market Instruments," below.
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ALLIANCE EQUITY INDEX PORTFOLIO--INVESTMENT POLICIES
The Alliance Equity Index Portfolio's investment objective is to seek a total
return before expenses that approximates the total return of the S&P 500
Index (the "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 Alliance 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 that 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 Alliance Equity Index Portfolio's industry diversification, and therefore
economic events could potentially have a dramatically different impact on the
performance of the Alliance Equity Index Portfolio from that of the Index.
Recognizing this fact, the modeling techniques also consider industry
diversification when selecting investments for the Alliance Equity Index
Portfolio. The investment adviser also seeks to diversify the Alliance Equity
Index Portfolio's assets with respect to market capitalization. As a result,
the Alliance Equity Index Portfolio will include securities of smaller and
medium-sized capitalization companies in the Index.
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 Alliance 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 Alliance Equity Index Portfolio's investments and the Index.
Cash may be accumulated in the Alliance Equity Index Portfolio until it
reaches approximately 1% of the value of the Alliance Equity Index Portfolio
at which time such cash will be invested in common stocks as described above.
Accumulation of cash increases tracking error. The Alliance 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
Alliance Equity Index Portfolio.
In order to reduce brokerage costs, maintain liquidity to meet shareholder
redemptions or minimize tracking error when the Alliance Equity Index
Portfolio holds cash, the Alliance 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 Alliance Equity Index Portfolio plus
the contract value of futures contracts underlying call options purchased by
the Alliance Equity Index Portfolio will not exceed 20% of the Alliance
Equity Index Portfolio's total assets.
The Alliance 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.
ALLIANCE COMMON STOCK PORTFOLIO--INVESTMENT POLICIES
The Alliance Common Stock Portfolio attempts to achieve its investment
objective by investing primarily in common stocks and other equity-type
securities that Alliance believes will share in the growth of the nation's
economy over a long period.
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Most of the time, the Alliance 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 Alliance
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 Alliance 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, 1996, less than 1% of the average assets
of the Portfolio were invested in higher yielding securities.
The Alliance Common Stock Portfolio may make temporary investments in money
market instruments of the same type and credit quality as those in which the
Alliance 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 Alliance 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.
ALLIANCE GLOBAL PORTFOLIO--INVESTMENT POLICIES
The Alliance 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-U.S. companies that,
in the opinion of Alliance, have prospects for growth, as well as in
securities issued by United States companies. These non-U.S. companies may
have operations in the United States, in their country of incorporation or in
other countries. The Alliance 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 Alliance Global
Portfolio may at times invest substantially all of its assets in securities
issued by U.S. companies or in cash or cash equivalents, including money
market instruments issued by foreign entities.
The Alliance 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 Alliance Global Portfolio intends under normal conditions to invest in
equity securities. The Portfolio may make secured loans of up to 50% of its
total portfolio securities. See "Investment Techniques--Securities Lending,"
below. The Alliance 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 Alliance 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.
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ALLIANCE INTERNATIONAL PORTFOLIO--INVESTMENT POLICIES
The Alliance International Portfolio attempts to achieve its objective by
investing primarily in a diversified portfolio of equity securities selected
principally to permit participation in non-U.S. companies or foreign
governmental enterprises that, in the opinion of Alliance, have prospects for
growth. These non-U.S. companies may have operations in the United States, in
their country of incorporation and/or in other countries. The Alliance
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 Alliance International Portfolio may purchase securities of
developing countries, which include, among others, Mexico, Brazil, Hong Kong,
India, Poland, Turkey and South Africa. The Alliance International Portfolio
intends to diversify investments among several countries, although for
temporary defensive purposes, the Alliance 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 Alliance 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 Alliance
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 Alliance International Portfolio intends under normal
market conditions to invest primarily in equity securities. The Alliance
International Portfolio may make loans of up to 50% of its portfolio
securities. See "Investment Techniques--Securities Lending," below. The
Alliance 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 Alliance International 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--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.
ALLIANCE AGGRESSIVE STOCK PORTFOLIO--INVESTMENT POLICIES
The Alliance Aggressive Stock Portfolio attempts to achieve its objective by
investing primarily in common stocks and other equity-type securities issued
by intermediateand small-sized companies that, in the opinion of Alliance,
have favorable growth prospects. The Alliance 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 Alliance 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
Alliance 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 Alliance 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 Alliance 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 Alliance 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.
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Risk Factors. More risk is associated with investment in intermediateand
small-sized companies, because they are often dependent on limited product
lines, financial resources or management groups. They may be more vulnerable
to competition from larger companies with greater resources and to economic
conditions affecting their market sector. Intermediateand 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, and may trade infrequently or in
limited volume. The prices of these stocks often fluctuate more than those of
larger more established companies.
ALLIANCE SMALL CAP GROWTH PORTFOLIO--INVESTMENT POLICIES
The Alliance Small Cap Growth Portfolio will pursue its objective by
investing primarily in U.S. common stocks and other equity-type securities
issued by smaller companies with favorable growth prospects. The Alliance
Small Cap Growth 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.
The Alliance Small Cap Growth Portfolio may also invest in equity-type
securities other than common stocks (such as preferred stocks and convertible
debt instruments) and in protective options if it is Alliance's judgment
that, in light of economic conditions, such investments offer the Alliance
Small Cap Growth Portfolio better prospects for achieving its objective.
Under certain market conditions, the Small Cap Growth 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 Alliance Small Cap Growth
Portfolio will not invest more than 20% of its net asset value, measured at
the time of investment, in securities principally traded on foreign
securities markets (other than commercial paper). See "Investment
Techniques--Foreign Securities and Currencies," below. The Alliance Small Cap
Growth Portfolio may make secured loans of up to 50% of its total portfolio
securities. See "Investment Techniques--Securities Lending," below. The
Alliance Small Cap Growth Portfolio may write covered call options and may
purchase call and put options on individual equity securities, securities
indexes and foreign currencies. The Alliance Small Cap Growth Portfolio may
also purchase and sell stock index and foreign currency futures contracts and
options thereon. See "Investment Techniques--Forward Commitments and
When-Issued and Delayed Delivery Securities," "Investment
Techniques--Options," "Investment Techniques--Futures," and "Investment
Techniques--Risk Factors in Options and Futures," below.
Under current SEC guidelines, for so long as the Portfolio has the words
"Small Cap" in its name, it is required, under normal market conditions, to
invest at least 65% of its total assets in securities of smaller
capitalization companies (currently considered by Alliance to mean companies
with market capitalization at or below $2 billion).
Risk Factors. More risk is associated with investment in small-sized
companies, because they tend to be often dependent on limited product lines,
financial resources or management groups. They tend to be more vulnerable to
competition from larger companies with greater resources and to economic
conditions affecting their market sector. 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, and may trade infrequently or in limited volume. The prices of
these stocks often fluctuate more than those of larger, more established
companies.
THE FIXED INCOME SERIES
ALLIANCE MONEY MARKET PORTFOLIO--INVESTMENT POLICIES
The Alliance 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
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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 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 (see
"Investment Techniques--Repurchase Agreements," below). Time deposits with
maturities greater than seven days are considered to be illiquid securities.
Investments by the Alliance Money Market Portfolio are limited to those which
present minimal credit risk. If a security held by the Alliance Money Market
Portfolio is no longer deemed to present minimal credit risk, the Alliance
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, 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
Alliance 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.
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO--INVESTMENT POLICIES
The Alliance Intermediate Government Securities 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 Alliance Intermediate Government Securities 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 Alliance Intermediate Government Securities 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.
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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.
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
Alliance Intermediate Government Securities Portfolio's shares.
The Portfolio buys and sells securities with a view to maximizing current
return without, in the view of Alliance, 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 Alliance's
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 securities held by the Portfolio. However, at all times, each instrument
held by the Portfolio will have either a final maturity of not more than ten
years or a duration, as determined by Alliance, 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. In some cases, Alliance's calculation of duration
will be based on certain assumptions (including assumptions regarding
prepayment rates, in the mortgage-backed or asset-backed securities, and
foreign and domestic interest rates). As of December 31, 1996, the duration
of a 10-year Treasury bond was considered by Alliance to be 7.2 years. The
Portfolio may also invest a substantial portion of its assets in money market
instruments. See "Investment Techniques--Certain Money Market Instruments,"
below.
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It is a fundamental policy of the Alliance Intermediate Government Securities
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 Alliance Intermediate Government Securities Portfolio
may also purchase collateralized mortgage obligations ("CMOs") issued by
non-governmental issuers and securities issued by a real estate mortgage
investment conduits ("REMICs"). See "Investment Techniques--Mortgage-Backed
and Asset-Backed Securities," below. The Alliance Intermediate Government
Securities Portfolio will purchase only CMOs only if they collateralized by
U.S. Government Securities. However, CMOs issued by entities other than U.S.
Government agencies or instrumentalities and securities issued by REMICs are
not considered U.S. Government Securities for purposes of the investment
policies of the Alliance Intermediate Government Securities 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 Alliance, such investment is 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. Because U.S. Government Securities with shorter maturities
generally have a lower yield to maturity, however, 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.
ALLIANCE QUALITY BOND PORTFOLIO--INVESTMENT POLICIES
The Alliance Quality Bond Portfolio expects to invest in readily marketable
securities with relatively attractive yields, but which do not, in the
opinion of Alliance, involve undue risk of loss of capital. The
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Alliance Quality Bond Portfolio will follow a policy of investing at least
65% of its total assets in securities which are rated at the time of purchase
at least Baa by Moody's or BBB by S&P, or in unrated fixed income securities
determined by Alliance to be of comparable quality. In the event that the
credit rating of a security held by the Alliance Quality Bond Portfolio falls
below investment grade (or, in the case of unrated securities, Alliance
determines that the quality of such security has deteriorated below
investment grade), the Alliance Quality Bond Portfolio will not be obligated
to dispose of such security and may continue to hold the obligation if, in
the opinion of Alliance, such investment is appropriate in the circumstances.
The Alliance 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 Alliance Quality Bond Portfolio has complete flexibility as to the types
of securities in which it will invest and the relative proportions thereof,
and the Alliance 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 Alliance's assessment of prospective
cyclical changes even if such action may adversely affect current income.
The Alliance Quality Bond Portfolio may invest in foreign securities. The
Alliance 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
Alliance 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 Alliance Quality Bond Portfolio may
invest in certain money market instruments. See "Investment
Techniques--Certain Money Market Instruments," below.
The Alliance Quality Bond Portfolio may purchase put and call options and
write covered put and call options on securities it may purchase. The
Alliance 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 Alliance 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 Alliance 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 Alliance 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 Alliance 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 Alliance 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 Alliance 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 Alliance 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 Alliance Quality
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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 such transaction. If there is a
default by the other party to such a transaction, the Alliance Quality Bond
Portfolio will have contractual remedies pursuant to the agreements related
to the transaction. Caps and floors are relatively recent innovations which
may be illiquid.
Zero Coupon Securities. To the extent consistent with its investment
objective, the Alliance 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. Accordingly, such
securities usually trade at a deep discount from their face or par value and
will be subject to greater fluctuations in market value in response to
changing interest rates than debt obligations of comparable maturities that
make current distributions of interest. The Alliance 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 Alliance 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.
ALLIANCE HIGH YIELD PORTFOLIO--INVESTMENT POLICIES
The Alliance High Yield Portfolio attempts to achieve its objective by
investing primarily in a diversified mix of high yield, fixed income
securities, which generally involve 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 assets 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 Alliance
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 Alliance, 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 Alliance; however, this restriction will not apply to (i)
fixed income securities which, in the opinion of Alliance, 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 Alliance, 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 Alliance 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
Alliance, such investment is considered appropriate under the circumstances.
For the fiscal year ended December 31, 1996, 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: 0% in
securities rated AAA or its equivalent, 13.4% in securities rated BB or its
equivalent and 58.6% in securities rated B or its equivalent. Of these
securities, 89.8% were rated by an NRSRO and 10.2% 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.
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
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risks, in the case of non-U.S. dollar denominated foreign securities. The
Portfolio 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 Alliance High Yield Portfolio will attempt 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 Alliance 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 Alliance Money Market and the Alliance
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 Alliance Money Market, Alliance Equity Index and
Alliance Intermediate Government Securities Portfolios, may also write
covered put and call options and buy put and call options on foreign
currencies. The Alliance Balanced, Alliance Common Stock, Alliance Aggressive
Stock, Alliance Small Cap Growth, Alliance High Yield, Alliance Global,
Alliance International, Alliance Conservative Investors, Alliance Growth
Investors, Alliance Intermediate Government Securities, Alliance Quality
Bond, Alliance Growth and Income and Alliance Equity Index Portfolios may buy
and sell 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 Alliance 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 predict with certainty 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
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<PAGE>
the 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
Alliance 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 invest in money market instruments, including
certificates of deposit, time deposits, bankers' acceptances, bank notes and
other short-term debt obligations issued by commercial banks or 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 Alliance Equity Index Portfolio, may also
invest in 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 or 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 but of comparable quality 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 Alliance'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
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<PAGE>
make it more difficult for the Portfolio 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 also reduce
their current yield and total return. However, Alliance 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 Alliance, subject to the
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%
(10% in the case of the Alliance Money Market Portfolio) of the Portfolio's
net assets would be invested in "illiquid securities."
LOAN ASSIGNMENTS AND PARTICIPATIONS
The Alliance 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 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, and the Portfolio will generally 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
payment and delivery taking place in the future in order to secure what
Alliance considers to be an advantageous price or yield to the Portfolio at
the time of entering into the transaction. However, the
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<PAGE>
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 an advantageous price or
yield. Forward commitments and when-issued and delayed delivery transactions
are generally expected to settle within four 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, liquid assets 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 Alliance Money Market and Alliance 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 Alliance Money Market,
Alliance Intermediate Government Securities and Alliance 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.
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,
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<PAGE>
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 Alliance Money Market, Alliance Intermediate
Government Securities and Alliance 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 Alliance High Yield, Alliance Global, Alliance International, Alliance
Conservative Investors, Alliance Growth Investors, Alliance Intermediate
Government Securities, Alliance Balanced and Alliance 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 Alliance Intermediate Government
Securities and Alliance Quality Bond Portfolios) as well as the Alliance
Common Stock, Alliance Aggressive Stock, Alliance Small Cap Growth and
Alliance 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 Alliance 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 Alliance High Yield, Alliance
Global, Alliance International, Alliance Conservative Investors, Alliance
Growth Investors, Alliance Balanced, Alliance Common Stock, Alliance
Aggressive Stock, Alliance Small Cap Growth, Alliance Quality Bond and
Alliance 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 Alliance 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) 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 Alliance Equity Index Portfolio plus the contract
value of futures contracts underlying call options purchased by the Alliance
Equity Index Portfolio will not exceed 20% of the Alliance 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 liquid assets (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.
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FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
All the Portfolios, except the Alliance Money Market, Alliance Intermediate
Government Securities and Alliance 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.
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 U.S. dollar value of securities
denominated in a foreign currency or protecting the U.S. 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 Alliance Intermediate Government Securities
and Alliance 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 Alliance High Yield and
Alliance Intermediate Government Securities 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
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securities or possible loss of rights in the collateral should the borrower
fail financially. Loans will only be made to firms deemed by Alliance to be
of good standing and will not be made unless, in the judgment of Alliance,
the consideration to be earned from such loans would justify the risk.
PORTFOLIO TURNOVER
Portfolio turnover rates are set forth under "Financial Highlights." These
rates of portfolio turnover may be greater than those of most other
investment companies. A high rate of portfolio turnover involves
correspondingly greater brokerage and other expenses than a lower rate, which
must be borne by the Portfolio.
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.
The Alliance High Yield and Alliance Intermediate Government Securities
Portfolios may make secured loans of portfolio securities or cash without
limitation. None of the other Portfolios will make loans, except that each
such Portfolio 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
holdings in that industry exceed 25% of the Portfolio's total assets.
However, this restriction does not apply to investments by the Alliance 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 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 Alliance 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 Alliance 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 Alliance 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.
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 Agreement and Declaration of Trust and By-laws.
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THE INVESTMENT ADVISER
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 (the "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, administrative and other services, other than investor
services or accounting 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>
FIRST NEXT NEXT NEXT
$750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
-------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Alliance International ............. 0.900% 0.825% 0.800% 0.780% 0.770%
Alliance Global .................... 0.675% 0.600% 0.550% 0.530% 0.520%
Alliance Aggressive Stock .......... 0.625% 0.575% 0.525% 0.500% 0.475%
Alliance Common Stock .............. 0.475% 0.425% 0.375% 0.355% 0.345%*
Alliance Growth and Income ......... 0.550% 0.525% 0.500% 0.480% 0.470%
Alliance Small Cap Growth .......... 0.900% 0.850% 0.825% 0.800% 0.775%
Alliance Growth Investors .......... 0.550% 0.500% 0.450% 0.425% 0.400%
Alliance Balanced .................. 0.450% 0.400% 0.350% 0.325% 0.300%
Alliance Conservative Investors .... 0.475% 0.425% 0.375% 0.350% 0.325%
Alliance High Yield ................ 0.600% 0.575% 0.550% 0.530% 0.520%
Alliance Quality Bond .............. 0.525% 0.500% 0.475% 0.455% 0.445%
Alliance Intermediate Government
Securities ........................ 0.500% 0.475% 0.450% 0.430% 0.420%
Alliance Equity Index .............. 0.325% 0.300% 0.275% 0.255% 0.245%
Alliance Money Market .............. 0.350% 0.325% 0.300% 0.280% 0.270%
</TABLE>
* On assets in excess of $10 billion, the management fee for the Alliance
Common Stock Portfolio is reduced to 0.335% of average daily net assets.
THE PORTFOLIO MANAGERS
THE ASSET ALLOCATION SERIES
ALLIANCE CONSERVATIVE INVESTORS, ALLIANCE BALANCED AND ALLIANCE GROWTH
INVESTORS PORTFOLIOS
Robert G. Heisterberg has been the person principally responsible for the
Alliance Conservative Investors, Alliance Balanced and Alliance Growth
Investors Portfolios' investment programs since February 12, 1996. Mr.
Heisterberg, a Senior Vice President of Alliance and Global Economic Policy
Analysis, has been associated with Alliance since 1977.
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THE EQUITY SERIES
ALLIANCE GROWTH AND INCOME PORTFOLIO
Paul Rissman and W. Theodore Kuck have been the persons principally
responsible for the Alliance Growth and Income Portfolio's investment
program, Mr. Rissman since February 12, 1996 and Mr. Kuck since the
Portfolio's inception. Mr. Rissman, a Vice President of Alliance, has been
associated with Alliance since 1989. Mr. Kuck, a Vice President of Alliance,
has been associated with Alliance since 1971.*
ALLIANCE EQUITY INDEX PORTFOLIO
Judith A. Maglio has been the person principally responsible for the Alliance
Equity Index Portfolio's investment program since its inception. Ms. Maglio,
a Vice President of Alliance, has been associated with Alliance since 1970.
ALLIANCE COMMON STOCK PORTFOLIO
Tyler J. Smith has been the person principally responsible for the Alliance
Common Stock Portfolio's investment program since 1977. Mr. Smith, a Senior
Vice President of Alliance, has been associated with Alliance since 1970.*
ALLIANCE GLOBAL AND ALLIANCE INTERNATIONAL PORTFOLIOS
Ronald L. Simcoe has been the person principally responsible for the Alliance
Global Portfolio's investment program since 1988 and the Alliance
International Portfolio's investment program since its inception. Mr. Simcoe,
a Vice President of Alliance, has been associated with Alliance since 1978.*
ALLIANCE AGGRESSIVE STOCK PORTFOLIO
Alden M. Stewart and Randall E. Haase have been the persons principally
responsible for the Alliance Aggressive Stock Portfolio's investment program
since 1993. Mr. Stewart, an Executive Vice President of Alliance, has been
associated with Alliance since 1970.* Mr. Haase, a Vice President of
Alliance, has been associated with Alliance since 1988.*
ALLIANCE SMALL CAP GROWTH PORTFOLIO
Michael F. Gaffney has been the person principally responsible for the
Alliance Small Cap Growth Portfolio's investment program since its inception.
Mr. Gaffney, a Senior Vice President of Alliance, has been associated with
Alliance since 1987.*
THE FIXED INCOME SERIES
ALLIANCE MONEY MARKET PORTFOLIO
Raymond J. Papera has been the person principally responsible for the
Alliance Money Market Portfolio's investment program since 1990. Mr. Papera,
a Vice President of Alliance, has been associated with Alliance since 1990.*
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
Patricia J. Young and Jeffrey S. Phlegar have been the persons principally
responsible for the Alliance Intermediate Government Securities Portfolio's
investment program, Ms. Young since 1995 and Mr. Phlegar since 1997. Ms.
Young, a Senior Vice President of Alliance, has been associated with Alliance
since 1992. Mr. Phlegar, a Vice President of Alliance, has been associated
with Alliance since 1988.
ALLIANCE QUALITY BOND PORTFOLIO
Matthew Bloom has been the person principally responsible for the Alliance
Quality Bond Portfolio's investment program since 1995. Mr. Bloom, a Vice
President of Alliance, has been associated with Alliance since 1989.
34
<PAGE>
ALLIANCE HIGH YIELD PORTFOLIO
Wayne C. Tappe has been the person principally responsible for the Alliance
High Yield Portfolio's investment program since 1995. Mr. Tappe, a Vice
President of Alliance, has been associated with Alliance since 1987.*
- -----------
* Prior to July 22, 1993, with Equitable Capital Management Corporation
("Equitable Capital"). On that date Alliance acquired the business and
substantially all of the assets of Equitable Capital and became the
investment adviser to the Trust.
THE TRUST'S EXPENSES
The Trust pays all of its operating expenses not specifically assumed by
Alliance. The expenses borne by the Trust include or could include taxes;
brokerage commissions; interest charges; securities lending fees; fees and
expenses of the registration or qualification of a Portfolio's securities
under federal or state securities laws; fees of the Portfolio's custodian,
transfer agent, independent accountants and legal counsel; all expenses of
shareholders' and trustees' meetings; all expenses of the preparation,
typesetting, printing and mailing to existing shareholders of prospectuses,
prospectus supplements, statements of additional information, proxy
statements, and annual and semi-annual reports; any proxy solicitor's fees
and expenses; costs of fidelity bonds and Trustees' liability insurance
premiums as well as extraordinary expenses such as indemnification payments
or damages awarded in litigation or settlements made; any membership fees of
the Investment Company Institute and similar organizations; costs of
maintaining the Trust's corporate existence and the compensation of Trustees
who are not directors, officers, or employees of Alliance or its affiliates.
The following table, reflecting the Trust's estimated expenses, is based on
information for the year ended December 31, 1996 and has been restated to
reflect (i) the fees that would have been paid to Alliance if the present
advisory agreement had been in effect as of January 1, 1996 and (ii)
estimated accounting expenses for the year ended December 31, 1997. No
information has been provided with respect to Alliance Small Cap Growth
Portfolio because such Portfolio has not yet completed its first fiscal year.
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE ALLIANCE GROWTH ALLIANCE ALLIANCE
CONSERVATIVE ALLIANCE GROWTH AND EQUITY COMMON
INVESTORS BALANCED INVESTORS INCOME INDEX STOCK
TYPE OF EXPENSE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------- -------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.48% 0.42% 0.53% 0.55% 0.33% 0.38%
Other Expenses ........... 0.07% 0.05% 0.06% 0.05% 0.05% 0.03%
-------------- ----------- ----------- ----------- ----------- -----------
Total Expenses ........... 0.55% 0.47% 0.59% 0.60% 0.38% 0.41%
============== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE ALLIANCE INTERMEDIATE ALLIANCE ALLIANCE
ALLIANCE AGGRESSIVE MONEY GOVERNMENT QUALITY HIGH ALLIANCE
GLOBAL STOCK MARKET SECURITIES BOND YIELD INTERNATIONAL
TYPE OF EXPENSE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------- ----------- ------------ ----------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees .............. 0.65% 0.55% 0.35% 0.50% 0.53% 0.60% 0.90%
Other Expenses ..... 0.08% 0.03% 0.04% 0.09% 0.05% 0.06% 0.18%
----------- ------------ ----------- -------------- ----------- ----------- ---------------
Total Expenses ..... 0.73% 0.58% 0.39% 0.59% 0.58% 0.66% 1.08%
=========== ============ =========== ============== =========== =========== ===============
</TABLE>
Actual investment advisory fees, other expenses and total expenses for the
year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE ALLIANCE GROWTH ALLIANCE ALLIANCE
CONSERVATIVE ALLIANCE GROWTH AND EQUITY COMMON
INVESTORS BALANCED INVESTORS INCOME 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% 0.52% 0.55% 0.35% 0.36%
Other Expenses ........... 0.06% 0.04% 0.05% 0.03% 0.04% 0.02%
-------------- ----------- ----------- ----------- ----------- -----------
Total Expenses ........... 0.61% 0.41% 0.57% 0.58% 0.39% 0.38%
============== =========== =========== =========== =========== ===========
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE ALLIANCE INTERMEDIATE ALLIANCE ALLIANCE
ALLIANCE AGGRESSIVE MONEY GOVERNMENT QUALITY HIGH ALLIANCE
GLOBAL STOCK MARKET SECURITIES BOND YIELD INTERNATIONAL
TYPE OF EXPENSE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------- ----------- ------------ ----------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees .............. 0.53% 0.46% 0.40% 0.50% 0.55% 0.55% 0.90%
Other Expenses ..... 0.07% 0.02% 0.03% 0.06% 0.04% 0.04% 0.16%
----------- ------------ ----------- -------------- ----------- ----------- ---------------
Total Expenses ..... 0.60% 0.48% 0.43% 0.56% 0.59% 0.59% 1.06%
=========== ============ =========== ============== =========== =========== ===============
</TABLE>
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 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 Trust is divided into fourteen
portfolios, each of which has Class IA and Class IB shares. The Board of
Trustees may establish additional Portfolios and additional classes of
shares. Each share of each class of a Portfolio shall be entitled to one vote
(or fraction thereof in respect of a fractional share) on matters on which
such shares (or class of shares) shall be entitled to vote. Shareholders of
each Portfolio vote together on any matter, except to the extent otherwise
required by the Investment Company Act, or when the Board of Trustees of the
Trust have determined that the matter affects only the interest of
shareholders of one or more classes, in which case only the shareholders of
such class or classes shall be entitled to vote thereon. Any matter shall be
deemed to have been effectively acted upon with respect to each Portfolio if
acted upon as provided in Rule 18f-2 under the Investment Company Act, or any
successor rule, and in the Trust's Agreement and Declaration of Trust. 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.
Under the Trust's multi-class system, shares of each class of a Portfolio
represent equal pro rata interests in the assets of that Portfolio and,
generally, shall have identical voting, dividend, liquidation, and other
rights, preferences, powers, restrictions, limitations, qualifications and
terms and conditions, except that: (1) each class shall have a different
designation; (2) each class of shares shall bear its "Class Expenses"; (3)
each class shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to its distribution arrangements; (4) each
class shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class; (5) each class may have separate exchange privileges,
although exchange privileges are not currently contemplated; and (6) each
class may have different conversion features, although a conversion feature
is not currently
36
<PAGE>
contemplated. Expenses currently designated as "Class Expenses" by the
Trust's Board of Trustees under the plan pursuant to Rule 18f-3 are currently
limited to payments to the Distributor pursuant to the Distribution Plan for
Class IB shares.
PURCHASE AND REDEMPTION
EQ Financial Consultants, Inc., formerly Equico Securities, Inc. ("EQ
Financial"), a wholly-owned subsidiary of Equitable, is the principal
underwriter of the Class IA shares of the Trust. EQ Financial'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 Agreement and
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.
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 Alliance
Money Market Portfolio which mature in 60 days or less are valued at
amortized cost, which approximates market value. Securities held in the
Alliance 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 (the "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.
37
<PAGE>
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 Portfolios.
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 Alliance 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 period,
expressed as an annual percentage rate. The Alliance 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 Alliance Intermediate Government Securities, Alliance Quality Bond and
Alliance 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.
38
<PAGE>
APPENDIX A
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.
A-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.
A-2
<PAGE>
APPENDIX B
PERFORMANCE INFORMATION
The following tables provide performance results for The Hudson River Trust
Portfolios (except for the Alliance Small Cap Growth Portfolio), 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. The unmanaged market indexes do 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 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 U.S. Treasury intended for distribution in the domestic market.
B-1
<PAGE>
The Standard and Poor's 500 Composite Stock Price 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 Morgan Stanley Capital International EAFE Index ("MSCI EAFE") is a market
capitalization weighted equity index composed of a sample of companies
representative of the market structure of Europe, Australia and the Far East.
The Standard & Poor's MidCap 400 Index ("S&P 400") represents an unmanaged
weighted index of 400 domestic stocks chosen for market size (median market
capitalization of about $610 million), liquidity, and industry group
representation.
The Russell 2000 Index consists of the smallest 2,000 securities in the
Russell 3000 Index. (The Russell 3000 Index represents approximately 98% of
the investable U.S. equity market.) The Russell 2000 Index, widely regarded
in the industry as the premier measure of small capitalization stocks,
represents approximately 11% of the Russell 3000 Index total market
capitalization.
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 400/50% Russell 2000) 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 Alliance Common Stock Portfolio on June 16, 1975; the Alliance
Money Market Portfolio on July 13, 1981; the Alliance Balanced and Alliance
Aggressive Stock Portfolios on January 27, 1986; the Alliance High Yield
Portfolio on January 2, 1987; the Alliance Global Portfolio on August 27,
1987; the Alliance Conservative Investors and Alliance Growth Investors
Portfolios on October 2, 1989; the Alliance Intermediate Government
Securities Portfolio on April 1, 1991; the Alliance Quality Bond and Alliance
Growth and Income Portfolios on October 1, 1993; the Alliance Equity Index
Portfolio on March 1, 1994; and the Alliance International Portfolio on April
3, 1995. 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 Alliance 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 Alliance 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.
B-2
<PAGE>
TABLE I
ANNUALIZED RATES OF RETURN
PERIODS ENDING DECEMBER 31, 1996
<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
ALLIANCE CONSERVATIVE INVESTORS ............. 5.21% 6.70% 7.32% -- -- 9.03%
Lipper Flexible Portfolio Average ........... 13.59 11.78 10.84 -- -- 10.68
70% Lehman Treasury/30% S&P 500.............. 8.78 10.14 9.64 -- -- 10.42
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
ALLIANCE BALANCED ........................... 11.68 7.15 6.06 10.38% -- 12.05
Lipper Balanced Mutual Funds Average ........ 13.76 11,67 10.73 11.09 -- 11.65
50% S&P 500/50% Lehman Gov't Corp. .......... 12.93 13.15 11.47 12.30 -- 12.98
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
ALLIANCE GROWTH INVESTORS.................... 12.61 11.29 10.76 -- -- 15.57
Lipper Flexible Portfolio Average ........... 13.59 11.78 10.84 -- -- 10.68
70% S&P 500/30% Lehman Gov't Corp. .......... 16.94 15.84 13.02 -- -- 12.73
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
THE EQUITY SERIES
ALLIANCE GROWTH AND INCOME................... 20.09 14.00 -- -- -- 12.77
Lipper Growth & Income Funds Average ........ 20.78 16.15 -- -- -- 15.71
75% S&P 500/25% Value Line Convertible ...... 21.28 17.93 -- -- -- 17.24
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
ALLIANCE EQUITY INDEX........................ 22.39 -- -- -- -- 20.25
Lipper S&P 500 Index Funds Average........... 22.30 -- -- -- -- 20.10
S&P 500...................................... 22.96 -- -- -- -- 20.90
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
ALLIANCE COMMON STOCK........................ 24.28 17.22 15.72 15.83 16.51% 15.22
Lipper Growth Equity Mutual Funds Average ... 19.24 15.23 13.04 13.47 14.58 15.06
S&P 500...................................... 22.96 19.66 15.20 15.28 14.85 14.63
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
ALLIANCE GLOBAL ............................. 14.60 12.74 13.50 -- -- 11.70
Lipper Global Mutual Funds Average........... 16.51 9.61 11.36 -- -- 8.69
MSCI World .................................. 13.48 12.91 10.82 -- -- 7.44
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
ALLIANCE INTERNATIONAL....................... 9.82 -- -- -- -- 12.14
Lipper International Mutual Funds Average ... 11.78 -- -- -- -- 13.12
MSCI EAFE.................................... 6.05 -- -- -- -- 8.74
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
ALLIANCE AGGRESSIVE STOCK.................... 22.20 15.66 11.83 18.60 -- 20.22
Lipper Small Company Growth Funds
Average..................................... 20.20 15.31 15.10 14.22 -- 13.46
50% S&P 400/50% Russell 2000................. 17.85 14.14 14.80 14.29 -- 13.98
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
THE FIXED INCOME SERIES
ALLIANCE MONEY MARKET ....................... 5.33 5.03 4.31 5.90 7.08 7.28
Lipper Money Market Mutual Funds
Average..................................... 4.80 4.63 3.96 5.52 6.66 7.01
3 Month T-Bill .............................. 5.25 5.07 4.37 5.67 6.72 6.97
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES 3.78 3.99 5.60 -- -- 6.95
Lipper Intermediate Government Funds
Average..................................... 2.68 4.55 5.66 -- -- 6.96
Lehman Intermediate Government Bond ........ 4.06 5.37 6.23 -- -- 7.43
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
ALLIANCE QUALITY BOND........................ 5.36 5.38 -- -- -- 4.79
Lipper Corporate Debt Funds A Rated
Average..................................... 2.49 5.11 -- -- -- 4.60
Lehman Aggregate Bond........................ 3.63 6.03 -- -- -- 5.57
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
ALLIANCE HIGH YIELD.......................... 22.89 12.73 14.66 -- -- 11.41
Lipper High Current Yield Mutual
Funds Average............................... 13.67 8.30 12.10 -- -- 9.38
ML Master.................................... 11.06 9.59 12.76 -- -- 11.24
- -------------------------------------------- -------- --------- --------- ---------- ---------- -----------
</TABLE>
B-3
<PAGE>
TABLE II
CUMULATIVE RATES OF RETURN
PERIODS ENDING DECEMBER 31, 1996
<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
ALLIANCE CONSERVATIVE INVESTORS............ 5.21% 21.49% 42.36% -- -- 87.12
Lipper Flexible Portfolio Average ........ 13.59 40.15 68.94 -- -- 112.84
70% Lehman Treasury/30% S&P 500 ........... 8.78 33.60 58.40 -- -- 105.23
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
ALLIANCE BALANCED.......................... 11.68 23.00 34.23 168.58 -- 246.66
Lipper Balanced Mutual Funds Average ..... 13.76 39.41 66.98 188.07 -- 235.32
50% S&P 500/50% Lehman Gov't Corp. ....... 12.93 44.87 72.14 218.95 -- 279.68
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
ALLIANCE GROWTH INVESTORS.................. 12.61 37.83 66.71 -- -- 185.55
Lipper Flexible Portfolio Average. ....... 13.59 40.15 68.94 -- -- 112.84
70% S&P 500/30% Lehman Gov't Corp. ....... 16.94 55.46 84.42 -- -- 138.49
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
THE EQUITY SERIES
ALLIANCE GROWTH AND INCOME................. 20.09 48.14 -- -- -- 47.77
Lipper Growth & Income Funds Average ..... 20.78 56.95 -- -- -- 60.96
75% S&P 500/25% Value Line Convertible ... 21.28 63.99 -- -- -- 67.75
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
ALLIANCE EQUITY INDEX ..................... 22.39 -- -- -- -- 68.84
Lipper S&P 500 Index Funds Average ....... 22.30 -- -- -- -- 68.03
S&P 500.................................... 22.96 -- -- -- -- 71.28
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
ALLIANCE COMMON STOCK...................... 24.28 61.08 107.55 334.66% 888.92% 1,849.35
Lipper Growth Equity Mutual Funds Average . 19.24 53,78 87.06 266.86 705.20 2,152.74
S&P 500.................................... 22.96 71.34 102.85 314.34 925.25 1,655.74
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
ALLIANCE GLOBAL............................ 14.60 43.28 88.36 -- -- 181.40
Lipper Global Mutual Funds Average ....... 16.51 32.17 72.23 -- -- 120.81
MSCI World ................................ 13.48 43.95 67.12 -- -- 95.62
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
ALLIANCE INTERNATIONAL..................... 9.82 -- -- -- -- 22.21
Lipper International Mutual Funds Average . 11.78 -- -- -- -- 24.22
MSCI EAFE.................................. 6.05 -- -- -- -- 15.78
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
ALLIANCE AGGRESSIVE STOCK.................. 22.20 54.73 74.93 450.62 -- 648.20
Lipper Small Company Growth Funds Average 20.20 54.13 104.43 288.11 -- 309.45
50% S&P 400/50% Russell 2000............... 17.85 48.69 99.38 280.32 -- 318.19
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
THE FIXED INCOME SERIES
ALLIANCE MONEY MARKET...................... 5.33 15.85 23.51 77.35 179.15 196.68
Lipper Money Market Mutual Funds Average . 4.80 14.54 21.42 71.13 163.30 185.78
3 Month T-Bill............................. 5.25 15.99 23.86 73.61 165.31 184.26
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
ALLIANCE INTERMEDIATE GOVERNMENT
SECURITIES................................ 3.78 12.47 31.33 -- -- 47.16
Lipper Intermediate Government Funds
Average .................................. 2.68 14.32 31.82 -- -- 47.39
Lehman Intermediate Government Bond ...... 4.06 16.98 35.30 -- -- 51.07
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
ALLIANCE QUALITY BOND...................... 5.36 17.01 -- -- -- 16.42
Lipper Corporate Debt Funds A Rated
Average .................................. 2.49 16.16 -- -- -- 15.79
Lehman Aggregate Bond...................... 3.63 19.19 -- -- -- 19.27
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
ALLIANCE HIGH YIELD........................ 22.89 43.27 98.16 -- -- 194.62
Lipper High Current Yield Bond Funds
Average .................................. 13.67 27.12 77.40 -- -- 146.99
ML Master ................................. 11.06 31.63 82.29 -- -- 190.43
- ------------------------------------------ -------- --------- --------- ---------- ---------- -----------
</TABLE>
B-4
<PAGE>
TABLE III
ANNUAL RATES OF RETURN
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE ALLIANCE ALLIANCE
YEAR ENDING COMMON MONEY AGGRESSIVE ALLIANCE HIGH ALLIANCE
DECEMBER 31 STOCK MARKET STOCK BALANCED YIELD GLOBAL
- ----------- -------- -------- ---------- -------- -------- --------
<S> <C> <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%* -13.3%*
1988........ 22.4 7.3 1.1 13.3 9.7 10.9
1989........ 25.6 9.2 43.5 25.8 5.1 26.7
1990........ -8.1 8.2 8.2 0.3 -1.1 -6.1
1991........ 37.9 6.2 86.9 41.3 24.5 30.5
1992........ 3.2 3.6 -3.2 -2.8 12.3 -0.5
1993........ 24.8 3.0 16.8 12.3 23.2 32.1
1994........ -2.1 4.0 -3.8 -8.0 -2.8 5.2
1995........ 32.5 5.7 31.6 19.8 19.9 18.8
1996........ 24.3 5.3 22.2 11.7 22.9 14.6
- ----------- -------- -------- ---------- -------- -------- --------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE ALLIANCE ALLIANCE ALLIANCE GROWTH ALLIANCE
YEAR ENDING CONSERV. GROWTH INTERMEDIATE QUALITY AND EQUITY ALLIANCE
DECEMBER 31 INVESTORS INVESTORS GOVT. SECURITIES BOND INCOME INDEX INTERNATIONAL
- ----------- --------- --------- ---------------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1976 .......
1977 .......
1978 .......
1979 .......
1980 .......
1981 .......
1982 .......
1983 .......
1984 .......
1985 .......
1986 .......
1987 .......
1988 .......
1989........ 3.1%* 4.0%*
1990........ 6.3 10.7
1991........ 19.8 48.8 12.1%*
1992........ 5.6 4.9 5.5
1993........ 10.8 15.3 10.6 -0.5%* -0.3%*
1994........ -4.1 -3.2 -4.4 -5.1 -0.6 1.1*
1995........ 20.4 26.4 13.3 17.0 24.0 36.5 11.3%*
1996........ 5.2 12.6 3.8 5.4 20.1 22.4 9.8
- ----------- --------- --------- ---------------- -------- -------- -------- ----
</TABLE>
- ------------
*Unannualized from the inception date described in the Prospectus through the
end of the calendar year indicated.
B-5
<PAGE>
PERFORMANCE OF PORTFOLIOS MANAGED SIMILARLY TO THE ALLIANCE SMALL CAP GROWTH
PORTFOLIO
In addition to managing the assets of the Alliance Small Cap Growth
Portfolio, Alliance manages six portfolios of discretionary tax-exempt
accounts of institutional clients managed as described below without
significant client-imposed restrictions ("Historical Portfolios"). These
accounts have substantially the same investment objectives and policies and
are managed in accordance with essentially the same investment strategies and
techniques as those of the Alliance Small Cap Growth Portfolio. The
Historical Portfolios are not subject to certain limitations, diversification
requirements and other restrictions to which the Alliance Small Cap Growth
Portfolio, as a registered investment company, is subject and which if
applicable to the Historical Portfolios, may have adversely affected the
performance results of the Historical Portfolios.
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the fourteen full calendar years during
which Alliance has managed the Historical Portfolios. As of December 31,
1996, the assets in the Historical Portfolios totaled approximately $397
million and the average size of a Historical Portfolio was $66 million. Each
Historical Portfolio has a nearly identical composition of individual
investment holdings and related percentage weightings.
The performance data is net of an imputed advisory fee deemed paid quarterly
at the same level as the advisory fee payable by the Alliance Small Cap
Growth Portfolio, although the actual advisory fees payable by the Historical
Portfolios varied. The performance data includes the cost of brokerage
commissions, but excludes custodial fees, transfer agency costs and other
administrative expenses that will be payable by the Alliance Small Cap Growth
Portfolio and will result in a higher expense ratio for the Alliance Small
Cap Growth Portfolio. Expenses associated with the distribution of Class IB
shares of the Alliance Small Cap Growth Portfolio in accordance with the plan
adopted by the Trust's Board of Trustees pursuant to Rule 12b-1 under the
Investment Company Act ("distribution fees") are also excluded. The
performance data has also not been adjusted for corporate or individual
taxes, if any, payable by the account owners.
Alliance has calculated the investment performance of the Historical
Portfolios on a trade-date basis. Dividends have been accrued at the end of
the month and cash flows weighted daily. Due to the similarity of investment
composition and the performance of each of the Historical Portfolios,
composite investment performance for all portfolios has been determined on a
simple average, rather than a dollar-weighted, basis. New accounts are
included in the composite investment performance computations at the
beginning of the month following the initial contribution. The composite
total returns set forth below are calculated using a method that links the
monthly returns, for the disclosed periods, resulting in a time-weighted rate
of return.
As reflected below, the Historical Portfolios have over time performed
favorably when compared with the performance of recognized performance
indices. The Russell 2000 Index is compiled by Frank Russell Company and
consists of the 2000 smallest of the 3000 largest capitalization U.S.
companies. The Russell 2000 Growth Index is compiled by Frank Russell Company
and consists of that half of the 2000 smallest of the 3000 largest
capitalization U.S. companies that has higher price-to-book ratios and higher
forecasted growth values. The Russell Indices reflect changes in market
prices, but excludes investment income.
To the extent the Alliance Small Cap Growth Portfolio does not invest in U.S.
common stocks or utilizes investment techniques such as futures or options,
the Russell Indices may not be substantially comparable to the Alliance Small
Cap Growth Portfolio. The Russell Indices are included to illustrate material
economic and market factors that existed during the time period shown. The
Russell Indices do not reflect the deduction of any fees. If the Alliance
Small Cap Growth Portfolio were to purchase a portfolio of securities
substantially identical to the securities comprising the Russell Indices, the
Alliance Small Cap Growth Portfolio's performance relative to the Russell
Indices would be reduced by the Alliance Small Cap Growth Portfolio's
expenses, including brokerage commissions, advisory fees, distribution fees,
custodial fees, transfer agency costs and other administrative expenses as
well as by the impact on the Alliance Small Cap Growth Portfolio's
shareholders of sales charges and income taxes.
B-6
<PAGE>
The Lipper Small Company Growth Fund Index is prepared by Lipper Analytical
Services, Inc. and represents a composite index of the investment performance
for the 30 largest growth mutual funds. The composite investment performance
of the Lipper Small Company Growth Fund Index reflects investment management
and administrative fees and other operating expenses paid by these mutual
funds and reinvested income dividends and capital gain distributions, but
excludes the impact of any income taxes and sales charges.
The following performance data is provided solely to illustrate Alliance's
performance in managing the Historical Portfolios as measured against certain
broad based market indices and against the composite performance of other
open-end growth mutual funds. Investors should not rely on the following
performance data of the Historical Portfolios as an indication of future
performance of the Alliance Small Cap Growth Portfolio. The composite
investment performance for the periods presented may not be indicative of
future rates of return. Other methods of computing investment performance may
produce different results, and the results for different periods may vary.
SCHEDULE OF COMPOSITE INVESTMENT PERFORMANCE--HISTORICAL PORTFOLIOS
FOR THE FOURTEEN YEARS ENDED DECEMBER 31, 1996*
<TABLE>
<CAPTION>
LIPPER SMALL
RUSSELL CO.
HISTORICAL RUSSELL 2000 GROWTH GROWTH
PORTFOLIOS 2000 INDEX INDEX FUND INDEX
TOTAL RETURN TOTAL RESEARCH TOTAL RETURN TOTAL RETURN
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Year ended:
December 31, 1996 ................. 36.91% 16.50% 11.26% 20.00%
December 31, 1995 ................. 54.59% 28.45% 31.04% 32.02%
December 31, 1994 ................. -3.47% -1.82% -2.43% -0.58%
December 31, 1993 ................. 14.35% 18.88% 13.36% 17.41%
December 31, 1992 ................. 4.85% 18.41% 7.77% 13.39%
December 31, 1991 ................. 40.96% 46.04% 51.19% 51.56%
December 31, 1990 ................. -23.46% -19.48% -17.41% -9.49%
December 31, 1989 ................. 25.81% 16.26% 20.17% 25.26%
December 31, 1988 ................. 25.63% 25.02% 20.37% 19.87%
December 31, 1987 ................. -7.66% -8.80% -10.48% -3.87%
December 31, 1986 ................. 15.30% 5.68% 3.58% 9.76%
December 31, 1985 ................. 42.57% 31.05% 30.97% 30.84%
December 31, 1984 ................. -11.73% -7.30% -15.83% -9.78%
December 31, 1983 ................. 32.53% 29.13% 20.13% 26.28%
Cumulative total return for the
period January 1, 1983 to December
31, 1996 ............................. 641.74% 434.41% 285.48% 492.59%
</TABLE>
- ------------
* Total return is a measure of investment performance that is based upon
the change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in
the preceding discussion.
The average annual total returns presented below are based upon the
cumulative total return as of December 31, 1996, assume a steady compounded
rate of return and are not year-by-year results, which fluctuated over the
periods as shown.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------------------
LIPPER SMALL
RUSSELL CO.
HISTORICAL RUSSELL 2000 GROWTH GROWTH
PORTFOLIOS 2000 INDEX INDEX FUND INDEX
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Three years ........... 26.89% 13.68% 12.47% 15.32%
Five years ............ 19.62% 15.64% 11.69% 15.24%
Ten years ............. 14.45% 12.42% 10.88% 14.34%
Since January 1, 1983 15.38% 12.72% 10.12% 13.15%
</TABLE>
B-7
<PAGE>
THE HUDSON RIVER TRUST
Principal Office Located at
1345 Avenue of the Americas -- New York, New York 10105
The Hudson River Trust (the "Trust") is a mutual fund, currently issuing
fourteen series of shares of beneficial interest, each representing a
separate investment portfolio (each a "Portfolio"). The Portfolios are The
Asset Allocation Series: Alliance Conservative Investors, Alliance Balanced
and Alliance Growth Investors; The Equity Series: Alliance Growth and Income,
Alliance Equity Index, Alliance Common Stock, Alliance Global, Alliance
International, Alliance Aggressive Stock and Alliance Small Cap Growth; and
The Fixed Income Series: Alliance Money Market, Alliance Intermediate
Government Securities, Alliance Quality Bond and Alliance High Yield. An
investment in the Alliance Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government. Shares of each Portfolio are currently
divided into two classes: Class IA shares, ,offered pursuant to another
prospectus and Class IB shares, offered hereby.
This prospectus sets forth concisely the investment objectives and policies
of the fourteen 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 relating to Class IB shares ("SAI")
dated May 1, 1997 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. California
residents may obtain the SAI at no charge by calling 1-800-999-3527.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Financial Highlights......................... 2
The Trust.................................... 3
Investment Objectives and Policies........... 3
Investment Techniques........................ 18
Certain Investment Restrictions.............. 24
Management of the Trust...................... 24
Description of the Trust's Shares............ 28
Dividends, Distributions and Taxes........... 30
Investment Performance....................... 31
Appendix A--Description of Bond Ratings ..... A-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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS DATED MAY 1, 1997
- -----------------------------------------------------------------------------
HRT103 (5/97) Copyright 1996 The Hudson River Trust. All rights reserved.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited by Price
Waterhouse LLP, the Trust's independent accountants. The December 31, 1996
audited financial statements of the Trust and the "Report of Independent
Accountants" appear in the SAI. The Trust's annual report, which contains
additional performance information, is available without charge upon request.
No Class IB shares of the Alliance Conservative Investors, Alliance Balanced,
Alliance Growth and Income, Alliance Equity Index, Alliance International,
Alliance Small Cap Growth, Alliance Intermediate Government Securities and
Alliance Quality Bond Portfolios were outstanding as of December 31, 1996.
FINANCIAL HIGHLIGHTS
PER SHARE INCOME AND CAPITAL CHANGES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)(b)
<TABLE>
<CAPTION>
OCTOBER 2, 1996 TO DECEMBER 31, 1996
-------------------------------------
ALLIANCE ALLIANCE ALLIANCE
AGGRESSIVE COMMON GROWTH
STOCK STOCK INVESTORS
------------ ---------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period ........ $ 37.28 $ 17.90 $ 16.78
------------ ---------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...................... (0.01) 0.02 0.07
Net realized and unrealized gain on
investments and foreign currency
transactions .............................. 0.85 1.52 0.71
------------ ---------- -----------
Total from investment operations ........... 0.84 1.54 0.78
------------ ---------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment income ....... -- (0.00) (0.02)
Dividends in excess of net investment income (0.02) (0.03) (0.09)
Distributions from realized gains .......... (0.23) (0.16) (0.02)
Distributions in excess of realized gains .. (2.04) (1.03) (0.24)
Tax return of capital distributions ........ -- -- --
------------ ---------- -----------
Total dividends and distributions .......... (2.29) (1.22) (0.37)
------------ ---------- -----------
Net asset value, end of period ............... $ 35.83 $18.22 $ 17.19
============ ========== ===========
Total return (c).............................. 2.32% 8.49% 4.64%
============ ========== ===========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............ $ 613 $ 1,244 $ 472
Ratio of expenses to average net assets ..... 0.73%(a) 0.63%(a) 0.84%(a)
Ratio of net investment income to average net
assets ..................................... (0.10)%(a) 0.61%(a) 1.69%(a)
Portfolio turnover rate....................... 108% 55% 190%
Average commission rate paid ................. $0.0263 $0.0565 $0.0495
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE ALLIANCE MONEY
GLOBAL HIGH YIELD MARKET
---------- ------------ ----------
<S> <C> <C> <C>
Net asset value, beginning of period ........ $ 16.57 $10.25 $10.16
---------- ------------ ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...................... 0.02 0.19 0.11
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions .............................. 0.81 0.15 0.01
---------- ------------ ----------
Total from investment operations ........... 0.83 0.34 0.12
---------- ------------ ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ....... -- (0.03) (0.02)
Dividends in excess of net investment income (0.11) (0.25) (0.10)
Distributions from realized gains .......... (0.10) (0.01) --
Distributions in excess of realized gains .. (0.28) (0.29) --
Tax return of capital distributions ........ (0.00) -- --
---------- ------------ ----------
Total dividends and distributions .......... (0.49) (0.58) (0.12)
---------- ------------ ----------
Net asset value, end of period ............... $ 16.91 $10.01 $10.16
========== ============ ==========
Total return (c).............................. 4.98% 3.32% 1.29%
========== ============ ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............ $ 290 $ 685 $3,184
Ratio of expenses to average net assets ..... 0.86%(a) 0.82%(a) 0.67%(a)
Ratio of net investment income to average net
assets ..................................... 0.48%(a) 8.71%(a) 4.94%(a)
Portfolio turnover rate....................... 59% 485% --
Average commission rate paid ................. $0.0418 -- --
</TABLE>
- ------------
* 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.
(a) Annualized.
(b) Net investment income and capital changes per share are based upon
monthly average shares outstanding.
(c) 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.
2
<PAGE>
THE TRUST
The Trust is an open-end management investment company under the Investment
Company Act of 1940 (the "Investment Company Act"). As a "series" investment
company, the Trust issues shares of beneficial interest that are currently
divided into fourteen Portfolios, although the Trust may, from time to time,
establish additional Portfolios. Each Portfolio is a separate diversified
series of the Trust, and the Trust's assets and liabilities are divided among
the Portfolios. Originally organized as a Maryland corporation which
commenced operations on March 22, 1985, the Trust was reorganized as a
Massachusetts business trust on July 10, 1987.
Shares of each Portfolio are currently divided into two classes: Class IA
shares are offered pursuant to another prospectus at net asset value and are
not subject to fees imposed pursuant to a distribution plan. Class IB shares
are offered pursuant to this prospectus at net asset value and are subject to
distribution fees imposed pursuant to a distribution plan (the "Distribution
Plan") adopted under Rule 12b-1 under the Investment Company Act. Class IB
shares are sold to an insurance company separate account of Equitable.
Inquiries regarding Class IB shares should be addressed to Equitable, Income
Management Group, at 200 Plaza Drive, Secaucus, NJ 07096 (toll-free:
1-800-789-7771).
The two classes of shares are offered under the Trust's multiple class
distribution system approved by the Trust's Board of Trustees, and are
designed to allow promotion of insurance products investing in the Trust
through alternative distribution channels. Under the Trust's multi-class
system, shares of each class of a Portfolio represent an equal pro rata
interest in the assets of that Portfolio and, generally, have identical
voting, dividend, liquidation, and other rights, other than with respect to
the payment of distribution fees under the Distribution Plan.
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") and
certain insurance companies unaffiliated with Equitable. Equitable was the
record owner of approximately 99.7% and 100% of the Trust's Class IA and
Class IB shares, respectively, as of March 31, 1997, and consequently may be
deemed to control the Trust.
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 could 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 Alliance 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 Alliance Balanced Portfolio's fundamental investment objective
is to achieve a high return through both appreciation of capital
and current income. The Alliance 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 Alliance 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
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income securities, including at times common stocks issued by
intermediate and small-sized companies and at times lower quality
fixed income securities commonly known as "junk bonds."
THE EQUITY SERIES
o The Alliance 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.
o The Alliance 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
("S&P") 500 Composite Stock Price Index, including reinvestment of
dividends, at a risk level consistent with that of the Index.
o The Alliance 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 Alliance Global Portfolio's fundamental investment objective is
to achieve long-term growth of capital. The Alliance Global
Portfolio will pursue this objective by investing primarily in
equity securities of non-U.S. companies as well as U.S. issuers.
o The Alliance 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-U.S. companies with
prospects for growth.
o The Alliance Aggressive Stock Portfolio's fundamental investment
objective is to achieve long-term growth of capital. The Alliance
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 that, in the
opinion of Alliance Capital Management L.P. ("Alliance"), have
strong growth prospects and in covered options on those securities.
o The Alliance Small Cap Growth Portfolio's fundamental investment
objective is to achieve long-term growth of capital. The Alliance
Small Cap Growth Portfolio will pursue this objective by investing
primarily in U.S. common stocks and other equity-type securities
issued by smaller companies that, in the opinion of Alliance, have
favorable growth prospects.
THE FIXED INCOME SERIES
o The Alliance Money Market Portfolio's fundamental investment
objective is to obtain a high level of current income, preserve its
assets and maintain liquidity. The Alliance Money Market Portfolio
will pursue this objective by investing in primarily high quality
U.S. dollar-denominated money market instruments.
o The Alliance 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 Alliance Intermediate Government Securities
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 Alliance 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 Alliance Quality Bond Portfolio
reserves the right to invest in convertible debt securities,
preferred stocks and dividend-paying common stocks.
o The Alliance 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 Alliance High Yield Portfolio will pursue this
objective by investing primarily
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in a diversified mix of high yield, fixed income securities, which
generally involve greater volatility of price and risk of principal
and income than higher quality fixed income securities. Lower
quality debt securities are commonly 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 SAI.
THE ASSET ALLOCATION SERIES
The Alliance Conservative Investors Portfolio, the Alliance Balanced
Portfolio and the Alliance 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 an
effort to reduce risk while producing desired return objectives. Portfolio
management, therefore, will consist not only of selecting specific securities
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
equity market strength. Consequently, the asset mix for the Alliance
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 Alliance
Growth Investors Portfolio attempts to provide for upside potential without
excessive volatility.
The "balanced investor" is somewhat less aggressive than the growth investor
and has a medium-to long-term investment horizon. 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 Alliance Balanced Portfolio attempts to
capture a sizable portion of the market's upside while diversifying risk
among asset classes.
Alliance Capital Management L.P., the Trust's investment adviser
("Alliance"), has established an asset allocation committee (the
"Committee"), all the members of which are employees of Alliance, 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 Alliance
Conservative Investors Portfolio particularly emphasize risk assessment of
each asset class viewed over the shorter term, while decisions for the
Alliance 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 it appears that cash flow will, in the
opinion of Alliance, be insufficient to achieve the desired asset mix, the
Portfolios will sell securities and reinvest the proceeds in the appropriate
asset class.
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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 the securities
in which the Portfolios in the Asset Allocation Series may invest, these
Portfolios bear the risk that Alliance will not accurately assess and respond
to changing market conditions. While Alliance 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, these
Portfolios may incur additional operating expenses during periods of
frequently changing asset mix ranges.
ALLIANCE CONSERVATIVE INVESTORS PORTFOLIO--INVESTMENT POLICIES
The Alliance 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
instruments and cash) and publicly traded common stocks and other equity
securities of U.S. and non-U.S. 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"). The Portfolio may invest in the types of equity
securities in which the Alliance Common Stock Portfolio may invest, including
convertible securities. No more than 15% of the Portfolio's assets will be
invested in securities of non-U.S. 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, as determined by
Alliance, that is 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. In
some cases, Alliance's calculation of duration will be based on certain
assumptions (including assumptions regarding prepayment rates, in the case of
mortgage-backed or asset-backed securities, and foreign and domestic interest
rates). As of December 31, 1996, the duration of a 10-year Treasury bond was
considered by Alliance to be 7.2 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.
ALLIANCE BALANCED PORTFOLIO--INVESTMENT POLICIES
The Alliance 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 Alliance 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 Alliance 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
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relevant considerations, including the risks associated with each investment
medium. Although the Alliance Balanced Portfolio will seek to reduce the
risks associated with any one investment medium by utilizing a variety of
investments, performance will depend upon Alliance's ability to assess
accurately and react to changing market conditions.
The Alliance 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, as well
as money market instruments). 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 Alliance Balanced Portfolio will
consist of the types of securities in which the Alliance Common Stock
Portfolio may invest. The money market securities will consist of the types
of securities and credit quality in which the Alliance 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 Alliance considers them appropriate investments under the
circumstances. In addition, the Alliance Balanced Portfolio may at times hold
some of its assets in cash. The Portfolio may invest up to 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 Alliance 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 Alliance 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.
ALLIANCE GROWTH INVESTORS PORTFOLIO--INVESTMENT POLICIES
The Alliance 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 both exchange-traded and
over-the-counter common stocks and equity-type securities, which may include
preferred stock and convertible securities, and may include securities issued
by intermediate-and small-sized companies that, in the opinion of Alliance,
have favorable growth prospects. More risk is associated with investment in
intermediate and small-sized companies because they are often dependent on
limited product lines, financial resources or management groups. They may be
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, and may trade
infrequently or in limited volume. The prices of these stocks often fluctuate
more than those of larger, more established companies. 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"; and "Investment
Techniques--Risk Factors of Lower Rated Fixed Income Securities," below. For
the fiscal year ended December 31,
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1996, approximately 19% of the Portfolio was invested in fixed income
securities, all rated AAA or its equivalent. No more than 30% of the
Portfolio's assets will be invested in securities of non-U.S. 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
Alliance 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
ALLIANCE GROWTH AND INCOME PORTFOLIO--INVESTMENT POLICIES
The Alliance 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 Alliance 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 Alliance. 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.
The Alliance Growth and Income Portfolio may invest without limit in
securities convertible into common stocks, which include convertible bonds,
convertible preferred stocks and convertible warrants. The Alliance 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 yield that is higher than that of
the underlying stock but lower than that of 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 Alliance 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 Alliance 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 Alliance 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 Alliance Growth and Income Portfolio
may invest in certain money market instruments. See "Investment
Techniques--Certain Money Market Instruments," below.
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ALLIANCE EQUITY INDEX PORTFOLIO--INVESTMENT POLICIES
The Alliance Equity Index Portfolio's investment objective is to seek a total
return before expenses that approximates the total return of the S&P 500
Index (the "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 Alliance 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 that 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 Alliance Equity Index Portfolio's industry diversification, and therefore
economic events could potentially have a dramatically different impact on the
performance of the Alliance Equity Index Portfolio from that of the Index.
Recognizing this fact, the modeling techniques also consider industry
diversification when selecting investments for the Alliance Equity Index
Portfolio. The investment adviser also seeks to diversify the Alliance Equity
Index Portfolio's assets with respect to market capitalization. As a result,
the Alliance Equity Index Portfolio will include securities of smaller and
medium-sized capitalization companies in the Index.
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 Alliance 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 Alliance Equity Index Portfolio's investments and the Index.
Cash may be accumulated in the Alliance Equity Index Portfolio until it
reaches approximately 1% of the value of the Alliance Equity Index Portfolio
at which time such cash will be invested in common stocks as described above.
Accumulation of cash increases tracking error. The Alliance 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
Alliance Equity Index Portfolio.
In order to reduce brokerage costs, maintain liquidity to meet shareholder
redemptions or minimize tracking error when the Alliance Equity Index
Portfolio holds cash, the Alliance 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 Alliance Equity Index Portfolio plus
the contract value of futures contracts underlying call options purchased by
the Alliance Equity Index Portfolio will not exceed 20% of the Alliance
Equity Index Portfolio's total assets.
The Alliance 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.
ALLIANCE COMMON STOCK PORTFOLIO--INVESTMENT POLICIES
The Alliance Common Stock Portfolio attempts to achieve its investment
objective by investing primarily in common stocks and other equity-type
securities that Alliance believes will share in the growth of the nation's
economy over a long period.
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Most of the time, the Alliance 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 Alliance
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 Alliance 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, 1996, less than 1% of the average assets
of the Portfolio were invested in higher yielding securities.
The Alliance Common Stock Portfolio may make temporary investments in money
market instruments of the same type and credit quality as those in which the
Alliance 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 Alliance 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.
ALLIANCE GLOBAL PORTFOLIO--INVESTMENT POLICIES
The Alliance 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-U.S. companies that,
in the opinion of Alliance, have prospects for growth, as well as in
securities issued by United States companies. These non-U.S. companies may
have operations in the United States, in their country of incorporation or in
other countries. The Alliance 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 Alliance Global
Portfolio may at times invest substantially all of its assets in securities
issued by U.S. companies or in cash or cash equivalents, including money
market instruments issued by foreign entities.
The Alliance 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 Alliance Global Portfolio intends under normal conditions to invest in
equity securities. The Portfolio may make secured loans of up to 50% of its
total portfolio securities. See "Investment Techniques--Securities Lending,"
below. The Alliance 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 Alliance 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.
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ALLIANCE INTERNATIONAL PORTFOLIO--INVESTMENT POLICIES
The Alliance International Portfolio attempts to achieve its objective by
investing primarily in a diversified portfolio of equity securities selected
principally to permit participation in non-U.S. companies or foreign
governmental enterprises that, in the opinion of Alliance, have prospects for
growth. These non-U.S. companies may have operations in the United States, in
their country of incorporation and/or in other countries. The Alliance
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 Alliance International Portfolio may purchase securities of
developing countries, which include, among others, Mexico, Brazil, Hong Kong,
India, Poland, Turkey and South Africa. The Alliance International Portfolio
intends to diversify investments among several countries, although for
temporary defensive purposes, the Alliance 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 Alliance 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 Alliance
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 Alliance International Portfolio intends under normal
market conditions to invest primarily in equity securities. The Alliance
International Portfolio may make loans of up to 50% of its portfolio
securities. See "Investment Techniques--Securities Lending," below. The
Alliance 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 Alliance International 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--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.
ALLIANCE AGGRESSIVE STOCK PORTFOLIO--INVESTMENT POLICIES
The Alliance 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 that, in the opinion of Alliance,
have favorable growth prospects. The Alliance 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 Alliance 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
Alliance 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 Alliance 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 Alliance 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 Alliance 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.
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Risk Factors. More risk is associated with investment in intermediate-and
small-sized companies, because they are often dependent on limited product
lines, financial resources or management groups. They may be 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, and may trade infrequently or in
limited volume. The prices of these stocks often fluctuate more than those of
larger more established companies.
ALLIANCE SMALL CAP GROWTH PORTFOLIO--INVESTMENT POLICIES
The Alliance Small Cap Growth Portfolio will pursue its objective by
investing primarily in U.S. common stocks and other equity-type securities
issued by smaller companies with favorable growth prospects. The Alliance
Small Cap Growth 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.
The Alliance Small Cap Growth Portfolio may also invest in equity-type
securities other than common stocks (such as preferred stocks and convertible
debt instruments) and in protective options if it is Alliance's judgment
that, in light of economic conditions, such investments offer the Alliance
Small Cap Growth Portfolio better prospects for achieving its objective.
Under certain market conditions, the Small Cap Growth 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 Alliance Small Cap Growth
Portfolio will not invest more than 20% of its net asset value, measured at
the time of investment, in securities principally traded on foreign
securities markets (other than commercial paper). See "Investment
Techniques--Foreign Securities and Currencies," below. The Alliance Small Cap
Growth Portfolio may make secured loans of up to 50% of its total portfolio
securities. See "Investment Techniques--Securities Lending," below. The
Alliance Small Cap Growth Portfolio may write covered call options and may
purchase call and put options on individual equity securities, securities
indexes and foreign currencies. The Alliance Small Cap Growth Portfolio may
also purchase and sell stock index and foreign currency futures contracts and
options thereon. See "Investment Techniques--Forward Commitments and
When-Issued and Delayed Delivery Securities," "Investment
Techniques--Options," "Investment Techniques--Futures," and "Investment
Techniques--Risk Factors in Options and Futures," below.
Under current SEC guidelines, for so long as the Portfolio has the words
"Small Cap" in its name, it is required, under normal market conditions, to
invest at least 65% of its total assets in securities of smaller
capitalization companies (currently considered by Alliance to mean companies
with market capitalization at or below $2 billion).
Risk Factors. More risk is associated with investment in small-sized
companies, because they tend to be often dependent on limited product lines,
financial resources or management groups. They tend to be more vulnerable to
competition from larger companies with greater resources and to economic
conditions affecting their market sector. 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, and may trade infrequently or in limited volume. The prices of
these stocks often fluctuate more than those of larger, more established
companies.
THE FIXED INCOME SERIES
ALLIANCE MONEY MARKET PORTFOLIO--INVESTMENT POLICIES
The Alliance 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
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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 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 (see
"Investment Techniques--Repurchase Agreements," below). Time deposits with
maturities greater than seven days are considered to be illiquid securities.
Investments by the Alliance Money Market Portfolio are limited to those which
present minimal credit risk. If a security held by the Alliance Money Market
Portfolio is no longer deemed to present minimal credit risk, the Alliance
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, 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
Alliance 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.
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO--INVESTMENT POLICIES
The Alliance Intermediate Government Securities 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 Alliance Intermediate Government Securities 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 Alliance Intermediate Government Securities 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.
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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.
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
Alliance Intermediate Government Securities Portfolio's shares.
The Portfolio buys and sells securities with a view to maximizing current
return without, in the view of Alliance, 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 Alliance's
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 securities held by the Portfolio. However, at all times, each instrument
held by the Portfolio will have either a final maturity of not more than ten
years or a duration, as determined by Alliance, 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. In some cases, Alliance's calculation of duration
will be based on certain assumptions (including assumptions regarding
prepayment rates, in the mortgage-backed or asset-backed securities, and
foreign and domestic interest rates). As of December 31, 1996, the duration
of a 10-year Treasury bond was considered by Alliance to be 7.2 years. The
Portfolio may also invest a substantial portion of its assets in money market
instruments. See "Investment Techniques--Certain Money Market Instruments,"
below.
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It is a fundamental policy of the Alliance Intermediate Government Securities
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 Alliance Intermediate Government Securities Portfolio
may also purchase collateralized mortgage obligations ("CMOs") issued by
non-governmental issuers and securities issued by a real estate mortgage
investment conduits ("REMICs"). See "Investment Techniques--Mortgage-Backed
and Asset-Backed Securities," below. The Alliance Intermediate Government
Securities Portfolio will purchase only CMOs only if they collateralized by
U.S. Government Securities. However, CMOs issued by entities other than U.S.
Government agencies or instrumentalities and securities issued by REMICs are
not considered U.S. Government Securities for purposes of the investment
policies of the Alliance Intermediate Government Securities 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 Alliance, such investment is 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. Because U.S. Government Securities with shorter maturities
generally have a lower yield to maturity, however, 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.
ALLIANCE QUALITY BOND PORTFOLIO--INVESTMENT POLICIES
The Alliance Quality Bond Portfolio expects to invest in readily marketable
securities with relatively attractive yields, but which do not, in the
opinion of Alliance, involve undue risk of loss of capital. The
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Alliance Quality Bond Portfolio will follow a policy of investing at least
65% of its total assets in securities which are rated at the time of purchase
at least Baa by Moody's or BBB by S&P, or in unrated fixed income securities
determined by Alliance to be of comparable quality. In the event that the
credit rating of a security held by the Alliance Quality Bond Portfolio falls
below investment grade (or, in the case of unrated securities, Alliance
determines that the quality of such security has deteriorated below
investment grade), the Alliance Quality Bond Portfolio will not be obligated
to dispose of such security and may continue to hold the obligation if, in
the opinion of Alliance, such investment is appropriate in the circumstances.
The Alliance 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 Alliance Quality Bond Portfolio has complete flexibility as to the types
of securities in which it will invest and the relative proportions thereof,
and the Alliance 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 Alliance's assessment of prospective
cyclical changes even if such action may adversely affect current income.
The Alliance Quality Bond Portfolio may invest in foreign securities. The
Alliance 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
Alliance 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 Alliance Quality Bond Portfolio may
invest in certain money market instruments. See "Investment
Techniques--Certain Money Market Instruments," below.
The Alliance Quality Bond Portfolio may purchase put and call options and
write covered put and call options on securities it may purchase. The
Alliance 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 Alliance 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 Alliance 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 Alliance 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 Alliance 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 Alliance 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 Alliance 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 Alliance 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 Alliance Quality
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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 such transaction. If there is a
default by the other party to such a transaction, the Alliance Quality Bond
Portfolio will have contractual remedies pursuant to the agreements related
to the transaction. Caps and floors are relatively recent innovations which
may be illiquid.
Zero Coupon Securities. To the extent consistent with its investment
objective, the Alliance 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. Accordingly, such
securities usually trade at a deep discount from their face or par value and
will be subject to greater fluctuations in market value in response to
changing interest rates than debt obligations of comparable maturities that
make current distributions of interest. The Alliance 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 Alliance 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.
ALLIANCE HIGH YIELD PORTFOLIO--INVESTMENT POLICIES
The Alliance High Yield Portfolio attempts to achieve its objective by
investing primarily in a diversified mix of high yield, fixed income
securities, which generally involve 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 assets 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 Alliance
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 Alliance, 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 Alliance; however, this restriction will not apply to (i)
fixed income securities which, in the opinion of Alliance, 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 Alliance, 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 Alliance 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
Alliance, such investment is considered appropriate under the circumstances.
For the fiscal year ended December 31, 1996, 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: 0% in
securities rated AAA or its equivalent, 13.4% in securities rated BB or its
equivalent and 58.6% in securities rated B or its equivalent. Of these
securities, 89.8% were rated by an NRSRO and 10.2% 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.
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
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risks, in the case of non-U.S. dollar denominated foreign securities. The
Portfolio 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 Alliance High Yield Portfolio will attempt 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 Alliance 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 Alliance Money Market and the Alliance
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 Alliance Money Market, Alliance Equity Index and
Alliance Intermediate Government Securities Portfolios, may also write
covered put and call options and buy put and call options on foreign
currencies. The Alliance Balanced, Alliance Common Stock, Alliance Aggressive
Stock, Alliance Small Cap Growth, Alliance High Yield, Alliance Global,
Alliance International, Alliance Conservative Investors, Alliance Growth
Investors, Alliance Intermediate Government Securities, Alliance Quality
Bond, Alliance Growth and Income and Alliance Equity Index Portfolios may buy
and sell 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 Alliance 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 predict with certainty 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
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<PAGE>
the 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
Alliance 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 invest in money market instruments, including
certificates of deposit, time deposits, bankers' acceptances, bank notes and
other short-term debt obligations issued by commercial banks or 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 Alliance Equity Index Portfolio, may also
invest in 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 or 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 but of comparable quality 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 Alliance'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
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<PAGE>
make it more difficult for the Portfolio 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 also reduce
their current yield and total return. However, Alliance 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 Alliance, subject to the
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%
(10% in the case of the Alliance Money Market Portfolio) of the Portfolio's
net assets would be invested in "illiquid securities."
LOAN ASSIGNMENTS AND PARTICIPATIONS
The Alliance 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 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, and the Portfolio will generally 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
payment and delivery taking place in the future in order to secure what
Alliance considers to be an advantageous price or yield to the Portfolio at
the time of entering into the transaction. However, the
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<PAGE>
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 an advantageous price or
yield. Forward commitments and when-issued and delayed delivery transactions
are generally expected to settle within four 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, liquid assets 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 Alliance Money Market and Alliance 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 Alliance Money Market,
Alliance Intermediate Government Securities and Alliance 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.
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,
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<PAGE>
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 Alliance Money Market, Alliance Intermediate
Government Securities and Alliance 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 Alliance High Yield, Alliance Global, Alliance International, Alliance
Conservative Investors, Alliance Growth Investors, Alliance Intermediate
Government Securities, Alliance Balanced and Alliance 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 Alliance Intermediate Government
Securities and Alliance Quality Bond Portfolios) as well as the Alliance
Common Stock, Alliance Aggressive Stock, Alliance Small Cap Growth and
Alliance 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 Alliance 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 Alliance High Yield, Alliance
Global, Alliance International, Alliance Conservative Investors, Alliance
Growth Investors, Alliance Balanced, Alliance Common Stock, Alliance
Aggressive Stock, Alliance Small Cap Growth, Alliance Quality Bond and
Alliance 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 Alliance 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) 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 Alliance Equity Index Portfolio plus the contract
value of futures contracts underlying call options purchased by the Alliance
Equity Index Portfolio will not exceed 20% of the Alliance 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 liquid assets (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.
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FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
All the Portfolios, except the Alliance Money Market, Alliance Intermediate
Government Securities and Alliance 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.
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 U.S. dollar value of securities
denominated in a foreign currency or protecting the U.S. 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 Alliance Intermediate Government Securities
and Alliance 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 Alliance High Yield and
Alliance Intermediate Government Securities 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
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securities or possible loss of rights in the collateral should the borrower
fail financially. Loans will only be made to firms deemed by Alliance to be
of good standing and will not be made unless, in the judgment of Alliance,
the consideration to be earned from such loans would justify the risk.
PORTFOLIO TURNOVER
Portfolio turnover rates are set forth under "Financial Highlights." These
rates of portfolio turnover may be greater than those of most other
investment companies. A high rate of portfolio turnover involves
correspondingly greater brokerage and other expenses than a lower rate, which
must be borne by the Portfolio.
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.
The Alliance High Yield and Alliance Intermediate Government Securities
Portfolios may make secured loans of portfolio securities or cash without
limitation. None of the other Portfolios will make loans, except that each
such Portfolio 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
holdings in that industry exceed 25% of the Portfolio's total assets.
However, this restriction does not apply to investments by the Alliance 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 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 Alliance 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 Alliance 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 Alliance 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.
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 Agreement and Declaration of Trust and By-laws.
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THE INVESTMENT ADVISER
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 (the "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, administrative and other services, other than investor
services or accounting 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>
FIRST NEXT NEXT NEXT
$750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
-------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Alliance International...................... 0.900% 0.825% 0.800% 0.780% 0.770%
Alliance Global............................. 0.675% 0.600% 0.550% 0.530% 0.520%
Alliance Aggressive Stock................... 0.625% 0.575% 0.525% 0.500% 0.475%
Alliance Common Stock....................... 0.475% 0.425% 0.375% 0.355% 0.345%*
Alliance Growth and Income.................. 0.550% 0.525% 0.500% 0.480% 0.470%
Alliance Small Cap Growth................... 0.900% 0.850% 0.825% 0.800% 0.775%
Alliance Growth Investors................... 0.550% 0.500% 0.450% 0.425% 0.400%
Alliance Balanced........................... 0.450% 0.400% 0.350% 0.325% 0.300%
Alliance Conservative Investors............. 0.475% 0.425% 0.375% 0.350% 0.325%
Alliance High Yield......................... 0.600% 0.575% 0.550% 0.530% 0.520%
Alliance Quality Bond....................... 0.525% 0.500% 0.475% 0.455% 0.445%
Alliance Intermediate Government
Securities................................. 0.500% 0.475% 0.450% 0.430% 0.420%
Alliance Equity Index....................... 0.325% 0.300% 0.275% 0.255% 0.245%
Alliance Money Market....................... 0.350% 0.325% 0.300% 0.280% 0.270%
</TABLE>
* On assets in excess of $10 billion, the management fee for the Alliance
Common Stock Portfolio is reduced to 0.335% of average daily net assets.
THE PORTFOLIO MANAGERS
THE ASSET ALLOCATION SERIES
ALLIANCE CONSERVATIVE INVESTORS, ALLIANCE BALANCED AND ALLIANCE GROWTH
INVESTORS PORTFOLIOS
Robert G. Heisterberg has been the person principally responsible for the
Alliance Conservative Investors, Alliance Balanced and Alliance Growth
Investors Portfolios' investment programs since February 12, 1996. Mr.
Heisterberg, a Senior Vice President of Alliance and Global Economic Policy
Analysis, has been associated with Alliance since 1977.
25
<PAGE>
THE EQUITY SERIES
ALLIANCE GROWTH AND INCOME PORTFOLIO
Paul Rissman and W. Theodore Kuck have been the persons principally
responsible for the Alliance Growth and Income Portfolio's investment
program, Mr. Rissman since February 12, 1996 and Mr. Kuck since the
Portfolio's inception. Mr. Rissman, a Vice President of Alliance, has been
associated with Alliance since 1989. Mr. Kuck, a Vice President of Alliance,
has been associated with Alliance since 1971.*
ALLIANCE EQUITY INDEX PORTFOLIO
Judith A. Maglio has been the person principally responsible for the Alliance
Equity Index Portfolio's investment program since its inception. Ms. Maglio,
a Vice President of Alliance, has been associated with Alliance since 1970.
ALLIANCE COMMON STOCK PORTFOLIO
Tyler J. Smith has been the person principally responsible for the Alliance
Common Stock Portfolio's investment program since 1977. Mr. Smith, a Senior
Vice President of Alliance, has been associated with Alliance since 1970.*
ALLIANCE GLOBAL AND ALLIANCE INTERNATIONAL PORTFOLIOS
Ronald L. Simcoe has been the person principally responsible for the Alliance
Global Portfolio's investment program since 1988 and the Alliance
International Portfolio's investment program since its inception. Mr. Simcoe,
a Vice President of Alliance, has been associated with Alliance since 1978.*
ALLIANCE AGGRESSIVE STOCK PORTFOLIO
Alden M. Stewart and Randall E. Haase have been the persons principally
responsible for the Alliance Aggressive Stock Portfolio's investment program
since 1993. Mr. Stewart, an Executive Vice President of Alliance, has been
associated with Alliance since 1970.* Mr. Haase, a Vice President of
Alliance, has been associated with Alliance since 1988.*
ALLIANCE SMALL CAP GROWTH PORTFOLIO
Michael F. Gaffney has been the person principally responsible for the
Alliance Small Cap Growth Portfolio's investment program since its inception.
Mr. Gaffney, a Senior Vice President of Alliance, has been associated with
Alliance since 1987.*
THE FIXED INCOME SERIES
ALLIANCE MONEY MARKET PORTFOLIO
Raymond J. Papera has been the person principally responsible for the
Alliance Money Market Portfolio's investment program since 1990. Mr. Papera,
a Vice President of Alliance, has been associated with Alliance since 1990.*
ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
Patricia J. Young and Jeffrey S. Phlegar have been the persons principally
responsible for the Alliance Intermediate Government Securities Portfolio's
investment program, Ms. Young since 1995 and Mr. Phlegar since 1997. Ms.
Young, a Senior Vice President of Alliance, has been associated with Alliance
since 1992. Mr. Phlegar, a Vice President of Alliance, has been associated
with Alliance since 1988.
ALLIANCE QUALITY BOND PORTFOLIO
Matthew Bloom has been the person principally responsible for the Alliance
Quality Bond Portfolio's investment program since 1995. Mr. Bloom, a Vice
President of Alliance, has been associated with Alliance since 1989.
26
<PAGE>
ALLIANCE HIGH YIELD PORTFOLIO
Wayne C. Tappe has been the person principally responsible for the Alliance
High Yield Portfolio's investment program since 1995. Mr. Tappe, a Vice
President of Alliance, has been associated with Alliance since 1987.*
- -----------------
* Prior to July 22, 1993, with Equitable Capital Management Corporation
("Equitable Capital"). On that date Alliance acquired the business and
substantially all of the assets of Equitable Capital and became the
investment adviser to the Trust.
THE TRUST'S EXPENSES
The Trust pays all of its operating expenses not specifically assumed by
Alliance. The expenses borne by the Trust include or could include taxes;
brokerage commissions; interest charges; securities lending fees; fees and
expenses of the registration or qualification of a Portfolio's securities
under federal or state securities laws; fees of the Portfolio's custodian,
transfer agent, independent accountants and legal counsel; all expenses of
shareholders' and trustees' meetings; all expenses of the preparation,
typesetting, printing and mailing to existing shareholders of prospectuses,
prospectus supplements, statements of additional information, proxy
statements, and annual and semi-annual reports; any proxy solicitor's fees
and expenses; costs of fidelity bonds and Trustees' liability insurance
premiums as well as extraordinary expenses such as indemnification payments
or damages awarded in litigation or settlements made; any membership fees of
the Investment Company Institute and similar organizations; costs of
maintaining the Trust's corporate existence and the compensation of Trustees
who are not directors, officers, or employees of Alliance or its affiliates.
The following table, reflecting the Trust's estimated expenses, is based on
information for Class IA shares the year ended December 31, 1996 and has been
restated to reflect (i) the fees that would have been paid to Alliance if the
present advisory agreement had been in effect as of January 1, 1996 and (ii)
estimated accounting expenses for the year ended December 31, 1997. No
information has been provided with respect to Alliance Small Cap Growth
Portfolio because such Portfolio has not yet completed its first fiscal year.
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE ALLIANCE GROWTH ALLIANCE ALLIANCE
CONSERVATIVE ALLIANCE GROWTH AND EQUITY COMMON
INVESTORS BALANCED INVESTORS INCOME INDEX STOCK
TYPE OF EXPENSE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------- -------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.48% 0.42% 0.53% 0.55% 0.33% 0.38%
12b-1 Fees ............... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses ........... 0.07% 0.05% 0.06% 0.05% 0.05% 0.03%
-------------- ----------- ----------- ----------- ----------- -----------
Total Expenses ........... 0.80% 0.72% 0.84% 0.85% 0.63% 0.66%
============== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE ALLIANCE INTERMEDIATE ALLIANCE ALLIANCE
ALLIANCE AGGRESSIVE MONEY GOVERNMENT QUALITY HIGH ALLIANCE
GLOBAL STOCK MARKET SECURITIES BOND YIELD INTERNATIONAL
TYPE OF EXPENSE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------- ----------- ------------ ----------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees .............. 0.65% 0.55% 0.35% 0.50% 0.53% 0.60% 0.90%
12b-1 Fees ......... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses ..... 0.08% 0.03% 0.04% 0.09% 0.05% 0.06% 0.18%
----------- ------------ ----------- -------------- ----------- ----------- ---------------
Total Expenses ..... 0.98% 0.83% 0.64% 0.84% 0.83% 0.91% 1.33%
=========== ============ =========== ============== =========== =========== ===============
</TABLE>
27
<PAGE>
Actual investment advisory fees, other expenses and total expenses for the
period ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE ALLIANCE GROWTH ALLIANCE ALLIANCE
CONSERVATIVE ALLIANCE GROWTH AND EQUITY COMMON
INVESTORS BALANCED INVESTORS INCOME 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% 0.52% 0.55% 0.35% 0.36%
12b-1 Fees ............... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses ........... 0.06% 0.04% 0.05% 0.03% 0.04% 0.02%
-------------- ----------- ----------- ----------- ----------- -----------
Total Expenses ........... 0.86% 0.66% 0.82% 0.83% 0.64% 0.63%
============== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE
ALLIANCE ALLIANCE INTERMEDIATE ALLIANCE ALLIANCE
ALLIANCE AGGRESSIVE MONEY GOVERNMENT QUALITY HIGH ALLIANCE
GLOBAL STOCK MARKET SECURITIES BOND YIELD INTERNATIONAL
TYPE OF EXPENSE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------- ----------- ------------ ----------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees .............. 0.53% 0.46% 0.40% 0.50% 0.55% 0.55% 0.90%
12b-1 Fees ......... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses ..... 0.07% 0.02% 0.03% 0.06% 0.04% 0.04% 0.16%
----------- ------------ ----------- -------------- ----------- ----------- ---------------
Total Expenses ..... 0.85% 0.73% 0.68% 0.81% 0.84% 0.84% 1.31%
=========== ============ =========== ============== =========== =========== ===============
</TABLE>
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 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 Trust is divided into fourteen
portfolios, each of which has Class IA and Class IB shares. The Board of
Trustees may establish additional Portfolios and additional classes of
shares. Each share of each class of a Portfolio shall be entitled to one vote
(or fraction thereof in respect of a fractional share) on matters on which
such shares (or class of shares) shall be entitled to vote. Shareholders of
each Portfolio vote together on any matter, except to the extent otherwise
required by the Investment Company Act, or when the Board of Trustees of the
Trust have determined that the matter affects only the interest of
shareholders of one or more classes, in which case only the shareholders of
such class or classes shall be entitled to vote thereon. Any matter shall be
deemed to have been effectively acted upon with respect to each Portfolio if
acted upon as provided in Rule 18f-2 under the Investment Company Act,
28
<PAGE>
or any successor rule, and in the Trust's Agreement and Declaration of Trust.
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.
Under the Trust's multi-class system, shares of each class of a Portfolio
represent equal pro rata interests in the assets of that Portfolio and,
generally, shall have identical voting, dividend, liquidation, and other
rights, preferences, powers, restrictions, limitations, qualifications and
terms and conditions, except that: (1) each class shall have a different
designation; (2) each class of shares shall bear its "Class Expenses"; (3)
each class shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to its distribution arrangements; (4) each
class shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class; (5) each class may have separate exchange privileges,
although exchange privileges are not currently contemplated; and (6) each
class may have different conversion features, although a conversion feature
is not currently contemplated. Expenses currently designated as "Class
Expenses" by the Trust's Board of Trustees under the plan pursuant to Rule
18f-3 are currently limited to payments to the Distributor pursuant to the
Distribution Plan for Class IB shares.
PURCHASE AND REDEMPTION
Class IB shares are offered at net asset value and are subject to
distribution fees under the Distribution Plan. 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 purchase 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.
The Trust has a distribution agreement for its Class IB shares with Equitable
Distributors, Inc. (the "Distributor"), a Delaware corporation and an
indirect, wholly-owned subsidiary of The Equitable Life Assurance Society of
the United States located at 787 Seventh Avenue, New York, New York 10019.
The Trust has adopted the Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act for the Class IB shares of the Trust. Pursuant to the
Distribution Plan, the Trust compensates the Distributor from assets
attributable to the Class IB shares for services rendered and expenses borne
in connection with activities primarily intended to result in the sale of
Trust's Class IB shares. It is anticipated that a portion of the amounts
received by the Distributor will be used to defray various costs incurred or
paid by the Distributor in connection with the printing and mailing of Trust
prospectuses, statements of additional information, any supplements thereto
and shareholder reports and holding seminars and sales meetings with
wholesale and retail sales personnel designed to promote the distribution of
Class IB shares. The Distributor may also use a portion of the amounts
received to provide compensation to financial intermediaries and third-party
broker-dealers for their services in connection with the distribution of
Class IB shares.
The Distribution Plan provides that the Trust, on behalf of each Portfolio,
may pay annually up to 0.50% of the average daily net assets of a Portfolio
attributable to its Class IB shares in respect of activities primarily
intended to result in the sale of Class IB shares. However, under the
distribution agreement payments to the Distributor for activities pursuant to
the Distribution Plan are limited to payments at an annual rate equal to
0.25% of average daily net assets of a Portfolio attributable to its Class IB
shares. Under the terms of the Distribution Plan and the distribution
agreement, each Portfolio is authorized to make payments monthly to the
Distributor which may be used to pay or reimburse entities providing
distribution and shareholder servicing with respect to the Class IB shares
for such entities' fees or expenses incurred or paid in that regard.
The Distribution Plan is of a type known as a "compensation" plan because
payments are made for services rendered to the Trust with respect to Class IB
shares regardless of the level of expenditures by the distributor. The
Trustees will, however, take into account such expenditures for purposes of
reviewing operations under the Distribution Plan and in connection with their
annual consideration of the Plan's
29
<PAGE>
renewal. The Distributor has indicated that it expects its expenditures to
include, without limitation: (a) the printing and mailing of Trust
prospectuses, statements of additional information, any supplements thereto
and shareholder reports for prospective Contract owners with respect to the
Class IB shares of the Trust; (b) those relating to the development,
preparation, printing and mailing of advertisements, sales literature and
other promotional materials describing and/or relating to the Class IB shares
of the Trust; (c) holding seminars and sales meetings designed to promote the
distribution of the Trust Class IB shares; (d) obtaining information and
providing explanations to wholesale and retail distributors of Contracts
regarding Trust investment objectives and policies and other information
about the Trust and its Portfolios, including the performance of the
Portfolios; (e) training sales personnel regarding the Class IB shares of the
Trust; and (f) financing any other activity that the Distributor determines
is primarily intended to result in the sale of Class IB shares.
All shares may redeemed in accordance with the Trust's Agreement and
Declaration of Trust and By-Laws. Class IB 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.
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 Alliance
Money Market Portfolio which mature in 60 days or less are valued at
amortized cost, which approximates market value. Securities held in the
Alliance 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 (the "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 Portfolios.
30
<PAGE>
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 Alliance 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 period,
expressed as an annual percentage rate. The Alliance 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 Alliance Intermediate Government Securities, Alliance Quality Bond and
Alliance 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.
31
<PAGE>
APPENDIX A
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.
A-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.
A-2
<PAGE>
THE HUDSON RIVER TRUST
1345 Avenue of the Americas -- New York, New York 10105
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
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, 1997 relating to Class IA shares and retained for future reference. This
Statement of Additional Information relates to the Trust's Class IA shares. A
separate Statement of Additional Information relates to the Trust's Class IB
shares.
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 ... 7
Management of the Trust................................................. 21
Investment Advisory and Other Services.................................. 25
Brokerage Allocation.................................................... 27
Trust Expenses and Other Charges........................................ 29
Purchase and Pricing of Securities...................................... 29
Certain Tax Considerations.............................................. 31
Portfolio Performance................................................... 32
Other Services.......................................................... 34
Financial Statements ................................................... 36
Appendix A--Description of Commercial Paper Ratings..................... A-1
</TABLE>
- -----------------------------------------------------------------------------
HRT-SAI (5/97) Copyright 1997. 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 reorganized as a
Massachusetts business trust. Shares of each Portfolio are divided into two
classes: Class IA shares and Class IB shares. Class IA shares are offered at
net asset value pursuant to this Statement of Additional Information and a
related prospectus and are not subject to fees imposed under any distribution
plan. Class IB shares are offered at net asset value pursuant to a separate
Statement of Additional Information and related prospectus and are subject to
distribution fees imposed under a distribution plan (the "Distribution Plan")
adopted pursuant to Rule 12b-1 under the Investment Company Act. Prior to
October 1, 1996, the Trust offered only Class IA shares.
The two classes of shares are offered under the Trust's multiple class
distribution system approved by the Trust's Board of Trustees on June 7, 1996
and are designed to allow promotion of insurance products that invest in the
Trust through alternative distribution channels. Under the Trust's
multi-class system, shares of each class of a Portfolio represent an equal
pro rata interest in the assets of that Portfolio and, generally, have
identical voting, dividend, liquidation, and other rights, other than with
respect to the payment of distribution fees under the Distribution Plan.
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 of Class IA shares are separate accounts
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, regardless of whether they
are affiliated with Equitable. As of March 31, 1997, Equitable owned
approximately 99.7% of the Trust's outstanding Class IA shares and all of the
Trust's outstanding Class IB shares and, as a result, may be deemed to
control the Trust. Class IB shares are sold only to an insurance company
separate account of The Equitable Life Assurance Society of the United States
("Equitable").
As a "series" investment company, 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 Alliance Common Stock and Alliance
Money Market Portfolios are the successors to Separate Accounts I and II of
Equitable Variable Life Insurance Company, formerly a wholly owned subsidiary
of Equitable that was merged into Equitable as of January 1, 1997 ("Equitable
Variable"). (See "Description of Reorganization and Other Matters"). The
Alliance Balanced and Alliance Aggressive Stock Portfolios received their
initial funding on January 27, 1986 from Equitable Variable. The Alliance
High Yield Portfolio received its initial funding on January 2, 1987. The
Alliance Global Portfolio received its initial funding on August 27, 1987.
The Alliance Conservative Investors and Alliance Growth Investors Portfolios
received their initial funding on October 2, 1989. The Alliance Intermediate
Government Securities Portfolio received its initial funding on April 1,
1991. The Alliance Quality Bond and Alliance Growth and Income Portfolios
received their initial funding on October 1, 1993. The Alliance Equity Index
Portfolio received its initial funding on March 1, 1994. The Alliance
International Portfolio received its initial funding on April 3, 1995. The
Alliance Small Cap Growth Portfolio is expected to receive its initial funding
on May 1, 1997.
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, 1997, 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 any class of the outstanding shares of a Portfolio.
2
<PAGE>
CLASS IA
<TABLE>
<CAPTION>
QUALITY BOND GLOBAL
PORTFOLIO PORTFOLIO
------------------------ -----------------------
UNITS % OF UNITS % OF
OWNED PORTFOLIO OWNED PORTFOLIO
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Boatmen's Trust Co.*.......... 11,475,054 64.8
Equitable Realty Assets
Corp......................... 3,674,844 5.9
</TABLE>
[FN]
- ------------
* Boatmen's Trust Co., Trustee under Master Trust Agreement for SBC
Communications, Inc. Deferred Compensation Plans and other Executive
Benefit Plans.
CLASS IB
<TABLE>
<CAPTION>
MONEY MARKET GLOBAL COMMON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------- -------------------- ---------------------
UNITS % OF UNITS % OF UNITS % OF
OWNED PORTFOLIO OWNED PORTFOLIO OWNED PORTFOLIO
-------- ----------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
PAINE WEBBER ... 74,962 9.1 44,923 11.8 102,448 10.2
KEWPIE DUNCAN .. 49,644 6.0
JAMES AND JANET
VANDERVELD..... 20,973 5.5
RAYMOND JAMES
AND
ASSOCIATES..... 20,732 5.4 52,613 5.2
WALTER CERSKI ..
</TABLE>
(TABLE RESTUBED FROM ABOVE)
<TABLE>
<CAPTION>
GROWTH
INVESTORS AGGRESSIVE STOCK HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------- -------------------- --------------------
UNITS % OF UNITS % OF UNITS % OF
OWNED PORTFOLIO OWNED PORTFOLIO OWNED PORTFOLIO
-------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
PAINE WEBBER ... 35,907 8.5 24,603 8.1 61,490 13.1
KEWPIE DUNCAN ..
JAMES AND JANET
VANDERVELD..... 24,887 5.3
RAYMOND JAMES
AND
ASSOCIATES..... 16,121 5.7
WALTER CERSKI .. 39,664 8.4
</TABLE>
The principal addresses of Boatmen's Trust Co., Equitable Realty Asset Corp.,
Paine Webber, Kewpie Duncan, James and Janet Vanderveld, Raymond James and
Associates and Walter Cerski are 175 East Houston Street, San Antonio, Texas,
9000 Central Park Avenue, Atlanta, Georgia, 1200 Harbor Boulevard, Union
City, New Jersey, P.O. Box 122, Aspermont, Texas, 1042 Willow Creek Road,
Prescott, Arizona, 880 Carillon Parkway, St. Petersburg, Florida, and 15165
Chamisal Drive, Chesterfield, Missouri, respectively.
Were such a substantial 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.
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. The Trust has agreed to be bound by the procedures
set forth in Section 16(c) of the Investment Company Act, and accordingly,
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 by the Trust 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
3
<PAGE>
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.
At a meeting held on April 9, 1997, the shareholders of the Trust approved
the amendment and restatement of the Trust's Agreement and Declaration of
Trust. On April 16, 1997 the Agreement and Declaration of Trust was amended
and restated, and filed with the office of the Secretary of the Commonwealth
of Massachusetts.
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 Alliance 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 Alliance High Yield and Alliance
Intermediate Government Securities Portfolios. 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,
4
<PAGE>
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
holdings in that industry exceed 25% of the Portfolio's assets. However, this
restriction does not apply to investments by the Alliance 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 the collateral underlying the repurchase agreements consists
exclusively of U.S. Government securities and such repurchase agreements are
fully collateralized.
Further, as a matter of operating policy, the Alliance 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
Alliance 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
Alliance 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
its total assets, at the time a Second Tier Security is 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 net 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 Alliance Global and Alliance International Portfolios may
trade in foreign exchange without limitation in connection with their
foreign currency hedging strategies; and the Alliance High Yield,
Alliance Quality Bond, Alliance Growth and Income, Alliance Conservative
Investors, Alliance Balanced, Alliance Common Stock, Alliance Aggressive
Stock, Alliance Growth Investors and Alliance Small Cap Growth
Portfolios may trade in foreign exchange in connection with their
foreign currency hedging strategies, provided the amount of foreign
exchange underlying such 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
5
<PAGE>
its gross revenues from securities related activities), except that the
Portfolios (other than the Alliance 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 APPLICABLE TO THE ALLIANCE COMMON STOCK,
ALLIANCE BALANCED,
ALLIANCE AGGRESSIVE STOCK AND ALLIANCE CONSERVATIVE INVESTORS PORTFOLIOS
The Alliance Common Stock, Alliance Balanced, Alliance Aggressive Stock and
Alliance 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.
ADDITIONAL INVESTMENT RESTRICTIONS APPLICABLE TO THE ALLIANCE MONEY MARKET
PORTFOLIO
The Alliance 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 Alliance 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 APPLICABLE TO THE ALLIANCE HIGH YIELD AND
ALLIANCE GROWTH INVESTORS PORTFOLIOS
The Alliance High Yield and Alliance 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 ("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 (A) 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
6
<PAGE>
Moody's or B-or higher by S&P, or (B) 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 Alliance 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 debt instruments 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 the Portfolio's holding period.
Repurchase agreements may exhibit 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 U.S. Government obligations,
certificates of deposit, or bankers' acceptances with registered
broker-dealers, U.S. Government securities dealers or domestic banks whose
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% (10%, in the
case of the Alliance Money Market Portfolio) of the Portfolio's net assets
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 Alliance
considers 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
liquid assets 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,
7
<PAGE>
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 a 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, 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 that 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).
WARRANTS
All the Portfolios, except the Alliance 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 in parallel with 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 Alliance Intermediate Government Securities and
Alliance Equity Index Portfolios, may invest in foreign securities. Each of
the Alliance Common Stock, Alliance Balanced, Alliance Quality Bond, Alliance
Aggressive Stock and Alliance Small Cap Growth 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 Alliance
Money Market Portfolio may invest up to 20% of its assets in foreign money
market instruments denominated in U.S. dollars. The Alliance Conservative
Investors Portfolio may invest up to 15% of its assets in foreign securities,
the Alliance Growth Investors Portfolio may invest up to 30% of its assets in
foreign securities, and the Alliance Growth and Income Portfolio may invest
up to 25% of its assets in foreign securities. The Alliance High Yield
Portfolio may purchase foreign securities, provided the value of issues
denominated in foreign currencies shall not exceed 20% of the Portfolio's
total assets and the value of issues denominated in U.S. currency shall not
exceed 25% of the Portfolio's total assets.
No percentage limitation applies to investments in foreign securities by the
Alliance Global Portfolio or the Alliance International Portfolio.
Foreign securities involve currency risks. The value of a foreign security
denominated in a foreign currency changes with fluctuations in 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
8
<PAGE>
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 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 Alliance 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
mortgage-backed securities issued by the U.S. 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 Alliance 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
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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 loan institutions, 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 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 Alliance 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. Alliance 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 Alliance 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 retail installment loans, leases or revolving credit receivables
are subject to prepayment, which may reduce the overall return to certificate
holders. Certificate holders may also experience delays in payment on the
certificates if the full amounts due on underlying retail installment loans,
leases or revolving credit receivables are not realized by the Trust because
of unanticipated legal or administrative costs of enforcing the contracts,
retail installment loans, leases or revolving credit receivables, or because
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of depreciation or damage to the collateral (usually automobiles) securing
certain contracts, retail installment loans, leases or revolving credit
receivables, 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 U.S. 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, 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
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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.
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
U.S. or foreign banks payable in U.S. dollars are known as Eurodollar
deposits. Eurodollar securities also include 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 U.S. and
foreign banks are subject to 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.
U.S. 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 U.S. 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 Alliance High Yield Portfolio, as described in the Prospectus, intends to
invest primarily in debt securities offering high current income. The
Alliance Growth Investors Portfolio may invest up to 15% of its total assets
in such high yield debt securities, and the Alliance 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 Alliance. 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 risks associated with acquiring the securities of such issuers generally
are 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, 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 Alliance High Yield, Alliance Growth and Income and Alliance Growth
Investors Portfolios may have difficulty disposing of certain high yield
securities, particularly those perceived to have a high credit
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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 exists, it may be 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.
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 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 securities 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 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 and quality of management, its sensitivity to economic
conditions and trends, its operating history 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 Alliance 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. Each Portfolio, other than the Alliance Money Market
and Alliance Equity Index Portfolios, may write (sell) covered call options
on its portfolio securities in an attempt to enhance
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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 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 liquid
securities having a value equal to or greater than the exercise price of the
option.
The Portfolios, except the Alliance Money Market and Alliance 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
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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 Alliance Money Market and
Alliance 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 purchased.
SECURITIES INDEX OPTIONS
The Portfolios, except the Alliance Money Market and Alliance 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 liquid securities 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 included in the index. For example, some securities index options
are based on a broad market index such as the S&P 500 or the New York Stock
Exchange ("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; NYSE; 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. The
principal risk of purchasing securities index options 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.
The principal risk of writing securities index options 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 traded on an exchange. Accordingly, it may be more difficult to
value such options. In addition, it may be difficult to
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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, in the opinion of Alliance, 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 Portfolios
have established standards of creditworthiness for these primary dealers, the
Portfolios may still be subject to the risk that firms participating in such
transactions will fail to meet their obligations. With respect to agreements
concerning the over-the-counter options a Portfolio has written, the
Portfolio will 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 Alliance 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 Commodity Futures Trading Commission
("CFTC").
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 may be 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 Alliance Money Market, Alliance Equity Index and
Alliance Intermediate Government Securities 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 in 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 in part, by gains on futures
contracts purchased by a Portfolio. In order to achieve desired asset mix
parameters, the Alliance Conservative Investors and Alliance 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 Alliance
Conservative Investors and Alliance 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. In the case of the Alliance
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
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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.
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 futures contract 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
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 Alliance Money Market Portfolio, may
also purchase and write exchange-traded call and put options on futures
contracts it 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 liquid securities 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 the 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 so long as the Portfolio is obligated as the
writer of the call, the Portfolio owns 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 futures margin 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.
17
<PAGE>
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.
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, except the Alliance
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 liquid assets 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
18
<PAGE>
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.
FOREIGN CURRENCY OPTIONS, FOREIGN CURRENCY FUTURES CONTRACTS AND OPTIONS ON
FUTURES
The Portfolios, other than the Alliance Money Market, Alliance Intermediate
Government Securities and Alliance 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 currencies or on foreign
currency futures contracts only if they are "covered." A put option 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 liquid assets equal at all times to the aggregate exercise price of
the put. A call option on a foreign currency or on a foreign currency futures
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.
Although the purchase of an option on foreign currency may constitute an
effective hedge against fluctuations in exchange rates in the event of
exchange 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, thus 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 foreign currency exchange rates.
19
<PAGE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
When a Portfolio invests in foreign securities, the securities are usually
denominated in a 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 U.S. dollar. To control
the effects of this exchange risk, all of the Portfolios, except the Alliance
Money Market, Alliance Equity Index and Alliance Intermediate Government
Securities 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 fix the U.S. 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 U.S. 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 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. The Portfolios will only enter
forward currency contracts with counter parties that, in the opinion of
Alliance, do not present undue credit risk.
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 involves
certain risks. A lack of correlation between the index or instrument
underlying an option or futures contract and the assets or liabilities 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 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. Accordingly a
Portfolio may be required to maintain a position until exercise or
expiration, which could result in losses. If in the event of an adverse
movement the Portfolio could not close a futures position, it would be
required to continue to make daily cash payments of variation margin. If a
Portfolio could not close an option position, an option holder would be able
to realize profits or limit losses only by exercising the 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 or offset 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 and/or securities price
movements, as well as on the expense of hedging.
20
<PAGE>
MANAGEMENT OF THE TRUST
As of March 31, 1997, 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, ADDRESS AND AGE PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------- ----------------------------------------------------------------
<S> <C>
*John D. Carifa (52)................. President, Chief Operating Officer and a Director of ACMC;
Alliance Capital Management L.P. Chairman and Chief Executive Officer of Alliance's Mutual Fund
1345 Avenue of the Americas Division. Currently a Director and Trustee of all other
New York, NY 10105 registered investment companies (the "Alliance Mutual Funds")
sponsored by Alliance, and
Director of Frontier Trust Company, a subsidiary of
Equitable.
Richard W. Couper (74).............. President Emeritus of the Woodrow Wilson National Fellowship
The Burke Library Foundation and President Emeritus of the New York Public
Hamilton College Library.
P.O. Box 345
Clinton, NY 13323-0345
Brenton W. Harries (69)............. Director of Enhance Reinsurance Co. since December 1986. Mr.
14 Point Road Harries 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)(67) ... Currently a consultant specializing in retailing, finance and
200 East 57th Street real estate. Former Chairman and Chief Executive Officer of
Penthouse D Brooks Fashion Stores, Inc. (specialty clothing stores); Former
New York, NY 10022 Chairman, President and Chief Operating Officer of Allied Stores
Corporation (department and specialty stores), 1987; Executive
Vice President and Director, Allied Stores Corporation from June
1984 to June 1987.
William L. Mannion (66)............. Retired. Former Group Senior Vice President of Operations of
45 Bonnie Way American Ultramar Limited until December 1986; President and
Allendale, NJ 07401 Chief Executive Officer of Tittston Petroleum, Inc., from
January 1978 to July 1985; Director of the East Jersey Railroad
and the Bayonne Terminal Warehouse from July 1978 to May 1983.
Alton G. Marshall (75).............. Senior Fellow, Nelson A. Rockefeller Institute of Government
136 E. 79th Street since January 1991. President of Alton G. Marshall Associates,
New York, NY 10021 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.
21
<PAGE>
NAME, ADDRESS AND AGE PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------- ----------------------------------------------------------------
Clifford L. Michel (57)............. Partner of the law firm of Cahill Gordon & Reindel since January
St. Bernard's Road 1972. President, Chief Executive Officer and Director of Wenonah
Gladstone, NJ 07934 Development Company (investment holding company) since 1976.
Director since 1987 and Member of the Human Resources,
Environmental and Safety, and Executive Committees since 1987 of
Placer Dome Inc. (mining). Director, Faber-Castell Corporation
from 1988-1994 (writing instruments). President of Board of
Trustees of St. Mark's School from 1988 to 1993. Chairman of the
Board of Trustees of Morristown Memorial Hospital (and Memorial
Health Foundation) from 1991 to 1996. Director, Vice Chairman
and Treasurer of Atlantic Health Systems, Inc. and Atlantic
Hospital since 1996.
*Peter D. Noris (41)................. Executive Vice President (since May 1995) and Chief Investment
The Equitable Life Assurance Officer of Equitable (since July 1995); Executive Vice
Society of the United States President, The Equitable Companies Incorporated ("Equitable
787 Seventh Avenue Companies")(since May 1995); Director of Alliance Capital
New York, NY 10019 Management Corporation ("ACMC"), the general partner of
Alliance, since July 1995. Prior thereto, Vice President of
Salomon Brothers Inc., from 1992 to 1995. Principal of Morgan
Stanley & Co. Inc., from 1984 to 1992.
Donald J. Robinson (62)............. Senior Partner of the law firm of Orrick, Herrington & Sutcliffe
599 Lexington Avenue from July 1987 to December 1994; Member of the Executive
New York, NY 10022 Committee of the firm from January to December 1994; Senior
Counsel of the firm since January 1995. Trustee of the Museum of
the City of New York from 1977 to 1995.
</TABLE>
*Trustees Carifa and Noris 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 and
director of ACMC and Alliance. Mr. Noris is deemed an "interested person" of
the Trust by virtue of his position as an officer of Equitable and a director
of ACMC.
Trustees Couper, Harries and Robinson are trustees (but not "interested
persons") of The Alliance Portfolios, a mutual fund. Trustee Robinson is also
a director or trustee (but not an "interested person") of 37 other mutual
funds advised by Alliance. 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.
Trustee Michel is a director or trustee (but not an "interested person") of
37 other mutual funds advised by Alliance. Trustee Hassler is a director (but
not an "interested person") of Alliance Real Estate Investment Fund, Inc.
COMMITTEES OF THE BOARD
The Trust has a standing audit committee consisting of Trustees Mannion,
Couper, Harries, Hassler, Marshall, Michel and Robinson. 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 a nominating committee consisting of Trustees Hassler, Couper
and Robinson. This committee considers individuals for nomination as Trustees
of the Trust.
22
<PAGE>
The Trust has a valuation committee consisting of Trustees Harries, Mannion
and Noris. 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, Michel
and Robinson. The conflicts committee's function is to take any action
necessary to resolve conflicts among shareholders.
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION FROM
AGGREGATE RETIREMENT THE ALLIANCE FUND
COMPENSATION BENEFITS ACCRUED ESTIMATED ANNUAL COMPLEX,
FROM THE AS PART OF TRUST BENEFITS UPON INCLUDING THE
TRUSTEE TRUST EXPENSES RETIREMENT TRUST1
- ------------------ -------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
John D. Carifa $ -0- $-0- $-0- $ -0-
- ------------------ -------------- ---------------- ---------------- -----------------
Richard W. Couper $59,000(2) $-0- $-0- $ 85,000
- ------------------ -------------- ---------------- ---------------- -----------------
Brenton W. Harries $59,000 $-0- $-0- $ 86,000
- ------------------ -------------- ---------------- ---------------- -----------------
Howard E. Hassler $85,000 $-0- $-0- $ 86,750
- ------------------ -------------- ---------------- ---------------- -----------------
William L. Mannion $66,000(2) $-0- $-0- $ 66,000
- ------------------ -------------- ---------------- ---------------- -----------------
Alton G. Marshall $61,000 $-0- $-0- $134,500
- ------------------ -------------- ---------------- ---------------- -----------------
Clifford L. Michel $20,068(3) $-0- $-0- $146,068
- ------------------ -------------- ---------------- ---------------- -----------------
Peter D. Noris $ -0- $-0- $-0- $ -0-
- ------------------ -------------- ---------------- ---------------- -----------------
Donald J. Robinson $63,000(2) $-0- $-0- $137,250
- ------------------ -------------- ---------------- ---------------- -----------------
</TABLE>
[FN]
- ------------
(1) As of December 31, 1996 there were 110 investment companies in the
Alliance Fund Complex.
(2) Completely deferred.
(3) Appointed as Trustee on October 16, 1996.
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 $29,000, plus an additional fee of $4,000 per board meeting and $2,000 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 $7,000. 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, 1996, the Trust paid total retainer and
meeting fees of $413,068 (including deferrals of $188,000).
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.
23
<PAGE>
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 AND AGE POSITION WITH TRUST PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------ --------------------------------- --------------------------------------------
<S> <C> <C>
Mark D. Gersten (46) Treasurer and Chief Financial Senior Vice President, Alliance Fund
Officer Services, Inc. ("AFS"), with which he has
been associated since prior to 1991.
Thomas R. Manley (45) Controller and Chief Vice President, ACMC (May 1996 to present);
Accounting Officer Assistant Vice President, ACMC (July 1993 to
May 1996); Assistant Vice President,
Equitable Capital Management Corporation
("ECMC")(March 1991 to July 1993).
Bruce Calvert (50) Vice President Vice Chairman and Chief Investment Officer
of ACMC, with which he has been associated
since prior to 1991.
Kathleen A. Corbet (37) 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 (52) 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).
Wayne D. Lyski (55) Vice President Executive Vice President, ACMC, with which
he has been associated since prior to 1991.
Michael S. Martin (50) Vice President Senior Vice President, Equitable (June 1985
to present); Chairman, EQF (May 1992 to
present); Chief Executive Officer, EQF
(January 1994 to present); formerly, Vice
President, Equitable Variable (May 1996 to
December 1996); Chairman and Chief Executive
Officer, EquiSource of New York (January
1992 to October 1994) and Frontier (April
1992 to October 1994); Vice President and
Treasurer, Equitable Distributors, Inc.
(August 1993 to February 1995). Director of
several Equitable-affiliated companies.
24
<PAGE>
NAME AND AGE POSITION WITH TRUST PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------ --------------------------------- --------------------------------------------
Samuel B. Shlesinger (50) Vice President Senior Vice President, Equitable (November
1986 to present); Senior Vice President,
Equitable Variable (February 1988 to
December 1996); President and Chief
Executive Officer, Equitable of Colorado
(October 1985 to present).
Alden M. Stewart (51) Vice President Executive Vice President, ACMC (July 1993 to
present); ECMC since prior to 1991.
Edmund P. Bergan, Jr. (46) Secretary Senior Vice President and General Counsel,
AFD, with which he has been associated since
prior to 1991.
</TABLE>
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. Alliance's principal executive officer is Dave H.
Williams, its Chairman and Chief Executive Officer.
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, 1996, ACMC, Inc. and Equitable Capital
Management Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, owned in the aggregate approximately 57% of the issued and
outstanding units representing assignments of beneficial ownership of limited
partnership interests in the Adviser ("Units"), and approximately 33% and 10%
of the Units were owned by the public and employees of the Adviser and its
subsidiaries, respectively, calculated. 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. The principal offices of Alliance and ACMC are
located at 1345 Avenue of the Americas, New York, New York 10105.
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 and 1290 Avenue of the Americas, New York, New York 10019,
respectively.
AXA, a French insurance holding company, currently owns approximately 63.9%
of the outstanding voting shares of common stock of The Equitable Companies.
As a majority shareholder of 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 holding
company for an international group of insurance and related financial
services companies. AXA is the eleventh largest insurance group in the world
based on the worldwide revenues in 1994 and the second largest French
insurance group based on worldwide gross premiums in 1994. AXA is also
engaged in asset management, investment banking, securities trading and
financial services activities principally in the United States, as well as in
Western Europe and the Asia Pacific area.
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<PAGE>
ADVISORY AGREEMENT
The 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.
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 NEXT NEXT
$750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
-------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Alliance Conservative Investors .475% .425% .375% .350% .325%
Alliance Balanced .............. .450% .400% .350% .325% .300%
Alliance Growth Investors ..... .550% .500% .450% .425% .400%
Alliance Common Stock .......... .475% .425% .375% .355% .345%*
Alliance Global ................ .675% .600% .550% .530% .520%
Alliance Aggressive Stock ..... .625% .575% .525% .500% .475%
Alliance Small Cap Growth ..... .900% .850% .825% .800% .775%
Alliance Money Market .......... .350% .325% .300% .280% .270%
Alliance Intermediate
Government
Securities .................... .500% .475% .450% .430% .420%
Alliance High Yield ............ .600% .575% .550% .530% .520%
Alliance Growth and Income .... .550% .525% .500% .480% .470%
Alliance Quality Bond .......... .525% .500% .475% .455% .445%
Alliance Equity Index .......... .325% .300% .275% .255% .245%
Alliance International ......... .900% .825% .800% .780% .770%
</TABLE>
- ------------
* On assets in excess of $10 billion, the management fee for the Alliance
Common Stock Portfolio is reduced to 0.335% of average daily net assets.
Because of undertakings made by Equitable Variable in connection with the
Reorganization, Equitable reimburses the Alliance Common Stock and Alliance
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 reimburses the Alliance High Yield,
Alliance Aggressive Stock and Alliance 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 Alliance Common Stock, Alliance Money Market and
Alliance 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 Alliance Aggressive Stock Division for the portion
that exceeds a .41% effective rate. Policies sold by insurers other than
Equitable and newer policy designs of Equitable bear the advisory fees
without adjustment. For a discussion of the Reorganization, see "General
Information," above.
In 1996, the Trust paid advisory fees of $59,901,466 to Alliance. In 1995,
the Trust paid advisory fees of $40,636,168 to Alliance. In 1994, the Trust
paid advisory fees of $31,614,475 to Alliance.
SPECIFIC SERVICES PERFORMED
Alliance performs the following services for or on behalf of the Trust
pursuant to the Investment Advisory Agreement.
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<PAGE>
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 Agreement and
Declaration of Trust, By-laws, Prospectus and Statement of Additional
Information 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.
At the Trust's request, Alliance provides, without charge, personnel, who may
be the Trust's officers, to render such clerical, administrative and other
services, other than investor services or accounting services, to the Trust
and also furnishes to the Trust, without charge, such office facilities,
which may be Alliance's own offices, as may be required to perform its
investment advisory and portfolio management services. 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 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.
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.
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<PAGE>
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.
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 Alliance 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 Alliance 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 Alliance Money Market Portfolio transactions will generally
be with issuers or market makers where no commissions are charged. 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. In 1995 the Trust paid an aggregate of $21,329,056 in
brokerage commissions of which $18,468,344 was paid to brokers relating to
transactions aggregating $8,928,306,482 which were directed to them in part
for research services provided by them. In 1996 the Trust paid an aggregate
of $27,895,553 in brokerage commissions of which $25,576,822 was paid to
brokers relating to transactions aggregating $12,956,909,742 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
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<PAGE>
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.
During the years ended December 31, 1994 and December 31, 1995, the Trust
paid no brokerage commissions to DLJ, and during the fiscal year ended
December 31, 1996, the Trust paid $2,500 to Autranet, Inc., an affiliate of
DLJ, in accordance with the procedures described above.
TRUST EXPENSES AND OTHER CHARGES
Pursuant to the Trust's Investment Advisory Agreement, the Trust is obligated
to pay all of its operating expenses not specifically assumed by Alliance. In
addition, as principal underwriter of the Trust's Class IA shares, EQ
Financial Consultants, Inc. ("EQ Financial") will bear the Trust's marketing
expenses. A daily adjustment will be made in the values under certain
Contracts outstanding and offered by Equitable and Equitable Variable when
the management separate accounts of Equitable and Equitable Variable 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 bear such expenses without adjustment. Although Equitable does
not expect the Trust to incur any federal income or excise tax liability (see
"Dividends, Distributions and Taxes" in the Prospectus), Equitable reserves
the right to exclude any such taxes from such adjustments.
The expenses borne by the Trust include or could include taxes; brokerage
commissions; interest charges; securities lending fees; fees and expenses of
the registration or qualification of a Portfolio's securities under federal
or state securities laws; fees of the Portfolio's custodian, transfer agent,
independent accountants, and legal counsel; all expenses of shareholders' and
trustees' meetings; all expenses of the preparation, typesetting, printing
and mailing to existing shareholders of prospectuses, prospectus supplements,
statements of additional information, proxy statements, and annual and
semi-annual reports; any proxy solicitor's fees and expenses; costs of
fidelity bonds and Trustees; liability insurance premiums as well as
extraordinary expenses such as indemnification payments or damages awarded in
litigation or settlements made; any membership fees of the Investment Company
Institute and similar organizations; costs of maintaining the Trust's
corporate existence and the compensation of Trustees who are not directors,
officers, or employees of Alliance or its affiliates.
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 proceeds derived from the sale,
exchange or liquidation of such assets, (c) any funds or payments
29
<PAGE>
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 NYSE 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. (Eastern time) close respectively of the NYSE and the
Options Price Reporting Authority; for bonds the close of trading 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 generally 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 held by 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 held by 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.
o Purchased options, including options on futures, are valued at their
last bid price. Written options are valued at their last asked price.
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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 for assistance in valuing the assets of the Trust. Alliance
will continuously monitor the performance of such pricing 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,
1996 only the Alliance 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 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.
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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 U.S. 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
ALLIANCE MONEY MARKET PORTFOLIO YIELD
The Alliance 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 Alliance 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 Alliance 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.
Alliance 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 Alliance Money Market Portfolio, maturities and rates of return on
investments, among other factors. In addition, the value of shares of the
Alliance Money Market Portfolio will fluctuate and not remain constant.
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The Alliance 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 Alliance
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 Alliance 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 5.18% for the
period ended December 31, 1996. The effective yield for that period was
5.27%.
ALLIANCE QUALITY BOND, ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES AND
ALLIANCE HIGH YIELD PORTFOLIO YIELDS
Yields of the Alliance Quality Bond, Alliance Intermediate Government
Securities and Alliance 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 Alliance Quality Bond, Alliance Intermediate
Government Securities and Alliance High Yield Portfolios for the period ended
December 31, 1996 were 5.94%, 5.60% and 10.65%, 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. These total returns do not reflect insurance company charges
and fees applicable to the Contracts.
The average annual total returns through December 31, 1996 for the Alliance
Common Stock Portfolio for one year, five years, and 10 years were 24.28%,
15.72%, and 15.83%, respectively.
33
<PAGE>
The average annual total returns through December 31, 1996 for the Alliance
Intermediate Government Securities Portfolio for one year, five years, and
since inception (on April 1, 1991) were 3.78%, 5.60%, and 6.95%,
respectively.
The average annual total returns through December 31, 1996 for the Alliance
High Yield Portfolio for one year, five years, and since inception (on
January 2, 1987) were 22.89%, 14.66%, and 11.41%, respectively.
The average annual total returns through December 31, 1996 for the Alliance
Balanced Portfolio for one year, five years, and ten years were 11.68%,
6.06%, and 10.38%, respectively.
The average annual total returns through December 31, 1996 for the Alliance
Global Portfolio for one year, five years, and since inception (on August 27,
1987) were 14.60%, 13.50%, and 11.70%, respectively.
The average annual total returns through December 31, 1996 for the Alliance
Aggressive Stock Portfolio for one year, five years, and ten years were
22.20%, 11.83%, and 18.60%, respectively.
The average annual total returns through December 31, 1996 for the Alliance
Conservative Investors Portfolio for one year, five years, and since
inception (on October 2, 1989) were 5.21%, 7.32%, and 9.03%, respectively.
The average annual total returns through December 31, 1996 for the Alliance
Growth Investors Portfolio for one year, five years, and since inception (on
October 2, 1989) were 12.61%, 10.76%, and 15.57%, respectively.
The average annual total returns through December 31, 1996 for the Alliance
Quality Bond Portfolio for one year and since inception (on October 1, 1993)
were 5.36% and 4.79%, respectively.
The average annual total returns through December 31, 1996 for the Alliance
Growth and Income Portfolio for one year and since inception (on October 1,
1993) were 20.09% and 12.77%, respectively.
The average annual total return through December 31, 1996 for the Alliance
Equity Index Portfolio for one year and since inception (on March 1, 1994)
was 22.39% and 20.25%, respectively.
The average annual total return through December 31, 1996 for the Alliance
International Portfolio for one year and since inception (April 3, 1995) was
9.82% and 12.14%, respectively.
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, 1996, for the Alliance Common Stock, Alliance Intermediate
Government Securities, Alliance High Yield, Alliance Balanced, Alliance
Global, Alliance Aggressive Stock, Alliance Conservative Investors, Alliance
Growth Investors, Alliance Quality Bond, Alliance Growth and Income, Alliance
Equity Index and Alliance International Portfolios were 1,849.35%, 47.19%,
194.62%, 246.66%, 181.40%, 648.20%, 87.12%, 185.55%, 16.42%, 47.77%, 68.84%
and 22.21%, respectively. These total returns do not reflect insurance
company charges and fees applicable to the Contracts.
34
<PAGE>
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 Alliance Common Stock, Alliance Money Market, Alliance Balanced, Alliance
Aggressive Stock, Alliance High Yield, Alliance Global, Alliance Conservative
Investors, Alliance Growth Investors, Alliance Intermediate Government
Securities, Alliance Quality Bond, Alliance Growth and Income, Alliance
Equity Index and Alliance International Portfolios for the year ended
December 31, 1996, 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, 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, 1996, Equitable received no
compensation for providing such services for the Trust.
UNDERWRITER
EQ Financial, a wholly-owned subsidiary of Equitable, serves, without
compensation from the Trust, as the principal underwriter of the Class IA
shares of the Trust, pursuant to an agreement with the Trust. Under the terms
of the agreement, EQ Financial 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, EQ Financial bears the Trust's marketing expenses.
However, EQ Financial expects to be reimbursed for the portion of expenses
attributable to the marketing of other insurance companies' products by such
insurance companies. EQ Financial has entered into sales agreements with
Equitable 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.
35
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT GROWTH AND
MONEY MARKET SECURITIES QUALITY BOND HIGH YIELD INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at value (Notes 1 and 4) .. $450,990,752 $ 92,621,366 $153,282,787 $197,549,284 $231,763,058
Cash ................................... 171,525 124,732 176,934 2,017,705 125,387
Foreign cash ........................... -- -- -- -- --
Receivable for securities sold ......... -- -- 5,071,875 -- 461,289
Deposits received for securities
lending ............................... -- 18,301,550 28,167,188 -- 2,000,000
Receivable from Separate Accounts for
Trust shares sold ..................... 14,190,878 817,649 64,327 1,043,413 229,252
Unrealized appreciation of forward
currency
contracts (Notes 1 and 4) ............. -- -- 147,593 -- --
Dividends, interest and other
receivables ........................... 1,458,902 822,759 1,476,344 3,556,124 754,268
-------------- -------------- -------------- -------------- --------------
Total assets ......................... 466,812,057 112,688,056 188,387,048 204,166,526 235,333,254
-------------- -------------- -------------- -------------- --------------
LIABILITIES:
Options written at value (Premiums
received:
Common Stock
Portfolio--$68,607,800)(Notes 1 and
4) ................................... -- -- -- -- --
Payable to custodian ................... -- -- -- -- --
Payable for securities purchased ...... -- 5,942,099 5,081,250 3,997,946 1,117,681
Payable for securities loaned .......... -- 18,301,550 28,167,188 -- 2,000,000
Payable to Separate Accounts for Trust
shares redeemed ....................... -- -- -- -- --
Unrealized depreciation of forward
currency
contracts (Notes 1 and 4) ............. -- -- -- -- --
Variation margin payable on futures
contracts ............................. -- -- -- -- --
Distribution fees payable .............. 254 -- -- 58 --
Investment advisory fees payable ...... 144,177 38,264 85,952 94,624 108,563
Trustees' fees payable ................. 24,024 5,014 4,226 5,132 2,919
Accrued expenses ....................... 37,408 16,704 24,960 23,301 23,703
-------------- -------------- -------------- -------------- --------------
Total liabilities .................... 205,863 24,303,631 33,363,576 4,121,061 3,252,866
-------------- -------------- -------------- -------------- --------------
NET ASSETS ............................. $466,606,194 $ 88,384,425 $155,023,472 $200,045,465 $232,080,388
============== ============== ============== ============== ==============
Investments at cost .................... $450,833,231 $ 92,000,197 $151,005,932 $192,006,772 $204,211,023
============== ============== ============== ============== ==============
COMPONENTS OF NET ASSETS (NOTE 1):
Paid in capital ....................... $466,405,482 $ 97,591,462 $157,812,746 $195,004,416 $204,516,556
Accumulated undistributed
(overdistributed) net
investment income .................... 43,191 3,160 (220,079) 23,927 11,797
Accumulated net realized loss.......... -- (9,831,366) (4,993,810) (525,390) --
Unrealized appreciation on investments
and
foreign currency denominated assets
and liabilities ...................... 157,521 621,169 2,424,615 5,542,512 27,552,035
-------------- -------------- -------------- -------------- --------------
NET ASSETS ............................. $466,606,194 $ 88,384,425 $155,023,472 $200,045,465 $232,080,388
============== ============== ============== ============== ==============
CLASS IA SHARES:
Net Assets ............................. $463,422,535 $ 88,384,425 $155,023,472 $199,360,473 $232,080,388
============== ============== ============== ============== ==============
Shares outstanding (Note 5)............. 45,575,983 9,517,076 16,343,116 19,900,343 17,833,887
============== ============== ============== ============== ==============
Net asset value, offering and
redemption
price per share (Note 1) .............. $ 10.17 $ 9.29 $ 9.49 $ 10.02 $ 13.01
============== ============== ============== ============== ==============
CLASS IB SHARES:
Net Assets.............................. $ 3,183,659 $ 684,992
============== ==============
Shares outstanding (Note 5) ............ 313,273 68,416
============== ==============
Net asset value, offering and
redemption
price per share (Note 1)............... $ 10.16 $ 10.01
============== ==============
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
EQUITY INDEX COMMON STOCK GLOBAL INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$383,044,256 $6,668,952,271 $ 991,831,989 $149,318,779 $3,890,482,751 $275,640,496 $1,627,121,599 $1,290,840,729
188,834 1,501,081 456,313 -- 2,364,412 5,139,961 4,172,088 480,215
-- -- 2,258,618 1,672,592 -- -- 465 1,008,532
-- 65,341,050 3,867,161 613,862 2,337,046 156,273 2,937,003 3,246,261
1,356,953 105,377,860 72,320,750 12,820,136 200,344,604 24,170,813 138,838,707 90,833,147
2,643,610 9,646,997 1,281,713 1,519,154 -- -- 768,754 3,693,911
-- -- 2,063,841 252,876 -- 89 -- 511,818
701,269 8,133,115 1,216,101 205,847 350,639 2,100,127 9,549,968 5,129,713
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
387,934,922 6,858,952,374 1,075,296,486 166,403,246 4,095,879,452 307,207,759 1,783,388,584 1,395,744,326
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- 70,867,650 -- -- -- -- -- --
-- -- -- 534,429 -- 8,074 -- --
-- 53,373,896 4,987,613 971,883 21,101,356 182,066 5,921,615 2,011,774
1,356,953 105,377,860 72,320,750 12,820,136 200,344,604 24,170,813 138,838,707 90,833,147
-- -- -- -- 6,662,427 250,025 -- --
-- -- -- -- -- -- 58 --
152,250 -- -- -- -- -- -- --
-- 134 49 -- 63 -- -- 78
127,671 2,040,224 452,415 115,412 1,530,928 136,367 525,339 588,404
5,276 205,484 19,851 1,520 93,747 7,170 61,689 25,366
43,591 453,547 184,324 53,031 276,910 50,843 185,672 170,574
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
1,685,741 232,318,795 77,965,002 14,496,411 230,010,035 24,805,358 145,533,080 93,629,343
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$386,249,181 $6,626,633,579 $ 997,331,484 $151,906,835 $3,865,869,417 $282,402,401 $1,637,855,504 $1,302,114,983
============== ============== ============== ============== ============== ============== ============== ==============
$320,617,584 $5,041,593,068 $ 858,568,339 $144,374,839 $3,396,898,743 $265,933,643 $1,509,715,325 $1,193,558,142
============== ============== ============== ============== ============== ============== ============== ==============
$324,019,332 $5,094,665,983 $ 865,441,879 $147,381,465 $3,377,717,888 $273,073,244 $1,523,732,949 $1,207,265,289
(5,276) (194,316) (3,212,284) (614,431) (58,479) 9,815 (190,700) (1,135,946)
(22,547) (92,937,401) (258,562) (50,107) (5,374,000) (387,954) (3,096,172) (1,817,216)
62,257,672 1,625,099,313 135,360,451 5,189,908 493,584,008 9,707,296 117,409,427 97,802,856
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$386,249,181 $6,626,633,579 $ 997,331,484 $151,906,835 $3,865,869,417 $282,402,401 $1,637,855,504 $1,302,114,983
============== ============== ============== ============== ============== ============== ============== ==============
$386,249,181 $6,625,390,070 $ 997,041,626 $151,906,835 $3,865,256,884 $282,402,401 $1,637,855,504 $1,301,642,871
============== ============== ============== ============== ============== ============== ============== ==============
25,484,413 363,529,982 58,938,705 13,214,071 107,805,909 25,019,109 98,455,586 75,693,420
============== ============== ============== ============== ============== ============== ============== ==============
$ 15.16 $ 18.23 $ 16.92 $ 11.50 $ 35.85 $ 11.29 $ 16.64 $ 17.20
============== ============== ============== ============== ============== ============== ============== ==============
$ 1,243,509 $ 289,858 $ 612,533 $ 472,112
============== ============== ============== ==============
68,266 17,143 17,094 27,468
============== ============== ============== ==============
$ 18.22 $ 16.91 $ 35.83 $ 17.19
============== ============== ============== ==============
</TABLE>
37
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF OPERATIONS
Year Ended December 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT GROWTH AND
MONEY MARKET SECURITIES QUALITY BOND HIGH YIELD INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income*(Note 1):
Dividends (including $3,460,799 and
$3,411,934 from affiliated companies
for the Common Stock and Aggressive
Stock Portfolios, respectively) ..... $ -- $ -- $ -- $ 175,797 $ 3,034,669
Interest ............................. 20,638,163 5,024,881 11,293,429 16,214,440 933,842
-------------- -------------- -------------- ------------- ------------
Total income......................... 20,638,163 5,024,881 11,293,429 16,390,237 3,968,511
-------------- -------------- -------------- ------------- ------------
Expenses (Notes 1, 2 and 3):
Investment advisory fee............... 1,472,114 399,460 935,462 856,390 864,549
Custody fees.......................... 13,550 21,460 26,840 23,922 15,532
Distribution fees--Class IB .......... 254 -- -- 58 --
Printing and mailing expenses ....... 57,975 12,134 26,374 21,783 19,986
Professional fees .................... 14,254 9,190 9,007 8,368 8,214
SEC registration fees ................ 4,987 217 434 217 1,084
Trustees' fees ....................... 12,178 3,159 5,643 4,849 4,554
Miscellaneous ........................ 6,858 3,678 3,801 3,069 2,594
-------------- -------------- -------------- ------------- ------------
Total expenses....................... 1,582,170 449,298 1,007,561 918,656 916,513
-------------- -------------- -------------- ------------- ------------
NET INVESTMENT INCOME .................. 19,055,993 4,575,583 10,285,868 15,471,581 3,051,998
-------------- -------------- -------------- ------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)
(NOTES 1 AND 4):
Realized Gain (Loss):
On securities (including $2,796,965,
$(8,821,017) and $60,876 from
affiliated companies for the Common
Stock, Aggressive Stock and Global
Portfolios, respectively) ........... -- (453,637) 939,845 12,420,138 12,181,263
On options written ................... -- -- -- -- --
On foreign currency transactions .... -- -- (68,186) -- --
On futures contracts ................. -- -- -- -- --
-------------- -------------- -------------- ------------- ------------
Realized gain (loss)--net ............. -- (453,637) 871,659 12,420,138 12,181,263
-------------- -------------- -------------- ------------- ------------
Change in Unrealized
Appreciation/Depreciation:
On securities......................... (7,886) (1,025,808) (1,868,060) 3,447,403 16,443,384
On options written ................... -- -- -- -- --
On foreign currency transactions .... -- -- 118,525 -- --
On futures contracts ................. -- -- -- -- --
-------------- -------------- -------------- ------------- ------------
Unrealized
appreciation/depreciation--net ........ (7,886) (1,025,808) (1,749,535) 3,447,403 16,443,384
-------------- -------------- -------------- ------------- ------------
REALIZED AND UNREALIZED GAIN
(LOSS)--NET ........................... (7,886) (1,479,445) (877,876) 15,867,541 28,624,647
-------------- -------------- -------------- ------------- ------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS............................. $19,048,107 $ 3,096,138 $ 9,407,992 $31,339,122 $31,676,645
============== ============== ============== ============= ============
</TABLE>
- ------------
* Net of foreign taxes withheld on dividends of $3,042, $32,886,
$357,439, $1,103,645, $180,624, $53,371, $457,582 and $359,641 for the
Growth and Income, Equity Index, Common Stock, Global, International,
Conservative Investors, Balanced and Growth Investors Portfolios,
respectively, and on interest of $103 and $95 for the Global and Growth
Investors Portfolios, respectively.
See Notes to Financial Statements.
38
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
EQUITY INDEX COMMON STOCK GLOBAL INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,341,057 $ 64,326,955 $ 10,411,663 $1,229,599 $ 7,463,840 $ 1,138,588 $ 10,683,609 $ 9,229,448
462,343 6,192,091 5,565,223 877,635 16,908,426 12,897,917 45,681,532 22,850,498
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
6,803,400 70,519,046 15,976,886 2,107,234 24,372,266 14,036,505 56,365,141 32,079,946
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
1,034,043 20,314,128 4,491,125 875,316 15,504,789 1,517,920 5,820,114 5,816,056
51,343 136,065 447,082 137,463 62,332 90,112 296,359 313,381
-- 134 49 -- 63 -- -- 78
36,406 843,481 122,011 11,232 491,450 41,649 251,544 157,430
11,364 149,352 25,827 6,667 90,030 11,695 46,552 32,235
1,951 -- 5,637 -- -- 434 -- 6,721
8,755 185,691 26,046 2,830 108,798 8,948 54,329 34,735
3,192 78,424 9,756 1,652 39,802 4,952 24,921 13,196
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
1,147,054 21,707,275 5,127,533 1,035,160 16,297,264 1,675,710 6,493,819 6,373,832
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
5,656,346 48,811,771 10,849,353 1,072,074 8,075,002 12,360,795 49,871,322 25,706,114
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
13,813,315 517,703,619 42,673,209 2,763,980 651,849,153 6,717,096 128,577,417 130,296,769
-- 69,528,454 -- -- -- -- -- --
-- (23,974) 2,323,828 287,769 (2,878) (27,275) (184,947) 903,574
1,381,635 -- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
15,194,950 587,208,099 44,997,037 3,051,749 651,846,275 6,689,821 128,392,470 131,200,343
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
41,401,218 651,940,355 57,875,656 4,019,520 (19,577,800) (4,721,625) (3,423,214) (21,124,616)
-- (15,633,132) -- -- -- -- -- --
-- (216) 2,507,509 225,883 -- 443 3,153 575,473
(172,800) -- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
41,228,418 636,307,007 60,383,165 4,245,403 (19,577,800) (4,721,182) (3,420,061) (20,549,143)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
56,423,368 1,223,515,106 105,380,202 7,297,152 632,268,475 1,968,639 124,972,409 110,651,200
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$62,079,714 $1,272,326,877 $116,229,555 $8,369,226 $640,343,477 $14,329,434 $174,843,731 $136,357,314
============== ============== ============== ============== ============== ============== ============== ==============
</TABLE>
39
<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,
1996 1995 1996 1995
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .............................. $ 19,055,993 $ 18,312,330 $ 4,575,583 $ 3,659,738
Realized gain (loss)--net........................... -- -- (453,637) 1,061,357
Change in unrealized appreciation/depreciation of
investments and foreign currency denominated
assets and liabilities--net ....................... (7,886) 145,252 (1,025,808) 2,579,005
--------------- --------------- -------------- --------------
Net increase in net assets from operations ........ 19,048,107 18,457,582 3,096,138 7,300,100
--------------- --------------- -------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE
1):
Class IA:
Dividends from net investment income .............. (19,050,946) (18,199,892) (4,575,583) (3,633,574)
Dividends in excess of net investment income ..... (25,232) -- (19,617) --
Distributions from realized gains.................. -- -- -- --
Distributions in excess of realized gains ........ -- -- -- --
Tax return of capital distributions ............... -- -- -- --
--------------- --------------- -------------- --------------
Total Class IA dividends and distributions ........ (19,076,178) (18,199,892) (4,595,200) (3,633,574)
--------------- --------------- -------------- --------------
Class IB:
Dividends from net investment income............... (5,047) -- -- --
Dividends in excess of net investment income ...... (29,384) -- -- --
Distributions from realized gains.................. -- -- -- --
Distributions in excess of realized gains ......... -- -- -- --
--------------- --------------- -------------- --------------
Total Class IB dividends and distributions ........ (34,431) -- -- --
--------------- --------------- -------------- --------------
Decrease in net assets from dividends and
distributions ..................................... (19,110,609) (18,199,892) (4,595,200) (3,633,574)
--------------- --------------- -------------- --------------
SHARE TRANSACTIONS (NOTES 1 AND 5):
Class IA:
Shares sold........................................ 508,537,942 394,575,427 36,879,548 29,533,754
Shares issued in reinvestment of dividends and
distributions..................................... 19,076,178 18,199,892 4,595,200 3,633,574
Shares redeemed.................................... (450,848,823) (351,733,059) (23,371,086) (13,571,893)
--------------- --------------- -------------- --------------
Total Class IA transactions ........................ 76,765,297 61,042,260 18,103,662 19,595,435
--------------- --------------- -------------- --------------
Class IB:
Shares sold ....................................... 3,624,653 -- -- --
Shares issued in reinvestment of dividends and
distributions..................................... 34,431 -- -- --
Shares redeemed.................................... (446,631) -- -- --
--------------- --------------- -------------- --------------
Total Class IB transactions ........................ 3,212,453 -- -- --
--------------- --------------- -------------- --------------
Net increase (decrease) in net assets derived from
share transactions................................. 79,977,750 61,042,260 18,103,662 19,595,435
--------------- --------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS.................... 79,915,248 61,299,950 16,604,600 23,261,961
NET ASSETS, BEGINNING OF PERIOD...................... 386,690,946 325,390,996 71,779,825 48,517,864
--------------- --------------- -------------- --------------
NET ASSETS, END OF PERIOD* .......................... $ 466,606,194 $ 386,690,946 $ 88,384,425 $ 71,779,825
=============== =============== ============== ==============
</TABLE>
- ------------
* Including accumulated undistributed (overdistributed) net investment
income of $43,191 and $97,807 for the Money Market Portfolio; $3,160 and
$22,777 for the Intermediate Government Securities Portfolio; $(220,079)
and $63,771 for the Quality Bond Portfolio; $23,927 and $22,557 for the
High Yield Portfolio; $11,797 and $10,278 for the Growth and Income
Portfolio; $(5,276) and $(851) for the Equity Index Portfolio, as of
December 31, 1996 and December 31, 1995, respectively.
See Notes to Financial Statements.
40
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND INCOME
QUALITY BOND PORTFOLIO HIGH YIELD PORTFOLIO PORTFOLIO EQUITY INDEX PORTFOLIO
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995 1996 1995
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10,285,868 $ 8,846,857 $ 15,471,581 $ 9,874,042 $ 3,051,998 $ 1,929,904 $ 5,656,346 $ 1,847,863
871,659 3,312,031 12,420,138 1,037,899 12,181,263 (78,675) 15,194,950 1,143,375
(1,749,535) 10,351,408 3,447,403 6,108,056 16,443,384 11,348,703 41,228,418 21,464,214
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
9,407,992 22,510,296 31,339,122 17,019,997 31,676,645 13,199,932 62,079,714 24,455,452
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(10,285,868) (8,729,254) (15,469,541) (9,874,042) (3,050,479) (1,919,557) (5,656,346) (1,841,475)
(326,079) -- (432,568) (385,462) -- -- (4,427) --
-- -- (11,348,200) -- (11,682,352) -- (15,093,505) (1,143,375)
-- -- -- -- -- -- -- (84,099)
-- -- -- -- -- -- (7,525) (123)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(10,611,947) (8,729,254) (27,250,309) (10,259,504) (14,732,831) (1,919,557) (20,761,803) (3,069,072)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- (2,040) -- -- -- -- --
-- -- (15,935) -- -- -- -- --
-- -- (908) -- -- -- -- --
-- -- (18,516) -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- (37,399) -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(10,611,947) (8,729,254) (27,287,708) (10,259,504) (14,732,831) (1,919,557) (20,761,803) (3,069,072)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
27,205,153 18,946,820 71,897,677 46,607,272 111,512,120 57,426,026 230,679,439 153,767,030
10,611,947 8,729,254 27,250,309 10,259,504 14,732,831 1,919,557 20,761,803 3,069,072
(39,032,520) (11,589,738) (21,997,075) (19,393,315) (9,161,198) (4,095,508) (72,295,253) (49,185,409)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(1,215,420) 16,086,336 77,150,911 37,473,461 117,083,753 55,250,075 179,145,989 107,650,693
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- 677,158 -- -- -- -- --
-- -- 37,399 -- -- -- -- --
-- -- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- 714,557 -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(1,215,420) 16,086,336 77,865,468 37,473,461 117,083,753 55,250,075 179,145,989 107,650,693
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(2,419,375) 29,867,378 81,916,882 44,233,954 134,027,567 66,530,450 220,463,900 129,037,073
157,442,847 127,575,469 118,128,583 73,894,629 98,052,821 31,522,371 165,785,281 36,748,208
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$155,023,472 $157,442,847 $200,045,465 $118,128,583 $232,080,388 $98,052,821 $386,249,181 $165,785,281
============== ============== ============== ============== ============== ============== ============== ==============
</TABLE>
41
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
<TABLE>
<CAPTION>
COMMON STOCK PORTFOLIO GLOBAL PORTFOLIO
------------------------------ ------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .............................. $ 48,811,771 $ 53,432,936 $ 10,849,353 $ 9,803,075
Realized gain--net ................................. 587,208,099 262,461,526 44,997,037 17,804,800
Change in unrealized appreciation/depreciation of
investments and foreign currency denominated
assets and liabilities--net ....................... 636,307,007 845,152,888 60,383,165 72,106,049
-------------- -------------- -------------- --------------
Net increase in net assets from operations ........ 1,272,326,877 1,161,047,350 116,229,555 99,713,924
-------------- -------------- -------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE
1):
Class IA:
Dividends from net investment income .............. (44,580,327) (53,432,936) (10,849,259) (9,500,310)
Dividends in excess of net investment income ...... -- (6,567,658) (4,499,020) --
Distributions from realized gains.................. (587,198,121) (262,461,526) (42,474,239) (17,804,800)
Distributions in excess of realized gains ........ (71,434,343) (8,497,379) -- (1,081,237)
Tax return of capital distributions ............... (988,016) -- (220,411) (546,316)
-------------- -------------- -------------- --------------
Total Class IA dividends and distributions ........ (704,200,807) (330,959,499) (58,042,929) (28,932,663)
-------------- -------------- -------------- --------------
Class IB:
Dividends from net investment income............... (326) -- (94) --
Dividends in excess of net investment income ...... (4,564) -- (2,076) --
Distributions from realized gains.................. (9,978) -- (1,502) --
Distributions in excess of realized gains ........ (62,273) -- (4,502) --
Tax return of capital distributions................ (108) -- (31) --
-------------- -------------- -------------- --------------
Total Class IB dividends and distributions ........ (77,249) -- (8,205) --
-------------- -------------- -------------- --------------
Decrease in net assets from dividends and
distributions ..................................... (704,278,056) (330,959,499) (58,051,134) (28,932,663)
-------------- -------------- -------------- --------------
SHARE TRANSACTIONS (NOTES 1 AND 5):
Class IA:
Shares sold ....................................... 756,034,799 509,750,491 255,537,439 229,097,991
Shares issued in reinvestment of dividends and
distributions .................................... 704,200,807 330,959,499 58,042,929 28,932,663
Shares redeemed ................................... (282,642,349) (257,365,702) (60,861,388) (64,369,805)
-------------- -------------- -------------- --------------
Total Class IA transactions ........................ 1,177,593,257 583,344,288 252,718,980 193,660,849
-------------- -------------- -------------- --------------
Class IB:
Shares sold ....................................... 1,237,252 -- 285,485 --
Shares issued in reinvestment of dividends and
distributions .................................... 77,249 -- 8,205 --
Shares redeemed ................................... -- -- -- --
-------------- -------------- -------------- --------------
Total Class IB transactions ........................ 1,314,501 -- 293,690 --
-------------- -------------- -------------- --------------
Net increase in net assets derived from share
transactions....................................... 1,178,907,758 583,344,288 253,012,670 193,660,849
-------------- -------------- -------------- --------------
INCREASE IN NET ASSETS............................... 1,746,956,579 1,413,432,139 311,191,091 264,442,110
NET ASSETS, BEGINNING OF PERIOD ..................... 4,879,677,000 3,466,244,861 686,140,393 421,698,283
-------------- -------------- -------------- --------------
NET ASSETS, END OF PERIOD* .......................... $6,626,633,579 $4,879,677,000 $997,331,484 $686,140,393
============== ============== ============== ==============
</TABLE>
- ------------
* Including accumulated undistributed (overdistributed) net investment
income of $(194,316) and $8,246,095 for the Common Stock Portfolio;
$(3,212,284) and $455,586 for the Global Portfolio; $(614,431) and
$6,487 for the International Portfolio; $(58,479) and $(4,129) for the
Aggressive Stock Portfolio; $9,815 and $63,026 for the Conservative
Investors Portfolio; $(190,700) and $86,599 for the Balanced Portfolio,
as of December 31, 1996 and December 31, 1995, respectively.
** Commencement of Operations.
See Notes to Financial Statements.
42
<PAGE>
<TABLE>
<CAPTION>
CONSERVATIVE INVESTORS
INTERNATIONAL PORTFOLIO AGGRESSIVE STOCK PORTFOLIO PORTFOLIO BALANCED PORTFOLIO
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
APRIL 3,
1995**
YEAR ENDED TO YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995 1996 1995
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,072,074 $ 142,455 $ 8,075,002 $ 6,203,510 $ 12,360,795 $ 11,574,771 $ 49,871,322 $ 47,303,460
3,051,749 266,775 651,846,275 346,368,084 6,689,821 11,270,671 128,392,470 64,616,058
4,245,403 944,505 (19,577,800) 262,696,319 (4,721,182) 16,138,395 (3,420,061) 144,740,180
-------------- -------------- -------------- -------------- -------------- -------------- --------------
8,369,226 1,353,735 640,343,477 615,267,913 14,329,434 38,983,837 174,843,731 256,659,698
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(1,072,074) (142,455) (8,075,028) (6,203,510) (12,360,795) (11,510,223) (49,871,322) (47,099,230)
(972,982) (240,038) (50,994) (43,012) (44,557) -- (241,952) --
(2,651,391) (118,651) (651,842,635) (300,293,392) (6,689,821) (1,556,393) (128,392,470) (41,562,533)
-- -- (1,362,771) -- (396,608) -- (2,491,886) --
-- -- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(4,696,447) (501,144) (661,331,428) (306,539,914) (19,491,781) (13,066,616) (180,997,630) (88,661,763)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- -- -- -- -- -- --
-- -- (452) -- -- -- -- --
-- -- (3,630) -- -- -- -- --
-- -- (32,780) -- -- -- -- --
-- -- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- (36,862) -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(4,696,447) (501,144) (661,368,290) (306,539,914) (19,491,781) (13,066,616) (180,997,630) (88,661,763)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
141,011,557 29,365,420 1,093,061,087 843,611,785 50,046,532 50,112,293 64,030,181 55,178,023
4,696,447 501,144 661,331,428 306,539,914 19,491,781 13,066,616 180,997,630 88,661,763
(26,157,811) (2,035,292) (568,654,477) (590,529,129) (34,074,560) (10,686,445) (124,160,136) (118,515,605)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
119,550,193 27,831,272 1,185,738,038 559,622,570 35,463,753 52,492,464 120,867,675 25,324,181
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- 604,481 -- -- -- -- --
-- -- 36,862 -- -- -- -- --
-- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- 641,343 -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
119,550,193 27,831,272 1,186,379,381 559,622,570 35,463,753 52,492,464 120,867,675 25,324,181
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
123,222,972 28,683,863 1,165,354,568 868,350,569 30,301,406 78,409,685 114,713,776 193,322,116
28,683,863 -- 2,700,514,849 1,832,164,280 252,100,995 173,691,310 1,523,141,728 1,329,819,612
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$151,906,835 $28,683,863 $3,865,869,417 $2,700,514,849 $282,402,401 $252,100,995 $1,637,855,504 $1,523,141,728
============== ============== ============== ============== ============== ============== ============== ==============
</TABLE>
43
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF CHANGES IN NET ASSETS (Concluded)
<TABLE>
<CAPTION>
GROWTH INVESTORS
PORTFOLIO
------------------------------
YEAR ENDED
DECEMBER 31,
1996 1995
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .............................. $ 25,706,114 $ 23,451,903
Realized gain--net ................................. 131,200,343 20,094,016
Change in unrealized appreciation/depreciation of
investments and foreign currency denominated
assets and liabilities--net ....................... (20,549,143) 114,933,862
-------------- --------------
Net increase in net assets from operations ........ 136,357,314 158,479,781
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1):
Class IA:
Dividends from net investment income .............. (25,705,569) (23,451,903)
Dividends in excess of net investment income ...... (2,082,361) (429,740)
Distributions from realized gains.................. (131,199,726) (11,896,371)
Distributions in excess of realized gains ......... (570,518) --
-------------- --------------
Total Class IA dividends and distributions ........ (159,558,174) (35,778,014)
-------------- --------------
Class IB:
Dividends from net investment income .............. (545) --
Dividends in excess of net investment income ...... (2,449) --
Distributions from realized gains ................. (617) --
Distributions in excess of realized gains ......... (6,239) --
-------------- --------------
Total Class IB dividends and distributions ........ (9,850) --
-------------- --------------
Decrease in net assets from dividends and
distributions ..................................... (159,568,024) (35,778,014)
-------------- --------------
SHARE TRANSACTIONS (NOTES 1 AND 5):
Class IA:
Shares sold ....................................... 297,495,728 264,281,654
Shares issued in reinvestment of dividends and
distributions .................................... 159,558,174 35,778,014
Shares redeemed ................................... (28,339,916) (19,105,124)
-------------- --------------
Total Class IA transactions ........................ 428,713,986 280,954,544
-------------- --------------
Class IB:
Shares sold ....................................... 468,087 --
Shares issued in reinvestment of dividends and
distributions .................................... 9,850 --
Shares redeemed ................................... (90) --
-------------- --------------
Total Class IB transactions ........................ 477,847 --
-------------- --------------
Net increase in net assets derived from
share transactions ................................ 429,191,833 280,954,544
-------------- --------------
INCREASE IN NET ASSETS .............................. 405,981,123 403,656,311
NET ASSETS, BEGINNING OF PERIOD ..................... 896,133,860 492,477,549
-------------- --------------
NET ASSETS, END OF PERIOD* .......................... $1,302,114,983 $896,133,860
============== ==============
</TABLE>
- ------------
* Including accumulated undistributed (overdistributed) net investment
income of $(1,135,946) and $105,968 for the Growth Investors Portfolio,
as of December 31, 1996 and December 31, 1995, respectively.
See Notes to Financial Statements.
44
<PAGE>
THE HUDSON RIVER TRUST
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EFFECTIVE
PRINCIPAL VALUE ANNUAL
AMOUNT (NOTE 1) YIELD*
- ------------------------------------------------------ -------------- -------------- -----------
<S> <C> <C> <C>
SHORT-TERM DEBT SECURITIES:
BANK NOTES
Bank of New York:
Due 03/24/97.......................................... $10,000,000 $10,001,699 5.48%
Due 04/01/97.......................................... 5,000,000 5,000,441 5.47
--------------
TOTAL BANK NOTES (3.2%) ............................. 15,002,140
--------------
CERTIFICATES OF DEPOSIT
Bayerische Vereinsbank AG
Due 07/29/97.......................................... 15,000,000 15,004,438 5.50
Caisse Nationale de Credit Agricole
Due 09/05/97.......................................... 15,000,000 15,008,047 5.47
First National Bank-Chicago
Due 06/18/97.......................................... 10,000,000 10,006,299 5.51
Bank of Tokyo-Mitsubishi Bank Ltd., N.Y.
Due 04/30/97.......................................... 17,000,000 17,006,022 5.72
Norinchukin Bank Ltd.:
Due 04/07/97.......................................... 8,000,000 8,004,587 5.47
Due 04/23/97.......................................... 9,000,000 9,009,161 5.46
Sumitomo Bank Ltd.
Due 01/27/97.......................................... 17,000,000 17,004,514 5.78
--------------
TOTAL CERTIFICATES OF DEPOSIT (19.5%) ............... 91,043,068
--------------
COMMERCIAL PAPER
Alamo Funding
Due 01/30/97.......................................... 17,500,000 17,425,285 5.53
Allianz of America Financial Corp.
Due 04/24/97.......................................... 8,000,000 7,867,916 5.53
Atlas Funding Corp.:
Due 01/21/97.......................................... 16,400,000 16,351,893 5.51
Due 02/04/97.......................................... 1,253,000 1,246,764 5.50
Barton Capital Corp.:
Due 01/31/97.......................................... 13,600,000 13,540,273 5.50
Due 06/16/97.......................................... 3,876,000 3,781,990 5.55
Beta Finance, Inc.:
Due 03/10/97.......................................... 5,000,000 4,950,228 5.52
Due 03/13/97.......................................... 5,000,000 4,948,032 5.52
Due 06/02/97.......................................... 6,000,000 5,866,747 5.54
BHF Delaware, Inc.
Due 03/10/97.......................................... 5,000,000 4,950,228 5.52
Briarcliff Capital Corp.
Due 01/24/97.......................................... 1,910,000 1,903,557 5.51
Centauri Corp.:
Due 03/13/97.......................................... 6,300,000 6,234,272 5.54
Due 04/11/97.......................................... 11,200,000 11,036,356 5.52
Chase Manhattan Bank
Due 03/14/97.......................................... 5,000,000 4,947,300 5.52
Enterprise Funding Corp.
Due 03/03/97.......................................... 1,290,000 1,278,481 5.51
Eureka Corp.
Due 02/03/97.......................................... 14,000,000 13,932,368 5.50
General Electric Capital Corp.
Due 03/03/97.......................................... 5,000,000 4,955,182 5.54
Greenwich Asset Funding, Inc.
Due 03/24/97.......................................... 8,835,000 8,728,945 5.52
International Securitization
Due 02/20/97.......................................... 7,715,000 7,658,531 5.51
45
<PAGE>
THE HUDSON RIVER TRUST
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- ---------------------------------------------------------------------------------------------------
EFFECTIVE
PRINCIPAL VALUE ANNUAL
AMOUNT (NOTE 1) YIELD*
- ------------------------------------------------------ -------------- -------------- -----------
Jefferson Smurfit Corp.:
Due 02/19/97.......................................... $ 5,000,000 $ 4,964,135 5.51%
Due 03/18/97.......................................... 4,100,000 4,054,385 5.52
Morgan (J.P.) & Co.
Due 03/05/97.......................................... 5,000,000 4,953,888 5.52
Morgan Stanley Group, Inc.
Due 02/12/97.......................................... 17,500,000 17,391,588 5.55
Old Line Funding Corp.:
Due 02/24/97.......................................... 10,000,000 9,920,950 5.51
Due 03/11/97.......................................... 7,500,000 7,424,244 5.52
Premium Funding-Series B
Due 02/18/97.......................................... 2,000,000 1,985,947 5.51
Premium Funding-Series A & E:
Due 02/05/97.......................................... 10,108,000 10,056,211 5.50
Due 02/14/97.......................................... 5,400,000 5,365,218 5.51
Ranger Funding Corp.:
Due 02/04/97.......................................... 6,189,000 6,158,196 5.50
Due 02/13/97.......................................... 5,000,000 4,968,526 5.51
Receivable Capital Corp.
Due 05/01/97.......................................... 12,100,000 11,887,847 5.53
Riverwood Funding Corp.
Due 02/14/97.......................................... 17,500,000 17,387,281 5.51
R.O.S.E. Funding Ltd.
Due 03/26/97.......................................... 17,500,000 17,284,804 5.52
Sigma Finance Corp.:
Due 02/10/97.......................................... 5,800,000 5,766,038 5.51
Due 04/09/97.......................................... 4,500,000 4,435,565 5.52
Three Rivers Funding:
Due 01/21/97.......................................... 3,859,000 3,847,680 5.51
Due 01/27/97.......................................... 8,046,000 8,015,318 5.51
Working Capital Management, Inc.
Due 01/13/97.......................................... 17,500,000 17,468,675 5.60
--------------
TOTAL COMMERCIAL PAPER (65.4%) ...................... 304,940,844
--------------
VARIABLE RATE LIBOR
General Electric Capital Corp.
Due 06/27/97.......................................... 5,000,000 4,997,351 5.72
Goldman Sachs & Co.
Due 01/13/97.......................................... 15,000,000 15,000,406 5.73
Merrill Lynch & Co., Inc.
Due 03/24/97.......................................... 15,000,000 14,998,479 5.76
--------------
TOTAL VARIABLE RATE LIBOR (7.5%) .................... 34,996,236
--------------
VARIABLE RATE SECURITIES (1.1%)
General Electric Capital Corp.
Due 05/12/97.......................................... 5,000,000 5,008,464 5.21
--------------
TOTAL INVESTMENTS IN SHORT-TERM DEBT SECURITIES
(96.7%)
(Amortized Cost $450,833,231) ........................ 450,990,752
OTHER ASSETS LESS LIABILITIES (3.3%)................... 15,615,442
--------------
NET ASSETS (100.0%) ................................... $466,606,194
==============
</TABLE>
[FN]
- ------------
* Based on market values at the close of business on December 31, 1996.
See Notes to Financial Statements.
46
<PAGE>
THE HUDSON RIVER TRUST
INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- -----------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------ ------------ -------------
LONG-TERM DEBT SECURITIES:
COLLATERALIZED MORTGAGE
OBLIGATIONS (0.5%)
Federal Home Loan
Mortgage Corp.
5.75% PAC-1(11), 10/15/11 .... $ 454,373 $ 453,379
-------------
MORTGAGE RELATED (28.8%)
Federal Home Loan
Mortgage Corp:
7.0% TBA, 12/10/11............ 5,900,000 5,898,159
9.5%, 01/01/20 ............... 4,951 5,329
Federal National Mortgage
Association:
8.031%, 05/01/27 (a).......... 1,639,402 1,718,307
7.0% 7 Year Balloon,
04/01/03...................... 503,023 504,284
7.0% 7 Year Balloon,
05/01/03...................... 775,588 777,531
7.0% 7 Year Balloon,
06/01/03...................... 4,828,104 4,840,203
7.0% 7 Year Balloon,
07/01/03...................... 1,084,899 1,087,619
7.0% 7 Year Balloon,
08/01/03...................... 2,059,778 2,064,938
Government National Mortgage
Association:
8.0%, 06/15/23................ 961,303 980,530
8.0%, 11/15/23................ 287,762 293,518
8.0%, 07/15/24................ 294,082 299,964
8.0%, 09/15/24................ 362,341 369,588
8.0%, 10/15/24................ 271,178 276,602
8.0%, 11/15/24................ 278,497 284,067
8.0%, 03/15/25................ 326,433 332,962
8.0%, 04/15/25................ 321,914 328,353
8.0%, 05/15/25................ 1,496,347 1,526,276
8.0%, 05/15/26................ 714,987 729,289
8.0%, 07/15/26................ 3,051,008 3,112,030
-------------
25,429,549
-------------
U.S. GOVERNMENT & AGENCIES (68.5%)
Federal Home Loan Bank
5.5%, 01/10/01 ............... $ 4,500,000 $ 4,373,955
Resolution Funding S.T.R.I.P.S
Zero Coupon Deb., 04/15/99 ... 5,000,000 4,367,750
Tennessee Valley Authority
6.5%, 08/20/01 ............... 5,400,000 5,422,787
U.S. Treasury:
6.125% Note, 08/31/98......... 6,800,000 6,819,128
6.0% Note, 08/15/99........... 14,000,000 13,995,630
5.5% Note, 12/31/00........... 6,600,000 6,447,375
6.625% Note, 06/30/01......... 3,200,000 3,251,002
6.25% Note, 10/31/01.......... 4,000,000 4,002,500
5.875% Note, 11/30/01......... 3,700,000 3,645,658
11.875% Bond, 11/15/03........ 6,300,000 8,213,625
-------------
60,539,410
-------------
TOTAL LONG-TERM DEBT SECURITIES (97.8%)
(Amortized Cost $85,801,169) . 86,422,338
-------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT AGENCIES
Federal Home Loan Bank
5.0%, due 01/02/97............ 500,000 499,931
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97............ 5,700,000 5,699,097
-------------
TOTAL U.S. GOVERNMENT
AGENCIES (7.0%) ............. 6,199,028
-------------
TOTAL SHORT-TERM DEBT SECURITIES (7.0%)
(Amortized Cost $6,199,028) .. 6,199,028
-------------
TOTAL INVESTMENTS (104.8%)
(Amortized Cost $92,000,197) . 92,621,366
OTHER ASSETS LESS LIABILITIES (-4.8%) (4,236,941)
-------------
NET ASSETS (100.0%)............ $88,384,425
=============
- ------------
(a) Adjustable rate mortgage; stated interest rate in effect at December
31, 1996.
See Notes to Financial Statements.
47
<PAGE>
THE HUDSON RIVER TRUST
QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------- ------------ --------------
LONG-TERM DEBT SECURITIES:
BASIC MATERIALS
CHEMICALS (8.7%)
Reliance Industries Ltd.
10.375%, 06/24/16+............. $ 6,700,000 $ 7,253,554
Soc Quimica Y Minera
7.7%, 09/15/06+................ 6,000,000 6,154,620
--------------
TOTAL BASIC MATERIALS (8.7%) .. 13,408,174
--------------
CREDIT SENSITIVE
BANKS (4.3%)
Zion's First National Bank
8.536%, 12/15/26+.............. 6,500,000 6,704,945
--------------
FOREIGN GOVERNMENT (13.5%)
Government of Australia
7.0%, 04/15/00................. 17,250,000 13,819,508
Republic of Poland
4.0% PDI, 10/27/14(a).......... 8,500,000 7,182,500
--------------
21,002,008
--------------
INSURANCE (3.3%)
Conseco Finance Trust II
8.7%, 11/15/26................. 5,050,000 5,076,109
--------------
MORTGAGE RELATED (23.6%)
Chase Manhattan Grantor Trust
5.2%, 02/15/02................. 5,926,867 5,874,854
Federal Home Loan
Mortgage Corp.
7.0%, 09/01/11................. 7,735,144 7,732,731
Federal National Mortgage
Association:
6.5%, 05/01/11................. 13,074,403 12,837,429
6.5%, 08/01/11................. 2,124,701 2,086,191
7.0%, 05/01/26................. 8,269,379 8,091,075
--------------
36,622,280
--------------
UTILITY--ELECTRIC (4.7%)
Empresa Electrica del Norte
7.75%, 03/15/06+............... $ 7,165,000 $ 7,223,538
--------------
UTILITY--GAS (3.3%)
RAS Laffan Liquid Natural Gas
8.294%, 09/15/14+.............. 5,000,000 5,081,075
--------------
U.S. GOVERNMENT (34.1%)
U.S. Treasury:
6.375% Note, 05/15/99.......... 25,290,000 25,511,288
6.25% Note, 10/31/01........... 14,735,000 14,744,209
5.75% Note, 08/15/03........... 13,000,000 12,610,000
--------------
52,865,497
--------------
TOTAL CREDIT SENSITIVE
(86.8%)........................ 134,575,452
--------------
TOTAL LONG-TERM DEBT SECURITIES (95.5%)
(Amortized Cost $145,706,771) . 147,983,626
--------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT AGENCIES (3.4%)
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97............. 5,300,000 5,299,161
--------------
TOTAL SHORT-TERM DEBT SECURITIES (3.4%)
(Amortized Cost $5,299,161) ... 5,299,161
--------------
TOTAL INVESTMENTS (98.9%)
(Amortized Cost $151,005,932) . 153,282,787
OTHER ASSETS
LESS LIABILITIES (1.1%)........ 1,740,685
--------------
NET ASSETS (100.0%)............. $155,023,472
==============
- ------------
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $32,417,732
or 20.9% of net assets.
(a) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at December 31, 1996.
Glossary:
PDI--Past Due Interest Bond
See Notes to Financial Statements.
48
<PAGE>
THE HUDSON RIVER TRUST
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ------------------------------- ------------ -------------
COMMON STOCKS AND WARRANTS:
BUSINESS SERVICES (0.0%)
PRINTING, PUBLISHING &
BROADCASTING
Pegasus Media & Communications
(Class B)*..................... 150 $ 45,000
-------------
CAPITAL GOODS (0.0%)
BUILDING & CONSTRUCTION
Capital Pacific Holdings,
Inc.--
Warrants*...................... 11,850 17,775
-------------
CONSUMER CYCLICALS
RETAIL--GENERAL (0.0%)
Eye Care Centers of America--
Warrants*...................... 5,000 20,000
Florists Transworld Corp.
(Class B)*+.................... 18,750 18,750
-------------
TOTAL CONSUMER CYCLICALS (0.0%) 38,750
-------------
CONSUMER NONCYCLICALS
HOSPITAL SUPPLIES & SERVICES (0.0%)
Wright Medical Technology,
Inc.--Warrants*................ 618 80,340
-------------
SOAPS & TOILETRIES (0.1%)
Renaissance Cosmetics--
Warrants*+ .................... 2,000 100,000
-------------
TOTAL CONSUMER NONCYCLICALS (0.1%) 180,340
-------------
TOTAL COMMON STOCKS
AND WARRANTS (0.1%)
(Cost $157,935)................ 281,865
-------------
PREFERRED STOCKS:
BUSINESS SERVICES (3.4%)
PRINTING, PUBLISHING &
BROADCASTING
Cablevision Systems Corp.
11.125%, Series M (a).......... 75,495 6,775,676
-------------
TOTAL PREFERRED STOCKS (3.4%)
(Cost $7,042,039).............. 6,775,676
-------------
PRINCIPAL
AMOUNT
------------
LONG-TERM DEBT SECURITIES:
BASIC MATERIALS
CHEMICALS (4.9%)
Kaiser Aluminum & Chemical
10.875%, 10/15/06+............. $4,000,000 4,240,000
-------------
Trans Resources, Inc.
11.875% Sr. Sub. Note
Series B, 07/01/02............. 5,500,000 5,527,500
-------------
9,767,500
-------------
METALS & MINING (1.3%)
Great Lakes Carbon Corp.
10.0%, 01/01/06................ 2,500,000 2,650,000
-------------
PAPER (3.4%)
FSW International
12.5%, 11/01/06+............... 4,000,000 4,240,000
Maxxam Group Holdings, Inc.
12.0%, 08/01/03+ .............. 2,500,000 2,550,000
-------------
6,790,000
-------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------ ------------ --------------
STEEL (3.3%)
AK Steel Corp.
9.125%, 12/15/06+............. $4,000,000 $ 4,103,752
Ivaco, Inc.
11.5%, 09/15/05 .............. 2,500,000 2,487,500
--------------
6,591,252
--------------
TOTAL BASIC MATERIALS
(12.9%)....................... 25,798,752
--------------
BUSINESS SERVICES
PRINTING, PUBLISHING &
BROADCASTING (16.3%)
All American Communications,
Inc.
10.875%, 10/15/01............. 4,000,000 4,060,000
Albritton Communications
9.75%, 11/30/07............... 5,000,000 4,850,000
Goss Graphic Systems, Inc.
12.0%, 10/15/06 .............. 5,250,000 5,407,500
Grupo Televisa S.A.
Zero Coupon, 05/15/08 (b) .... 9,000,000 5,940,000
Park Broadcasting, Inc.
11.75%, 05/15/04+............. 5,000,000 5,875,000
Telemundo Group, Inc.
7.0%, 02/15/06 (c)............ 6,735,000 6,499,275
--------------
32,631,775
--------------
TRUCKING, SHIPPING (2.1%)
Ryder Trucks Inc.
10.0%, 12/01/06+.............. 4,000,000 4,160,000
--------------
TOTAL BUSINESS SERVICES (18.4%) 36,791,775
--------------
CAPITAL GOODS
AEROSPACE (1.8%)
Hawk Corp.
10.25%, 12/01/03+............. 3,500,000 3,570,000
--------------
MACHINERY (2.1%)
Dictaphone Corp.
11.75%, 08/01/05.............. 4,500,000 4,140,000
--------------
TOTAL CAPITAL GOODS (3.9%) ... 7,710,000
--------------
CONSUMER CYCLICALS
AIRLINES (1.0%)
Continental Airlines, Inc.
9.5%, 12/15/01+ .............. 2,000,000 2,030,000
--------------
AUTO RELATED (1.5%)
Harvard Industries, Inc.
12.0%, 07/15/04............... 3,500,000 3,027,500
--------------
LEISURE RELATED (4.2%)
American Skiing Corp.
12.0%, 07/15/06+.............. 4,000,000 4,210,000
Waterford Gaming LLC
12.75%, 11/15/03+............. 4,000,000 4,170,000
--------------
8,380,000
--------------
RETAIL--GENERAL (2.1%)
Pantry, Inc.
12.0%, 11/15/00............... 4,500,000 4,241,250
--------------
TOTAL CONSUMER CYCLICALS (8.8%) 17,678,750
49
<PAGE>
THE HUDSON RIVER TRUST
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------ ------------ --------------
CONSUMER NONCYCLICALS
CONTAINERS (3.0%)
Gaylord Container Corp.
11.5%, 05/15/01............... $3,500,000 $ 3,780,000
MVE, Inc.
12.5%, 02/15/02............... 2,000,000 2,160,000
--------------
5,940,000
--------------
HOSPITAL SUPPLIES & SERVICES (3.1%)
Quest Diagnostic, Inc.
10.75%, 12/15/06.............. 3,452,000 3,624,600
Unison Healthcare Corp.
12.25%, 11/01/06+............. 2,500,000 2,562,500
--------------
6,187,100
--------------
TOTAL CONSUMER NONCYCLICALS (6.1%) 12,127,100
--------------
CREDIT SENSITIVE
FOREIGN GOVERNMENT (1.2%)
Republic of Russia
Floater, 12/15/20 (d)......... 4,000,000 2,335,000
--------------
UTILITY--ELECTRIC (1.5%)
AES China Generating Co.
10.125%, 12/15/06............. 3,000,000 3,120,000
--------------
TOTAL CREDIT SENSITIVE
(2.7%)........................ 5,455,000
--------------
ENERGY
OIL--DOMESTIC (7.9%)
Abraxas Petroleum Corp.
11.5%, 11/01/04+.............. 3,500,000 3,718,750
National Energy Group
10.75%, 11/01/06+............. 6,500,000 6,760,000
TransTexas Gas Corp.
Zero Coupon, 12/31/03 (b) .... 9,512,000 5,231,600
--------------
15,710,350
--------------
OIL--SUPPLIES & CONSTRUCTION (4.6%)
Deeptech International, Inc.
12.0%, 12/15/00............... 3,500,000 3,675,000
Transamerican Refining Corp.
Zero Coupon, 02/15/02 (b) .... 6,750,000 5,568,750
--------------
9,243,750
--------------
TOTAL ENERGY (12.5%).......... 24,954,100
--------------
TECHNOLOGY
ELECTRONICS (11.8%)
Advanced Micro Devices
11.0%, 08/01/03............... 6,000,000 6,510,000
Anacomp, Inc.
13.0%, 06/04/02 (e)........... $4,500,000 $ 4,826,250
Sullivan Graphic, Inc.
12.75%, 08/01/05.............. 5,000,000 4,825,000
Unisys Corp.:
12.0%, 04/15/03............... 5,000,000 5,325,000
11.75%, 10/15/04.............. 2,000,000 2,135,000
--------------
23,621,250
--------------
TELECOMMUNICATIONS (12.8%)
CAI Wireless Systems, Inc.
12.25%, 09/15/02.............. 4,880,000 2,244,800
Celestica International, Inc.
10.5%, 12/31/06+.............. 2,500,000 2,625,000
Colt Telecom Group PLC
Zero Coupon, 12/15/06 (b) .... 7,000,000 4,200,000
Ionica Corp. PLC
13.5%, 08/15/06+ (f).......... 6,000,000 6,720,000
Lodgenet Entertainment
10.25%, 12/15/06+............. 2,500,000 2,506,250
Nextel Communications
Zero Coupon, 08/15/04 (b) .... 7,000,000 4,777,500
Phonetel Technologies, Inc.
12.0%, 12/15/06............... 2,500,000 2,587,500
--------------
25,661,050
--------------
TOTAL TECHNOLOGY (24.6%) ..... 49,282,300
--------------
TOTAL LONG-TERM DEBT SECURITIES (89.9%)
(Amortized Cost
$174,112,832)................. 179,797,777
--------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT AGENCIES
Federal Home Loan Bank
5.26%, due 01/15/97........... 2,300,000 2,295,296
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97............ 8,400,000 8,398,670
--------------
TOTAL U.S. GOVERNMENT
AGENCIES (5.4%).............. 10,693,966
--------------
TOTAL SHORT-TERM DEBT SECURITIES (5.4%)
(Amortized Cost $10,693,966) . 10,693,966
--------------
TOTAL INVESTMENTS (98.8%)
(Cost/Amortized Cost $192,006,772) 197,549,284
OTHER ASSETS
LESS LIABILITIES (1.2%)....... 2,496,181
--------------
NET ASSETS (100.0%)............ $200,045,465
==============
- ------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $64,160,002
or 32.1% of net assets.
(a) Dividends may be paid-in-kind or in cash until a specific date;
thereafter, all payments will be in cash.
(b) Debt security initially issued in zero coupon form which converts to
coupon form at a specific rate and date.
(c) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at December 31, 1996.
(d) Security purchased on a when issued basis.
(e) Paid-in-kind.
(f) Consists of more than one class of securities traded together as a
unit; generally bonds with attached stocks or warrants.
See Notes to Financial Statements.
50
<PAGE>
THE HUDSON RIVER TRUST
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ------------------------------- ----------- --------------
COMMON STOCKS:
BASIC MATERIALS (1.2%)
CHEMICALS
Dow Chemical Co. ............... 35,000 $ 2,743,125
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.6%)
WMX Technologies, Inc. ......... 40,000 1,305,000
--------------
PRINTING, PUBLISHING &
BROADCASTING (3.3%)
Comcast Corp. (Class A) SPL .... 92,000 1,638,750
LibertyMediaGroup(ClassA)* ... 62,000 1,770,875
Lin Television Corp.*........... 26,000 1,098,500
New York Times Co............... 41,000 1,558,000
Time Warner, Inc................ 44,000 1,650,000
--------------
7,716,125
--------------
TRUCKING, SHIPPING (0.5%)
Xtra Corp....................... 26,500 1,149,438
--------------
TOTAL BUSINESS SERVICES
(4.4%)......................... 10,170,563
--------------
CAPITAL GOODS
BUILDING MATERIALS & FOREST
PRODUCTS (0.7%)
Louisiana Pacific Corp. ........ 75,000 1,584,375
--------------
ELECTRICAL EQUIPMENT (1.3%)
General Electric Co............. 30,000 2,966,250
--------------
TOTAL CAPITAL GOODS (2.0%) ... 4,550,625
--------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.8%)
Reebok International Ltd. ...... 45,000 1,890,000
--------------
AUTO RELATED (1.7%)
Goodyear Tire & Rubber Co. ..... 76,500 3,930,188
--------------
FOOD SERVICES, LODGING (0.4%)
Brinker International, Inc.* ... 60,000 960,000
--------------
HOUSEHOLD FURNITURE,
APPLIANCES (1.0%)
Black & Decker Corp............. 42,500 1,280,313
Sunbeam Corp. .................. 38,000 978,500
--------------
2,258,813
--------------
RETAIL--GENERAL (3.7%)
AutoZone, Inc.*................. 51,200 1,408,000
Dayton Hudson Corp.............. 58,000 2,276,500
Federated Department Stores,
Inc.*.......................... 38,000 1,296,750
Price/Costco, Inc.*............. 75,000 1,884,374
Sears, Roebuck & Co. ........... 40,000 1,845,000
--------------
8,710,624
--------------
TOTAL CONSUMER CYCLICALS (7.6%) 17,749,625
--------------
CONSUMER NONCYCLICALS
BEVERAGES (2.6%)
Anheuser Busch, Inc. ........... 53,000 2,120,000
Pepsico, Inc.................... 135,700 3,969,225
--------------
6,089,225
--------------
FOODS (5.7%)
Campbell Soup Co................ 90,000 7,222,500
General Mills, Inc. ............ 35,000 2,218,124
Nabisco Holdings Corp.
(Class A)...................... 54,000 $ 2,099,250
Whitman Corp.................... 76,000 1,738,500
--------------
13,278,374
--------------
DRUGS (7.0%)
Amgen, Inc.*.................... 12,700 690,570
Bristol-Myers Squibb Co......... 25,000 2,718,750
Centocor, Inc.*................. 101,000 3,610,750
Merck & Co., Inc................ 115,200 9,129,600
--------------
16,149,670
--------------
HOSPITAL SUPPLIES & SERVICES (1.3%)
Abbott Laboratories............. 60,000 3,045,000
--------------
RETAIL--FOOD (0.5%)
Kroger Co.*..................... 23,000 1,069,500
--------------
SOAPS & TOILETRIES (0.5%)
Gillette Corp................... 14,000 1,088,500
--------------
TOBACCO (5.6%)
American Brands, Inc............ 42,000 2,084,250
Philip Morris Cos., Inc. ...... 56,500 6,363,313
RJR Nabisco Holdings Corp. ..... 135,500 4,607,000
--------------
13,054,563
--------------
TOTAL CONSUMER NONCYCLICALS (23.2%) 53,774,832
--------------
CREDIT SENSITIVE
BANKS (5.7%)
Chase Manhattan Corp............ 25,200 2,249,100
First Union Corp................ 58,000 4,292,000
Morgan (J.P.) & Co., Inc. ...... 24,000 2,343,000
Wells Fargo & Co. .............. 16,200 4,369,950
--------------
13,254,050
--------------
FINANCIAL SERVICES (2.0%)
Dean Witter Discover & Co. .... 21,000 1,391,250
Merrill Lynch & Co., Inc. ...... 40,000 3,260,000
--------------
4,651,250
--------------
INSURANCE (5.5%)
General Re Corp................. 26,400 4,164,600
ITT Hartford Group, Inc......... 56,600 3,820,500
PMI Group, Inc.................. 48,600 2,691,225
Travelers Group, Inc............ 45,333 2,056,985
--------------
12,733,310
--------------
UTILITY--ELECTRIC (4.2%)
Cinergy Corp.................... 60,000 2,002,500
FPL Group, Inc.................. 43,000 1,978,000
Houston Industries, Inc......... 60,000 1,357,500
NIPSCO Industries, Inc.......... 28,000 1,109,500
Pinnacle West Capital Corp. .... 36,000 1,143,000
Texas Utilities Co.............. 55,000 2,241,250
--------------
9,831,750
--------------
UTILITY--GAS (1.2%)
Consolidated Natural Gas Co. .. 50,000 2,762,500
--------------
UTILITY--TELEPHONE (5.2%)
AT&T Corp....................... 254,100 11,053,349
LCI International, Inc.*........ 39,610 851,615
--------------
11,904,964
--------------
TOTAL CREDIT SENSITIVE (23.8%). 55,137,824
--------------
51
<PAGE>
THE HUDSON RIVER TRUST
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ------------------------------- ----------- --------------
ENERGY
COAL & GAS PIPELINES (0.9%)
MCN Corp. ...................... 70,000 $ 2,021,250
--------------
OIL--DOMESTIC (0.3%)
Apache Corp..................... 22,000 778,250
--------------
OIL--INTERNATIONAL (5.6%)
Exxon Corp...................... 80,000 7,840,000
Mobil Corp...................... 42,300 5,171,175
--------------
13,011,175
--------------
OIL--SUPPLIES & CONSTRUCTION (0.3%)
Transocean Offshore, Inc. ...... 9,900 619,988
--------------
RAILROADS (1.4%)
Canadian Pacific Ltd............ 39,000 1,033,500
Union Pacific Corp.............. 39,000 2,344,875
--------------
3,378,375
--------------
TOTAL ENERGY (8.5%)............ 19,809,038
--------------
TECHNOLOGY
ELECTRONICS (3.9%)
Atmel Corp.*.................... 90,000 2,981,250
National Semiconductor Corp.* .. 153,000 3,729,375
Seagate Technology, Inc.* ...... 12,811 506,035
Tyco International Ltd. ........ 33,900 1,792,463
--------------
9,009,123
--------------
OFFICE EQUIPMENT (2.8%)
Compaq Computer Corp.*.......... 25,000 1,856,250
International Business Machines
Corp. ......................... 20,000 3,020,000
Xerox Corp...................... 30,000 1,578,750
--------------
6,455,000
--------------
TELECOMMUNICATIONS (4.1%)
ICG Communications, Inc.* ...... 21,552 379,854
MFS Communications Co., Inc.* .. 1,045 56,953
Nokia Corp. (ADR)............... 62,000 3,572,750
Scientific Atlanta, Inc......... 100,000 1,500,000
Teleport Communications Group,
Inc. (Class A)*................ 79,700 2,430,850
Vodafone Group PLC (ADR)........ 41,000 1,696,374
--------------
9,636,781
--------------
TOTAL TECHNOLOGY (10.8%) ..... 25,100,904
--------------
DIVERSIFIED (0.7%)
MISCELLANEOUS
Allied Signal, Inc.............. 27,000 1,809,000
--------------
TOTAL COMMON STOCKS (82.2%)
(Cost $168,673,703)............ 190,845,536
--------------
PREFERRED STOCKS:
CONSUMER CYCLICALS
AIRLINES (0.2%)
Continental Air Finance Trust
8.5% Conv. .................... 7,500 502,500
--------------
APPAREL, TEXTILE (0.2%)
Designer Finance Trust
6.0% Conv. .................... 6,900 319,125
--------------
TOTAL CONSUMER CYCLICALS (0.4%) 821,625
--------------
CONSUMER NONCYCLICALS (0.5%)
CONTAINERS
Crown Cork & Seal Co., Inc.
4.5% Conv. ................... 23,100 $1,201,200
--------------
CREDIT SENSITIVE
BANKS (0.3%)
First Chicago NBD Corp.
5.75% Conv. Series B.......... 7,600 685,900
--------------
FINANCIAL SERVICES (0.1%)
Money Store
6.5% Conv. ................... 12,000 328,500
--------------
INSURANCE (0.3%)
PennCorp Financial Group, Inc.
7.0% Conv.+ .................. 10,050 597,975
--------------
TOTAL CREDIT SENSITIVE
(0.7%)........................ 1,612,375
--------------
TECHNOLOGY (0.7%)
TELECOMMUNICATIONS
MFS Communications Co., Inc.
8.0% Conv..................... 18,700 1,706,375
--------------
TOTAL PREFERRED STOCKS (2.3%)
(Cost $4,309,492) ............ 5,341,575
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.3%)
United Waste Systems, Inc.
4.5% Conv., 06/01/01+........... 490,000 592,900
--------------
PROFESSIONAL SERVICES (0.9%)
Career Horizons, Inc.
7.0% Conv., 11/01/02............ 220,000 431,475
Danka Business Systems PLC
6.75% Conv., 04/01/02........... 470,000 634,500
First Financial Management Corp.
5.0% Conv., 12/15/99............ 655,000 1,101,218
-------------
2,167,193
-------------
TOTAL BUSINESS SERVICES (1.2%) 2,760,093
-------------
CAPITAL GOODS (0.2%)
MACHINERY
DII Group, Inc.
6.0% Conv., 10/15/02+........... 510,000 484,500
-------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.3%)
Nine West Group, Inc.
5.5% Conv., 07/15/03+........... 790,000 786,050
-------------
FOOD SERVICES, LODGING (0.5%)
HFS, Inc.
4.5% Conv., 10/01/99............ 320,000 1,059,200
-------------
RETAIL--GENERAL (0.5%)
Saks Holdings, Inc.
5.5% Conv., 09/15/06............ 500,000 460,000
U.S. Office Products Co.
5.5% Conv. Sub. Notes,
02/01/01........................ 490,000 637,000
-------------
1,097,000
-------------
TOTAL CONSUMER CYCLICALS (1.3%) 2,942,250
-------------
52
<PAGE>
THE HUDSON RIVER TRUST
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------- ------------ --------------
CONSUMER NONCYCLICALS
DRUGS (0.5%)
MedImmune, Inc.
7.0% Conv. Sub., 07/01/03+ .... $ 500,000 $ 538,750
Quintiles Transnational Corp.
4.25% Conv., 05/31/00+......... 505,000 530,250
--------------
1,069,000
--------------
HOSPITAL SUPPLIES & SERVICES (0.9%)
American Medical Response, Inc.
5.25% Conv., 02/01/01+......... 545,000 587,237
Healthsouth Corp.
5.0% Conv., 04/01/01........... 270,000 558,563
Phycor, Inc.
4.5% Conv., 02/01/03........... 540,000 525,825
Tenet Healthcare Corp.
6.0% Conv., 12/01/05........... 415,000 435,750
--------------
2,107,375
--------------
TOTAL CONSUMER NONCYCLICALS (1.4%) 3,176,375
--------------
CREDIT SENSITIVE
FINANCIAL SERVICES (0.9%)
Aames Financial Corp.
5.5% Conv., 03/15/06+.......... 330,000 445,913
Leasing Solutions, Inc.
6.875% Conv., 10/01/03......... 760,000 760,000
RAC Financial Group, Inc.
7.25% Conv. Sub., 08/15/03+ ... 365,000 487,731
Safeguard Scientifics
6.0% Conv., 02/01/06+.......... 345,000 376,050
--------------
2,069,694
--------------
INSURANCE (0.3%)
Penn Treaty American Corp.
6.25% Conv., 12/01/03+......... 660,000 716,100
--------------
TOTAL CREDIT SENSITIVE (1.2%) 2,785,794
--------------
ENERGY
COAL & GAS PIPELINES (0.4%)
Nabors Industries, Inc.
5.0% Conv., 05/15/06........... 395,000 489,800
Swift Energy Co.
6.25% Conv., 11/15/06.......... 375,000 411,563
--------------
901,363
--------------
OIL--SUPPLIES & CONSTRUCTION (0.2%)
Seacor Holdings
5.375% Conv. Sub. Notes,
11/15/06+...................... 370,000 429,200
--------------
TOTAL ENERGY (0.6%) ........... 1,330,563
--------------
TECHNOLOGY
ELECTRONICS (4.3%)
Altera Corp.
5.75% Conv. Sub. Note,
06/15/02+...................... 905,000 1,400,487
Applied Magnetics Corp.:
7.0% Conv. Sub., 03/15/06 ..... $1,135,000 $ 2,008,950
7.0% Conv. Sub. Euro,
03/15/06....................... 100,000 177,000
C-Cube Microsystems, Inc.
5.875% Conv., 11/01/05......... 500,000 647,500
Checkpoint Systems, Inc.
5.25% Conv., 11/01/05+......... 215,000 314,169
LSI Logic Corp.
5.5% Conv., 03/15/01+.......... 425,000 932,875
Plasma & Materials
Technologies, Inc.
7.125% Conv., 10/15/01+........ 645,000 632,100
Sanmina Corporation
5.5% Conv., 08/15/02+.......... 750,000 1,568,438
SCI Systems, Inc.
5.0% Conv., 05/01/06........... 780,000 891,150
S3 Incorporated
5.75% Conv. Sub. Note,
10/01/03+...................... 350,000 383,250
3Com Corp.
10.25% Conv., 11/01/01+........ 495,000 1,092,712
--------------
10,048,631
--------------
TELECOMMUNICATIONS (0.9%)
Bay Networks, Inc.
5.25%, 05/15/03+............... 270,000 243,675
BBN Corp.
6.0% Conv., 04/01/12........... 710,000 688,700
Comverse Technology, Inc.
5.75% Conv. Sub., 10/01/06+ ... 1,020,000 1,056,975
--------------
1,989,350
--------------
TOTAL TECHNOLOGY (5.2%) ...... 12,037,981
--------------
DIVERSIFIED (0.4%)
MISCELLANEOUS
Thermo Electron Corp.
5.0% Conv. Euro, 04/15/01 ..... 585,000 1,159,763
--------------
TOTAL LONG-TERM DEBT SECURITIES (11.5%)
(Amortized Cost $22,329,200) .. 26,677,319
--------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT AGENCIES
Federal Home Loan Bank
5.25%, due 01/02/97............ 3,000,000 2,999,563
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97............. 5,900,000 5,899,065
--------------
TOTAL U.S. GOVERNMENT
AGENCIES (3.9%) .............. 8,898,628
--------------
TOTAL SHORT-TERM DEBT SECURITIES (3.9%)
(Amortized Cost $8,898,628) ... 8,898,628
--------------
TOTAL INVESTMENTS (99.9%)
(Cost/Amortized Cost $204,211,023) 231,763,058
OTHER ASSETS
LESS LIABILITIES (0.1%)........ 317,330
--------------
NET ASSETS (100.0%) ............ $232,080,388
==============
- ------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $14,197,337
or 6.1% of net assets.
Glossary:
ADR--American Depository Receipt
See Notes to Financial Statements.
53
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS (2.5%)
Air Products & Chemicals, Inc. ... 7,400 $ 511,525
Avery Dennison Corp. .............. 7,200 254,700
Dow Chemical Co. .................. 16,100 1,261,837
Dupont (E.I.) de Nemours & Co. ... 37,300 3,520,187
Eastman Chemical Company........... 5,400 298,350
Ecolab, Inc. ...................... 5,000 188,125
FMC Corp.*......................... 2,600 182,325
Goodrich (B.F.) Co. ............... 4,400 178,200
Grace (W.R.) & Co. ................ 6,400 331,200
Hercules, Inc. .................... 6,800 294,100
Millipore Corp. ................... 5,000 206,875
Monsanto Co. ...................... 38,900 1,512,238
Nalco Chemical Co.................. 5,100 184,238
Rohm & Haas Co. ................... 4,200 342,825
Union Carbide Corp. ............... 8,400 343,350
--------------
9,610,075
--------------
CHEMICALS--SPECIALTY (0.3%)
Great Lakes Chemical Corp. ........ 4,400 205,700
Morton International, Inc. ........ 10,100 411,575
Raychem Corp. ..................... 3,000 240,375
Sigma-Aldrich Corp. ............... 3,600 224,775
--------------
1,082,425
--------------
METALS & MINING (1.2%)
Alcan Aluminium Ltd................ 900 30,262
Alcan Aluminium Ltd. (Canada) ..... 14,800 499,908
Aluminum Co. of America............ 12,400 790,500
Barrick Gold Corp. ................ 23,500 675,625
Cyprus Amax Minerals Co. .......... 7,900 184,663
Engelhard Corp. ................... 9,450 180,731
Freeport-McMoRan
Copper & Gold, Inc. (Class B) .... 13,600 406,300
Homestake Mining Co. .............. 11,700 166,725
Inco Ltd. ......................... 12,000 382,500
Newmont Mining Corp. .............. 6,948 310,923
Phelps Dodge Corp. ................ 4,600 310,500
Placer Dome, Inc. ................. 17,000 369,750
Reynolds Metals Co. ............... 4,300 242,412
Santa Fe Pacific Gold Corp. ...... 12,420 190,958
--------------
4,741,757
--------------
PAPER (1.3%)
Champion International Corp. ..... 6,400 276,800
Georgia Pacific Corp. ............. 6,100 439,200
International Paper Co. ........... 20,225 816,584
James River Corp................... 6,000 198,750
Kimberly Clark Corp. .............. 19,022 1,811,846
Mead Corp. ........................ 3,500 203,438
Moore Corp. Ltd. .................. 9,100 185,412
Stone Container Corp. ............. 12,400 184,450
Temple Inland, Inc. ............... 3,900 211,087
Union Camp Corp. .................. 4,800 229,200
Westvaco Corp. .................... 7,500 215,625
Willamette Industries, Inc. ...... 3,900 271,538
--------------
5,043,930
--------------
STEEL (0.3%)
Allegheny Teledyne, Inc. .......... 10,600 $ 243,800
Bethlehem Steel Corp.*............. 13,600 122,400
Nucor Corp. ....................... 6,100 311,100
USX-U.S. Steel Group............... 6,300 197,663
Worthington Industries, Inc. ..... 8,400 152,250
--------------
1,027,213
--------------
TOTAL BASIC MATERIALS (5.6%) ..... 21,505,400
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.4%)
Browning-Ferris Industries, Inc. . 14,100 370,125
Johnson Controls, Inc. ............ 2,800 232,050
WMX Technologies, Inc. ............ 32,300 1,053,788
--------------
1,655,963
--------------
PRINTING, PUBLISHING &
BROADCASTING (1.9%)
Comcast Corp. (Class A) SPL........ 21,600 384,750
Deluxe Corp. ...................... 6,500 212,875
Donnelley (R.R.) & Sons Co. ...... 10,000 313,750
Dow Jones & Co., Inc. ............. 6,400 216,800
Dun & Bradstreet Corp. ............ 12,100 287,375
Gannett Co. ....................... 9,300 696,338
Jostens, Inc. ..................... 8,692 183,619
King World Productions, Inc.* ..... 5,200 191,750
Knight-Ridder, Inc. ............... 6,600 252,450
McGraw-Hill Companies, Inc. ...... 6,600 304,425
New York Times Co. ................ 6,900 262,200
TCI Group (Class A)*............... 44,000 574,750
Time Warner, Inc. ................. 37,700 1,413,750
Times Mirror Co. (Class A)......... 6,600 328,350
Tribune Co. ....................... 4,100 323,387
U.S. West Media Group*............. 41,400 765,900
Viacom, Inc. (Class A)*............ 1,000 34,500
Viacom, Inc. (Class B)*............ 22,500 784,687
--------------
7,531,656
--------------
PROFESSIONAL SERVICES (0.4%)
Block (H&R), Inc. ................. 7,200 208,800
Ceridian Corp.*.................... 5,000 202,500
Cognizant Corp. ................... 11,400 376,200
Interpublic Group Cos., Inc. ..... 5,400 256,500
Service Corp. International........ 15,400 431,215
--------------
1,475,215
--------------
TRUCKING, SHIPPING (0.3%)
Federal Express Corp.*............. 7,800 347,100
Laidlaw, Inc. (Class B)............ 20,800 239,200
Ryder System, Inc. ................ 6,700 188,437
--------------
774,737
--------------
TOTAL BUSINESS SERVICES (3.0%) ... 11,437,571
--------------
CAPITAL GOODS
AEROSPACE (2.2%)
Boeing Co. ........................ 24,267 2,581,402
General Dynamics Corp. ............ 4,600 324,300
Lockheed Martin Corp. ............. 12,704 1,162,416
McDonnell Douglas Corp. ........... 14,000 896,000
Northrop Grumman Corp. ............ 4,000 331,000
Raytheon Co. ...................... 15,600 750,750
54
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
Rockwell International Corp. ..... 15,900 $ 967,913
TRW, Inc. ......................... 8,400 415,800
United Technologies Corp. ......... 15,900 1,049,400
--------------
8,478,981
--------------
BUILDING MATERIALS & FOREST
PRODUCTS (0.7%)
Armstrong World Industries, Inc. . 2,900 201,550
Crane Co. ......................... 6,600 191,400
Louisiana Pacific Corp. ........... 8,600 181,675
Masco Corp. ....................... 11,500 414,000
Owens Corning...................... 4,600 196,075
PPG Industries, Inc. .............. 12,100 679,113
Sherwin Williams Co. .............. 5,800 324,800
Weyerhaeuser Co. .................. 13,300 630,087
--------------
2,818,700
--------------
ELECTRICAL EQUIPMENT (3.5%)
Emerson Electric Co. .............. 14,800 1,431,900
General Electric Co. .............. 110,100 10,886,138
Grainger (W.W.), Inc. ............. 3,700 296,925
Thomas & Betts Corp................ 4,200 186,375
Westinghouse Electric Corp. ...... 28,100 558,487
--------------
13,359,825
--------------
MACHINERY (1.3%)
Case Corp. ........................ 4,900 267,050
Caterpillar, Inc. ................. 12,700 955,675
Cooper Industries, Inc. ........... 7,200 303,300
Cummins Engine, Inc. .............. 4,400 202,400
Deere & Co......................... 17,200 698,750
Dover Corp. ....................... 7,500 376,875
Fluor Corp. ....................... 5,800 363,950
Foster Wheeler Corp. .............. 5,100 189,338
General Signal Corp. .............. 4,500 192,375
Harnischfeger Industries Corp. ... 4,100 197,312
Illinois Tool Works, Inc........... 8,200 654,975
Ingersoll Rand Co. ................ 7,300 324,850
Pall Corp.......................... 8,200 209,100
Parker-Hannifin Corp. ............. 5,300 205,375
--------------
5,141,325
--------------
TOTAL CAPITAL GOODS (7.7%)........ 29,798,831
--------------
CONSUMER CYCLICALS
AIRLINES (0.3%)
AMR Corp.*......................... 5,700 502,313
Delta Air Lines, Inc............... 4,700 333,113
Southwest Airlines Co. ............ 9,100 201,337
USAir Group, Inc.*................. 7,400 172,975
--------------
1,209,738
--------------
APPAREL, TEXTILE (0.6%)
Fruit of the Loom, Inc.*........... 5,000 189,375
Liz Claiborne, Inc. ............... 4,700 181,537
National Service Industries, Inc. 5,200 194,350
Nike, Inc. (Class B)............... 18,600 1,111,350
Reebok International Ltd. ......... 5,200 218,400
Russell Corp. ..................... 6,500 193,375
VF Corp. .......................... 4,200 283,500
--------------
2,371,887
--------------
AUTO RELATED (0.5%)
Cooper Tire & Rubber Co. .......... 7,400 $ 146,150
Dana Corp. ........................ 6,200 202,275
Eaton Corp. ....................... 5,600 390,600
Echlin, Inc. ...................... 5,500 173,938
Genuine Parts Co................... 8,500 378,250
Goodyear Tire & Rubber Co.......... 9,100 467,512
Snap-On, Inc. ..................... 5,050 179,906
--------------
1,938,631
--------------
AUTOS & TRUCKS (1.8%)
Chrysler Corp. .................... 47,800 1,577,400
Ford Motor Co. .................... 77,800 2,479,875
General Motors Corp. .............. 49,600 2,765,200
Paccar, Inc........................ 2,800 190,400
--------------
7,012,875
--------------
FOOD SERVICES, LODGING (0.9%)
Harrah's Entertainment, Inc.* ..... 10,500 208,688
HFS, Inc.*......................... 8,700 519,825
Marriott International, Inc. ..... 8,500 469,625
McDonald's Corp. .................. 45,500 2,058,875
Wendy's International, Inc. ...... 9,000 184,500
--------------
3,441,513
--------------
HOUSEHOLD FURNITURE,
APPLIANCES (0.4%)
Black & Decker Corp. .............. 6,200 186,775
Maytag Corp. ...................... 9,100 179,725
Newell Co. ........................ 10,500 330,750
Rubbermaid, Inc. .................. 10,800 245,700
Stanley Works...................... 6,600 178,200
Whirlpool Corp. ................... 5,200 242,450
Zenith Electronics Corp.*.......... 1,205 13,104
--------------
1,376,704
--------------
LEISURE RELATED (1.5%)
American Greetings Corp. .......... 7,100 201,463
Brunswick Corp. ................... 7,700 184,800
CUC International, Inc.*........... 26,050 618,687
Disney (Walt) Co. ................. 45,100 3,140,087
Hasbro, Inc. ...................... 6,400 248,800
Hilton Hotels Corp. ............... 16,400 428,450
ITT Corp.*......................... 8,100 351,338
Mattel, Inc........................ 17,743 492,368
--------------
5,665,993
--------------
PHOTO & OPTICAL (0.6%)
Allergan, Inc. .................... 5,400 192,375
Bausch & Lomb, Inc................. 5,200 182,000
Eastman Kodak Co. ................. 21,400 1,717,350
Polaroid Corp. .................... 4,100 178,350
--------------
2,270,075
--------------
RETAIL--GENERAL (3.7%)
Circuit City Stores, Inc. ......... 7,100 213,888
CVS Corp. ......................... 7,000 289,625
Dayton Hudson Corp. ............... 14,400 565,200
Dillard Department Stores, Inc.
(Class A)......................... 7,600 234,650
Federated Department Stores,
Inc.*............................. 13,800 470,925
55
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
Gap, Inc. ......................... 18,900 $ 569,362
Harcourt General, Inc. ............ 4,600 212,175
Home Depot, Inc. .................. 32,000 1,604,000
K-Mart Corp.*...................... 32,200 334,075
Limited, Inc. ..................... 18,000 330,750
Lowe's Cos., Inc. ................. 11,500 408,250
May Department Stores Co. ......... 16,800 785,400
Nordstrom, Inc..................... 5,400 191,362
Penney (J.C.), Inc................. 15,400 750,750
Pep Boys Manny Moe & Jack.......... 5,500 169,125
Price/Costco, Inc.*................ 13,100 329,138
Rite Aid Corp. .................... 8,200 325,950
Sears, Roebuck & Co. .............. 26,100 1,203,863
Tandy Corp. ....................... 4,300 189,200
TJX Cos., Inc...................... 5,300 251,088
Toys R Us, Inc.*................... 18,300 549,000
Tupperware Corp. .................. 4,200 225,225
Wal-Mart Stores, Inc. ............. 152,700 3,493,012
Walgreen Co. ...................... 16,400 656,000
Woolworth Corp.*................... 9,400 205,625
--------------
14,557,638
--------------
TOTAL CONSUMER CYCLICALS (10.3%) 39,845,054
--------------
CONSUMER NONCYCLICALS
BEVERAGES (3.7%)
Anheuser Busch, Inc. .............. 33,700 1,348,000
Brown Forman Corp. (Class B) ...... 4,700 215,025
Coca-Cola Co. ..................... 165,900 8,730,488
Pepsico, Inc. ..................... 103,100 3,015,675
Seagram Ltd. ...................... 25,200 976,500
--------------
14,285,688
--------------
CONTAINERS (0.2%)
Bemis, Inc. ....................... 5,300 195,437
Crown Cork & Seal Co., Inc. ...... 8,300 451,313
--------------
646,750
--------------
DRUGS (6.3%)
ALZA Corp. (Class A)*.............. 7,300 188,888
American Home Products Corp. ..... 42,400 2,485,700
Amgen, Inc.*....................... 17,600 957,000
Bristol-Myers Squibb Co. .......... 33,300 3,621,375
Lilly (Eli) & Co. ................. 36,700 2,679,100
Merck & Co., Inc. ................. 80,400 6,371,700
Pharmacia & Upjohn, Inc. .......... 33,890 1,342,891
Pfizer, Inc. ...................... 42,800 3,547,050
Schering Plough Corp. ............. 24,700 1,599,325
Warner-Lambert Co. ................ 18,100 1,357,500
--------------
24,150,529
--------------
FOODS (2.5%)
Archer Daniels Midland Co. ........ 36,074 793,628
Campbell Soup Co. ................. 15,500 1,243,875
ConAgra, Inc. ..................... 16,000 796,000
CPC International, Inc. ........... 9,500 736,250
General Mills, Inc. ............... 10,400 659,100
Heinz (H.J.) Co. .................. 24,350 870,513
Hershey Foods Corp. ............... 10,200 446,250
Kellogg Co. ....................... 14,000 918,750
Pioneer Hi Bred International,
Inc. ............................. 5,500 385,000
Quaker Oats Co. ................... 9,000 343,125
Ralston Purina Group............... 7,000 513,625
Sara Lee Corp. .................... 32,100 $ 1,195,725
Whitman Corp. ..................... 9,000 205,875
Wrigley (Wm.), Jr. Co. ............ 7,700 433,125
--------------
9,540,841
--------------
HOSPITAL SUPPLIES & SERVICES (3.6%)
Abbott Laboratories................ 51,600 2,618,700
Baxter International, Inc. ........ 18,100 742,100
Becton Dickinson & Co. ............ 8,300 360,012
Biomet, Inc. ...................... 12,400 187,550
Boston Scientific Corp.*........... 11,800 708,000
Columbia/HCA Healthcare Corp. ..... 44,600 1,817,450
Guidant Corp. ..................... 4,900 279,300
Humana, Inc.*...................... 11,200 214,200
Johnson and Johnson................ 88,500 4,402,875
Medtronic, Inc. ................... 15,900 1,081,200
Mallinckrodt, Inc. ................ 5,100 225,037
Saint Jude Medical, Inc.*.......... 5,750 245,093
Tenet Healthcare Corp.*............ 14,400 315,000
United Healthcare Corp. ........... 12,300 553,500
U.S. Surgical Corp. ............... 5,200 204,750
--------------
13,954,767
--------------
RETAIL--FOOD (0.6%)
Albertsons, Inc. .................. 16,800 598,500
American Stores Co. ............... 9,700 396,488
Giant Food, Inc. (Class A)......... 5,500 189,750
Kroger Co.*........................ 8,400 390,600
Supervalu, Inc. ................... 6,800 192,950
Sysco Corp. ....................... 11,900 388,238
Winn Dixie Stores, Inc. ........... 10,100 319,412
--------------
2,475,938
--------------
SOAPS & TOILETRIES (2.9%)
Avon Products, Inc. ............... 9,500 542,688
Clorox Co. ........................ 3,700 371,387
Colgate Palmolive Co. ............. 9,800 904,050
Gillette Corp. .................... 29,800 2,316,950
International Flavors &
Fragrances, Inc. ................. 7,700 346,500
Procter & Gamble Co................ 45,600 4,902,000
Unilever N.V. ..................... 10,700 1,875,175
--------------
11,258,750
--------------
TOBACCO (2.0%)
American Brands, Inc. ............. 11,300 560,763
Loews Corp. ....................... 7,600 716,300
Philip Morris Cos., Inc. .......... 54,000 6,081,750
UST, Inc. ......................... 13,300 430,587
--------------
7,789,400
--------------
TOTAL CONSUMER NONCYCLICALS (21.8%) 84,102,663
--------------
CREDIT SENSITIVE
BANKS (7.5%)
Ahmanson (H.F.) & Co. ............. 7,000 227,500
Banc One Corp. .................... 28,380 1,220,340
Bank of Boston Corp. .............. 10,100 648,925
Bank of New York Co. .............. 26,000 877,500
BankAmerica Corp. ................. 23,800 2,374,050
Bankers Trust New York Corp. ..... 5,700 491,625
Barnett Banks, Inc. ............... 12,900 530,513
Boatmen's Bancshares, Inc. ........ 10,300 664,350
Chase Manhattan Corp. ............. 29,140 2,600,745
56
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
Citicorp........................... 31,200 $ 3,213,600
Comerica, Inc. .................... 7,100 371,863
CoreStates Financial Corp. ........ 14,800 767,750
Fifth Third Bancorp................ 7,000 439,687
First Bank Systems................. 8,900 607,425
First Chicago NBD Corp. ........... 21,149 1,136,759
First Union Corp. ................. 18,845 1,394,530
Golden West Financial Corp. ...... 4,100 258,812
Great Western Financial Corp. .... 9,700 281,300
KeyCorp. .......................... 14,900 752,450
Mellon Bank Corp. ................. 8,600 610,600
Morgan (J.P.) & Co., Inc. ......... 12,400 1,210,550
National City Corp. ............... 14,700 659,663
NationsBank Corp. ................. 19,100 1,867,025
Norwest Corp. ..................... 24,600 1,070,100
PNC Bank Corp. .................... 22,600 850,325
Republic New York Corp. ........... 3,900 318,337
Suntrust Banks, Inc. .............. 14,800 728,900
U.S. Bancorp....................... 10,000 449,375
Wachovia Corp. .................... 11,000 621,500
Wells Fargo & Co. ................. 6,200 1,672,450
--------------
28,918,549
--------------
FINANCIAL SERVICES (2.0%)
American Express Co. .............. 31,400 1,774,100
Beneficial Corp. .................. 3,600 228,150
Dean Witter Discover & Co. ........ 10,700 708,875
Fleet Financial Group, Inc. ...... 17,379 866,778
Green Tree Financial Corp. ........ 9,100 351,488
Household International, Inc. .... 6,400 590,400
MBIA, Inc. ........................ 2,900 293,625
MBNA Corp. ........................ 14,750 612,125
Merrill Lynch & Co., Inc. ......... 10,900 888,350
Morgan Stanley Group, Inc. ........ 10,100 576,962
Salomon, Inc. ..................... 7,200 339,300
Transamerica Corp. ................ 4,400 347,600
--------------
7,577,753
--------------
INSURANCE (3.8%)
Aetna, Inc. ....................... 9,943 795,440
Allstate Corp. .................... 29,238 1,692,149
American General Corp. ............ 13,400 547,725
American International Group, Inc. 30,950 3,350,338
Aon Corp. ......................... 7,100 441,088
Chubb Corp. ....................... 11,500 618,125
CIGNA Corp. ....................... 5,000 683,125
General Re Corp. .................. 5,400 851,850
ITT Hartford Group, Inc. .......... 7,700 519,750
Jefferson-Pilot Corp. ............. 4,700 266,137
Lincoln National Corp. Industries . 6,900 362,250
Marsh & McLennan Cos., Inc. ...... 4,700 488,800
MGIC Investment Corp. ............. 4,200 319,200
Providian Corp. ................... 6,200 318,525
Safeco Corp. ...................... 8,300 327,331
Saint Paul Cos., Inc. ............. 5,500 322,438
Torchmark Corp..................... 4,600 232,300
Travelers Group, Inc............... 42,500 1,928,438
UNUM Corp. ........................ 4,800 346,800
USF&G Corp. ....................... 9,100 189,962
USLIFE Corp. ...................... 5,800 192,850
--------------
14,794,621
--------------
MORTGAGE RELATED (1.0%)
Federal Home Loan
Mortgage Corp. ................... 11,900 $ 1,310,488
Federal National Mortgage
Association....................... 72,400 2,696,900
--------------
4,007,388
--------------
UTILITY--ELECTRIC (2.8%)
American Electric Power, Inc. .... 12,400 509,950
Baltimore Gas & Electric Co. ...... 9,800 262,150
Carolina Power & Light Co.......... 10,100 368,650
Central & South West Corp.......... 14,000 358,750
Cinergy Corp. ..................... 10,513 350,871
Consolidated Edison Co. N.Y., Inc. 15,600 456,300
Dominion Resources, Inc. .......... 12,000 462,000
DTE Energy Co. .................... 9,600 310,800
Duke Power Co. .................... 13,400 619,750
Edison International............... 28,800 572,400
Entergy Corp. ..................... 15,300 424,575
FPL Group, Inc. ................... 12,100 556,600
GPU, Inc........................... 8,000 269,000
Houston Industries, Inc............ 15,600 352,950
Niagara Mohawk Power Co.*.......... 17,900 176,763
Northern States Power Co........... 4,900 224,787
Ohio Edison Co. ................... 10,100 229,775
Pacific Gas & Electric Co. ........ 27,400 575,400
Pacificorp......................... 19,600 401,800
Peco Energy Co. ................... 14,800 373,700
PP&L Resources, Inc. .............. 11,500 264,500
Public Service Enterprise Group ... 15,800 430,550
Southern Co. ...................... 44,700 1,011,337
Texas Utilities Co................. 14,900 607,175
Unicom Corporation................. 14,300 387,887
Union Electric Co. ................ 6,800 261,800
--------------
10,820,220
--------------
UTILITY--GAS (0.4%)
Columbia Gas System, Inc........... 3,900 248,137
Consolidated Natural Gas Co. ..... 6,300 348,075
ENRON Corp. ....................... 16,900 728,813
Nicor, Inc. ....................... 5,200 185,900
Peoples Energy Corp. .............. 5,800 196,475
--------------
1,707,400
--------------
UTILITY--TELEPHONE (5.8%)
Alltel Corp. ...................... 13,400 420,425
Ameritech Corp. ................... 36,400 2,206,750
AT&T Corp.......................... 107,400 4,671,900
Bell Atlantic Corp. ............... 29,000 1,877,750
BellSouth Corp. ................... 65,900 2,660,712
GTE Corp. ......................... 63,800 2,902,900
NYNEX Corp. ....................... 29,200 1,405,250
Pacific Telesis Group.............. 28,400 1,043,700
SBC Communications, Inc............ 40,000 2,070,000
Sprint Corp. ...................... 28,500 1,136,437
U.S. West Communications Group .... 31,700 1,022,325
WorldCom, Inc.*.................... 28,300 737,569
--------------
22,155,718
--------------
TOTAL CREDIT SENSITIVE (23.3%) ... 89,981,649
--------------
57
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
ENERGY
COAL & GAS PIPELINES (0.8%)
Burlington Resources, Inc. ........ 8,200 $ 413,075
Coastal Corp. ..................... 7,000 342,125
Pacific Enterprises Ltd. .......... 6,400 194,400
Panenergy Corp. ................... 10,000 450,000
Praxair, Inc. ..................... 10,400 479,700
Sonat, Inc. ....................... 5,700 293,550
Tenneco, Inc. ..................... 11,300 509,913
Williams Cos., Inc. ............... 10,350 388,125
--------------
3,070,888
--------------
OIL--DOMESTIC (2.2%)
Amerada Hess Corp. ................ 6,100 353,037
Amoco Corp. ....................... 32,600 2,624,300
Ashland, Inc. ..................... 4,800 210,600
Atlantic Richfield Co. ............ 10,600 1,404,500
Kerr McGee Corp. .................. 3,300 237,600
Louisiana Land & Exploration Corp. 3,300 176,963
Occidental Petroleum Corp. ........ 22,900 535,288
Oryx Energy Co.*................... 8,000 198,000
Pennzoil Co........................ 3,300 186,450
Phillips Petroleum Co. ............ 17,300 765,524
Sun, Inc. ......................... 7,600 185,250
Union Pacific Resources Group,
Inc. ............................. 16,408 479,934
Unocal Corp. ...................... 16,400 666,250
USX-Marathon Group................. 19,800 472,725
--------------
8,496,421
--------------
OIL--INTERNATIONAL (5.7%)
Chevron Corp. ..................... 43,300 2,814,500
Exxon Corp. ....................... 82,700 8,104,600
Mobil Corp. ....................... 26,100 3,190,725
Royal Dutch Petroleum Co. (ADR) ... 35,500 6,061,625
Texaco, Inc. ...................... 17,500 1,717,188
--------------
21,888,638
--------------
OIL--SUPPLIES & CONSTRUCTION (0.9%)
Baker Hughes, Inc. ................ 9,500 327,750
Dresser Industries, Inc. .......... 11,600 359,600
Halliburton Co. ................... 8,300 500,075
McDermott International, Inc. .... 11,900 197,838
Rowan Cos., Inc.*.................. 8,900 201,363
Schlumberger, Ltd. ................ 16,300 1,627,962
Western Atlas, Inc.*............... 3,900 276,412
--------------
3,491,000
--------------
RAILROADS (0.9%)
Burlington Northern Santa Fe ...... 10,151 876,793
Conrail, Inc. ..................... 5,647 562,582
CSX Corp. ......................... 14,400 608,400
Norfolk Southern Corp. ............ 8,300 726,250
Union Pacific Corp. ............... 16,200 974,025
--------------
3,748,050
--------------
TOTAL ENERGY (10.5%).............. 40,694,997
--------------
TECHNOLOGY
ELECTRONICS (5.0%)
Advanced Micro Devices, Inc.* ..... 9,900 254,925
AMP, Inc........................... 14,500 556,438
Applied Materials, Inc.*........... 11,900 $ 427,656
Bay Networks, Inc.*................ 13,700 285,988
Cabletron Systems, Inc.*........... 10,300 342,475
Cisco Systems, Inc.*............... 43,200 2,748,600
EMC Corp.*......................... 15,400 510,125
General Instrument Corp.*.......... 9,100 196,788
Harris Corp. ...................... 3,000 205,875
Intel Corp. ....................... 54,300 7,109,906
ITT Industries, Inc. .............. 8,400 205,800
LSI Logic Corp.*................... 8,900 238,075
Micron Technology, Inc............. 13,800 401,925
Motorola, Inc. .................... 39,200 2,405,900
National Semiconductor Corp.* ..... 9,200 224,250
Perkin-Elmer Corp.................. 3,600 211,950
Seagate Technology, Inc.*.......... 14,200 560,900
Tektronix, Inc. ................... 3,700 189,625
Texas Instruments, Inc. ........... 12,600 803,250
Tyco International, Ltd. .......... 10,400 549,900
3Com Corp.*........................ 11,500 843,812
--------------
19,274,163
--------------
OFFICE EQUIPMENT (3.7%)
Amdahl Corp.*...................... 14,400 174,600
Apple Computer, Inc.*.............. 8,600 179,525
Compaq Computer Corp.*............. 17,900 1,329,075
Dell Computer Corp.*............... 11,900 632,188
Digital Equipment Corp.*........... 10,300 374,663
Hewlett-Packard Co. ............... 67,300 3,381,825
Honeywell, Inc..................... 8,400 552,300
International Business Machines
Corp. ............................ 34,300 5,179,300
Pitney Bowes, Inc.................. 9,800 534,100
Sun Microsystems, Inc.*............ 24,300 624,206
Unisys Corp.*...................... 3,200 21,600
Xerox Corp. ....................... 21,500 1,131,437
--------------
14,114,819
--------------
OFFICE EQUIPMENT SERVICES (3.2%)
Autodesk, Inc. .................... 6,700 187,600
Automatic Data Processing, Inc. .. 19,300 827,488
Computer Associates International,
Inc. ............................. 24,250 1,206,438
Computer Sciences Corp.*........... 5,100 418,838
First Data Corp. .................. 29,800 1,087,700
Microsoft Corp.*................... 79,200 6,543,900
Novell, Inc.*...................... 25,700 243,345
Oracle Corp.*...................... 43,525 1,817,169
Silicon Graphics, Inc.*............ 12,500 318,750
--------------
12,651,228
--------------
TELECOMMUNICATIONS (1.6%)
AirTouch Communications, Inc.* .... 33,300 840,825
Andrew Corp.*...................... 4,175 221,536
Cox Communications Inc.
(Class A)*........................ 95 2,197
DSC Communications Corp.*.......... 10,300 184,113
Lucent Technologies, Inc........... 42,094 1,946,848
MCI Communications Corp............ 45,400 1,484,012
Northern Telecommunications Ltd. . 17,100 1,058,062
Tellabs, Inc.*..................... 12,600 474,075
--------------
6,211,668
--------------
TOTAL TECHNOLOGY (13.5%).......... 52,251,878
--------------
58
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
DIVERSIFIED
MISCELLANEOUS (1.4%)
Alco Standard Corp. ............... 8,800 $ 454,300
Allied Signal, Inc. ............... 18,800 1,259,600
Corning, Inc. ..................... 15,200 703,000
Minnesota Mining & Manufacturing
Co. .............................. 27,700 2,295,637
Textron, Inc. ..................... 5,500 518,375
--------------
TOTAL DIVERSIFIED (1.4%).......... 5,230,912
--------------
TOTAL COMMON STOCKS (97.1%)
(Cost $312,422,283)............... 374,848,955
--------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ----------------------------------- ----------- --------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT & AGENCIES
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97.......... $7,700,000 $ 7,698,780
U.S. Treasury
5.0%, due 02/20/97** ....... 500,000 496,521
-------------
TOTAL U.S. GOVERNMENT &
AGENCIES (2.1%)............ 8,195,301
-------------
TOTAL SHORT-TERM DEBT SECURITIES (2.1%)
(Amortized Cost
$8,195,301)................. 8,195,301
-------------
TOTAL INVESTMENTS (99.2%) ...
(Cost/Amortized Cost $320,617,584) 383,044,256
OTHER ASSETS
LESS LIABILITIES (0.8%) .... 3,204,925
-------------
NET ASSETS (100.0%).......... $386,249,181
=============
Financial Futures Contracts outstanding at December 31, 1996:
<TABLE>
<CAPTION>
EXPIRATION NUMBER ORIGINAL VALUE AT UNREALIZED
DESCRIPTION DATE OF CONTRACTS VALUE 12/31/96 DEPRECIATION
- -------------------- ------------ -------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
LONG S&P 500 INDEX* 3/97 21 $7,986,250 $7,817,250 $(169,000)
</TABLE>
- ------------
* Non-income producing.
** Security segregated as collateral on financial futures contracts.
See Notes to Financial Statements.
59
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ------------ --------------
COMMON STOCKS AND WARRANTS:
BASIC MATERIALS
CHEMICALS (1.0%)
Grace (W.R.) & Co. ............... 356,100 $ 18,428,175
Monsanto Co....................... 1,245,000 48,399,375
--------------
TOTAL BASIC MATERIALS (1.0%) .... 66,827,550
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.4%)
WMX Technologies, Inc. ........... 900,000 29,362,500
--------------
PRINTING, PUBLISHING &
BROADCASTING (4.0%)
Chris Craft Industries, Inc.
(Class B)*++ .................... 1,190,444 49,849,843
Comcast Corp. (Class A) SPL ...... 1,031,800 18,378,938
Liberty Media Group (Class A)* ... 1,523,309 43,509,513
TCI Group (Class A)*.............. 9,094,236 118,793,458
TCI Satellite Entertainment, Inc.
(Class A)*....................... 919,423 9,079,302
Time Warner, Inc.................. 190,000 7,125,000
U.S. West Media Group*............ 855,000 15,817,500
--------------
262,553,554
--------------
PROFESSIONAL SERVICES (2.4%)
ADT Ltd.*......................... 446,000 10,202,250
Ceridian Corp.*++................. 3,665,000 148,432,500
Cognizant Corp. .................. 130,000 4,290,000
--------------
162,924,750
--------------
TOTAL BUSINESS SERVICES (6.8%) .. 454,840,804
--------------
CAPITAL GOODS
AEROSPACE (0.4%)
LoralSpace&Communications*(a) 1,540,000 28,297,500
--------------
ELECTRICAL EQUIPMENT (0.6%)
Westinghouse Electric Corp. ..... 1,785,000 35,476,875
--------------
TOTAL CAPITAL GOODS (1.0%) ...... 63,774,375
--------------
CONSUMER CYCLICALS
AIRLINES (0.5%)
Delta Air Lines, Inc.............. 200,000 14,175,000
Northwest Airlines Corp.
(Class A)*....................... 93,300 3,650,363
UAL Corp.*........................ 291,700 18,231,250
--------------
36,056,613
--------------
LEISURE RELATED (3.6%)
CUC International, Inc.*(a) ...... 6,618,700 157,194,125
Disney (Walt) Co.................. 153,000 10,652,625
Hasbro, Inc....................... 336,100 13,065,888
ITT Corp.*........................ 1,322,600 57,367,775
--------------
238,280,413
--------------
PHOTO & OPTICAL (1.0%)
Eastman Kodak Co. ................ 837,700 67,225,425
--------------
RETAIL--GENERAL (6.3%)
AutoZone, Inc.*................... 4,470,100 122,927,750
CompUSA, Inc.*(a)................. 3,167,600 65,331,750
Home Depot, Inc................... 701,000 $ 35,137,625
Lowe's Cos., Inc.................. 1,741,400 61,819,700
Sears, Roebuck & Co. ............. 1,950,500 89,966,813
Wal-Mart Stores, Inc. ............ 1,766,000 40,397,250
--------------
415,580,888
--------------
TOTAL CONSUMER CYCLICALS (11.4%) 757,143,339
--------------
CONSUMER NONCYCLICALS
BEVERAGES (0.2%)
Pepsico, Inc...................... 421,000 12,314,250
--------------
DRUGS (4.6%)
Amgen, Inc.*...................... 150,000 8,156,250
Astra AB (A Shares)............... 1,290,000 63,750,955
Merck & Co., Inc.................. 1,849,200 146,549,100
Pfizer, Inc. ..................... 925,000 76,659,375
Schering Plough Corp.............. 200,000 12,950,000
--------------
308,065,680
--------------
HOSPITAL SUPPLIES &
SERVICES (2.3%)
Abbott Laboratories .............. 1,150,000 58,362,500
Boston Scientific Corp.*.......... 70,100 4,206,000
Healthsource, Inc.*............... 83,000 1,089,375
Medtronic, Inc.................... 992,900 67,517,200
Saint Jude Medical, Inc.*......... 114,600 4,884,825
United Healthcare Corp............ 333,500 15,007,500
--------------
151,067,400
--------------
TOBACCO (5.0%)
Loews Corp........................ 2,068,500 194,956,125
Philip Morris Cos., Inc. ......... 1,180,300 132,931,288
--------------
327,887,413
--------------
TOTAL CONSUMER NONCYCLICALS (12.1%) 799,334,743
--------------
CREDIT SENSITIVE
BANKS (5.6%)
Chase Manhattan Corp.............. 1,183,768 105,651,294
CoreStates Financial Corp. ...... 295,000 15,303,125
First Chicago NBD Corp............ 891,700 47,928,875
First Union Corp.................. 1,055,000 78,070,000
Morgan (J.P.) & Co., Inc.......... 84,900 8,288,363
NationsBank Corp.................. 1,178,000 115,149,500
--------------
370,391,157
--------------
FINANCIAL SERVICES (2.3%)
American Express Co............... 1,505,000 85,032,500
Dean Witter Discover & Co. ...... 556,583 36,873,624
Household International, Inc. .... 103,000 9,501,750
MBNA Corp. ....................... 527,300 21,882,950
--------------
153,290,824
--------------
INSURANCE (13.2%)
Allstate Corp..................... 1,851,647 107,164,070
American International Group,
Inc. ............................ 2,540,050 274,960,413
ITT Hartford Group, Inc. ......... 1,128,600 76,180,500
PMI Group, Inc.................... 808,700 44,781,763
60
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ------------ --------------
Progressive Corp. ................ 1,213,800 $ 81,779,775
TIG Holdings, Inc. ............... 1,159,800 39,288,225
Travelers Group, Inc. ............ 5,535,665 251,180,799
--------------
875,335,545
--------------
MORTGAGE RELATED (0.4%)
Federal National Mortgage
Association...................... 693,000 25,814,250
--------------
REAL ESTATE (2.9%)
CBL & Associates Properties,
Inc.++ .......................... 1,077,200 27,872,550
Essex Property Trust, Inc. ...... 292,200 8,583,375
First Industrial Realty Trust .... 213,000 6,469,875
Macerich Co. ..................... 717,500 18,744,688
Manufactured Home Communities .... 338,000 7,858,500
Regency Realty Corp.++............ 623,700 16,372,125
Simon Debartolo Group, Inc. ...... 1,443,000 44,733,000
Spieker Properties, Inc........... 1,307,200 47,059,200
Summit Properties, Inc............ 519,100 11,485,088
Sun Communities, Inc. ............ 161,000 5,554,500
--------------
194,732,901
--------------
UTILITY--TELEPHONE (0.2%)
BellSouth Corp. .................. 10,824 437,019
Frontier Corp. ................... 500,000 11,312,500
--------------
11,749,519
--------------
TOTAL CREDIT SENSITIVE (24.6%). 1,631,314,196
--------------
ENERGY
OIL--DOMESTIC (0.5%)
Union Pacific Resources Group,
Inc. ............................ 1,026,477 30,024,452
--------------
OIL--SUPPLIES & CONSTRUCTION (0.5%)
Western Atlas, Inc.*.............. 458,800 32,517,450
--------------
RAILROADS (2.3%)
Canadian Pacific Ltd. ............ 2,833,300 75,082,450
Union Pacific Corp................ 1,340,371 80,589,806
--------------
155,672,256
--------------
TOTAL ENERGY (3.3%).............. 218,214,158
--------------
TECHNOLOGY
ELECTRONICS (22.3%)
Altera Corp.*..................... 50,000 3,634,375
Bay Networks, Inc.*(a)............ 860,200 17,956,675
Cabletron Systems, Inc.*(a) ...... 1,305,700 43,414,525
Cisco Systems, Inc.*(a)........... 6,383,000 406,118,375
EMC Corp.*(a)..................... 3,590,900 118,948,563
General Instrument Corp.*......... 1,782,410 38,544,616
Intel Corp.(a).................... 2,752,800 360,444,750
Micron Technology, Inc............ 100,000 2,912,500
National Semiconductor Corp.*(a) . 2,319,400 56,535,375
Seagate Technology, Inc.*(a) ..... 1,210,000 47,795,000
Texas Instruments, Inc.(a) ...... 773,800 49,329,750
3Com Corp.*(a).................... 4,513,900 331,207,413
--------------
1,476,841,917
--------------
OFFICE EQUIPMENT (1.8%)
Compaq Computer Corp.*(a)......... 500,000 $ 37,125,000
Sterling Software, Inc.*.......... 586,200 18,538,575
Xerox Corp........................ 1,202,500 63,281,563
--------------
118,945,138
--------------
OFFICE EQUIPMENT SERVICES (3.8%)
Electronic Data Systems Corp. .... 2,100,000 90,825,000
Informix Corp.*(a)................ 1,696,900 34,574,338
Microsoft Corp.*.................. 854,000 70,561,750
Oracle Corp.*(a).................. 557,200 23,263,100
Sterling Commerce, Inc.*.......... 933,582 32,908,766
--------------
252,132,954
--------------
TELECOMMUNICATIONS (8.4%)
AirTouch Communications, Inc.* ... 2,444,600 61,726,150
Deutsche Telekom AG (ADR)* ...... 1,142,600 23,280,475
DSC Communications Corp.*......... 2,016,100 36,037,788
Mannesmann AG (ADR)............... 185,700 80,222,400
MCI Communications Corp........... 421,000 13,761,438
MFS Communications Co., Inc.*(a) . 6,226,764 339,358,630
Teleport Communications Group,
Inc. (Class A)*.................. 20,000 610,000
--------------
554,996,881
--------------
TOTAL TECHNOLOGY (36.3%)......... 2,402,916,890
--------------
DIVERSIFIED
MISCELLANEOUS (0.2%)
Anixter International, Inc.* ..... 812,434 13,100,498
Hanson (ADR)--Warrants
(Class B)*....................... 77,475,857 605,319
--------------
TOTAL DIVERSIFIED (0.2%)......... 13,705,817
--------------
TOTAL COMMON STOCKS AND WARRANTS
(96.7%)
(Cost $4,791,317,138)............ 6,408,071,872
--------------
PREFERRED STOCKS:
TECHNOLOGY (0.7%)
TELECOMMUNICATIONS
MFS Communications Co., Inc.
8.0% Conv. ...................... 487,000 44,438,750
--------------
TOTAL PREFERRED STOCKS (0.7%)
(Cost $34,577,944)............... 44,438,750
--------------
PRINCIPAL
AMOUNT
------------
LONG-TERM DEBT SECURITIES:
TECHNOLOGY (0.0%)
ELECTRONICS
3Com Corp.
10.25% Conv., 11/01/01+.......... $900,000 1,986,750
--------------
TOTAL LONG-TERM DEBT SECURITIES (0.0%)
(Amortized Cost $1,247,499) ..... 1,986,750
--------------
61
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------ ------------- --------------
SHORT-TERM DEBT SECURITIES:
BANKERS' ACCEPTANCES (0.2%)
Industrial Bank of Japan-L.A.
5.73%, due 01/16/97........... $10,000,000 $ 9,976,125
--------------
COMMERCIAL PAPER
Alamo Funding
5.45%, due 02/13/97........... 20,000,000 19,869,806
Associates Corp. of North
America
5.75%, due 01/02/97........... 25,000,000 24,996,007
Greenwich Asset Funding, Inc.
5.4%, due 04/04/97............ 12,200,000 12,034,222
Morgan Stanley Group, Inc.
6.79%, due 01/02/97........... 50,000,000 49,990,569
Three Rivers Funding
5.85%, due 01/27/97........... 2,800,000 2,788,170
--------------
TOTAL COMMERCIAL PAPER (1.7%) 109,678,774
--------------
TIME DEPOSITS
Sumitomo Bank Ltd.
6.0%, due 01/02/97............ 69,800,000 69,800,000
Toronto Dominion Bank
6.25%, due 01/02/97........... 25,000,000 25,000,000
--------------
TOTAL TIME DEPOSITS (1.4%) ... 94,800,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (3.3%)
(Amortized Cost
$214,450,487)................. 214,454,899
--------------
TOTAL INVESTMENTS (100.7%)
(Cost/Amortized Cost $5,041,593,068) 6,668,952,271
NUMBER OF
CONTRACTS(B)
------------
CALL OPTIONS WRITTEN*(c):
Bay Networks, Inc.:
January @ $26.5625............ 2,000 (12,000)
January @ $26.625............. 1,500 (9,000)
Cabletron Systems, Inc.:
March @ $35.50................ 2,000 (462,000)
March @ $40.75................ 3,000 (129,000)
Cisco Systems, Inc.:
January @ $63.375............. 2,500 (680,000)
January @ $65................. 1,500 (96,000)
January @ $65................. 2,000 (248,000)
February @ $63.375............ 2,000 (734,000)
February @ $65.375............ 4,000 (1,140,000)
February @ $67.375............ 1,500 (386,400)
March @ $63.25................ 1,500 (852,000)
March @ $66.25................ 3,000 (1,257,000)
Compaq Computer Corp.:
January @ $72.875............. 1,000 (359,000)
January @ $73................. 1,000 (360,000)
January @ $74................. 1,000 (290,000)
February @ $66.375............ 1,000 (969,500)
February @ $78.94............. 1,000 (290,000)
CompUSA, Inc.:
February @ $22.4375 .......... 2,000 (270,000)
February @ $22.625............ 4,000 (248,000)
February @ $22.625............ 2,000 (262,000)
February @ $23................ 4,000 (464,000)
February @ $23.125............ 6,000 (425,400)
March @ $21.50................ 1,500 (291,000)
March @ $22.375............... 2,000 (248,000)
March @ $22.6875.............. 4,000 (536,000)
CUC International, Inc.:
January @ $26.17.............. 2,250 (20,250)
January @ $27.17.............. 3,000 (9,000)
February @ $24.875............ 1,500 (159,000)
February @ $24.875............ 1,000 (99,000)
February @ $25................ 1,000 (96,000)
February @ $25.875............ 1,500 (76,350)
March @ $22.75................ 1,500 (358,500)
March @ $24.75 ............... 3,000 (426,000)
March @ $25.25................ 1,000 (96,800)
EMC Corp.
January @ $26.50.............. 2,000 (1,422,000)
Informix Corp.:
January @ $20.75.............. 2,450 (306,250)
January @ $27................. 2,000 (12,000)
February @ $20.625............ 1,000 (160,000)
February @ $20.75............. 1,500 (258,000)
February @ $21.375............ 2,000 (236,000)
March @ $20.875............... 3,000 (713,700)
March @ $21.625............... 2,000 (392,000)
Intel Corp.:
January @ $104.75............. 1,000 (2,633,000)
January @ $109.75............. 2,000 (4,356,000)
February @ $121............... 2,000 (2,854,000)
February @ $121.375........... 1,000 (1,461,000)
February @ $122.875........... 1,000 (1,365,000)
March @ $127.875.............. 1,000 (1,110,000)
March @ $132.50............... 1,000 (889,000)
Loral Space & Communications:
February @ $17.25............. 2,000 (336,000)
February @ $18.50............. 1,000 (131,000)
February @ $18.75............. 1,500 (166,500)
MFS Communications Co., Inc.:
January @ $45.125............. 2,000 (1,950,000)
January @ $49.95.............. 3,500 (2,082,500)
January @ $50.375............. 1,500 (849,000)
February @ $48.625............ 2,000 (1,594,000)
February @ $48.75............. 1,000 (792,000)
February @ $48.875............ 2,000 (1,546,000)
February @ $49................ 1,500 (1,168,500)
February @ $49.375............ 1,500 (1,035,000)
February @ $50.50............. 1,500 (870,000)
February @ $50.50............. 2,000 (1,294,000)
February @ $51.125............ 1,500 (876,000)
March @ $48.125............... 1,500 (1,219,500)
National Semiconductor Corp.
January @ $19.375............. 2,000 (1,011,400)
Oracle Corp.
March @ $43.50................ 2,000 (604,000)
Seagate Technology, Inc.
February @ $37.6875........... 2,000 (720,000)
Texas Instruments, Inc.:
January @ $50.50.............. 2,000 (2,694,000)
February @ $54.50............. 1,500 (1,485,000)
3Com Corp.:
January @ $62.50.............. 2,000 (2,276,600)
January @ $62.75.............. 2,000 (2,318,200)
January @ $64................. 1,500 (1,591,050)
62
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
NUMBER OF VALUE
CONTRACTS(B) (NOTE 1)
- ----------------------------- ------------ ---------------
January @ $65.59............. 2,000 $ (1,602,000)
January @ $65.875............ 1,500 (1,212,300)
February @ $69.75............ 1,500 (1,089,150)
February @ $71............... 1,500 (912,900)
February @ $72............... 1,500 (880,500)
February @ $73.33............ 1,500 (906,000)
February @ $75.125........... 2,000 (927,800)
February @ $75.50............ 1,000 (449,000)
March @ $79.125.............. 2,000 (798,000)
March @ $79.20............... 2,000 (770,000)
March @ $79.25............... 2,000 (790,000)
March @ $80.................. 2,000 (730,000)
March @ $81.125.............. 2,000 (662,600)
---------------
TOTAL CALL OPTIONS WRITTEN (-1.1%)
(Premiums Received $68,607,800) (70,867,650)
---------------
OTHER ASSETS
LESS LIABILITIES (0.4%)...... 28,548,958
---------------
NET ASSETS (100.0%)........... $6,626,633,579
===============
- ------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $1,986,750
or 0.03% of net assets.
++ Affiliated company as defined under the Investment Company Act of 1940
(see Note 6).
(a) Partially held as collateral on outstanding written call options.
(b) One contract relates to 100 shares.
(c) Covered call option contracts written in connection with securities
held.
Glossary:
ADR--American Depository Receipt
See Notes to Financial Statements.
63
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
[S] [C] [C]
COMMON STOCKS AND OTHER
INVESTMENTS:
BASIC MATERIALS
CHEMICALS (1.4%)
Bayer AG........................... 40,000 $ 1,623,343
Dainippon Ink & Chemical, Inc. .... 160,000 592,695
GP Batteries International Ltd. .. 850,000 2,822,000
GP Batteries International
Ltd.--Rights*..................... 12,500 6,250
Grace (W.R.) & Co. ................ 39,000 2,018,250
Indo Gulf Fertilisers (GDR)........ 150,000 105,000
Ishihara Sangyo Ltd.*.............. 438,000 1,058,976
Millennium Chemicals, Inc.*........ 7,142 126,771
Mitsubishi Chemical Corp........... 44,000 142,475
Royal Plastics Group Ltd.*+........ 50,000 925,689
Sanyo Chemicals.................... 96,000 737,760
Sekisui Chemical Co. Ltd. ......... 144,000 1,454,797
Shin-Etsu Chemical Ltd. ........... 39,000 710,560
SKW Trostberg AG................... 45,000 1,222,966
Tessenderlo Chemie................. 1,000 429,789
--------------
13,977,321
--------------
CHEMICALS--SPECIALTY (1.3%)
SGL Carbon AG+..................... 91,100 11,491,103
UCAR International, Inc.*.......... 40,000 1,505,000
--------------
12,996,103
--------------
METALS & MINING (0.5%)
Broken Hill Proprietary Co. Ltd. .. 100,000 1,424,371
Great Central Mines Ltd.*.......... 408,900 1,163,551
Johnson Matthey PLC................ 40,000 376,882
Plutonic Resources Ltd............. 50,000 232,494
Western Mining Corp. Ltd. ......... 200,000 1,260,632
Westralian Sands Ltd. ............. 280,000 890,232
--------------
5,348,162
--------------
PAPER (0.4%)
Asia Pacific Resources
International Holdings Ltd.
(Class A)*........................ 70,000 393,750
Enso Oy (Series R)................. 124,000 998,006
Fletcher Forestry Shares........... 17,026 28,527
Grupo Industrial Durango (ADR)* ... 70,000 743,750
Mayr-Melnhof Karton Aktien
AG*+.............................. 24,000 1,174,791
Nippon Paper Industries Co. ...... 32,000 149,210
Oji Paper Co. Ltd. ................ 71,000 449,383
--------------
3,937,417
--------------
STEEL (0.6%)
Acerinox S.A....................... 2,002 289,509
British Steel...................... 400,000 1,099,810
Hitachi Metals Ltd................. 158,000 1,256,524
SSAB Svenskt Stal (Class B)........ 6,000 100,305
Sumitomo Metal Industries.......... 1,196,000 2,943,269
--------------
5,689,417
--------------
TOTAL BASIC MATERIALS (4.2%) ..... 41,948,420
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (1.5%)
B.U.S. Berzelius
Umwelt-Service AG................. 76,700 947,037
Daiseki Co. Ltd.................... 32,000 762,628
Matsuda Sangyo Co. Ltd............. 23,000 593,817
Powerscreen International.......... 640,000 6,194,570
Tomra Systems ASA.................. 335,000 5,234,994
WMX Technologies, Inc. ............ 50,000 1,631,250
--------------
15,364,296
--------------
PRINTING, PUBLISHING &
BROADCASTING (2.7%)
Carlton Communications PLC......... 130,000 1,145,807
Comcast Corp. (Class A) SPL........ 57,000 1,015,313
Elsevier N.V. ..................... 180,000 3,040,525
Liberty Media Group
(Class A)*........................ 94,050 2,686,303
Mirror Group Newspapers PLC ...... 250,000 922,933
Nippon Television Network Corp. .. 12,300 3,717,296
Reed International................. 60,000 1,132,188
Takara Printing Co................. 4,000 32,467
TCI Group (Class A)*............... 482,709 6,305,390
TCI Satellite Entertainment, Inc.
(Class A)*........................ 47,800 472,025
Television Broadcasts.............. 50,000 199,754
Time Warner, Inc................... 15,750 590,625
Tokyo Broadcasting System.......... 170,000 2,598,221
TVI Televisao Independente*........ 4,700 13,948
Ver Ned Uitgeversbedr Ver
Bezit N.V......................... 150,000 3,132,504
--------------
27,005,299
--------------
PROFESSIONAL SERVICES (3.2%)
ADT Ltd.*.......................... 140,993 3,225,215
Apcoa Parking AG................... 20,000 2,144,528
Asatsu, Inc. ...................... 62,500 1,986,012
Ceridian Corp.*.................... 264,700 10,720,350
Content Beheer N.V.*+.............. 168,000 6,414,258
Dauphin O.T.A.*.................... 150 9,309
Goudsmit (Eduard) N.V.*............ 17,000 1,514,477
Meitec Corp. ...................... 163,600 3,121,976
Prosegur Compania Seguridad SA .... 4,310 39,868
WPP Group PLC...................... 600,000 2,610,764
--------------
31,786,757
--------------
TRUCKING, SHIPPING (1.1%)
Brambles Industries Ltd. .......... 140,000 2,731,899
Irish Continental Group............ 153,500 1,079,937
Kawasaki Kisen*.................... 292,000 665,642
Koninklijke Nedlloyd Groep N.V. .. 80,000 2,193,621
Western Bulk Shipping+ ............ 94,500 452,668
Yamato Transport .................. 343,000 3,554,097
--------------
10,677,864
--------------
TOTAL BUSINESS SERVICES (8.5%) ... 84,834,216
--------------
CAPITAL GOODS
AEROSPACE (0.4%)
Loral Space & Communications* ..... 163,000 2,995,125
Swire Pacific Ltd. (Class A) ...... 100,000 953,520
--------------
3,948,645
--------------
64
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
BUILDING & CONSTRUCTION (2.2%)
ABB AG ............................ 3,000 $ 3,731,789
Bam Groep Holdings................. 1,000 56,113
Bufete Industrial S.A. (ADR)* ..... 19,000 403,750
Fomento de Construcciones Y
Contratas SA...................... 1,000 93,272
Hitachi Plant Engineering &
Construction Co................... 135,000 799,672
Japan Industrial Land Development . 50,000 949,832
Kajima Corp. ...................... 121,000 865,107
Kaneshita Construction Co. ........ 127,000 1,206,286
MacMahon Holdings Ltd. ............ 2,000,000 1,780,464
Metacorp Berhard................... 308,000 786,617
Mitsui Home Co. Ltd................ 127,000 1,568,172
Nanno Construction Co. Ltd......... 53,000 315,776
National House Industrial Co. .... 22,000 292,548
Ohmoto Gumi Co. Ltd................ 61,000 874,363
Oriental Construction Co. ......... 60,300 775,814
Paul Y.-ITC Construction Holdings . 500,000 119,594
Paul Y.-ITC Construction
Holdings--Warrants*............... 100,000 1,791
Penta Ocean Construction........... 37,000 164,856
PS Corp. .......................... 109,700 1,837,648
Sacos Corp. ....................... 22,900 209,602
Sanyo Engineering & Construction,
Inc. ............................. 25,000 222,347
Sho Bond Construction.............. 119,700 3,224,799
Suido Kiko Kaisha.................. 42,000 297,384
Toda Construction.................. 114,000 866,246
Wesco, Inc......................... 46,150 577,821
--------------
22,021,663
--------------
BUILDING MATERIALS & FOREST
PRODUCTS (1.2%)
Boral Ltd. ........................ 180,000 512,201
BPB PLC ........................... 540,000 3,547,659
Fujikura Ltd. ..................... 211,000 1,690,769
Lafarge Canada..................... 7,000 122,056
Lafarge Corp....................... 33,000 1,979,936
Macmillan Bloedel Ltd.............. 30,000 393,281
Nichiha Corp....................... 154,500 2,734,867
Portland Valderrivas SA*........... 12,899 869,024
Sumitomo Forestry Co. ............. 30,000 365,253
--------------
12,215,046
--------------
ELECTRICAL EQUIPMENT (0.7%)
Alcatel Alsthom.................... 20,000 1,606,630
Omron Corp. ....................... 184,000 3,463,604
Vae Eisenbahnsys AG................ 3,000 340,523
Yaskawa Electric Corp.*............ 267,000 926,811
--------------
6,337,568
--------------
MACHINERY (3.0%)
Asahi Diamond
Industry Co. Ltd. ................ 108,000 979,190
BT Industries AB+.................. 70,000 1,303,674
Construcciones Auxiliar Ferro ..... 9,425 357,446
Danieli & Co.*..................... 32,200 265,349
Enshu*............................. 60,000 180,295
Fag Kugelfischer Georg Schaefer ... 16,200 $ 221,608
IHC Caland N.V..................... 52,000 2,969,024
Ishikawajima Harima Heavy
Industries Co. Ltd................ 164,000 729,298
Kalmar Industries AB+.............. 70,000 1,077,840
Kawasaki Heavy Industries.......... 380,000 1,571,712
Keppel Corp. ...................... 76,000 592,010
Keyence Corp. ..................... 14,000 1,728,694
Makino Milling Machine Co. ........ 76,000 484,967
Mitsubishi Heavy Industries Ltd. .. 515,000 4,091,184
Namura Shipbuilding Co............. 106,000 347,811
Nippon Seiko K.K. ................. 4,000 24,247
Nireco............................. 24,000 273,552
Nitta Corp......................... 122,000 1,527,502
Nitto Kohki Co. Ltd................ 62,000 2,221,743
Siebe PLC.......................... 90,000 1,668,217
SMC Corp........................... 50,600 3,403,627
Sodick Co.*........................ 380,000 3,149,987
Thai Engine Manufacturing Public
Co. Ltd.*......................... 87,000 675,076
--------------
29,844,053
--------------
TOTAL CAPITAL GOODS (7.5%)........ 74,366,975
--------------
CONSUMER CYCLICALS
AIRLINES (1.1%)
Air Canada*........................ 100,000 452,803
British Airways.................... 150,000 1,555,923
Continental Airlines, Inc.
(Class B)*........................ 38,000 1,073,500
Delta Air Lines, Inc............... 12,000 850,500
KLM................................ 100,000 2,811,444
Northwest Airlines Corp.
(Class A)*........................ 27,100 1,060,288
Qantas Airways Ltd................. 15,000 25,038
Singapore Airlines Ltd. ........... 250,000 2,268,992
UAL Corp.*......................... 16,500 1,031,250
--------------
11,129,738
--------------
APPAREL, TEXTILE (0.4%)
Adidas AG+......................... 13,000 1,123,603
Carli Gry International A/S* ...... 30,000 1,437,049
First Sign International
Holdings Ltd. .................... 2,630,000 841,586
King Co.*.......................... 55,000 247,431
Morishita Co. Ltd.................. 6,000 42,069
Renown, Inc.*...................... 27,000 72,040
--------------
3,763,778
--------------
AUTO RELATED (1.0%)
Asahi Glass Co. Ltd................ 73,000 687,074
Autoliv AB......................... 20,000 876,937
Autoliv AB (ADS)*+................. 23,700 1,025,025
Bridgestone Metalpha .............. 7,000 59,839
FCC Co. Ltd........................ 18,000 489,595
Mabuchi Motor Co. ................. 44,300 2,230,110
Michelin (CGDE), (Class B)......... 40,000 2,159,391
Minebea Co. ....................... 230,000 1,922,459
Toyoda Gosei*...................... 5,000 34,669
--------------
9,485,099
--------------
65
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
AUTOS & TRUCKS (0.6%)
Honda Motor Corp. ................. 157,000 $ 4,487,264
Isuzu Motors Ltd. ................. 127,000 564,761
Toyota Motor Corp. ................ 49,000 1,408,946
--------------
6,460,971
--------------
FOOD SERVICES, LODGING (0.6%)
AAPC Limited ...................... 1,500,000 906,129
Accor SA .......................... 12,000 1,519,514
International Fast Food Corp.* ... 8,000 1,040
Jurys Hotel Group PLC ............. 400,000 1,864,810
QPQ Corp.* ........................ 32,700 77,663
QPQ Corp.--Warrants* .............. 32,700 4,088
Sanyo Pax Co. Ltd. ................ 48,000 833,089
Thistle Hotels PLC* ............... 249,200 774,832
--------------
5,981,165
--------------
HOUSEHOLD FURNITURE,
APPLIANCES (0.9%)
Hunter Douglas N.V. ............... 30,000 2,021,810
Industrie Natuzzi (ADR) ........... 114,000 2,622,000
Matsushita Electric Industrial
Co. .............................. 60,000 979,190
Nippon Electric Glass ............. 79,000 1,214,230
Philips Electronics ............... 10,000 404,941
Sanyo Electric Co. Ltd. ........... 377,000 1,562,559
Sharp Corp. ....................... 37,000 527,157
--------------
9,331,887
--------------
LEISURE RELATED (2.9%)
Cinar Films, Inc. (Class B)* ..... 48,000 1,248,000
CUC International, Inc.* .......... 375,800 8,925,250
Enix Corp.* ....................... 10,200 230,757
Hasbro, Inc. ...................... 13,000 505,375
ITT Corp.* ........................ 67,700 2,936,488
Japan Airport Terminal Co. ........ 130,200 1,596,442
KTM Motorradholding AG* ........... 10,440 583,350
Mars Engineering Corp.* ........... 32,900 838,054
Namco Ltd. ........................ 85,100 2,608,626
Nelvana Limited*+ ................. 130,000 2,159,942
Nintendo Co. ...................... 43,700 3,128,167
Rank Group PLC .................... 100,000 746,055
Tag Heuer International SA (ADR)* 143,200 2,309,100
Tourism Holdings Ltd. ............. 600,000 1,145,259
--------------
28,960,865
--------------
PHOTO & OPTICAL (0.4%)
Luxottica Group (ADR) ............. 20,000 1,040,000
Noritsu Koki Co. Ltd. ............. 63,000 2,964,770
--------------
4,004,770
--------------
RETAIL--GENERAL (5.7%)
Asda Group PLC* ................... 400,000 842,845
AutoZone, Inc.* ................... 253,600 6,974,000
British Airport Author PLC ........ 500,000 4,167,116
Centros Comerciales Pryca SA ..... 75,000 1,589,858
CompUSA, Inc.* .................... 179,700 3,706,313
Dai-Ichi Corp. .................... 35,000 707,193
Dixons Group PLC* ................. 450,000 4,182,105
Doshisha Co. ...................... 47,000 771,091
Eiden Sakakiya Co. Ltd. ........... 84,000 848,631
Fu Hui Jewellery* ................. 450,000 41,890
Gucci Group N.V. .................. 15,000 958,125
Homac Corp. ....................... 35,700 647,353
Home Centers Ltd.* ................ 142,800 660,450
Home Wide Corp, Inc. .............. 18,000 161,644
House of Fraser PLC ............... 750,000 1,972,206
Isetan Co. ........................ 190,000 2,460,927
Lowe's Cos., Inc. ................. 24,300 862,650
Matsuyadenki Co. Industries ...... 6,000 56,472
MFI Furniture PLC ................. 100,000 319,493
Nissen Corp. Ltd. ................. 40,300 281,867
Paris Miki, Inc. .................. 60,900 2,198,100
Rinascente ........................ 175,000 1,015,247
Rinascente--Warrants* ............. 8,750 3,859
Sato Corp. ........................ 105,700 2,062,706
Sears, Roebuck & Co. .............. 107,300 4,949,213
Siam Makro Public Co. Ltd. ........ 50,000 210,559
Sriwani Holdings BHD .............. 680,000 1,830,925
Swank International Manufacturing 1,000,000 151,270
St. Dupont*+ ...................... 64,400 2,184,523
Thorn PLC* ........................ 500,000 2,154,223
Vendex International N.V. ......... 14,400 615,602
Wal-Mart Stores, Inc. ............. 165,000 3,774,375
Warehouse Group Ltd. .............. 846,250 2,034,072
Xebio Co. ......................... 30,600 911,579
--------------
56,308,482
--------------
TOTAL CONSUMER CYCLICALS (13.6%) 135,426,755
--------------
CONSUMER NONCYCLICALS
BEVERAGES (1.4%)
Grand Metropolitan ................ 300,000 2,358,939
Guinness PLC ...................... 650,000 5,094,331
Lion Nathan Ltd. .................. 592,000 1,418,764
Louis Dreyfus Citrus*+ ............ 71,500 2,342,681
Panamerican Beverages ............. 30,000 1,406,250
Quilmes Industrial Quins (ADR) .... 131,100 1,196,288
--------------
13,817,253
--------------
DRUGS (5.1%)
Astra AB (A Shares) ............... 40,000 1,976,774
Biogen, Inc.* ..................... 59,000 2,286,250
Hafslund Nycomed ASA
(B Shares)........................ 80,000 549,060
Merck & Co., Inc. ................. 107,600 8,527,300
Novartis AG (ADR) ................. 20,000 1,141,710
Novartis AG* ...................... 1,110 1,271,296
Novo-Nordisk AS (ADR)
(B Shares)........................ 17,500 3,299,607
Nycomed ASA (B Shares)* ........... 90,000 1,385,214
Pfizer, Inc. ...................... 54,000 4,475,250
Roche Holdings AG Genusscheine ... 800 6,224,879
Santen Pharmaceutical Co. ......... 150,000 3,108,540
Schering Plough Corp. ............. 13,000 841,750
Smith & Nephew PLC* ............... 500,000 1,550,356
Smithkline Beecham PLC ............ 200,000 2,773,509
Taisho Pharmaceutical Co. ......... 95,000 2,239,444
Takeda Chemical Industries ........ 30,000 629,479
Yamanouchi Pharmaceutical ......... 198,000 4,069,079
Zeneca Group PLC .................. 180,000 5,080,198
--------------
51,429,695
--------------
66
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
FOODS (0.7%)
Fyffes PLC ........................ 2,700,000 $ 5,034,988
Nestle AG ......................... 500 536,795
Nutrica Verenigde Bedrijven N.V. .. 2,900 440,373
Oie Sangyo Co. Ltd. ............... 4,000 51,809
Shriram Industrial Enterprises
Ltd. (GDR)*+ ..................... 165,000 24,750
Viscofan Envoltura ................ 60,000 878,758
--------------
6,967,473
--------------
HOSPITAL SUPPLIES & SERVICES (1.1%)
Abbott Laboratories ............... 38,500 1,953,875
Boston Scientific Corp.* .......... 23,000 1,380,000
Cochlear Ltd. ..................... 50,000 142,278
Coloplast A/S B ................... 800 91,047
Medtronic, Inc. ................... 56,400 3,835,200
Quest Medical, Inc.* .............. 164,543 1,275,208
Saint Jude Medical, Inc.* ......... 46,600 1,986,325
Scandinavian Mobility
International, Inc.+ ............. 13,700 225,732
Tamro Group ....................... 10,000 66,780
--------------
10,956,445
--------------
RETAIL--FOOD (0.6%)
Casino Guichard-Perrachon ......... 13,590 632,812
Daimon Co. Ltd. ................... 45,400 729,160
Familymart Co. .................... 4,900 195,898
Loblaw Companies Ltd. ............. 90,000 930,071
McBride PLC ....................... 350,000 815,436
Ministop Co. Ltd. ................. 19,800 483,844
Seven-Eleven Japan Ltd. ........... 41,000 2,400,311
--------------
6,187,532
--------------
SOAPS & TOILETRIES (0.2%)
Shiseido Co. ...................... 146,000 1,689,319
--------------
TOBACCO (1.9%)
BAT Industries .................... 300,000 2,489,991
Imperial Tobacco PLC* ............. 200,000 1,291,677
Loews Corp. ....................... 97,800 9,217,650
RJ Reynolds BHD ................... 200,000 542,467
Swedish Match Co. AB* ............. 1,100,000 3,871,426
Tabacalera SA ..................... 40,000 1,723,599
--------------
19,136,810
--------------
TOTAL CONSUMER NONCYCLICALS (11.0%) 110,184,527
--------------
CREDIT SENSITIVE
BANKS (5.0%)
Akita Bank ........................ 75,000 466,281
Asahi Bank Ltd. ................... 164,000 1,458,596
Banco Comercial Portuguese SA ..... 60,000 791,596
Banco Latinoamericano de
Exportaciones S.A. ............... 60,000 3,045,000
Banco Popular ..................... 5,000 982,822
Banco Santander-Chile (ADR) ...... 15,000 225,000
Bancomer B Local* ................. 1,000,000 398,882
Bank of Tokyo-Mitsubishi Bank .... 209,000 3,880,062
Bankinter-Banco Interc Espana .... 1,000 155,170
Barclays Bank ..................... 140,000 2,399,539
Chase Manhattan Corp. ............. 68,288 6,094,704
First Chicago NBD Corp. ........... 67,000 3,601,250
First Union Corp. ................. 88,000 6,512,000
Fokus Bank ........................ 58,000 399,890
Grupo Financiero Bantorte (Class
B)* .............................. 178,750 179,840
Hachijuni Bank .................... 59,000 560,401
HSBC Holdings PLC (H.K.$).......... 80,000 1,711,811
Mitsubishi Trust & Banking Corp. . 93,000 1,244,711
Morgan (J.P.) & Co., Inc. ......... 5,200 507,650
NationsBank Corp. ................. 67,000 6,549,250
Overseas Chinese Bank ............. 60,000 746,087
Overseas Union Bank Ltd. .......... 180,000 1,389,266
Shizuoka Bank ..................... 149,000 1,582,506
Sparbanken Sverige AB
(A Shares) ....................... 148,000 2,539,304
Standard Chartered PLC ............ 150,000 1,847,578
Toho Bank ......................... 77,000 466,747
Union Bank of Norway .............. 8,600 270,132
--------------
50,006,075
--------------
FINANCIAL SERVICES (4.7%)
American Express Co. .............. 143,000 8,079,500
Americredit Corp.* ................ 296,700 6,082,350
CMIC Finance & Securities Co. Ltd. 724,700 1,045,539
Credit Local de France ............ 25,000 2,177,893
Credit Saison Co. ................. 181,600 4,061,342
Dean Witter Discover & Co. ........ 35,900 2,378,375
Hong Leong Finance Ltd. ........... 160,000 372,758
Household International, Inc. .... 20,700 1,909,575
Invesco ........................... 400,000 1,778,198
JCG Holdings ...................... 142,000 138,613
MBNA Corp. ........................ 48,000 1,992,000
Mercury Finance Co. ............... 472,950 5,793,638
Nichiei Co. Ltd. .................. 57,500 4,225,240
Promise Co. Ltd. .................. 35,800 1,762,024
PT Bunas Finance Indonesia* ...... 377,000 399,026
Sanyo Shinpan Finance Co. Ltd. ... 27,100 1,696,529
Takefuji Corp.* ................... 20,200 1,456,437
Yamaichi Securities ............... 343,000 1,525,300
--------------
46,874,337
--------------
INSURANCE (5.3%)
Acceptance Industries Cos., Inc.* . 110,100 2,174,475
Aegon N.V. ........................ 95,000 6,050,679
American International
Group, Inc. ...................... 96,250 10,419,063
AMEV N.V. ......................... 125,000 4,374,804
Corporacion Mapfre
Cia Inter SA ..................... 70,853 4,320,154
Irish Life PLC .................... 100,000 459,421
Koa Fire & Marine ................. 109,000 528,953
Pacific & Orient BHD .............. 220,000 531,380
PennCorp Financial Group, Inc. ... 35,700 1,285,200
PMI Group, Inc. ................... 36,500 2,021,188
Progressive Corp. ................. 61,500 4,143,563
Travelers Group, Inc. ............. 293,133 13,300,910
Twentieth Century Industries ..... 211,000 3,560,625
--------------
53,170,415
--------------
67
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
MORTGAGE RELATED (0.1%)
Federal National Mortgage
Association ...................... 15,000 $ 558,750
--------------
REAL ESTATE (2.5%)
Arden Realty Group, Inc. .......... 98,500 2,733,375
Castle & Cooke, Inc.* ............. 85,000 1,349,375
Cheung Kong Holdings .............. 90,000 799,987
Chubu Sekiwa Real Estate .......... 23,000 295,916
City Developments Ltd. ............ 270,000 2,431,216
Daibiru Corp. ..................... 90,000 831,534
JP Realty, Inc. ................... 87,300 2,258,888
Macerich Co. ...................... 151,700 3,963,163
Mitsubishi Estate Co. ............. 218,000 2,240,048
Prentiss Properties Trust ......... 85,000 2,125,000
Sap Holdings* ..................... 66,000 316,215
Spieker Properties, Inc. .......... 37,700 1,357,200
Storage USA, Inc. ................. 28,000 1,053,500
Summit Properties, Inc. ........... 72,000 1,593,000
Sun Communities, Inc. ............. 41,000 1,414,500
--------------
24,762,917
--------------
UTILITY--ELECTRIC (2.8%)
British Energy PLC* ............... 1,672,000 4,210,526
Enersis S.A. (ADR) ................ 45,000 1,248,750
EVN ............................... 8,394 1,263,659
Gas Y Electridad SA (Series 2) ... 5,000 319,899
Hidroelectrica del Cantabrico .... 56,000 2,138,928
Iberdrola II ...................... 150,000 2,127,520
Iberdrola SA ...................... 250,000 3,545,866
Korea Electric Power (ADR) ........ 100,000 2,050,000
National Grid Group PLC ........... 1,100,000 3,684,022
National Power PLC ................ 450,000 3,769,677
Veba AG ........................... 60,000 3,450,741
--------------
27,809,588
--------------
UTILITY--GAS (0.4%)
General de Aguas d'Barcelona ..... 90,000 3,746,285
--------------
UTILITY--TELEPHONE (1.3%)
Empresas Telex-Chile S.A. (ADR) .. 119,000 550,375
Frontier Corp. .................... 42,000 950,250
Hellenic Telecommunication
Organization SA .................. 48,880 841,808
Kon. PTT Nederland+ ............... 120,000 4,574,671
PT Indonesian Satellite (ADR) .... 40,000 1,095,000
Stet Societa Finanz Telefon ...... 40,000 181,953
Tele Danmark AS (B Shares) ........ 6,000 331,235
Telefonica de Espana SA ........... 100,000 2,324,084
Telephone & Data Systems, Inc. ... 61,700 2,236,625
--------------
13,086,001
--------------
TOTAL CREDIT SENSITIVE (22.1%) ... 220,014,368
--------------
ENERGY
COAL & GAS PIPELINES (0.7%)
Nabors Industries, Inc.* .......... 121,000 2,329,250
OMV AG ............................ 40,000 4,510,754
--------------
6,840,004
--------------
OIL--DOMESTIC (0.1%)
Union Pacific Resources
Group, Inc. ...................... 39,465 $ 1,154,351
XCL Corp.* ........................ 700,000 131,250
--------------
1,285,601
--------------
OIL--INTERNATIONAL (0.6%)
Canadian Occidental ............... 10,000 160,000
ENI Spa ........................... 666,000 3,418,093
Repsol SA ......................... 65,000 2,495,211
Yukong Ltd. (GDR)+ ................ 25,000 156,250
--------------
6,229,554
--------------
OIL--SUPPLIES & CONSTRUCTION (0.6%)
Bouygues Offshore SA (ADR)* ...... 148,000 1,905,500
Coflexip (ADR)* ................... 70,117 1,840,571
Tubos de Acero de Mexico SA (ADR)* 112,400 1,784,350
--------------
5,530,421
--------------
RAILROADS (1.0%)
Canadian Pacific Ltd. ............. 218,400 5,787,600
Union Pacific Corp. ............... 63,633 3,825,934
--------------
9,613,534
--------------
TOTAL ENERGY (3.0%) .............. 29,499,114
--------------
TECHNOLOGY
ELECTRONICS (8.8%)
Austria Mikro Systeme
International..................... 4,000 308,844
Aval Data ......................... 14,000 112,426
Cabletron Systems, Inc.* .......... 54,100 1,798,825
Cisco Systems, Inc.* .............. 338,000 21,505,250
Cypress Semiconductor Corp.* ..... 120,000 1,695,000
EMC Corp.* ........................ 160,000 5,300,000
Fujimi, Inc. ...................... 500 26,941
Hirose Electric Co. Ltd............ 45,400 2,630,464
Hoya Corp. ........................ 86,000 3,378,810
Intel Corp. ....................... 144,500 18,920,458
National Semiconductor Corp.* .... 86,000 2,096,250
NEC Corp. ......................... 35,000 423,107
Rohm Co. Ltd. ..................... 31,000 2,034,367
Seagate Technology, Inc.* ......... 97,000 3,831,500
Seatex Garex ASA* ................. 81,700 443,963
TDK Corp. ......................... 35,000 2,281,755
Texas Instruments, Inc. ........... 38,100 2,428,875
Tokyo Electron .................... 38,000 1,164,839
Yokogawa Electric Corp. ........... 471,000 4,067,006
3Com Corp.* ....................... 182,500 13,390,938
--------------
87,839,618
--------------
OFFICE EQUIPMENT (1.2%)
Canon, Inc. ....................... 50,000 1,105,259
Compaq Computer Corp.* ............ 45,000 3,341,250
Ricoh Elemex Corp. ................ 21,000 293,757
Sterling Software, Inc.* .......... 169,600 5,363,600
Xerox Corp. ....................... 47,400 2,494,425
--------------
12,598,291
--------------
68
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ------------------------------- ------------ --------------
OFFICE EQUIPMENT SERVICES
(2.7%)
Accugraph Corp. (Class A)* .... 6,200 $ 4,936
Electronic Data Systems Corp. . 119,000 5,146,750
Fuji Soft Corp. ................ 32,500 993,438
Informix Corp.* ................ 67,000 1,365,125
Istar Internet, Inc.*+ ......... 12,500 41,994
Micro Warehouse, Inc.* ......... 60,900 715,575
Microsoft Corp.* ............... 66,000 5,453,250
Misys PLC ...................... 130,000 2,486,479
Oracle Corp.* .................. 44,800 1,870,400
Sterling Commerce, Inc.* ...... 236,660 8,342,265
Turbon International AG ........ 30,000 779,828
--------------
27,200,040
--------------
TELECOMMUNICATIONS (5.4%)
BCE Mobile Communications,
Inc.* ......................... 16,000 474,420
Cellular Communications Puerto
Rico, Inc.* ................... 7,600 150,100
Cox Communications, Inc.
(Class A)* .................... 17,000 393,125
DDI Corp. ...................... 401 2,652,327
Deutsche Telekom AG (ADR)* .... 232,000 4,727,000
Filtronic Comtek PLC ........... 1,210,000 7,648,820
Forval Corp. ................... 8,000 311,545
Korea Mobile Telecommunications
Corp. (ADR) ................... 362,560 4,667,960
MFS Communications Co., Inc.* . 361,145 19,682,400
NetCom Systems AB (B Shares)* .. 85,600 1,387,085
Rogers Cantel Mobile
Communications (Class B)* .... 20,000 396,567
Tadiran Telecommunications Ltd. 199,800 4,470,525
Teleport Communications Group,
Inc. (Class A)* ............... 60,500 1,845,250
United States Cellular Corp.* . 40,600 1,131,725
Vodafone Group ................. 900,000 3,800,512
--------------
53,739,361
--------------
TOTAL TECHNOLOGY (18.1%) ..... 181,377,310
--------------
DIVERSIFIED
MISCELLANEOUS (1.6%)
Alba ........................... 8,000 809,074
BTR PLC ........................ 200,000 973,041
Cie Generale des Eaux .......... 30,000 3,717,838
Crean (James) PLC--Units ...... 385,000 1,207,465
Hanson PLC ..................... 500,000 698,088
Indonesia Fund, Inc.* .......... 20,000 195,000
International UNP Holdings* ... 450,000 92,021
International UNP
Holdings--Warrants* ........... 225,000 0
Invesco Funding LLC* ........... 80,000 355,640
Mitsubishi Corp. ............... 186,000 1,927,295
Sime Darby BHD ................. 800,000 3,151,851
Taiwan Fund .................... 40,000 890,000
Tomkins PLC .................... 500,000 2,299,837
--------------
TOTAL DIVERSIFIED (1.6%) ..... 16,317,150
--------------
TOTAL COMMON STOCKS AND OTHER
INVESTMENTS (89.6%)
(Cost $766,444,974) ........... 893,968,835
--------------
PREFERRED STOCKS:
CONSUMER CYCLICALS (0.0%)
RETAIL--GENERAL
Fielmann AG .................... 8,000 $ 252,145
--------------
CONSUMER NONCYCLICALS (0.1%)
DRUGS
Fresenius AG* .................. 4,000 830,517
--------------
TECHNOLOGY
TELECOMMUNICATIONS (0.5%)
MFS Communications Co., Inc.
8.0% Conv. .................... 22,000 2,007,500
Nokia Oy Cum ................... 44,000 2,553,574
--------------
TOTAL TECHNOLOGY (0.5%) ...... 4,561,074
--------------
TOTAL PREFERRED STOCKS (0.6%)
(Cost $3,075,940) ............. 5,643,736
--------------
PRINCIPAL
AMOUNT
------------
LONG-TERM DEBT SECURITIES:
CONSUMER NONCYCLICALS (0.2%)
FOODS
Burns, Philp & Co., Ltd.
5.5% Conv., 04/30/04 .......... $2,000,000 1,756,250
--------------
CREDIT SENSITIVE (0.0%)
INSURANCE
Corporacion Mapfre
8.5% Conv., 02/27/99 .......Peseta 29,910,000 230,558
--------------
TECHNOLOGY
ELECTRONICS (0.9%)
Altera Corp.
5.75% Conv. Sub. Note,
06/15/02+ ..................... $1,305,000 2,019,488
3Com Corp.
10.25% Conv., 11/01/01+ ...... 3,000,000 6,622,500
--------------
TOTAL TECHNOLOGY (0.9%) ...... 8,641,988
--------------
DIVERSIFIED (0.0%)
MISCELLANEOUS
Brierley Investment Ltd.
9.0% Conv. Sub. Note,
06/30/98....................... 27,900 24,063
--------------
TOTAL LONG-TERM DEBT SECURITIES (1.1%)
(Amortized Cost $7,465,869) .. 10,652,859
--------------
SHORT-TERM DEBT SECURITIES:
BANKERS' ACCEPTANCES (1.0%)
Industrial Bank of Japan-L.A.
5.73%, due 01/16/97 ........... 10,000,000 9,976,125
--------------
COMMERCIAL PAPER
BHF Delaware Inc.
5.64%, due 03/10/97 ........... 5,000,000 4,950,228
Chase Manhattan Bank
5.59%, due 03/14/97 ........... 5,000,000 4,947,300
Dresdner U.S. Finance, Inc.
5.31%, due 04/10/97 ........... 5,000,000 4,927,263
Enterprise Funding Corp.
5.48%, due 03/03/97 ........... 1,300,000 1,288,391
International Securitization
5.45%, due 03/18/97 ........... 7,000,000 6,922,121
Koch Industries
6.9%, due 01/02/97 ............ 1,800,000 1,799,655
69
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------- ------------ --------------
Premium Funding--Series B
5.5%, due 02/18/97 ........... $ 8,241,000 $ 8,180,566
--------------
TOTAL COMMERCIAL PAPER (3.3%) 33,015,524
--------------
TIME DEPOSITS
Bank of Tokyo-
Mitsubishi Bank Ltd., N.Y.
5.5%, due 03/04/97 ........... 28,000,000 27,974,910
Toronto Dominion Bank
6.25%, due 01/02/97 .......... 10,600,000 10,600,000
--------------
TOTAL TIME DEPOSITS (3.8%) .. 38,574,910
--------------
TOTAL SHORT-TERM DEBT SECURITIES (8.1%)
(Amortized Cost $81,581,556) 81,566,559
--------------
TOTAL INVESTMENTS (99.4%)
(Cost/Amortized Cost $858,568,339) 991,831,989
OTHER ASSETS
LESS LIABILITIES (0.6%)....... 5,499,495
--------------
NET ASSETS (100.0%) ........... $997,331,484
==============
- ------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $45,781,555
or 4.6% of net assets.
Glossary:
ADR--Amercian Depository Receipt
GDR--Global Depository Receipt
See Notes to Financial Statements.
70
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ----------- ---------------
COMMON STOCKS AND OTHER
INVESTMENTS:
ARGENTINA
KTM Motorradholding AG* .......... 2,340 $ 130,751
Quilmes Industrial Quins (ADR) ... 19,000 173,375
---------------
TOTAL ARGENTINA (0.2%) .......... 304,126
---------------
AUSTRALIA
AAPC Ltd. ........................ 100,000 60,409
Aristocrat Leisure Ltd. .......... 160,000 415,866
Boral Ltd. ....................... 50,000 142,278
Brambles Industries Ltd. ......... 20,000 390,271
Broken Hill Proprietary Co. Ltd. . 21,000 299,118
Cochlear Ltd. .................... 90,000 256,101
Gio Australia Holdings Ltd.* .... 200,000 511,883
Great Central Mines Ltd.* ........ 100,000 284,556
Guinness Peat Group .............. 13,200 7,554
National Australia Bank Ltd. .... 4,900 57,643
News Corp. Ltd. .................. 5,900 31,139
Oil Search Ltd. .................. 500,000 973,691
Orogen Minerals Ltd. (GDS)*+ .... 60,000 1,758,000
Plutonic Resources Ltd. .......... 20,000 92,997
Qantas Airways Ltd. .............. 70,000 116,843
QBE Insurance Group Ltd. ......... 63,998 337,260
QCT Resources, Inc. .............. 200,000 270,249
Reinsurance Australia Corp.* .... 40,000 155,791
Spectrum Network Systems*+ ...... 600,000 209,840
Western Mining Corp. Ltd. ........ 22,000 138,670
Westralian Sands Ltd. ............ 14,000 44,512
---------------
TOTAL AUSTRALIA (4.3%) .......... 6,554,671
---------------
AUSTRIA
EVN-Energie Versorgung Niederland 800 120,435
OMV AG ........................... 600 67,661
VA Technologie AG* ............... 3,000 470,886
---------------
TOTAL AUSTRIA (0.4%) ............ 658,982
---------------
BELGIUM
Electrabel ....................... 250 59,224
Generale de Banque ............... 120 43,058
Petrofina SA ..................... 110 35,046
Tractebel Investment
International Capital ........... 70 32,625
Tractebel Investment
International Capital--
Warrants* ....................... 70 0
---------------
TOTAL BELGIUM (0.1%) ............ 169,953
---------------
CANADA
Accugraph Corp. (Class A)* ...... 5,000 3,980
Architel Systems Corp.* .......... 30,300 186,989
Istar Internet, Inc.*+ ........... 12,000 40,314
Loblaw Companies Ltd. ............ 20,000 206,682
Prime Resource Group, Inc. ...... 20,000 141,683
Renaissance Energy Ltd.* ......... 2,000 68,139
Rofin-Sinar Technologies, Inc.* . 40,000 470,000
Transat A.T., Inc.* .............. 67,500 554,592
---------------
TOTAL CANADA (1.1%) ............. 1,672,379
---------------
CHILE
Empresas Telex-Chile S.A. (ADR) . 20,000 92,500
Enersis S.A. (ADR) ............... 1,000 27,750
Santa Isabel S.A. (ADR) .......... 17,000 384,625
---------------
TOTAL CHILE (0.3%) .............. 504,875
---------------
DENMARK
Carli Gry International A/S* .... 15,600 747,266
Coloplast A/S B .................. 4,000 455,235
Den Danske Bank .................. 400 32,274
Scandinavian Mobility
International, Inc.+ ............ 6,000 98,861
Tele Danmark AS (B Shares) ...... 1,000 55,206
---------------
TOTAL DENMARK (0.9%) ............ 1,388,842
---------------
FINLAND
KCI Konecranes International* ... 20,000 630,824
Nokia Corp. (ADR) ................ 3,000 172,875
---------------
TOTAL FINLAND (0.5%) ............ 803,699
---------------
FRANCE
Accor SA ......................... 8,000 1,013,010
Alcatel Alsthom .................. 3,500 281,160
Banque Nationale de Paris ........ 700 27,091
Bouygues Offshore SA (ADR)* ..... 40,000 515,000
BSN Gervais Danone ............... 500 69,673
Carrefour ........................ 225 146,401
Cie de St. Gobain ................ 250 35,367
Cie Fin Paribas (Series A) ...... 750 50,723
Cie Generale des Eaux ............ 6,000 743,568
Coflexip (ADR)* .................. 3,000 78,750
Credit Local de France ........... 1,000 87,116
Dauphin O.T.A.* .................. 195 12,102
Elf Aquitaine .................... 2,250 204,814
Havas ............................ 350 24,554
Lafarge Corp. .................... 450 26,999
L'Air Liquide SA ................. 550 85,863
L'Oreal .......................... 495 186,418
Louis Dreyfus Citrus*+ ........... 20,300 665,125
Louis Vuitton Moet Hennessy ..... 500 139,636
Lyonnais des Eaux Dumez .......... 400 37,228
Michelin (CGDE), (Class B) ...... 1,800 97,173
Pernod-Ricard .................... 2,000 110,629
Peugeot SA ....................... 250 28,139
Pinault Printemps ................ 150 59,497
Promodes ......................... 100 28,236
Schneider SA ..................... 800 36,990
Societe Generale ................. 550 59,468
St. Dupont*+ ..................... 34,900 1,183,848
---------------
TOTAL FRANCE (4.0%) ............. 6,034,578
---------------
GERMANY
Adidas AG+ ....................... 3,000 259,293
Allianz AG Holding ............... 150 270,016
Apcoa Parking AG ................. 800 85,781
Bayer AG ......................... 4,500 182,626
B.U.S. Berzelius
Umwelt-Service AG ............... 24,850 306,830
Daimler-Benz AG* ................. 2,000 137,120
71
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ----------- ---------------
Deutsche Bank AG ................. 3,250 $ 151,644
Deutsche Telekom AG (ADR)* ...... 50,000 1,018,750
Dresdner Bank AG ................. 2,850 85,196
Kiekert AG ....................... 1,000 28,789
Linde AG ......................... 50 30,381
Lufthansa AG ..................... 2,000 27,008
Pfeiffer Vacuum Technology (ADR)* 10,000 180,000
RWE AG ........................... 1,850 77,424
SAP AG ........................... 500 68,397
Schering AG ...................... 400 33,767
SGL Carbon AG+ ................... 6,900 870,345
Siemens AG ....................... 2,500 116,032
SKW Trostberg AG ................. 5,000 135,885
Thyssen AG ....................... 150 26,602
Turbon International AG .......... 4,500 116,974
Veba AG .......................... 5,150 296,189
Viag AG .......................... 150 58,731
---------------
TOTAL GERMANY (3.0%) ............ 4,563,780
---------------
GREECE (0.2%)
Hellenic Telecommunication
Organization S.A. ............... 14,070 242,313
---------------
HONG KONG
Aeon Credit Service Co. .......... 924,000 295,675
Associated International Hotels . 10,000 7,499
Cheung Kong Holdings ............. 50,000 444,437
China Apollo Holdings Ltd. ...... 700,000 73,308
China Travel International
Investment Hong Kong Ltd.* ..... 700,000 309,975
First Sign International
Holdings Ltd. ................... 600,000 191,997
Hang Seng Bank ................... 5,000 60,767
HSBC Holdings PLC (H.K.$)......... 14,200 303,846
Hutchison Whampoa ................ 12,000 94,253
Jardine International
Holdings Ltd. ................... 32,000 42,821
JCG Holdings ..................... 250,000 244,036
Television Broadcasts ............ 37,000 147,818
---------------
TOTAL HONG KONG (1.5%) .......... 2,216,432
---------------
INDONESIA
PT Bunas Finance Indonesia* ..... 93,000 98,434
PT Citatah* ...................... 430,000 300,381
PT Indonesian Satellite (ADR) ... 10,000 273,750
PT Kalbe Farma* .................. 350,000 400,085
PT Sekar Bumi .................... 510,000 323,878
---------------
TOTAL INDONESIA (0.9%) .......... 1,396,528
---------------
IRELAND
Crean (James) PLC--Units ......... 5,000 15,681
Fyffes PLC ....................... 600,000 1,118,886
Irish Continental Group .......... 20,000 150,032
Irish Life PLC ................... 50,000 229,711
Jurys Hotel Group PLC ............ 62,000 289,046
---------------
TOTAL IRELAND (1.2%) ............ 1,803,356
---------------
ISRAEL
Home Centers Ltd.* ............... 15,400 71,225
Tadiran Telecommunications Ltd. .. 20,000 447,500
---------------
TOTAL ISRAEL (0.3%) ............. 518,725
---------------
ITALY
Assicurazioni Generali Spa ...... 5,500 104,244
Banca Commerciale Italiana Spa ... 10,000 18,195
Danieli & Co.* ................... 24,800 204,368
Editorale La Repubblica Spa* .... 40,000 55,509
ENI Spa .......................... 30,000 153,968
ENI Spa (ADR) .................... 6,000 309,750
Fiat Spa ......................... 20,000 60,519
Istituto Bancario San Paolo di
Torino .......................... 5,000 30,655
Istituto Mobilare Italiano ...... 2,500 21,426
Istituto Naz Delle Assicurazioni 22,500 29,310
Mediaset Spa* .................... 260,000 1,199,836
Mediolanum Spa*+ ................. 36,000 340,807
Rinascente ....................... 10,000 58,014
Rinascente--Warrants* ............ 500 221
Simint Spa* ...................... 100,000 372,477
Telecom Italia Mobile Spa ........ 40,000 101,129
Telecom Italia Spa ............... 5,000 12,987
Unicem Spa* ...................... 16,000 104,425
---------------
TOTAL ITALY (2.1%) .............. 3,177,840
---------------
JAPAN
Ajinomoto Co., Inc. .............. 3,000 30,567
Akita Bank ....................... 20,000 124,342
Asahi Bank Ltd. .................. 40,000 355,755
Asahi Chemical Industry Co. ..... 6,000 33,987
Asahi Diamond Industry Co. Ltd. . 22,000 199,465
Asahi Glass Co. Ltd. ............. 16,000 150,591
Asatsu, Inc. ..................... 14,000 444,867
Bank of Tokyo-Mitsubishi Bank ... 48,000 891,115
Bridgestone Corp. ................ 4,000 75,987
Bridgestone Metalpha Corp. ...... 12,000 102,582
Canon, Inc. ...................... 10,000 221,052
Capcom Co. Ltd. .................. 8,000 163,716
Chubu Sekiwa Real Estate ......... 5,000 64,330
Credit Saison Co. ................ 44,000 984,026
Daibiru Corp. .................... 21,000 194,025
Dai-Ichi Corp. ................... 6,000 121,233
Dai-Ichi Kangyo Bank ............. 12,000 173,042
Daimon Co. Ltd. .................. 9,000 144,547
Dainippon Ink & Chemical, Inc. .. 27,000 100,017
Dainippon Printing Co. Ltd. ..... 3,000 52,586
Daiseki Co. Ltd. ................. 6,000 142,993
Daiwa House Industry Co. ......... 2,000 25,732
DDI Corp. ........................ 80 529,143
Doshisha Co. ..................... 4,000 65,625
Eiden Sakakiya Co. Ltd. .......... 18,000 181,850
Enix Corp.* ...................... 9,400 212,659
Enshu* ........................... 42,000 126,207
Familymart Co. ................... 3,500 139,927
Fanuc Co. ........................ 900 28,832
FCC Co. Ltd. ..................... 10,000 271,997
Fuji Bank Ltd. ................... 11,000 160,522
Fuji Photo Film Co. .............. 1,000 32,985
Fuji Soft Corp. .................. 7,600 232,312
Fujikura Ltd. .................... 48,000 384,630
Fujimi, Inc. ..................... 5,500 296,347
Hachijuni Bank ................... 9,000 85,485
Hankyu Corp. ..................... 25,000 124,126
72
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ----------- ---------------
Hirose Electric Co. Ltd. ......... 11,000 $ 637,337
Hitachi Ltd. ..................... 16,000 149,210
Hitachi Metals Ltd. .............. 28,000 222,675
Hitachi Plant Engineering &
Construction Co. ................ 24,000 142,164
Hokushin ......................... 600 4,072
Homac Corp. ...................... 7,500 135,999
Home Wide Corp., Inc. ............ 15,000 134,703
Honda Motor Corp. ................ 22,000 628,789
Hoya Corp. ....................... 20,000 785,770
Industrial Bank of Japan ......... 9,720 168,700
Isetan & Co. ..................... 46,000 595,803
Ishihara Sangyo Ltd.* ............ 100,000 241,775
Ishikawajima Harima Heavy
Industries Co. Ltd. ............. 60,000 266,816
Isuzu Motors Ltd. ................ 40,000 177,878
Ito Yokado Co. Ltd. .............. 2,000 87,039
Japan Airport Terminal Co. ...... 32,200 394,819
Japan Industrial Land Development 8,000 151,973
Kajima Corp. ..................... 16,000 114,394
Kaneshita Construction Co. ...... 6,000 56,990
KAO Corp. ........................ 3,000 34,971
Kawasaki Heavy Industries ........ 150,000 620,413
Kawasaki Kisen* .................. 20,000 45,592
Kawasaki Steel ................... 13,000 37,380
Keyence Corp. .................... 4,000 493,912
Kikuchi Co. Ltd. ................. 14,000 181,331
King Co.* ........................ 38,000 170,952
Kinki Nippon Railroad Co. ........ 7,000 43,701
Kirin Brewery Co. ................ 4,000 39,375
Koa Fire & Marine ................ 22,000 106,761
Komatsu Ltd. ..................... 4,000 32,812
Kubota Corp. ..................... 6,000 28,961
Mabuchi Motor Co. ................ 10,000 503,411
Makino Milling Machine Co. ...... 30,000 191,434
Mars Engineering Corp.* .......... 6,000 152,837
Matsuda Sangyo Co. Ltd. .......... 8,000 206,545
Matsushita Electric
Industrial Co. .................. 11,000 179,518
Matsuyadenki Co. Industries ..... 6,000 56,472
Meitec Corp. ..................... 39,000 744,236
Minebea Co. ...................... 50,000 417,926
Ministop Co. Ltd. ................ 4,700 114,852
Misawa Ceramic Corp. ............. 34,000 184,958
Mitsubishi Chemical Corp. ........ 50,000 161,903
Mitsubishi Corp. ................. 44,000 455,919
Mitsubishi Estate Co. ............ 46,000 472,671
Mitsubishi Heavy Industries Ltd. . 100,000 794,405
Mitsubishi Materials Corp. ...... 6,000 24,247
Mitsubishi Trust & Banking Corp. 20,000 267,680
Mitsui Home Co. Ltd. ............. 28,000 345,739
Mitsui & Co. ..................... 6,000 48,700
Murata Manufacturing Co. Ltd. ... 1,000 33,244
Namco Ltd. ....................... 20,000 613,073
Namura Shipbuilding Co. .......... 26,000 85,312
Nanno Construction Co. Ltd. ..... 15,000 89,371
NEC Corp. ........................ 6,000 72,533
NGK Spark Plug Co. ............... 32,000 350,920
Nichiei Co. Ltd. ................. 12,000 881,789
Nichiha Corp. .................... 38,000 672,653
Nintendo Co. ..................... 12,000 858,993
Nippon Denwa Shisetsu* ........... 30,000 277,178
Nippon Electric Glass ............ 20,000 307,400
Nippon Express Co. Ltd. .......... 5,000 34,280
Nippon Kanzai Co. ................ 1,000 25,905
Nippon Paper Industries Co. ..... 18,000 83,931
Nippon Steel Corp. ............... 27,000 79,734
Nippon Television Network Corp. . 2,860 864,347
Nippon Yusen K.K. ................ 4,000 18,099
Nippondenso Co. Ltd. ............. 4,000 96,365
Nireco ........................... 15,000 170,970
Nissen Corp. Ltd. ................ 2,300 16,087
Nitta Corp. ...................... 27,000 338,054
Nitto Kohki Co. Ltd. ............. 15,000 537,518
Nomura Securities Co. ............ 8,000 120,197
Noritsu Koki Co. Ltd. ............ 18,000 847,077
Ohmoto Gumi Co. Ltd. ............. 11,000 157,672
Oie Sangyo Co. Ltd. .............. 12,000 155,427
Oji Paper Co. Ltd. ............... 14,000 88,611
Omron Corp. ...................... 44,000 828,253
Oriental Construction Co. ........ 11,000 141,525
Paris Miki, Inc. ................. 13,500 487,264
Promise Co. Ltd. ................. 9,000 442,967
PS Corp. ......................... 18,900 316,605
Renown, Inc.* .................... 70,000 186,771
Ricoh Elemex Corp. ............... 8,000 111,907
Rohm Co. Ltd. .................... 7,000 459,373
Rohto Pharmaceutical Co. ......... 33,000 319,143
Royal Ltd. ....................... 12,000 274,588
Santen Pharmaceutical Co. ........ 34,000 704,602
Sanyo Chemicals .................. 20,000 153,700
Sanyo Electric Co. Ltd. .......... 60,000 248,683
Sanyo Engineering & Construction,
Inc. ............................ 27,000 240,135
Sanyo Pax Co. Ltd. ............... 23,000 399,188
Sanyo Shinpan Finance Co. Ltd. .. 6,000 375,615
Sato Corp. ....................... 26,000 507,383
Sekisui Chemical Co. Ltd. ........ 22,000 222,261
Sekisui House Ltd. ............... 3,000 30,567
Seven-Eleven Japan Ltd. .......... 7,000 409,809
Shaddy Co. Ltd. .................. 2,000 31,949
Sharp Corp. ...................... 12,000 170,970
Shimizu Corp. .................... 3,000 22,407
Shin-Etsu Chemical Ltd. .......... 5,000 91,097
Shiseido Co. ..................... 32,000 370,262
Shizuoka Bank .................... 30,000 318,625
Sho Bond Construction ............ 28,000 754,339
SMC Corp. ........................ 10,000 672,653
Sodick Co.* ...................... 78,000 646,576
Sony Corp. ....................... 1,000 65,538
Suido Kiko Kaisha ................ 8,000 56,645
Sumitomo Bank Ltd. ............... 12,000 173,042
Sumitomo Chemical Co. Ltd. ...... 7,000 27,744
Sumitomo Forestry Co. ............ 6,000 73,051
Sumitomo Metal Industries ........ 200,000 492,185
Taisei Corp. ..................... 4,000 20,724
Taisho Pharmaceutical Co. ........ 22,000 518,608
Takara Printing Co. .............. 19,000 154,218
Takeda Chemical Industries ...... 8,000 167,861
Takefuji Corp.* .................. 4,000 288,403
Takihyo Co. Ltd. ................. 21,000 253,864
73
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ----------- ---------------
TDK Corp. ........................ 8,000 $ 521,544
Toda Construction ................ 18,000 136,776
Toei Co. ......................... 50,000 322,079
Toho Bank ........................ 15,000 90,925
Tokio Marine & Fire
Insurance Co. ................... 6,000 56,472
Tokyo Broadcasting System ........ 41,000 626,630
Tokyo Electric Power Co., Inc. .. 7,000 153,527
Tokyo Electron ................... 10,000 306,537
Tokyu Corp. ...................... 5,000 28,409
Toray Industries, Inc. ........... 6,000 37,043
Toso Co. Ltd. .................... 16,000 248,683
Tostem Corp. ..................... 1,000 27,631
Toyoda Gosei* .................... 20,000 138,675
Toyota Motor Corp. ............... 11,000 316,294
Warabeya Nichiyo Co. Ltd.* ...... 12,000 102,582
Wesco, Inc. ...................... 5,200 65,107
Xebio Co. ........................ 6,000 178,741
Yamaichi Securities .............. 40,000 177,878
Yamanouchi Pharmaceutical ........ 32,000 657,629
Yamato Transport ................. 65,000 673,516
Yaskawa Electric Corp.* .......... 48,000 166,618
Yokogawa Electric Corp. .......... 106,000 915,290
---------------
TOTAL JAPAN (30.3%) ............. 45,982,150
---------------
MALAYSIA
Guinness Anchor BHD .............. 30,000 73,649
Hong Leong Bank BHD .............. 50,000 174,223
IOI Corp. BHD .................... 250,000 384,082
Kim Hin Industry BHD ............. 100,000 167,888
Lingkaran Trans Kota Holdings
BHD*+ ........................... 152,000 312,968
Malayan Banking Berhad ........... 24,000 266,086
Mancon BHD* ...................... 76,666 233,747
Metacorp Berhard ................. 120,000 306,474
Pacific & Orient BHD ............. 80,000 193,229
Resorts World BHD ................ 20,000 91,071
RJ Reynolds BHD .................. 200,000 542,467
Sap Holdings* .................... 60,000 287,468
Sime Darby BHD ................... 150,000 590,972
Sriwani Holdings BHD ............. 180,000 484,657
Star Publications BHD ............ 30,000 118,194
---------------
TOTAL MALAYSIA (2.8%) ........... 4,227,175
---------------
MEXICO
Elamex S.A. de C.V.* ............. 33,300 320,513
Grupo Elektra S.A. de C.V.* ..... 60,000 471,799
Panamerican Beverages ............ 5,000 234,375
---------------
TOTAL MEXICO (0.7%) ............. 1,026,687
---------------
NETHERLANDS
ABN Amro Holdings ................ 1,456 94,672
Aegon N.V. ....................... 8,000 509,531
Akzo Nobel N.V. .................. 330 45,053
AMEV N.V. ........................ 10,000 349,984
Content Beheer N.V.*+ ............ 30,000 1,145,403
Elsevier N.V. .................... 17,310 292,397
Goudsmit (Eduard) N.V.* .......... 6,000 534,521
Gucci Group N.V. ................. 5,000 319,375
Heineken N.V. .................... 233 41,218
Hunter Douglas N.V. .............. 3,000 202,181
IHC Caland N.V. .................. 4,000 228,386
ING Groep N.V. ................... 3,392 122,050
KLM .............................. 2,000 $ 56,229
Kon. PTT Nederland+ .............. 25,000 953,056
Koninklijke Nedlloyd Groep N.V. .. 20,000 548,405
Nutrica Verenigde Bedrijven
N.V.+............................ 1,000 151,853
Royal Dutch Petroleum Co. ........ 2,487 435,781
Toolex Alpha N.V.* ............... 15,000 159,375
Unilever N.V. CVA ................ 742 131,175
Vendex International N.V. ........ 3,600 153,901
Ver Ned Uitgeversbedr
Ver Bezit N.V. .................. 5,000 104,417
---------------
TOTAL NETHERLANDS (4.3%) ........ 6,578,963
---------------
NEW ZEALAND
Lion Nathan Ltd. ................. 15,000 35,948
Tourism Holdings Ltd. ............ 15,000 28,631
Warehouse Group Ltd.* ............ 120,000 288,436
---------------
TOTAL NEW ZEALAND (0.2%) ........ 353,015
---------------
NORWAY
Alvern Norway ASA* ............... 110,000 1,468,453
Hafslund Nycomed ASA
(B Shares) ...................... 5,000 34,316
Merkantildata A/S ................ 1,000 18,375
Norsk Hydro AS ................... 1,100 59,602
Nycomed ASA (B Shares)* .......... 5,000 76,956
Seatex Garex ASA* ................ 100,000 543,406
Tomra Systems .................... 58,000 906,357
Union Bank of Norway ............. 12,000 376,929
---------------
TOTAL NORWAY (2.3%) ............. 3,484,394
---------------
PANAMA (0.3%)
Banco Latinoamericano de
Exportaciones, S.A. (E Shares) .. 10,000 507,500
---------------
PERU
Banco Wiese Limitado (ADR) ...... 10,000 58,750
Telefonica del Peru S.A. (ADR) .. 60,000 1,132,500
---------------
TOTAL PERU (0.8%) ............... 1,191,250
---------------
PORTUGAL
Banco Comercial Portugues SA .... 32,700 431,420
Telecel-Comunicacoes
Pessoai SA* ..................... 15,000 958,044
---------------
TOTAL PORTUGAL (0.9%) ........... 1,389,464
---------------
SINGAPORE
City Developments Ltd. ........... 65,000 585,293
Comfort Group Ltd. ............... 18,000 15,951
Fraser & Neave ................... 50,000 514,543
GP Batteries International Ltd. .. 30,000 99,600
GP Batteries International Ltd.+ . 110,000 365,200
Great Eastern Life
Assurance Co.* .................. 7,000 120,560
Overseas Union Bank Ltd. ......... 20,000 154,363
Singapore Airlines Ltd. .......... 20,000 181,519
SM Summit Holdings Ltd.* ......... 30,000 10,076
---------------
TOTAL SINGAPORE (1.4%) .......... 2,047,105
---------------
SOUTH KOREA
Korea Electric Power (ADR) ...... 10,000 205,000
Korea Mobile Telecommunications
Corp. (ADR) ..................... 63,860 822,198
---------------
TOTAL SOUTH KOREA (0.7%) ........ 1,027,198
---------------
74
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ----------- ---------------
SPAIN
Banco Bilbao Vizcaya SA .......... 1,627 $ 87,916
Banco de Valencia ................ 30,000 586,224
Banco Popular .................... 200 39,313
Banco Santander SA ............... 1,156 74,050
Centros Comerciales Pryca SA .... 3,000 63,594
Construcciones Auxiliar Ferro ... 500 18,963
Corporacion Mapfre Cia
Inter SA ........................ 10,000 609,735
Cubiertas Y Mzov SA .............. 2,000 154,168
El Aguila SA* .................... 19,000 91,244
Empresa Nacional de
Celulosa SA* .................... 5,000 59,933
Endesa ........................... 1,122 79,915
Gas Y Electridad SA (Series 2) .. 16,000 1,023,676
General de Aguas d'Barcelona .... 6,000 249,752
Hidroelectrica del Cantabrico ... 10,000 381,951
Iberdrola II ..................... 10,000 141,835
Iberdrola SA ..................... 25,668 364,061
Portland Valderrivas SA* ......... 5,424 365,423
Prosegur Compania
Seguridad SA .................... 4,315 39,914
Repsol SA ........................ 4,392 168,599
Tabacalera SA .................... 10,000 430,900
Telefonica de Espana SA .......... 12,358 287,210
Viscofan Envoltura ............... 2,500 36,615
---------------
TOTAL SPAIN (3.5%) .............. 5,354,991
---------------
SWEDEN
Astra AB (A Shares) .............. 2,900 143,316
Autoliv AB ....................... 3,000 131,541
BT Industries AB+ ................ 10,000 186,239
Dahl International AB*+ .......... 33,000 694,437
Ericsson (L.M.) Telephone Co.
(Series B) ...................... 6,400 198,029
Kalmar Industries AB+ ............ 4,000 61,591
Meda AB* ......................... 8,100 153,229
NetCom Systems AB
(B Shares)* ..................... 26,400 427,793
Scandic Hotels AB*+ .............. 71,600 1,196,975
Sparbanken Sverige AB
(A Shares) ...................... 16,000 274,519
Swedish Match Co. AB* ............ 200,000 703,896
---------------
TOTAL SWEDEN (2.8%) ............. 4,171,565
---------------
SWITZERLAND
ABB AG ........................... 210 261,225
CS Holdings ...................... 1,250 128,409
Nestle AG ........................ 180 193,246
Novartis AG* ..................... 528 604,725
Roche Holdings AG Genusscheine .. 52 404,617
Schweizerische Bankgesellschaft . 120 105,163
Schweizerische Ruckversicherungs
Gesellschaft .................... 120 128,114
Tag Heuer International SA (ADR)* 30,200 486,975
---------------
TOTAL SWITZERLAND (1.5%) ........ 2,312,474
---------------
THAILAND
CMIC Finance & Securities
Co. Ltd. ........................ 51,000 73,579
Nation Publishing Group
Co. Ltd. ........................ 130,000 380,176
Nawarat Patanakarn Public Co. ... 30,000 35,093
Siam Makro Public Co. Ltd. ...... 50,000 210,559
Thai Engine Manufacturing Public
Co. Ltd.* ....................... 70,000 543,165
---------------
TOTAL THAILAND (0.8%) ........... 1,242,572
---------------
UNITED KINGDOM
Barclays Bank .................... 20,000 342,791
Bass Breweries ................... 5,132 72,179
BAT Industries ................... 60,000 497,998
BOC Group Co. PLC ................ 2,591 38,772
Boots Co. PLC .................... 5,806 59,926
BPB PLC .......................... 70,000 459,882
British Aerospace ................ 2,120 46,487
British Airport Author PLC ...... 100,000 833,423
British Airways .................. 38,000 394,167
British Energy PLC* .............. 251,400 633,090
British Gas ...................... 25,021 96,229
British Petroleum Co. PLC ........ 29,367 352,412
British Sky Broadcasting
Group PLC ....................... 8,097 72,406
British Steel .................... 20,000 54,991
British Telecommunications ...... 35,150 237,550
BTR PLC .......................... 21,470 104,456
Cable & Wireless ................. 12,409 103,207
Cadbury Schweppes PLC ............ 5,961 50,293
Carlton Communications PLC ...... 20,000 176,278
Commercial Union PLC ............. 2,801 32,797
Cordiant PLC* .................... 170,000 299,964
Dixons Group PLC* ................ 120,000 1,115,228
Filtronic Comtek PLC ............. 180,000 1,137,841
General Accident ................. 2,904 38,132
General Electric Co. PLC ......... 13,890 90,897
GKN PLC .......................... 2,089 35,822
Glaxo Wellcome PLC................ 23,220 377,097
Granada Group PLC ................ 3,225 47,596
Grand Metropolitan ............... 24,736 194,502
Great Universal Stores ........... 3,970 41,622
Guinness PLC ..................... 80,571 631,470
Hanson PLC ....................... 44,569 62,226
Harvey Nichols Group PLC*+ ...... 70,000 411,315
House of Fraser PLC .............. 150,000 394,441
HSBC Holdings PLC ................ 10,000 217,906
Imperial Chemical Industries .... 3,109 40,931
Imperial Tobacco PLC* ............ 49,999 322,913
Invesco .......................... 100,000 444,549
Invesco Funding LLC* ............. 20,000 88,910
Kingfisher PLC ................... 4,084 44,182
Land Securities PLC .............. 3,207 40,875
Legal & General Group PLC ........ 7,475 47,636
Lloyds TSB Group PLC ............. 34,379 253,542
Marks & Spencer .................. 17,109 143,909
McBride PLC ...................... 20,000 46,596
Millennium Chemicals, Inc.* ..... 636 11,289
Mirror Group Newspapers PLC ..... 40,000 147,669
Misys PLC ........................ 12,000 229,521
National Grid Group PLC .......... 280,754 940,276
National Power PLC ............... 100,000 837,706
Peninsular & Oriental Steam
Navigation Co. .................. 3,314 33,496
Powerscreen International ........ 40,000 387,161
Prudential Corp. ................. 8,019 67,519
75
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ----------- ---------------
Rank Organisation PLC ............ 12,574 $ 93,809
Reed International ............... 13,000 245,307
Rentokil Group PLC ............... 70,000 526,436
Reuters Holdings ................. 7,496 96,503
RTZ Corp. ........................ 5,510 88,398
Safeway PLC ...................... 6,932 47,976
Scottish Power PLC ............... 5,263 31,736
Smith & Nephew PLC* .............. 100,000 310,071
Smithkline Beecham PLC ........... 40,000 554,702
Tate & Lyle PLC .................. 12,000 97,441
Tesco PLC ........................ 12,625 76,671
Thistle Hotels PLC* .............. 94,000 292,272
Thorn PLC* ....................... 120,000 517,014
Tomkins PLC ...................... 25,000 114,992
Unilever ......................... 4,907 119,074
United Utilities PLC ............. 2,901 30,862
Vodafone Group ................... 150,000 633,419
WPP Group PLC .................... 60,000 261,076
Zeneca Group PLC ................. 10,336 291,716
---------------
TOTAL UNITED KINGDOM (12.1%) .... 18,313,548
---------------
TOTAL COMMON STOCKS
AND OTHER INVESTMENTS (86.4%)
(Cost $126,187,152) ............. 131,221,130
---------------
PREFERRED STOCKS:
GERMANY
Fielmann AG ...................... 9,000 283,663
Fresenius AG* .................... 2,000 415,258
---------------
TOTAL GERMANY (0.5%) ............ 698,921
---------------
FINLAND (0.0%)
Nokia Oy Cum ..................... 1,400 81,250
---------------
TOTAL PREFERRED STOCKS (0.5%)
(Cost $868,953) ................. 780,171
---------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------ ------------- ---------------
[S] [C] [C]
LONG-TERM DEBT SECURITIES:
SPAIN (0.0%)
Corporacion Mapfre
8.5% Conv., 02/27/99.......... 2,520,000 $ 19,425
-------------
Peseta
TOTAL LONG-TERM DEBT SECURITIES (0.0%)
(Amortized Cost $20,681) .................... 19,425
-------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT AGENCIES
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97 ........... $12,300,000 12,298,053
Federal National Mortgage
Association
5.45%, due 02/13/97 .......... 5,000,000 5,000,000
-------------
TOTAL U.S. GOVERNMENT
AGENCIES (11.4%) ............ 17,298,053
-------------
TOTAL SHORT-TERM DEBT SECURITIES (11.4%)
(Amortized Cost $17,298,053) . 17,298,053
-------------
TOTAL INVESTMENTS (98.3%)
(Cost/Amortized $144,374,839) 149,318,779
OTHER ASSETS
LESS LIABILITIES (1.7%) ..... 2,588,056
-------------
NET ASSETS (100.0%) ........... $151,906,835
=============
MARKET SECTOR DIVERSIFICATION
As a Percentage of Total Equity Investments
Basic Materials ............... 4.2%
Business Services ............. 10.8
Capital Goods ................. 13.2
Consumer Cyclicals ............ 21.0
Consumer Non-Cyclicals ........ 13.2
Credit Sensitive .............. 21.7
Energy......................... 4.1
Technology..................... 10.0
Diversified ................... 1.8
-------
100.0%
=======
- ------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $10,905,470
or 7.2% of net assets.
Glossary:
ADR--American Depository Receipt
GDS--Global Depository Share
See Notes to Financial Statements.
76
<PAGE>
THE HUDSON RIVER TRUST
AGGRESSIVE STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS:
BASIC MATERIALS
METALS & MINING (2.0%)
Cyprus Amax Minerals Co. ........ 907,300 $ 21,208,138
Kaiser Aluminum Corp.* .......... 780,900 9,077,962
Titanium Metals Corp.* .......... 1,392,200 45,768,575
--------------
76,054,675
--------------
CHEMICALS--SPECIALTY (4.4%)
Crompton & Knowles Corp. ........ 3,404,400 65,534,700
Cytec Industries, Inc.* ......... 2,087,500 84,804,688
IDEXX Laboratories, Inc.* ...... 549,700 19,789,200
--------------
170,128,588
--------------
STEEL (2.2%)
AK Steel Holding Corp.++ ........ 1,326,300 52,554,637
Worthington Industries, Inc. ... 1,949,700 35,338,313
--------------
87,892,950
--------------
TOTAL BASIC MATERIALS (8.6%) .. 334,076,213
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (6.7%)
Philip Environmental, Inc.* .... 1,625,000 23,562,500
Republic Industries, Inc.* ..... 2,694,000 84,019,125
USA Waste Services, Inc.* ...... 3,421,900 109,073,062
Wheelabrator Technologies, Inc. 2,597,800 42,214,250
--------------
258,868,937
--------------
PRINTING, PUBLISHING &
BROADCASTING (4.0%)
Comcast Corp. (Class A) SPL .... 5,147,100 91,682,719
Evergreen Media Corp.
(Class A) *++ .................. 2,511,300 62,782,500
--------------
154,465,219
--------------
TRUCKING, SHIPPING (1.5%)
Xtra Corp.++ .................... 1,376,400 59,701,350
--------------
TOTAL BUSINESS SERVICES
(12.2%)......................... 473,035,506
--------------
CONSUMER CYCLICALS
AIRLINES (3.9%)
America West Airlines, Inc.
(Class B)* ..................... 2,056,800 32,651,700
Continental Airlines, Inc.
(Class B)* ..................... 1,684,500 47,587,125
Delta Air Lines, Inc. ........... 569,700 40,377,488
Northwest Airlines Corp.
(Class A)* ..................... 788,700 30,857,888
--------------
151,474,201
--------------
APPAREL, TEXTILE (8.5%)
Tommy Hilfiger Corp.* ........... 1,127,300 54,110,400
Mohawk Industries, Inc.* ........ 1,230,400 27,068,800
Nine West Group, Inc.*++ ........ 3,112,800 144,356,100
Polymer Group, Inc.*++ .......... 2,534,600 35,167,575
Shaw Industries, Inc. ........... 2,542,100 29,869,675
UNIFI, Inc. ..................... 1,223,900 39,317,787
--------------
329,890,337
--------------
FOOD SERVICES, LODGING (6.4%)
Choice Hotels International,
Inc.* .......................... 1,742,400 30,709,800
Doubletree Corp.* ............... 590,700 26,581,500
Extended Stay America, Inc.* ... 1,573,600 31,668,700
Host Marriott Corp.* ............ 7,650,400 122,406,400
La Quinta Motor Inns, Inc. ..... 649,300 12,417,862
Studio Plus Hotels, Inc.* ...... 478,600 7,537,950
Suburban Lodges of America*++ .. 942,400 15,078,400
--------------
246,400,612
--------------
HOUSEHOLD FURNITURE,
APPLIANCES (2.1%)
Industrie Natuzzi (ADR) ......... 2,169,800 49,905,400
Sunbeam Corp. ................... 1,175,800 30,276,850
--------------
80,182,250
--------------
LEISURE RELATED (5.6%)
Electronic Arts* ................ 762,000 22,812,375
Harman International Industries,
Inc. ++ ........................ 1,497,200 83,281,750
Hasbro, Inc. .................... 1,938,600 75,363,075
ITT Corp.* ...................... 814,500 35,328,938
--------------
216,786,138
--------------
RETAIL--GENERAL (3.1%)
AutoZone, Inc.* ................. 1,460,200 40,155,500
Circuit City Stores, Inc. ...... 2,166,900 65,277,862
Pep Boys Manny Moe & Jack ...... 515,800 15,860,850
--------------
121,294,212
--------------
TOTAL CONSUMER CYCLICALS (29.6%) 1,146,027,750
--------------
CONSUMER NONCYCLICALS
DRUGS (3.8%)
Biogen, Inc.* ................... 1,651,000 63,976,250
Centocor, Inc.* ................. 1,847,400 66,044,550
MedImmune, Inc.* ................ 1,012,100 17,205,700
--------------
147,226,500
--------------
HOSPITAL SUPPLIES & SERVICES (7.9%)
Healthsouth Corp.* .............. 3,124,375 120,678,984
Health Management Associates,
Inc. (Class A)* ................ 1,510,900 33,995,250
Manor Care, Inc. ................ 1,742,400 47,044,800
Saint Jude Medical, Inc.* ...... 2,436,350 103,849,419
--------------
305,568,453
--------------
SOAPS & TOILETRIES (1.8%)
Dial Corp. ...................... 2,653,800 39,143,550
Estee Lauder Cos. (Class A) .... 587,000 29,863,625
--------------
69,007,175
--------------
TOTAL CONSUMER NONCYCLICALS (13.5%) 521,802,128
--------------
CREDIT SENSITIVE
FINANCIAL SERVICES (1.0%)
Aames Financial Corp.++ ......... 1,112,400 39,907,350
--------------
INSURANCE (3.1%)
CNA Financial Corp.* ............ 1,133,100 121,241,700
--------------
UTILITY--TELEPHONE (2.8%)
Telephone & Data Systems,
Inc.++.......................... 2,883,000 104,508,750
--------------
TOTAL CREDIT SENSITIVE (6.9%) . 265,657,800
--------------
ENERGY
OIL--DOMESTIC (4.8%)
Oryx Energy Co.* ................ 2,098,400 51,935,400
Ultramar Diamond Shamrock Corp.
++ ............................. 4,184,622 132,338,671
--------------
184,274,071
--------------
77
<PAGE>
THE HUDSON RIVER TRUST
AGGRESSIVE STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
OIL--SUPPLIES & CONSTRUCTION (4.6%)
Diamond Offshore Drilling,
Inc.*........................... 1,609,184 $ 91,723,488
Rowan Cos., Inc.* ............... 3,785,500 85,646,937
--------------
177,370,425
--------------
TOTAL ENERGY (9.4%) ............ 361,644,496
--------------
TECHNOLOGY
ELECTRONICS (3.0%)
American Power Conversion Corp.* 178,000 4,850,500
DT Industries, Inc. ++ .......... 581,900 20,366,500
Pairgain Technologies, Inc.* ... 183,400 5,582,238
Parametric Technology Corp.* ... 1,351,600 69,438,450
Xylan Corp.* .................... 534,100 15,088,325
--------------
115,326,013
--------------
OFFICE EQUIPMENT (2.0%)
Read-Rite Corp.* ................ 876,100 22,121,525
Storage Technology Corp.* ...... 739,800 35,232,975
Symantec Corp.* ................. 1,490,600 21,613,700
--------------
78,968,200
--------------
OFFICE EQUIPMENT SERVICES (4.1%)
Baan Co. N.V.* .................. 890,000 30,927,500
Fore Systems, Inc.* ............. 1,112,500 36,573,438
Informix Corp.* ................. 1,411,300 28,755,237
Premisys Communications, Inc.* . 872,500 29,446,875
Sterling Commerce, Inc.* ........ 893,448 31,494,042
--------------
157,197,092
--------------
TELECOMMUNICATIONS (4.7%)
American Satellite
Network--Warrants* ............. 49,450 0
Andrew Corp.* ................... 701,200 37,207,425
Glenayre Technologies, Inc.* ... 1,297,400 27,975,188
Millicom International Cellular
S.A.* .......................... 1,314,415 42,225,582
Tellabs, Inc.* .................. 648,400 24,396,050
United States Cellular Corp.* .. 1,033,100 28,797,662
Vanguard Cellular Systems, Inc.
(Class A)* ..................... 1,132,450 17,836,087
--------------
178,437,994
--------------
TOTAL TECHNOLOGY (13.8%) ...... 529,929,299
--------------
TOTAL COMMON STOCKS
AND WARRANTS (94.0%)
(Cost $3,138,615,856) .......... 3,632,173,192
--------------
SHORT-TERM DEBT SECURITIES:
BANKERS' ACCEPTANCES
Bank of Tokyo
5.52%, due 02/10/97 ............ $14,000,000 $ 13,914,133
Canadian Imperial Bank of
Commerce
5.38%, due 03/27/97 ............ 12,000,000 11,850,400
Industrial Bank of Japan-L.A.
5.73%, due 01/16/97 ............ 10,000,000 9,976,125
--------------
TOTAL BANKERS' ACCEPTANCES (0.9%) 35,740,658
--------------
CERTIFICATES OF DEPOSIT
Canadian Imperial Bank of
Commerce
5.44%, due 03/31/97 ............ 25,000,000 25,009,103
Sumitomo Bank Ltd.
5.51%, due 01/13/97 ............ 5,000,000 4,999,736
---------------
TOTAL CERTIFICATES OF DEPOSIT (0.8%) 30,008,839
---------------
COMMERCIAL PAPER
ASCC Commercial Paper
5.33%, due 03/18/97 ............ 11,300,000 11,174,280
Centauri Corp.
5.4%, due 02/06/97 ............. 9,000,000 8,951,400
Corporate Asset Securitization
Australia
5.55%, due 03/14/97 ............ 9,000,000 8,905,140
Dresdner U.S. Finance, Inc.
5.31%, due 04/10/97 ............ 5,000,000 4,927,263
Eureka Corp.
5.42%, due 02/19/97 ............ 10,000,000 9,926,228
Gotham Funding Corp.
5.45%, due 03/12/97 ............ 10,000,000 9,897,528
Jefferson Smurfit Corp.
5.45%, due 03/04/97 ............ 4,000,000 3,963,696
Morgan Stanley Group, Inc.
6.79%, due 01/02/97 ............ 77,000,000 76,985,477
Sigma Finance Corp.
5.36%, due 04/28/97 ............ 10,000,000 9,829,050
--------------
TOTAL COMMERCIAL PAPER (3.7%) 144,560,062
--------------
TIME DEPOSITS
Canadian Imperial Bank of
Commerce
6.0%, due 01/02/97 ............. 14,000,000 14,000,000
Sumitomo Bank Ltd.
6.5%, due 01/02/97 ............. 34,000,000 34,000,000
--------------
TOTAL TIME DEPOSITS (1.2%) .... 48,000,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (6.6%)
(Amortized Cost
$258,282,887)................... 258,309,559
--------------
TOTAL INVESTMENTS (100.6%)
(Cost/Amortized Cost $3,396,898,743) 3,890,482,751
OTHER ASSETS
LESS LIABILITIES (-0.6%) ...... (24,613,334)
--------------
NET ASSETS (100.0%) ............. $3,865,869,417
==============
- ------------
* Non-income producing.
++ Affiliated company as defined under the Investment Company Act of 1940
(see Note 6).
Glossary:
ADR--American Depository Receipt
See Notes to Financial Statements.
78
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
COMMON STOCKS AND WARRANTS:
BASIC MATERIALS
CHEMICALS (0.3%)
Akzo Nobel N.V. ................. 1,505 $ 205,467
Bayer AG......................... 5,735 232,747
Freeport-McMoRan, Inc............ 7,500 240,938
Holliday Chemical Holdings PLC .. 23,700 49,939
Olin Corp. ...................... 1,700 63,963
Toagosei Co. Ltd. ............... 5,000 17,701
UBE Industries Ltd. ............. 9,000 25,490
--------------
836,245
--------------
CHEMICALS--SPECIALTY (0.1%)
Cytec Industries, Inc.*.......... 4,000 162,500
NGK Insulators .................. 4,000 37,993
--------------
200,493
--------------
METALS & MINING (0.3%)
Mitsubishi Materials Corp. ...... 7,000 28,288
Nippon Light Metal Co............ 9,000 36,992
Pechiney SA (A Shares)........... 1,446 60,588
Reynolds Metals Co............... 9,300 524,288
Western Mining Corp. Ltd......... 11,494 72,449
--------------
722,605
--------------
PAPER (0.0%)
Fletcher Forestry Shares......... 14,000 23,457
UPM-Kymmene Oy................... 3,510 73,679
--------------
97,136
--------------
STEEL (0.1%)
Nippon Steel Corp................ 24,000 70,875
Nisshin Steel Co. Ltd. .......... 44,000 118,158
NKK Corp.*....................... 28,000 63,103
Pohang Iron & Steel Co. Ltd.
(ADR)........................... 2,000 40,500
Tokyo Steel Manufacturing Co.
Ltd. ........................... 11,000 156,721
Usinor Sacilor................... 5,280 76,831
--------------
526,188
--------------
TOTAL BASIC MATERIALS (0.8%) .. 2,382,667
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.6%)
Republic Industries, Inc.* ...... 5,500 171,531
USA Waste Services, Inc.*........ 26,000 828,750
WMX Technologies, Inc. .......... 19,500 636,188
--------------
1,636,469
--------------
PRINTING, PUBLISHING &
BROADCASTING (0.9%)
British Sky Broadcasting
Group PLC....................... 12,200 109,097
Cablevision Systems Corp.
(Class A)*...................... 6,000 183,750
Dainippon Printing Co. Ltd. ..... 6,000 105,172
Liberty Media Group (Class A)* .. 2,700 77,119
New York Times Co................ 14,500 551,000
Pearson PLC...................... 7,470 95,912
Reed International............... 8,830 166,620
Reuters Holdings................. 14,000 180,235
Schibsted ASA.................... 1,780 32,848
Singapore Press Holdings......... 5,000 98,621
TCI Group (Class A)*............. 10,000 130,625
Television Broadcasts............ 16,000 63,921
Time Warner, Inc................. 7,200 270,000
Viacom, Inc. (Class B)*.......... 14,560 507,780
--------------
2,572,700
--------------
PROFESSIONAL SERVICES (0.3%)
Adecco SA........................ 189 47,444
Associated First Capital Corp. . 7,500 330,938
Ceridian Corp.*.................. 10,000 405,000
ISS International Service
System A/S (Class B)*........... 2,510 66,086
--------------
849,468
--------------
TRUCKING, SHIPPING (0.1%)
Autopistas Concesionaria
Espanola........................ 4,260 58,780
Bergesen Dy AS (A Shares)........ 5,380 131,812
Kamigumi Co. Ltd................. 6,000 39,375
Mayne Nickless Ltd. ............. 6,000 41,014
Nippon Express Co. Ltd........... 10,000 68,561
Toyo Kanetsu..................... 7,000 24,297
Unitor ASA*...................... 940 12,106
--------------
375,945
--------------
TOTAL BUSINESS SERVICES (1.9%) . 5,434,582
--------------
CAPITAL GOODS
AEROSPACE (0.5%)
Boeing Co........................ 5,600 595,700
British Aerospace................ 6,200 135,952
Coltec Industries, Inc.*......... 11,000 207,625
General Electric Co. PLC......... 18,400 120,410
Swire Pacific Ltd. (Class A) .... 6,000 57,211
United Technologies Corp......... 4,800 316,800
--------------
1,433,698
--------------
BUILDING & CONSTRUCTION (0.3%)
American Standard
Companies, Inc.*................ 6,700 256,275
Bouygues......................... 1,203 124,740
Daito Trust Construction Co. .... 8,112 90,359
GTM Entrepose.................... 1,116 51,622
Maeda Road Construction Co. ..... 2,000 23,141
Matsushita Electric Works Ltd. .. 7,000 60,263
National House Industrial Co. ... 7,000 93,084
Shimizu Corp..................... 7,000 52,284
Wimpey (George) PLC.............. 46,100 99,902
--------------
851,670
--------------
BUILDING MATERIALS & FOREST
PRODUCTS (0.2%)
BPB PLC.......................... 8,200 53,872
Hepworth PLC..................... 8,600 37,347
Louisiana Pacific Corp........... 5,200 109,850
Martin Marietta Materials, Inc. . 4,200 97,650
Rugby Group PLC.................. 38,400 62,494
Stora Kopparbergs (Series B) .... 7,950 108,422
--------------
469,635
--------------
ELECTRICAL EQUIPMENT (0.5%)
Alcatel Alsthom.................. 320 25,706
General Electric Co.............. 13,700 1,354,588
Sumitomo Electric Industries .... 7,000 97,919
--------------
1,478,213
--------------
79
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
MACHINERY (0.3%)
Amano Corp....................... 8,000 $ 85,657
Daifuku Co....................... 7,000 88,247
Furukawa Co. Ltd. ............... 11,000 37,042
Ishikawajima Harima Heavy
Industries Co. Ltd. ............ 9,000 40,022
KSB AG........................... 590 92,020
Legris Industries................ 1,990 83,804
Mitsubishi Heavy Industries
Ltd............................. 11,000 87,385
Schindler Holding AG*............ 52 56,526
Siebe PLC........................ 7,150 132,531
TI Group PLC..................... 15,500 154,539
--------------
857,773
--------------
TOTAL CAPITAL GOODS (1.8%) 5,090,989
--------------
CONSUMER CYCLICALS
AIRLINES (0.3%)
Delta Air Lines, Inc............. 1,100 77,963
Lufthansa AG..................... 7,000 94,528
Northwest Airlines Corp.
(Class A)*...................... 11,800 461,675
Qantas Airways Ltd............... 7,000 11,684
Singapore Airlines Ltd........... 1,000 9,076
Swissair*........................ 60 48,547
--------------
703,473
--------------
APPAREL, TEXTILE (0.5%)
Cone Mills Corp.*................ 12,000 94,500
Kuraray Co. Ltd.................. 10,000 92,393
Reebok International Ltd......... 31,250 1,312,500
--------------
1,499,393
--------------
AUTO RELATED (0.1%)
Asahi Glass Co. Ltd.............. 17,000 160,003
Magneti Marelli Spa*............. 26,250 32,621
Sumitomo Rubber
Industries, Inc................. 6,000 44,711
--------------
237,335
--------------
AUTOS & TRUCKS (0.2%)
Bajaj Auto Ltd. (GDR)............ 4,000 105,500
Honda Motor Corp................. 3,000 85,744
Toyota Motor Corp................ 13,000 373,802
Volkswagen AG*................... 150 62,143
--------------
627,189
--------------
FOOD SERVICES, LODGING (0.5%)
Brinker International, Inc.* .... 30,500 488,000
Compass Group PLC*............... 9,500 100,495
Host Marriott Corp.*............. 16,200 259,200
John Q Hammons Hotels, Inc.
(Class A)*...................... 15,000 127,500
La Quinta Motor Inns, Inc. ...... 27,900 533,588
--------------
1,508,783
--------------
HOUSEHOLD FURNITURE,
APPLIANCES (0.6%)
Electrolux B..................... 920 53,426
First Brands Corp................ 12,500 354,688
Matsushita Electric
Industrial Co................... 12,000 195,838
Sunbeam Corp. ................... 46,900 1,207,675
--------------
1,811,627
--------------
LEISURE RELATED (0.7%)
Carnival Corp. .................. 1,600 52,800
Disney (Walt) Co................. 15,166 1,055,933
ITT Corp.*....................... 7,300 316,638
Ladbroke Group PLC............... 33,300 131,777
Learning Company, Inc.*.......... 4,800 69,000
Rank Group PLC................... 22,300 166,370
Resorts World BHD................ 20,000 91,071
Salomon SA....................... 830 71,186
Shimano, Inc..................... 3,000 51,032
--------------
2,005,807
--------------
PHOTO & OPTICAL (0.0%)
Fuji Photo Film Co............... 1,000 32,985
--------------
RETAIL--GENERAL (1.4%)
AutoZone, Inc.*.................. 46,500 1,278,750
British Airport Author PLC ...... 17,700 147,516
CompUSA, Inc.*................... 42,600 878,625
Dayton Hudson Corp............... 17,300 679,025
Fingerhut Companies, Inc......... 12,000 147,000
Kingfisher PLC................... 5,200 56,255
Kokuyo Co. ...................... 3,000 74,087
Sainsbury (J) PLC................ 22,800 151,547
Sears PLC........................ 64,700 105,295
Vendex International N.V. ...... 2,850 121,838
Woolworths Ltd................... 55,026 132,524
--------------
3,772,462
--------------
TOTAL CONSUMER CYCLICALS (4.3%) 12,199,054
--------------
CONSUMER NONCYCLICALS
BEVERAGES (0.5%)
Bass Breweries................... 7,980 112,235
Cadbury Schweppes PLC............ 14,900 125,712
Coca-Cola Amatil Ltd............. 7,048 75,348
Coca-Cola Co..................... 18,000 947,250
Grand Metropolitan............... 16,900 132,887
Kirin Brewery Co................. 11,000 108,281
Lion Nathan Ltd.................. 17,000 40,742
--------------
1,542,455
--------------
CONTAINERS (0.3%)
Crown Cork & Seal Co., Inc. ..... 12,000 652,500
Schmalbach Lubeca AG*............ 540 132,649
--------------
785,149
--------------
DRUGS (2.5%)
Amgen, Inc.*..................... 9,200 500,250
Apothekers Cooperatie Opg-CV .... 940 27,026
Astra AB (A Shares).............. 3,040 150,235
Biogen, Inc.*.................... 20,000 775,000
Centocor, Inc.*.................. 23,800 850,850
Eisai Co. Ltd.................... 4,000 78,750
Geltex Pharmaceuticals, Inc.* ... 3,200 77,600
Glaxo Wellcome PLC .............. 8,940 145,187
Merck & Co., Inc................. 17,200 1,363,100
Novartis AG*..................... 330 377,953
Orion-Yhtymae Oy (B Shares) ..... 3,030 116,661
Pfizer, Inc. .................... 18,600 1,541,475
Revco D.S., Inc.*................ 3,000 111,000
Sankyo Co........................ 1,000 28,322
Santen Pharmaceutical Co......... 2,000 41,447
80
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Smithkline Beecham PLC........... 8,900 $ 123,421
Taisho Pharmaceutical Co......... 4,000 94,292
Takeda Chemical Industries ...... 3,000 62,948
Warner-Lambert Co................ 6,500 487,500
Yamanouchi Pharmaceutical........ 7,000 143,856
--------------
7,096,873
--------------
FOODS (0.7%)
Campbell Soup Co................. 9,170 735,893
CSM N.V.*........................ 450 24,991
House Foods Industry............. 2,000 32,294
Nabisco Holdings Corp.
(Class A)....................... 19,770 768,559
Nestle AG........................ 186 199,688
Orkla A/S 'A'.................... 930 64,997
Suedzucker AG.................... 240 117,130
Viscofan Envoltura............... 1,950 28,560
Yakult Honsha Co. ............... 6,000 62,171
Yamakazi Baking Co. ............. 3,000 47,923
--------------
2,082,206
--------------
HOSPITAL SUPPLIES & SERVICES (1.1%)
Columbia/HCA Healthcare Corp. ... 27,000 1,100,250
Medtronic, Inc................... 9,600 652,800
Oxford Health Plans, Inc*........ 4,900 286,956
Pacificare Health Systems, Inc.
(Class B)*...................... 8,700 741,675
Steris Corp.*.................... 6,600 287,100
--------------
3,068,781
--------------
RETAIL--FOOD (0.2%)
Delhaize Freres.................. 930 55,298
Ito Yokado Co. Ltd. ............. 1,000 43,520
Kesko*........................... 1,750 24,705
Seven-Eleven Japan Ltd........... 5,000 292,721
Tesco PLC........................ 4,300 26,114
--------------
442,358
--------------
SOAPS & TOILETRIES (0.6%)
Colgate Palmolive Co............. 8,680 800,730
Gillette Corp.................... 10,275 798,881
KAO Corp. ....................... 11,000 128,227
Shiseido Co...................... 7,000 80,995
--------------
1,808,833
--------------
TOBACCO (1.0%)
BAT Industries................... 10,600 87,980
Hanjaya Mandala Sampoerna........ 24,000 128,027
Japan Tobacco, Inc............... 10 67,782
Loews Corp....................... 3,000 282,750
Philip Morris Cos., Inc. ........ 17,400 1,959,675
Tabacalera SA.................... 1,880 81,008
--------------
2,607,222
--------------
TOTAL CONSUMER NONCYCLICALS (6.9%) 19,433,877
--------------
CREDIT SENSITIVE
BANKS (1.1%)
AMMB Holdings BHD................ 8,000 67,155
Banco Santander SA............... 990 63,416
Bangkok Bank Public Co. ......... 2,000 19,340
Bank of Tokyo-Mitsubishi Bank ... 8,000 148,519
Barclays Bank ................... 14,050 240,811
Chase Manhattan Corp............. 2,500 223,125
Chiba Bank....................... 5,000 $ 34,108
Den Danske Bank.................. 2,000 161,371
First Union Corp................. 18,000 1,332,000
Kredietbank...................... 200 65,612
Malayan Banking Berhad........... 4,000 44,348
Mitsui Trust & Banking Co. ...... 22,000 171,920
National Westminster Bank* ...... 10,050 118,020
Overseas Chinese Bank............ 7,600 94,504
Overseas Union Bank Ltd.......... 10,000 77,181
Philippine Commercial
International Bank.............. 1,000 13,118
Sparbanken Sverige AB
(A Shares)...................... 2,300 39,462
Sparekassen Bikuben A/S*......... 870 40,788
State Bank of India (GDR)* ...... 4,000 58,000
Thai Farmers Bank Public Co. .... 13,000 81,104
Thai Farmers Bank Public Co.--
Warrants*....................... 375 102
Tokai Bank....................... 10,000 104,481
--------------
3,198,485
--------------
FINANCIAL SERVICES (1.9%)
American Express Co.............. 24,000 1,356,000
Beneficial Corp. ................ 3,500 221,813
Daiwa Securities Co. Ltd......... 3,000 26,682
Dean Witter Discover & Co. ..... 18,350 1,215,688
Incentive AB (B Shares)*......... 450 32,665
Industrial Credit & Investment
Corp. (GDR)*.................... 3,000 29,250
Industrial Credit & Investment
Corp. of India Ltd. (GDR)* ..... 1,000 9,500
ING Groep N.V.................... 6,260 225,246
Japan Securities Finance Co. ... 9,000 104,913
MBNA Corp........................ 28,300 1,174,450
Merrill Lynch & Co., Inc......... 9,900 806,850
Nikko Securities Co.............. 8,000 59,684
Nomura Securities Co............. 7,000 105,172
--------------
5,367,913
--------------
INSURANCE (1.4%)
AMEV N.V......................... 6,310 220,840
Assurances Generales de France .. 4,510 145,596
Baloise Holdings................. 60 120,583
Istituto Naz Delle
Assicurazioni................... 83,800 109,165
ITT Hartford Group, Inc.......... 500 33,750
MGIC Investment Corp. ........... 4,500 342,000
Mitsui Marine & Fire
Insurance Co. .................. 11,000 59,175
PennCorp Financial Group, Inc. .. 16,200 583,200
Sumitomo Marine & Fire Insurance
Co. ............................ 9,000 55,954
TIG Holdings, Inc................ 17,500 592,813
Travelers Group, Inc............. 35,566 1,613,807
United Assurance Group PLC ...... 10,000 82,314
Zurich Versicherungs Reg......... 190 52,805
--------------
4,012,002
--------------
REAL ESTATE (0.2%)
Hysan Development Co. Ltd. ...... 7,000 27,875
Hysan Development Co.
Ltd.--Warrants*................. 300 272
New World Development Co......... 5,000 33,777
81
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Sefimeg.......................... 600 $ 43,481
Simco S.A........................ 550 48,020
Societe des Immeubles
de France SA.................... 628 37,037
Sumitomo Realty & Development
Co.............................. 11,000 69,338
Unibail S.A...................... 950 94,478
Union Immobiliere de France ..... 530 43,260
Wharf Holdings................... 8,000 39,925
--------------
437,463
--------------
UTILITY--ELECTRIC (0.5%)
Cinergy Corp..................... 6,900 230,288
FPL Group, Inc................... 11,600 533,600
Korea Electric Power (ADR) ...... 2,000 41,000
Malakoff BHD*.................... 9,000 44,189
Manila Electric Co............... 5,200 42,510
National Grid Group PLC.......... 44,100 147,696
Tokyo Electric Power Co., Inc. .. 3,000 65,797
Veba AG.......................... 3,800 218,547
--------------
1,323,627
--------------
UTILITY--GAS (0.1%)
Anglian Water PLC................ 11,900 120,277
Hong Kong & China Gas Co......... 13,200 25,514
Hong Kong & China Gas
Co.--Warrants*.................. 1,100 612
Osaka Gas Co..................... 21,000 57,482
Tokyo Gas Co..................... 41,000 111,165
--------------
315,050
--------------
UTILITY--TELEPHONE (0.3%)
British Telecommunications ...... 17,500 118,268
Frontier Corp.................... 5,500 124,438
Telecom Corp. of New Zealand .... 14,000 71,458
Telecom Italia Spa............... 55,900 145,196
Telephone & Data Systems, Inc. .. 7,500 271,875
WorldCom, Inc.*.................. 4,000 104,250
--------------
835,485
--------------
TOTAL CREDIT SENSITIVE (5.5%) . 15,490,025
--------------
ENERGY
COAL & GAS PIPELINES (0.2%)
Nabors Industries, Inc.*......... 29,000 558,250
--------------
OIL--DOMESTIC (0.5%)
Apache Corp...................... 14,100 498,788
Louisiana Land & Exploration
Corp. .......................... 9,800 525,525
Union Pacific Resources
Group, Inc...................... 9,824 287,352
--------------
1,311,665
--------------
OIL--INTERNATIONAL (0.8%)
British Petroleum Co. PLC........ 17,700 212,405
Elf Aquitaine.................... 2,110 192,070
ENI Spa.......................... 25,400 130,360
Exxon Corp....................... 12,900 1,264,200
Mitsubishi Oil Co................ 10,000 59,839
Repsol SA........................ 2,410 92,515
Shell Transport & Trading Co.* .. 5,500 95,304
Tatneft (ADR)*................... 500 24,000
Total Campagnie Francaise........ 2,881 234,322
--------------
2,305,015
--------------
OIL--SUPPLIES & CONSTRUCTION (1.4%)
Baker Hughes, Inc................ 23,850 822,825
BJ Services Co.*................. 17,200 877,200
Halliburton Co................... 3,500 210,875
Noble Drilling Corp.*............ 12,500 248,438
Saipem Spa*...................... 11,950 54,989
Schlumberger, Ltd. .............. 8,500 848,938
Transocean Offshore, Inc......... 12,400 776,550
--------------
3,839,815
--------------
RAILROADS (0.6%)
Burlington Northern Santa Fe .... 6,600 570,074
Canadian Pacific Ltd............. 21,500 569,750
East Japan Railway Co............ 19 85,475
Guangshen Railway Co. Ltd.
(ADR)*.......................... 2,000 41,250
Union Pacific Corp............... 9,000 541,125
--------------
1,807,674
--------------
TOTAL ENERGY (3.5%) ............ 9,822,419
--------------
TECHNOLOGY
ELECTRONICS (2.7%)
Advanced Semiconductor
Engineering (GDR)*.............. 3,400 32,300
Altera Corp.*.................... 15,000 1,090,313
Cisco Systems, Inc.*............. 27,700 1,762,413
Hirose Electric Co. Ltd. ........ 2,000 115,879
Hoya Corp........................ 5,000 196,442
Intel Corp....................... 8,800 1,152,250
Intergraph Corp.*................ 10,500 107,625
Kandenko Co. Ltd................. 6,000 56,990
Kyocera Corp. ................... 1,000 62,343
National Semiconductor Corp.* ... 1,500 36,563
Rohm Co. Ltd..................... 6,000 393,748
Seagate Technology, Inc.*........ 6,500 256,750
SGS-Thomson Microelectronics
N.V.*........................... 760 53,757
TDK Corp......................... 4,000 260,772
Teradyne, Inc.*.................. 5,000 121,875
Texas Instruments, Inc........... 2,750 175,313
Ushio, Inc.*..................... 7,000 76,159
Yamatake-Honeywell Co............ 3,000 48,441
3Com Corp.*...................... 23,100 1,694,963
--------------
7,694,896
--------------
OFFICE EQUIPMENT (0.4%)
Canon, Inc....................... 9,000 198,947
Compaq Computer Corp.*........... 9,300 690,525
Sterling Software, Inc.*......... 4,000 126,500
Storage Technology Corp.*........ 1,500 71,438
--------------
1,087,410
--------------
OFFICE EQUIPMENT SERVICES (1.5%)
Electronic Data Systems Corp. ... 12,400 536,300
First Data Corp.................. 16,600 605,900
Informix Corp.*.................. 50,000 1,018,750
Microsoft Corp.*................. 7,800 644,475
Oracle Corp.*.................... 31,600 1,319,300
Sterling Commerce, Inc.*......... 6,370 224,543
--------------
4,349,268
--------------
TELECOMMUNICATIONS (1.0%)
Asia Satellite Telecommunications
Holdings Ltd.*.................. 2,000 4,642
DDI Corp. ....................... 65 429,928
82
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Deutsche Telekom AG*............. 2,140 $ 44,641
Deutsche Telekom AG (ADR)* ...... 2,000 40,750
DSC Communications Corp.*........ 5,100 91,163
Korea Mobile Telecommunications
Corp. (ADR)..................... 9,270 119,351
MFS Communications Co., Inc.* ... 5,250 286,125
Netscape Communications
Corp.*.......................... 9,600 546,000
Nokia Corp. (ADR)................ 3,000 172,875
PT Indosat....................... 41,000 121,506
PT Telekomunikasi Indonesia ..... 30,000 51,756
Scientific Atlanta, Inc.......... 19,000 285,000
Telecel Comunicacoes
Pessoai SA*..................... 280 17,883
Vanguard Cellular Systems, Inc.
(Class A)*...................... 25,000 393,750
Vodafone Group .................. 22,800 96,280
--------------
2,701,650
--------------
TOTAL TECHNOLOGY (5.6%) ........ 15,833,224
--------------
DIVERSIFIED MISCELLANEOUS (1.0%)
Allied Signal, Inc............... 18,700 1,252,900
BTR PLC.......................... 37,300 181,472
Cie Generale des Eaux............ 843 104,471
Citic Pacific Ltd................ 12,000 69,662
First Pacific Co................. 38,734 50,330
Hanson PLC....................... 52,000 72,601
Preussag AG...................... 210 47,492
Tomkins PLC...................... 23,600 108,552
U.S. Industries, Inc.*........... 25,500 876,564
--------------
TOTAL DIVERSIFIED (1.0%) ...... 2,764,044
--------------
TOTAL COMMON STOCKS
AND WARRANTS (31.3%)
(Cost $78,614,373) ............. 88,450,881
--------------
PREFERRED STOCKS:
BASIC MATERIALS (0.1%)
CHEMICALS
Henkel KGAA*..................... 3,144 157,117
--------------
CONSUMER CYCLICALS (0.0%)
RETAIL--GENERAL
Hornbach Holding AG.............. 1,490 106,512
--------------
TECHNOLOGY (0.0%)
TELECOMMUNICATIONS
Nokia Oy Cum..................... 1,580 91,697
--------------
TOTAL PREFERRED STOCKS (0.1%)
(Cost $285,154) ................ 355,326
--------------
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------- ------------ --------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES:
BUSINESS SERVICES (2.5%)
PRINTING, PUBLISHING &
BROADCASTING
Time Warner Entertainment Co.
8.375%, 03/15/23............... $ 7,000,000 $ 7,097,090
--------------
CREDIT SENSITIVE
BANKS (5.7%)
Chase Manhattan Corp.
8.625% Sub. Deb., 05/01/02 .... 5,500,000 5,961,010
Deutsche Bank
6.7%, 12/13/06................. 5,000,000 4,906,800
Sumitomo Bank International
0.75% Conv., 05/31/01.......... 11,000,000 100,445
Yen
Zion's First National Bank
8.536%, 12/15/26+.............. $ 5,050,000 5,209,227
--------------
16,177,482
--------------
FINANCIAL SERVICES (2.0%)
Ford Motor Credit Co.
6.125%, 01/09/06............... 6,000,000 5,633,640
--------------
FOREIGN GOVERNMENT (0.9%)
Province of Quebec
7.5%, 07/15/23................. 2,500,000 2,487,625
--------------
INSURANCE (2.5%)
Prudential Insurance Co.
8.1%, 07/15/15+................ 6,800,000 6,935,523
--------------
MORTGAGE RELATED (15.2%)
Federal Home Loan
Mortgage Corp.
7.0%, 09/01/11................. 8,943,760 8,940,970
Federal National Mortgage
Association:
6.0%, 11/01/10................. 16,453,280 15,820,866
6.5%, 01/01/11................. 3,752,490 3,684,476
7.0%, 05/01/26................. 8,999,030 8,804,993
Premier Auto Trust
7.15%, 02/04/99................ 5,650,000 5,692,375
--------------
42,943,680
--------------
UTILITY--GAS (1.8%)
RAS Laffan Liquid Natural Gas
8.294%, 09/15/14+.............. 5,000,000 5,081,075
--------------
U.S. GOVERNMENT (27.1%)
U.S. Treasury:
6.375% Note, 05/15/99.......... 38,450,000 38,786,430
6.125% Note, 09/30/00.......... 10,385,000 10,378,508
6.25% Note, 10/31/01........... 11,590,000 11,597,244
5.75% Note, 08/15/03........... 8,850,000 8,584,500
6.5% Note, 08/15/05............ 4,250,000 4,279,218
6.5% Bond, 11/15/26............ 2,950,000 2,894,688
--------------
76,520,588
--------------
TOTAL CREDIT SENSITIVE
(55.2%)........................ 155,779,613
--------------
TOTAL LONG-TERM DEBT SECURITIES (57.7%)
(Amortized Cost $163,076,530) . 162,876,703
--------------
83
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- -------------------------------- ----------- --------------
SHORT-TERM DEBT SECURITIES:
COMMERCIAL PAPER
ASCC Commercial Paper
5.34%, due 02/27/97............ $ 5,000,000 $ 4,957,725
Associates Corp. of North
America
5.75%, due 01/02/97............ 400,000 399,936
Morgan Stanley Group, Inc.
6.79%, due 01/02/97............ 400,000 399,925
--------------
TOTAL COMMERCIAL PAPER (2.0%) 5,757,586
--------------
TIME DEPOSITS
Canadian Imperial Bank of
Commerce
6.0%, due 01/02/97............. 4,300,000 4,300,000
Harris Trust & Savings
6.5%, due 01/02/97............. 900,000 900,000
Toronto Dominion Bank
6.25%, due 01/02/97............ 13,000,000 13,000,000
--------------
TOTAL TIME DEPOSITS (6.5%) ... 18,200,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (8.5%)
(Amortized Cost $23,957,586) .. 23,957,586
--------------
TOTAL INVESTMENTS (97.6%)
(Cost/Amortized Cost $265,933,643) 275,640,496
OTHER ASSETS
LESS LIABILITIES (2.4%) ....... 6,761,905
--------------
NET ASSETS (100.0%) ............ $282,402,401
==============
DISTRIBUTION OF INVESTMENTS BY GLOBAL REGION
As a Percentage of Total Investments
Canada.................... 0.2%
Japan..................... 2.6
New Zealand & Australia .. 0.2
Scandinavia............... 0.5
Southeast Asia............ 0.7
United Kingdom............ 1.7
United States**........... 92.2
Other European Countries 1.9
-------
100.0%
=======
- ------------
* Non-income producing.
** Includes Short-Term Debt Securities of 8.7%.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $17,225,825
or 6.1% of net assets.
Glossary:
ADR--American Depository Receipt
GDR--Global Depository Receipt
See Notes to Financial Statements.
84
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- -------------
COMMON STOCKS AND WARRANTS:
BASIC MATERIALS
CHEMICALS (0.6%)
Akzo Nobel N.V. ................... 13,380 $ 1,826,675
Bayer AG........................... 51,000 2,069,762
Freeport-McMoRan, Inc.............. 101,500 3,260,688
Holliday Chemical Holdings PLC .... 214,000 450,922
Monsanto Co........................ 55,000 2,138,125
Olin Corp. ........................ 9,900 372,488
Toagosei Co. Ltd. ................. 44,000 155,772
UBE Industries Ltd. ............... 70,000 198,256
-------------
10,472,688
-------------
CHEMICALS--SPECIALTY (0.1%)
Crompton & Knowles Corp............ 49,700 956,725
Cytec Industries, Inc.*............ 16,700 678,438
NGK Insulators..................... 36,000 341,939
-------------
1,977,102
-------------
METALS & MINING (0.6%)
Century Aluminum Co................ 40,700 702,075
Gibraltar Steel Corp.*............. 31,700 832,125
Kaiser Aluminum Corp.* ............ 40,500 470,813
Mitsubishi Materials Corp.......... 57,000 230,343
Nippon Light Metal Co.............. 93,000 382,247
Nord Resources Corp.*.............. 27,939 122,233
Pechiney SA (A Shares)............. 12,472 522,581
Reynolds Metals Co................. 81,200 4,577,650
Steel Dynamics, Inc.*.............. 39,200 749,700
Western Mining Corp. Ltd........... 107,481 677,470
-------------
9,267,237
-------------
PAPER (0.1%)
Fletcher Forestry Shares........... 122,000 204,408
UPM-Kymmene Oy..................... 31,120 653,246
-------------
857,654
-------------
STEEL (0.3%)
Nippon Steel Corp.................. 206,000 608,341
Nisshin Steel Co. Ltd. ............ 410,000 1,101,028
NKK Corp.*......................... 265,000 597,228
Pohang Iron & Steel Co. Ltd.
(ADR)............................. 13,000 263,250
Tokyo Steel Manufacturing Co. Ltd. 99,000 1,410,500
Usinor Sacilor..................... 47,000 683,916
-------------
4,664,263
-------------
TOTAL BASIC MATERIALS (1.7%) ..... 27,238,944
-------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.9%)
Culligan Water Technologies,
Inc.*............................. 17,400 704,700
Philip Environmental, Inc.*........ 46,300 671,350
Republic Industries, Inc.*......... 39,100 1,219,431
Superior Services, Inc.*........... 7,800 158,925
United States Filter Corp.*........ 23,000 730,250
United Waste Systems, Inc.*........ 21,600 742,500
USA Waste Services, Inc.*.......... 180,200 5,743,875
WMX Technologies, Inc. ............ 143,000 4,665,375
-------------
14,636,406
-------------
PRINTING, PUBLISHING &
BROADCASTING (1.6%)
British Sky Broadcasting Group
PLC............................... 108,100 966,671
Cablevision Systems Corp.
(Class A)*........................ 127,500 3,904,688
Dainippon Printing Co. Ltd......... 51,000 893,964
Evergreen Media Corp.
(Class A)*........................ 46,200 1,155,000
EZ Communications, Inc.*........... 12,600 461,475
Liberty Media Group
(Class A)*........................ 20,900 596,956
New York Times Co.................. 111,300 4,229,400
Pearson PLC........................ 66,200 849,987
Reed International................. 78,600 1,483,166
Reuters Holdings................... 124,400 1,601,519
Schibsted ASA...................... 15,800 291,570
Sinclair Broadcast Group, Inc.* ... 17,200 447,200
Singapore Press Holdings........... 49,000 966,483
Tele-Communications International,
Inc.*............................. 110,000 1,457,500
Television Broadcasts.............. 145,000 579,288
Time Warner, Inc................... 65,000 2,437,500
Universal Outdoor Holdings,
Inc.*............................. 15,900 373,650
Viacom, Inc. (Class B)*............ 110,311 3,847,096
-------------
26,543,113
-------------
PROFESSIONAL SERVICES (0.6%)
Adecco SA.......................... 1,670 419,216
Associated First Capital Corp. ... 39,500 1,742,938
Ceridian Corp.*.................... 73,800 2,988,900
Equity Corporation
International *................... 18,750 375,000
Ha-Lo Industries, Inc.*............ 48,062 1,321,705
Interim Services, Inc.*............ 11,700 415,350
ISS International Service
System A/S (Class B)*............. 23,850 627,945
Telespectrum Worldwide, Inc.* ..... 49,700 788,988
-------------
8,680,042
-------------
TRUCKING, SHIPPING (0.2%)
Autopistas Concesionaria Espanola . 37,850 522,256
Bergesen Dy AS (A Shares).......... 47,300 1,158,868
Kamigumi Co. Ltd................... 56,000 367,498
Mayne Nickless Ltd................. 55,005 375,998
Nippon Express Co. Ltd............. 81,000 555,341
Toyo Kanetsu....................... 61,000 211,743
Unitor ASA *....................... 8,560 110,239
-------------
3,301,943
-------------
TOTAL BUSINESS SERVICES (3.3%) 53,161,504
-------------
CAPITAL GOODS
AEROSPACE (0.6%)
Boeing Co.......................... 27,100 2,882,763
British Aerospace.................. 55,400 1,214,793
Coltec Industries, Inc.*........... 115,000 2,170,625
General Electric Co. PLC........... 163,900 1,072,568
Swire Pacific Ltd. (Class A) ...... 51,000 486,295
United Technologies Corp........... 39,400 2,600,400
-------------
10,427,444
-------------
85
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
BUILDING & CONSTRUCTION (0.4%)
American Standard Companies,
Inc.*............................. 24,700 $ 944,775
Bouygues........................... 10,708 1,110,322
Daito Trust Construction Co. ...... 70,570 786,075
GTM Entrepose...................... 9,953 460,387
Maeda Road Construction Co......... 19,000 219,843
Matsushita Electric Works Ltd. .... 65,000 559,580
National House Industrial Co. .... 53,000 704,775
Shimizu Corp....................... 64,000 478,024
Wimpey (George) PLC ............... 416,000 901,502
-------------
6,165,283
-------------
BUILDING MATERIALS & FOREST
PRODUCTS (0.4%)
BPB PLC............................ 72,700 477,620
Buckeye Cellulose Corp.*........... 15,400 410,025
Hepworth PLC....................... 76,500 332,217
Hughes Supply, Inc................. 16,200 698,625
Louisiana Pacific Corp............. 48,200 1,018,225
Martin Marietta Materials, Inc. ... 110,000 2,557,500
Rugby Group PLC.................... 347,000 564,723
Stora Kopparbergs (Series B) ...... 70,600 962,841
-------------
7,021,776
-------------
ELECTRICAL EQUIPMENT (0.7%)
Alcatel Alsthom.................... 2,640 212,075
General Electric Co................ 110,100 10,886,138
Sumitomo Electric Industries ...... 56,000 783,352
-------------
11,881,565
-------------
MACHINERY (0.5%)
Amano Corp......................... 73,000 781,625
Daifuku Co......................... 57,000 718,591
Furukawa Co. Ltd. ................. 105,000 353,596
Ishikawajima Harima Heavy
Industries Co. Ltd. .............. 83,000 369,096
KSB AG-Vorzug...................... 5,600 873,408
Legris Industries.................. 17,300 728,544
Mitsubishi Heavy Industries Ltd. .. 100,000 794,405
Schindler Holding AG*.............. 465 505,473
Siebe PLC.......................... 63,500 1,177,020
TI Group PLC....................... 138,200 1,377,887
-------------
7,679,645
-------------
TOTAL CAPITAL GOODS (2.6%)........ 43,175,713
-------------
CONSUMER CYCLICALS
AIRLINES (0.3%)
Lufthansa AG....................... 62,850 848,728
Mesa Airlines, Inc.*............... 47,200 318,600
Northwest Airlines Corp.
(Class A)*........................ 94,800 3,709,050
Qantas Airways Ltd................. 62,000 103,489
Singapore Airlines Ltd. ........... 11,000 99,836
Swissair *......................... 560 453,104
-------------
5,532,807
-------------
APPAREL, TEXTILE (1.0%)
Designer Holdings Ltd.*............ 33,600 541,800
Kuraray Co. Ltd.................... 96,000 886,970
Mohawk Industries, Inc.*........... 32,500 715,000
Nine West Group, Inc.*............. 27,200 1,261,400
Polymer Group, Inc.*............... 32,100 445,388
Reebok International Ltd. ......... 244,500 10,269,000
Stage Stores, Inc.*................ 28,300 516,475
Tommy Hilfiger Corp.*.............. 16,900 811,200
Warnaco Group, Inc. (Class A) ..... 22,300 660,638
-------------
16,107,871
-------------
AUTO RELATED (0.2%)
Asahi Glass Co. Ltd................ 140,000 1,317,676
Magneti Marelli Spa *.............. 256,100 318,253
Miller Industries, Inc.*........... 22,950 459,000
Sumitomo Rubber Industries, Inc. .. 49,000 365,141
Team Rental Group, Inc.*........... 50,900 820,763
-------------
3,280,833
-------------
AUTOS & TRUCKS (0.3%)
Bajaj Auto Ltd. (GDR).............. 30,400 801,800
Honda Motor Corp................... 27,000 771,695
Toyota Motor Corp.................. 112,000 3,220,447
Volkswagen AG*..................... 1,310 542,712
-------------
5,336,654
-------------
FOOD SERVICES, LODGING (1.0%)
Brinker International, Inc.* ...... 234,700 3,755,200
Compass Group PLC*................. 84,700 895,990
Doubletree Corp.*.................. 25,341 1,140,345
Host Marriott Corp.*............... 138,200 2,211,200
Innkeepers USA Trust............... 43,300 600,788
Interstate Hotels Co.*............. 29,100 822,075
John Q Hammons Hotels, Inc. (Class
A)*............................... 200,000 1,700,000
La Quinta Motor Inns, Inc.......... 225,750 4,317,469
Suburban Lodges of America, Inc.* . 31,700 507,200
-------------
15,950,267
-------------
HOUSEHOLD FURNITURE,
APPLIANCES (1.0%)
Electrolux B....................... 8,210 476,766
First Brands Corp.................. 95,200 2,701,300
Industrie Natuzzi (ADR)............ 19,000 437,000
Matsushita Electric Industrial Co.. 109,000 1,778,862
Sunbeam Corp. ..................... 394,500 10,158,375
-------------
15,552,303
-------------
LEISURE RELATED (1.1%)
Carnival Corp...................... 12,400 409,200
Cyrk, Inc.*........................ 220,600 2,867,800
Disney (Walt) Co. ................. 118,200 8,229,675
Harman International Industries,
Inc............................... 18,100 1,006,813
Ladbroke Group PLC................. 296,000 1,171,349
Learning Company, Inc.*............ 62,700 901,313
Rank Group PLC..................... 198,700 1,482,411
Resorts World BHD.................. 187,000 851,515
Salomon SA ........................ 7,450 638,961
Shimano, Inc. ..................... 34,000 578,361
-------------
18,137,398
-------------
PHOTO & OPTICAL (0.0%)
Fuji Photo Film Co. ............... 14,000 461,791
-------------
RETAIL--GENERAL (2.1%)
AutoZone, Inc.*.................... 380,000 10,450,000
British Airport Author PLC......... 157,500 1,312,641
CompUSA, Inc.*..................... 333,600 6,880,500
Consolidated Stores Corp.*......... 18,750 602,344
Dayton Hudson Corp................. 128,500 5,043,625
86
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Fingerhut Companies, Inc........... 260,500 $ 3,191,125
Kingfisher PLC..................... 46,500 503,048
Kokuyo Co. ........................ 29,000 716,173
Petco Animal Supplies, Inc.* ...... 31,400 651,550
Sainsbury (J) PLC.................. 202,600 1,346,647
Sears PLC ......................... 584,900 951,893
Vendex International N.V. ......... 25,300 1,081,579
Woolworths Ltd..................... 509,991 1,228,260
-------------
33,959,385
-------------
TOTAL CONSUMER CYCLICALS (7.0%) 114,319,309
-------------
CONSUMER NONCYCLICALS
BEVERAGES (0.6%)
Bass Breweries..................... 71,000 998,583
Cadbury Schweppes PLC.............. 132,700 1,119,592
Coca-Cola Amatil Ltd............... 64,000 684,207
Coca-Cola Co....................... 97,000 5,104,625
Grand Metropolitan................. 150,000 1,179,469
Kirin Brewery Co................... 42,000 413,436
Lion Nathan Ltd. .................. 157,000 376,260
-------------
9,876,172
-------------
CONTAINERS (0.5%)
Crown Cork & Seal Co., Inc......... 105,000 5,709,375
Hub Group, Inc. (Class A)*......... 24,400 652,700
Schmalbach Lubeca AG *............. 4,760 1,169,275
-------------
7,531,350
-------------
DRUGS (3.3%)
Amgen, Inc.*....................... 90,700 4,931,813
Apothekers Cooperatie Opg-CV ...... 9,445 271,551
Astra AB (A Shares)................ 27,030 1,335,805
Biogen, Inc.*...................... 161,655 6,264,131
Centocor, Inc.*.................... 198,000 7,078,500
Eisai Co. Ltd...................... 37,000 728,435
Geltex Pharmaceuticals, Inc.* ..... 33,100 802,675
Glaxo Wellcome PLC ................ 79,700 1,294,343
Medicis Pharmaceutical Corp.
(Class A)*........................ 11,300 497,200
MedImmune, Inc.*................... 28,500 484,500
Merck & Co., Inc................... 116,000 9,193,000
Novartis AG*....................... 3,105 3,556,194
Orion-Yhtymae Oy (B Shares)........ 26,700 1,028,003
Pfizer, Inc. ...................... 107,600 8,917,350
Sankyo Co.......................... 8,000 226,578
Santen Pharmaceutical Co........... 11,000 227,960
Smithkline Beecham PLC............. 80,100 1,110,790
Taisho Pharmaceutical Co........... 37,000 872,204
Takeda Chemical Industries......... 30,000 629,479
United Natural Foods, Inc.*........ 32,600 554,200
Warner-Lambert Co.................. 41,200 3,090,000
Yamanouchi Pharmaceutical.......... 58,000 1,191,952
-------------
54,286,663
-------------
FOODS (1.0%)
Campbell Soup Co................... 69,500 5,577,375
CSM N.V.*.......................... 4,100 227,692
House Foods Industry............... 22,000 355,237
Nabisco Holdings Corp.
(Class A)......................... 141,900 5,516,363
Nestle AG.......................... 1,650 1,771,423
Orkla A/S 'A'...................... 8,300 580,078
Suedzucker AG...................... 2,115 1,032,210
Viscofan Envoltura................. 16,700 244,588
Yakult Honsha Co. ................. 46,000 476,643
Yamakazi Baking Co. ............... 32,000 511,182
-------------
16,292,791
-------------
HOSPITAL SUPPLIES & SERVICES (1.5%)
Columbia/HCA Healthcare Corp. ..... 225,000 9,168,750
Compdent Corp.*.................... 15,700 553,425
Coventry Corp.*.................... 46,600 431,778
Enterprises Systems, Inc.*......... 33,000 775,500
Medtronic, Inc..................... 81,700 5,555,600
National Surgery Centers, Inc.* ... 18,000 684,000
Oxford Health Plans, Inc.*......... 31,500 1,844,719
Pacificare Health Systems, Inc.
(Class B)*........................ 24,000 2,046,000
Rotech Medical Corp.*.............. 29,200 613,200
Steris Corp.*...................... 84,762 3,687,147
-------------
25,360,119
-------------
RETAIL--FOOD (0.3%)
Delhaize Freres.................... 8,300 493,524
Ito Yokado Co. Ltd. ............... 13,000 565,754
Kesko*............................. 14,530 205,126
Seven-Eleven Japan Ltd............. 48,000 2,810,120
Tesco PLC.......................... 38,000 230,772
-------------
4,305,296
-------------
SOAPS & TOILETRIES (0.9%)
Colgate Palmolive Co............... 71,210 6,569,123
Gillette Corp...................... 80,810 6,282,978
KAO Corp. ......................... 100,000 1,165,702
Shiseido Co........................ 60,000 694,241
-------------
14,712,044
-------------
TOBACCO (1.0%)
BAT Industries..................... 94,300 782,687
Hanjaya Mandala Sampoerna.......... 221,000 1,178,916
Japan Tobacco, Inc................. 95 643,943
Philip Morris Cos., Inc. .......... 118,100 13,301,013
Tabacalera SA...................... 16,960 730,806
-------------
16,637,365
-------------
TOTAL CONSUMER NONCYCLICALS (9.1%) 149,001,800
-------------
CREDIT SENSITIVE
BANKS (1.5%)
AMMB Holdings BHD.................. 70,000 587,606
Banco Santander SA................. 8,800 563,700
Bangkok Bank Public Co. ........... 18,000 174,062
Bank of Tokyo-Mitsubishi Bank ..... 72,000 1,336,672
Barclays Bank ..................... 125,400 2,149,302
Chase Manhattan Corp............... 3,000 267,750
Chiba Bank......................... 53,000 361,540
Den Danske Bank.................... 17,570 1,417,642
First Union Corp................... 140,600 10,404,400
Kredietbank........................ 1,940 636,435
Long-Term Credit Bank of Japan .... 1,000 5,414
Malayan Banking Berhad............. 41,000 454,563
Mitsui Trust & Banking Co.......... 198,000 1,547,276
National Westminster Bank*......... 89,500 1,051,025
Overseas Chinese Bank.............. 68,100 846,809
Overseas Union Bank Ltd............ 91,000 702,351
Philippine Commercial
International Bank................ 5,000 65,589
Sparbanken Sverige AB
(A Shares)........................ 19,600 336,286
87
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Sparekassen Bikuben A/S *.......... 7,770 $ 364,277
State Bank of India (GDR)*......... 32,000 464,000
Thai Farmers Bank Public Co. ...... 116,000 723,700
Thai Farmers Bank Public
Co.--Warrants*.................... 2,875 785
Tokai Bank......................... 85,000 888,093
-------------
25,349,277
-------------
FINANCIAL SERVICES (2.7%)
Aames Financial Corp............... 16,800 602,700
American Express Co................ 152,000 8,588,000
Beneficial Corp. .................. 35,000 2,218,125
Daiwa Securities Co. Ltd........... 32,000 284,604
Dean Witter Discover & Co.......... 142,000 9,407,500
Hambrecht & Quist Group*........... 28,000 605,500
Incentive AB (B Shares)*........... 3,820 277,291
Industrial Credit & Investment
Corp.(GDR)*....................... 32,000 312,000
Industrial Credit & Investment
Corp. of India Ltd.(GDR)*......... 8,000 76,000
ING Groep N.V...................... 55,800 2,007,788
Japan Securities Finance Co. ...... 78,000 909,248
MBNA Corp.......................... 223,700 9,283,550
Merrill Lynch & Co., Inc........... 77,200 6,291,800
Nikko Securities Co................ 67,000 499,853
Nomura Securities Co............... 71,000 1,066,747
Oxford Resources Corp.
(Class A)*........................ 29,900 923,163
RAC Financial Group, Inc.*......... 20,900 441,513
Union Acceptance Corp.
(Class A)*........................ 41,900 743,725
-------------
44,539,107
-------------
INSURANCE (2.6%)
AMEV N.V........................... 56,100 1,963,412
Assurances Generales de France .... 40,100 1,294,546
Baloise Holdings................... 540 1,085,245
Istituto Naz Delle Assicurazioni .. 745,000 970,497
ITT Hartford Group, Inc............ 3,600 243,000
Life Re Corp....................... 140,500 5,426,813
MGIC Investment Corp. ............. 51,000 3,876,000
Mitsui Marine & Fire Insurance
Co................................ 105,000 564,848
NAC Re Corp........................ 88,800 3,008,100
PennCorp Financial Group, Inc. .... 133,800 4,816,800
PMI Group, Inc..................... 12,400 686,650
Sumitomo Marine & Fire Insurance
Co. .............................. 82,000 509,801
TIG Holdings, Inc. ................ 120,000 4,065,000
Travelers Group, Inc............... 278,166 12,621,782
United Assurance Group PLC......... 89,200 734,245
Zurich Versicherungs Reg. ......... 1,700 472,469
-------------
42,339,208
-------------
REAL ESTATE (0.3%)
Hysan Development Co. Ltd.......... 67,000 266,805
Hysan Development Co.
Ltd.--Warrants *.................. 3,350 3,032
JP Realty, Inc..................... 20,000 517,500
Macerich Co. ...................... 19,600 512,050
New World Development Co. ......... 43,000 290,484
Sefimeg ........................... 5,800 420,314
Simco Ord SA....................... 5,275 460,552
Societe des Immeubles
de France SA...................... 6,240 368,014
Sumitomo Realty & Development Co. . 103,000 649,253
Unibail SA......................... 7,880 783,672
Union Immobiliere de France........ 4,600 375,465
Wharf Holdings..................... 74,000 369,306
-------------
5,016,447
-------------
UTILITY--ELECTRIC (0.6%)
Cinergy Corp....................... 53,900 1,798,913
FPL Group, Inc..................... 65,000 2,990,000
Korea Electric Power (ADR)......... 18,000 369,000
Malakoff BHD *..................... 81,000 397,703
Manila Electric Co................. 49,400 403,840
National Grid Group PLC............ 392,000 1,312,851
Tokyo Electric Power Co., Inc. .... 35,000 767,637
Veba AG............................ 33,800 1,943,917
-------------
9,983,861
-------------
UTILITY--GAS (0.2%)
Anglian Water PLC.................. 106,100 1,072,383
Hong Kong & China Gas Co........... 130,800 252,823
Hong Kong & China Gas
Co.--Warrants *................... 10,900 6,060
Osaka Gas Co....................... 178,000 487,229
Tokyo Gas Co....................... 372,000 1,008,618
-------------
2,827,113
-------------
UTILITY--TELEPHONE (0.5%)
British Telecommunications......... 155,300 1,049,545
Frontier Corp...................... 50,000 1,131,250
LCI International, Inc.*........... 38,000 817,000
Telecom Corp. of New Zealand ...... 128,000 653,335
Telecom Italia Spa................. 530,800 1,378,727
Telephone & Data Systems, Inc. .... 34,700 1,257,875
WorldCom, Inc.*.................... 43,900 1,144,144
-------------
7,431,876
-------------
TOTAL CREDIT SENSITIVE (8.4%) .... 137,486,889
-------------
ENERGY
COAL & GAS PIPELINES (0.2%)
Nabors Industries, Inc.*........... 200,000 3,850,000
-------------
OIL--DOMESTIC (1.3%)
Apache Corp........................ 131,000 4,634,125
Costilla Energy, Inc.*............. 63,400 863,825
KCS Energy, Inc. .................. 18,900 675,675
Louis Dreyfus Natural Gas Corp.* .. 245,400 4,202,475
Louisiana Land & Exploration Corp. 76,700 4,113,038
Tom Brown, Inc.*................... 121,000 2,525,875
Ultramar Diamond Shamrock Corp. .. 16,258 514,159
Union Pacific Resources Group,
Inc............................... 123,176 3,602,898
-------------
21,132,070
-------------
OIL--INTERNATIONAL (1.2%)
British Petroleum Co. PLC.......... 157,700 1,892,442
Elf Aquitaine...................... 18,800 1,711,331
ENI Spa............................ 225,800 1,158,867
Exxon Corp......................... 98,200 9,623,600
88
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Mitsubishi Oil Co.................. 86,000 $ 514,619
Repsol SA.......................... 20,950 804,226
Shell Transport & Trading Co.* .... 49,000 849,072
Tatneft (ADR)*..................... 4,700 225,600
Total Campagnie Francaise.......... 26,234 2,133,709
-------------
18,913,466
-------------
OIL--SUPPLIES & CONSTRUCTION (2.1%)
Baker Hughes, Inc.................. 212,000 7,314,000
BJ Services Co.*................... 152,000 7,752,000
Halliburton Co..................... 35,000 2,108,750
Noble Drilling Corp.*.............. 133,000 2,643,375
Parker Drilling Co.*............... 132,100 1,271,463
Rowan Cos., Inc.*.................. 49,700 1,124,463
Saipem Spa*........................ 106,400 489,608
Schlumberger, Ltd. ................ 46,500 4,644,188
Transocean Offshore, Inc. ......... 110,500 6,920,063
-------------
34,267,910
-------------
RAILROADS (1.0%)
Burlington Northern Santa Fe ...... 56,600 4,888,825
Canadian Pacific Ltd............... 182,000 4,823,000
East Japan Railway Co.............. 185 832,268
Genesee & Wyoming, Inc.
(Class A)*........................ 24,500 851,375
Guangshen Railway Co. Ltd. (ADR)* . 16,000 330,000
Union Pacific Corp................. 86,400 5,194,800
-------------
16,920,268
-------------
TOTAL ENERGY (5.8%)............... 95,083,714
-------------
TECHNOLOGY
ELECTRONICS (4.4%)
Advanced Semiconductor Engineering
(GDR)*............................ 32,060 304,570
Altera Corp.*...................... 114,600 8,329,988
BMC Industries, Inc................ 36,400 1,146,600
Cisco Systems, Inc.*............... 239,400 15,231,825
Exabyte Corp.*..................... 37,700 504,238
Hirose Electric Co. Ltd............ 25,000 1,448,493
HMT Technology Corp.*.............. 28,000 420,438
Hoya Corp. ........................ 45,000 1,767,982
IDT Corp.*......................... 35,700 392,700
Insight Enterprises, Inc.*......... 14,900 417,200
Intel Corp......................... 73,800 9,663,187
Intergraph Corp.*.................. 90,000 922,500
Kandenko Co. Ltd................... 51,000 484,414
Kent Electronics Corp.*............ 24,700 636,025
Kyocera Corp. ..................... 11,000 685,778
National Semiconductor Corp.* ..... 30,000 731,250
Network General Corp.*............. 21,100 638,275
Rohm Co. Ltd....................... 53,000 3,478,111
Seagate Technology, Inc.*.......... 68,600 2,709,700
SGS-Thomson Microelectronics
N.V.*............................. 6,750 477,450
Systemsoft Corp.*.................. 31,800 473,025
TDK Corp........................... 38,000 2,477,334
Teradyne, Inc.*.................... 30,000 731,250
Texas Instruments, Inc. ........... 21,000 1,338,750
Uniphase Corp.*.................... 9,900 519,750
Ushio, Inc.*....................... 64,000 696,313
Westell Technologies, Inc.*........ 18,800 430,050
Yamatake-Honeywell Co.............. 37,000 597,444
3Com Corp.*........................ 181,300 13,302,880
3D Labs, Inc. Ltd.*................ 15,100 $ 347,300
-------------
71,304,820
-------------
OFFICE EQUIPMENT (0.7%)
Applix, Inc.*...................... 24,500 535,938
Canon, Inc......................... 75,000 1,657,888
Compaq Computer Corp.*............. 75,600 5,613,300
Read-Rite Corp.*................... 33,100 835,775
Sterling Software, Inc.*........... 47,100 1,489,538
Storage Technology Corp.*.......... 19,100 909,638
-------------
11,042,077
-------------
OFFICE EQUIPMENT SERVICES (2.3%)
Adobe Systems, Inc. ............... 39,300 1,468,838
Comverse Technology, Inc.*......... 44,900 1,697,781
Electronic Data Systems Corp. ..... 79,000 3,416,750
First Data Corp.................... 125,000 4,562,500
Informix Corp.*.................... 430,000 8,761,250
Microsoft Corp.*................... 61,600 5,089,700
Oracle Corp.*...................... 259,450 10,832,038
Premisys Communications, Inc.* .... 11,300 381,375
Sterling Commerce, Inc.*........... 54,685 1,927,646
Structural Dynamics Research Corp.
(Class A)*........................ 23,100 462,000
-------------
38,599,878
-------------
TELECOMMUNICATIONS (1.5%)
Act Networks, Inc.*................ 14,800 540,200
Asia Satellite Telecommunications
Holdings Ltd.*.................... 18,000 41,774
Cable Design Technologies *........ 17,400 541,575
Comnet Cellular, Inc.*............. 98,800 2,754,050
DDI Corp. ......................... 618 4,087,620
Deutsche Telekom AG*............... 19,250 401,563
DSC Communications Corp.*.......... 44,000 786,500
ICG Communications, Inc.*.......... 28,800 507,600
Korea Mobile Telecommunications
Corp. (ADR)....................... 74,160 954,810
MFS Communications Co., Inc.* ..... 45,013 2,453,209
Millicom International
Cellular SA *..................... 11,500 369,438
Netscape Communications Corp.* .... 79,200 4,504,500
Nokia Corp. (ADR).................. 35,000 2,016,875
PT Indosat ........................ 375,000 1,111,346
PT Telekomunikasi Indonesia........ 277,000 477,890
Scientific Atlanta, Inc............ 107,300 1,609,500
Telecel-Comunicacoes
Pessoai SA *...................... 2,490 159,035
Vodafone Group..................... 202,500 855,115
Winstar Communications, Inc.* ..... 28,300 594,300
Xircom *........................... 26,700 580,725
-------------
25,347,625
-------------
TOTAL TECHNOLOGY (8.9%)........... 146,294,400
-------------
DIVERSIFIED
MISCELLANEOUS (1.1%)
Allied Signal, Inc................. 147,900 9,909,300
BTR PLC............................ 331,800 1,614,275
Cie Generale des Eaux.............. 7,259 899,593
Citic Pacific Ltd.................. 111,000 644,373
First Pacific Co................... 355,685 462,167
Hanson PLC......................... 463,000 646,430
Preussag AG........................ 1,860 420,639
89
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Tomkins PLC........................ 210,000 $ 965,931
U.S. Industries, Inc.*............. 88,000 3,025,000
-------------
TOTAL DIVERSIFIED (1.1%).......... 18,587,708
-------------
TOTAL COMMON STOCKS AND WARRANTS
(47.9%)
(Cost $682,993,577)............... 784,349,981
-------------
PREFERRED STOCKS:
BASIC MATERIALS (0.1%)
CHEMICALS
Henkel KGAA*....................... 27,980 1,398,272
-------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.0%)
Designer Finance Trust
6.0% Conv. ....................... 12,300 568,875
-------------
RETAIL--GENERAL (0.1%)
Hornbach Holding AG................ 12,420 887,835
-------------
TOTAL CONSUMER CYCLICALS (0.1%) 1,456,710
-------------
CONSUMER NONCYCLICALS (0.0%)
CONTAINERS
Crown Cork & Seal Co., Inc.
4.5% Conv ........................ 10,500 546,000
-------------
CREDIT SENSITIVE
BANKS (0.1%)
First Chicago NBD Corp.
5.75% Conv. Series B.............. 23,000 2,075,750
-------------
FINANCIAL SERVICES (0.0%)
Money Store
6.5% Conv......................... 22,500 615,938
-------------
INSURANCE (0.1%)
PennCorp Financial Group, Inc.
7.0% Conv. +...................... 19,950 1,187,025
-------------
TOTAL CREDIT SENSITIVE (0.2%) .... 3,878,713
-------------
TECHNOLOGY
TELECOMMUNICATIONS (0.2%)
MFS Communications Co., Inc.
8.0% Conv......................... 34,900 3,184,625
Nokia Oy Cum....................... 14,100 818,304
-------------
TOTAL TECHNOLOGY (0.2%)........... 4,002,929
-------------
TOTAL PREFERRED STOCKS (0.6%)
(Cost $8,111,854)................. 11,282,624
-------------
PRINCIPAL
AMOUNT
-------------
LONG-TERM DEBT SECURITIES:
BUSINESS SERVICES (0.1%)
ENVIRONMENTAL CONTROL
United Waste Systems, Inc.
4.5% Conv., 06/01/01+.............$ 1,135,000 1,373,350
------------
PRINTING, PUBLISHING &
BROADCASTING (1.3%)
Time Warner Entertainment Co.
8.375%, 03/15/23.................. 20,950,000 21,240,577
------------
PROFESSIONAL SERVICES (0.2%)
Career Horizons, Inc.
7.0% Conv., 11/01/02.............. 415,000 813,919
Danka Business Systems PLC
6.75% Conv., 04/01/02............. 905,000 1,221,750
First Financial Management Corp.
5.0% Conv., 12/15/99.............. 1,320,000 2,219,250
--------------
4,254,919
--------------
TOTAL BUSINESS SERVICES (1.6%) 26,868,846
--------------
CAPITAL GOODS (0.1%)
MACHINERY
DII Group, Inc.
6.0% Conv., 10/15/02+............. 1,100,000 1,045,000
--------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.1%)
Nine West Group, Inc.
5.5% Conv., 07/15/03+............. 1,675,000 1,666,625
--------------
FOOD SERVICES, LODGING (0.1%)
HFS, Inc.
4.5% Conv., 10/01/99.............. 612,000 2,025,720
--------------
RETAIL--GENERAL (0.2%)
Saks Holdings, Inc.
5.5% Conv., 09/15/06.............. 875,000 805,000
U.S. Office Products Co.
5.5% Conv., 02/01/01.............. 1,035,000 1,345,500
--------------
2,150,500
--------------
TOTAL CONSUMER CYCLICALS (0.4%) 5,842,845
--------------
CONSUMER NONCYCLICALS
DRUGS (0.1%)
MedImmune, Inc.
7.0% Conv. Sub., 07/01/03+ ....... 1,025,000 1,104,438
Quintiles Transnational Corp.
4.25% Conv., 05/31/00+............ 790,000 829,500
--------------
1,933,938
--------------
HOSPITAL SUPPLIES & SERVICES (0.3%)
American Medical Response, Inc.
5.25% Conv., 02/01/01+............ 940,000 1,012,850
Healthsouth Corp.
5.0% Conv., 04/01/01.............. 540,000 1,117,125
Phycor, Inc.
4.5% Conv., 02/01/03.............. 800,000 779,000
Tenet Healthcare Corp.
6.0% Conv., 12/01/05.............. 980,000 1,029,000
--------------
3,937,975
--------------
TOTAL CONSUMER NONCYCLICALS (0.4%) 5,871,913
--------------
CREDIT SENSITIVE
BANKS (1.3%)
Deutsche Bank
6.7%, 12/14/06................... 21,450,000 21,050,172
Sumitomo Bank International
0.75% Conv., 05/31/01 ... Yen 101,000,000 922,265
--------------
21,972,437
--------------
FINANCIAL SERVICES (3.1%)
Aames Financial Corp.
5.5% Conv., 03/15/06+ .......... $ 720,000 972,900
Bankamerica Capital II
8.0%, 12/15/26.................. 20,000,000 20,381,000
Commercial Credit Co.
6.125%, 12/01/05................ 10,000,000 9,412,700
90
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Leasing Solutions, Inc.
6.875% Conv., 10/01/03.......... $ 1,430,000 $ 1,430,000
RAC Financial Group, Inc.
7.25% Conv. Sub., 08/15/03+ .... 625,000 835,156
Santander Financial Issuances
7.0%, 04/01/06.................. 18,300,000 18,172,266
--------------
51,204,022
--------------
FOREIGN GOVERNMENT (1.3%)
Republic of Poland
4.0% PDI, 10/27/14 (a).......... 25,000,000 21,125,000
--------------
INSURANCE (2.5%)
John Hancock Mutual Life
Insurance Co.
7.375%, 02/15/24+............... 23,750,000 22,891,913
Penn Treaty American Corp.
6.25% Conv., 12/01/03+.......... 450,000 488,250
Travelers Capital III
7.625%, 12/01/36................ 18,000,000 17,515,260
--------------
40,895,423
--------------
MORTGAGE RELATED (9.3%)
Federal Home Loan
Mortgage Corp.
7.0%, 09/01/11.................. 28,523,343 28,514,444
Federal National Mortgage
Association:
6.5%, 05/01/11.................. 45,305,228 44,484,072
6.5%, 08/01/11.................. 18,430,548 18,096,494
7.0%, 05/01/26.................. 28,699,610 28,080,790
Government National Mortgage
Association
7.5%, 5/15/26................... 33,329,990 33,350,822
--------------
152,526,622
--------------
UTILITY--ELECTRIC (0.6%)
Empresa Electrica del Norte
7.75%, 03/15/06+................ 9,400,000 9,476,798
--------------
UTILITY--GAS (1.0%)
RAS Laffan Liquid Natural Gas
8.294%, 09/15/14+............... 16,730,000 17,001,277
--------------
U.S. GOVERNMENT (17.7%)
U.S. Treasury:
6.375% Note, 05/15/99........... 104,500,000 105,414,371
7.75% Note, 01/31/00............ 56,000,000 58,607,528
6.75% Note, 04/30/00............ 25,600,000 26,088,013
6.5% Note, 08/31/01............. 60,000,000 60,656,280
6.25% Note, 10/31/01............ 18,035,000 18,046,272
5.75% Note, 08/15/03............ 19,925,000 19,327,250
6.5% Note, 08/15/05............. 1,225,000 1,233,422
--------------
289,373,136
--------------
TOTAL CREDIT SENSITIVE (36.8%) . 603,574,715
--------------
ENERGY
COAL & GAS PIPELINES (0.0%)
Swift Energy Co.
6.25% Conv., 11/15/06........... $ 710,000 $ 779,225
--------------
OIL--SUPPLIES & CONSTRUCTION (0.1%)
Seacor Holdings
5.375% Conv. Sub. Notes,
11/15/06+....................... 675,000 783,000
--------------
TOTAL ENERGY (0.1%)............. 1,562,225
--------------
TECHNOLOGY
ELECTRONICS (1.1%)
Altera Corp.
5.75% Conv. Sub. Note,
06/15/02+....................... 1,630,000 2,522,425
Applied Magnetics Corp.:
7.0% Conv. Sub., 03/15/06 ...... 2,120,000 3,752,400
7.0% Conv. Sub. Euro, 03/15/06 . 140,000 247,800
C-Cube Microsystems, Inc.
5.875% Conv., 11/01/05.......... 930,000 1,204,350
Checkpoint Systems, Inc.
5.25% Conv., 11/01/05+.......... 455,000 664,869
LSI Logic Corp.
5.5% Conv., 03/15/01+........... 780,000 1,712,100
Plasma & Materials Technologies,
Inc.
7.125% Conv., 10/15/01+......... 1,100,000 1,078,000
Sanmina Corporation
5.5% Conv., 08/15/02+........... 1,410,000 2,948,663
SCI Systems, Inc.
5.0% Conv., 05/01/06............ 1,385,000 1,582,363
S3 Incorporated
5.75% Conv. Sub. Note,
10/01/03+....................... 605,000 662,475
3Com Corp.
10.25% Conv., 11/01/01+......... 1,035,000 2,284,763
--------------
18,660,208
--------------
TELECOMMUNICATIONS (0.3%)
BBN Corp.
6.0% Conv., 04/01/12............ 1,660,000 1,610,200
Comverse Technology, Inc.
5.75% Conv. Sub., 10/01/06+ .... 2,185,000 2,264,206
--------------
3,874,406
--------------
TOTAL TECHNOLOGY (1.4%)......... 22,534,614
--------------
DIVERSIFIED (0.1%)
MISCELLANEOUS
THERMO ELECTRON CORP.
5.0% CONV. EURO., 04/15/01..... 1,055,000 2,091,538
--------------
TOTAL LONG-TERM DEBT SECURITIES (40.9%)
(Amortized Cost $656,543,317) . 669,391,696
--------------
91
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------ ------------ --------------
SHORT-TERM DEBT SECURITIES:
BANKERS' ACCEPTANCES (0.6%)
Industrial Bank of Japan-L.A.
5.73%, due 01/16/97............. $10,000,000 $ 9,976,125
--------------
CERTIFICATES OF DEPOSIT (1.5%)
Canadian Imperial Bank of
Commerce
5.44%, due 03/31/97............. 25,000,000 25,009,103
--------------
COMMERCIAL PAPER
ASCC Commercial Paper:
5.34%, due 02/27/97............. 10,000,000 9,915,450
5.37%, due 03/27/97............. 19,300,000 19,059,849
Associates Corp. of North
America
5.75%, due 01/02/97............. 2,400,000 2,399,617
BHF Delaware, Inc.
5.64%, due 03/10/97............. 5,000,000 4,950,228
Dresdner U.S. Finance, Inc.
5.31%, due 04/10/97............. 5,000,000 4,927,263
International Securitization
5.45%, due 03/18/97............. 13,000,000 12,855,367
Koch Industries
6.9%, due 01/02/97.............. 500,000 499,904
Morgan (J.P.) & Co.
5.62%, due 03/05/97............. 5,000,000 4,953,538
Morgan Stanley Group, Inc.
6.79%, due 01/02/97............. 19,700,000 19,696,284
Sigma Finance Corp.
5.4%, due 03/17/97.............. $15,000,000 $ 14,835,312
Suntrust Banks, Inc.:
5.3%, due 03/10/97.............. 5,000,000 4,950,039
5.35%, due 03/31/97............. 10,000,000 9,869,219
--------------
TOTAL COMMERCIAL PAPER (6.7%) 108,912,070
--------------
TIME DEPOSITS
Canadian Imperial Bank of
Commerce
6.0%, due 01/02/97.............. 5,300,000 5,300,000
Harris Trust & Savings
6.5%, due 01/02/97.............. 4,800,000 4,800,000
Toronto Dominion Bank
6.25%, due 01/20/97............. 8,100,000 8,100,000
--------------
TOTAL TIME DEPOSITS (1.1%) ..... 18,200,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (9.9%)
(Amortized Cost $162,066,577) .. 162,097,298
--------------
TOTAL INVESTMENTS (99.3%)
(Cost/Amortized Cost $1,509,715,325) 1,627,121,599
OTHER ASSETS
LESS LIABILITIES (0.7%)......... 10,733,905
--------------
NET ASSETS (100.0%).............. $1,637,855,504
==============
- ----------------------------------
DISTRIBUTION OF INVESTMENTS BY
GLOBAL REGION
As a Percentage of Total
Investments
Canada................... 0.3%
Japan.................... 4.0
New Zealand & Australia . 0.3
Scandinavia.............. 0.7
Southeast Asia........... 1.1
United Kingdom........... 2.5
United States**.......... 86.7
Other European
Countries............... 4.4
-------
100.0%
=======
</TABLE>
- ------------
* Non-income producing.
** Includes Short-Term Debt Securities of 10.0%.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $74,805,583
or 4.6% of net assets.
(a) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at December 31, 1996.
Glossary:
ADR--American Depository Receipt
GDR--Global Depository Receipt
PDI--Past Due Interest Bond
See Notes to Financial Statements.
92
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ----------- -------------
<S> <C> <C>
COMMON STOCKS AND OTHER
INVESTMENTS:
BASIC MATERIALS
CHEMICALS (1.1%)
AGA AB (A Shares)................. 3,400 $ 51,355
Akzo Nobel N.V.................... 875 119,457
Asahi Chemical Industry Co. ..... 27,000 152,940
Bayer AG.......................... 15,850 643,250
BOC Group Co. PLC ................ 6,825 102,129
Dainippon Ink & Chemical, Inc. ... 51,000 188,922
Freeport-McMoRan, Inc............. 103,000 3,308,875
GP Batteries International Ltd. .. 143,000 474,760
GP Batteries International Ltd.+ . 37,000 122,840
GP Batteries International
Ltd.--Rights* ................... 5,750 2,875
Imperial Chemical Industries .... 18,212 239,764
Indo Gulf Fertilisers (GDR) ...... 50,000 35,000
Ishihara Sangyo Ltd.*............. 161,000 389,258
L'Air Liquide SA.................. 2,035 317,693
Linde AG.......................... 150 91,142
Millennium Chemicals, Inc.* ...... 1,904 33,796
Mitsubishi Chemical Corp.......... 52,000 168,379
Mitsui Toatsu Chemicals, Inc. .... 15,000 45,721
Monsanto Co....................... 125,000 4,859,375
Olin Corp. ....................... 26,000 978,250
Royal Plactics Group Ltd.*+ ...... 10,000 185,138
Sanyo Chemicals................... 20,000 153,700
Sekisui Chemical Co. Ltd. ........ 41,000 414,213
Shin-Etsu Chemical Ltd. .......... 10,000 182,195
Solvay Et Cie Societe Anonyme .... 120 73,529
Sumitomo Chemical Co. Ltd......... 31,000 122,865
Toray Industries, Inc............. 33,000 203,739
UBE Industries Ltd. .............. 14,000 39,651
-------------
13,700,811
-------------
CHEMICALS--SPECIALTY (0.5%)
Crompton & Knowles Corp........... 59,900 1,153,075
Cytec Industries, Inc.*........... 65,200 2,648,750
Kyowa Hakko Kogyo Co. ............ 8,000 61,066
NGK Insulators.................... 6,000 56,990
SGL Carbon AG+.................... 15,000 1,892,059
UCAR International, Inc.*......... 5,000 188,125
-------------
6,000,065
-------------
METALS & MINING (0.7%)
Alusuisse Lonza Holding AG........ 90 71,744
Broken Hill Proprietary Co. Ltd. 24,800 353,244
Century Aluminum Co............... 48,200 831,450
CRA Ltd........................... 5,800 91,050
Degussa AG........................ 250 113,725
Gibraltar Steel Corp.*............ 38,300 1,005,375
Great Central Mines Ltd.*......... 120,000 341,468
Gwalia Consolidated Ltd........... 95,800 224,633
Kaiser Aluminum Corp.*............ 48,800 567,300
Mitsubishi Materials Corp......... 24,000 96,986
Plutonic Resources Ltd............ 30,000 139,496
Reynolds Metals Co................ 67,000 3,777,125
RTZ Corp.......................... 19,347 310,387
Steel Dynamics, Inc.*............. 46,700 893,138
Sumitomo Metal Mining Co. ........ 10,000 67,438
Western Mining Corp. Ltd.......... 40,700 256,539
-------------
9,141,098
-------------
PAPER (0.1%)
Amcor Ltd......................... 8,900 57,230
Asia Pacific Resources
International Holdings Ltd.
(Class A)*....................... 5,000 28,125
Enso Oy (Series R) ............... 30,000 241,453
Fletcher Forestry Shares.......... 4,256 7,131
Grupo Industrial Durango (ADR)* .. 12,000 127,500
Mayr-Melnhof Karton Aktien AG*+ .. 1,500 73,424
Nippon Paper Industries Co. ...... 37,000 172,524
Oji Paper Co. Ltd. ............... 27,000 170,892
Svenska Cellulosa (Series B) ..... 3,200 64,993
UPM-Kymmene Oy.................... 3,292 69,103
-------------
1,012,375
-------------
STEEL (0.2%)
British Steel..................... 69,074 189,921
Hitachi Metals Ltd................ 54,000 429,445
Kawasaki Steel.................... 61,000 175,399
Nippon Steel Corp................. 147,000 434,108
NKK Corp.*........................ 85,000 191,564
Sumitomo Metal Industries......... 320,000 787,497
Thyssen AG........................ 450 79,806
Usinor Sacilor.................... 3,500 50,930
-------------
2,338,670
-------------
TOTAL BASIC MATERIALS (2.6%) .... 32,193,019
-------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (1.7%)
B.U.S. Berzelius Umwelt-Service
AG............................... 16,550 204,348
Culligan WaterTechnologies,Inc.*. 21,000 850,500
Daiseki Co. Ltd................... 10,000 238,321
Matsuda Sangyo Co. Ltd............ 12,000 309,818
Philip Environmental, Inc.* ...... 50,800 736,600
Powerscreen International......... 75,000 725,926
Rentokil Group PLC................ 30,000 225,615
Republic Industries, Inc.*........ 51,100 1,593,681
Superior Services, Inc.*.......... 9,400 191,525
Tomra Systems ASA................. 110,000 1,718,953
United States Filter Corp.* ...... 27,800 882,650
United Waste Systems, Inc.* ...... 26,000 893,750
USA Waste Services, Inc.*......... 174,200 5,552,625
WMX Technologies, Inc. ........... 260,000 8,482,500
-------------
22,606,812
-------------
PRINTING, PUBLISHING &
BROADCASTING (2.0%)
British Sky Broadcasting Group
PLC.............................. 33,749 301,796
Cablevision Systems Corp.
(Class A)*....................... 98,500 3,016,563
Carlton Communications PLC........ 25,000 220,347
Dainippon Printing Co. Ltd. ...... 12,000 210,345
93
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Elsevier N.V...................... 60,000 $1,013,508
Evergreen Media Corp.
(Class A)* ...................... 55,800 1,395,000
EZ Communications, Inc.*.......... 15,300 560,363
Havas............................. 200 14,031
Lagardere S.C.A................... 2,100 57,635
Liberty Media Group (Class A)* ... 28,500 814,031
Mediaset Spa*..................... 200,000 922,952
Mirror Group Newspapers PLC ..... 70,000 258,421
New York Times Co................. 109,200 4,149,600
News Corp. Ltd.................... 34,500 182,084
Nippon Television Network Corp. . 3,930 1,187,721
Pegasus Media & Communications
(Class B)*....................... 50 15,000
Reed International................ 22,000 415,136
Reuters Holdings.................. 36,570 470,800
Sinclair Broadcast Group, Inc.* .. 20,800 540,800
Singapore Press Holdings.......... 3,000 59,172
Star Publications BHD............. 20,000 78,796
Takara Printing Co................ 14,000 113,634
TCI Group (Class A)*.............. 41,500 542,094
Time Warner, Inc.................. 120,050 4,501,875
Tokyo Broadcasting System......... 56,000 855,885
Toppan Printing Co. .............. 7,000 87,644
Universal Outdoor
Holdings, Inc.*.................. 19,100 448,850
Ver Ned Uitgeversbedr
Ver Bezit N.V.................... 25,000 522,084
Viacom, Inc. (Class B)*........... 97,540 3,401,708
-------------
26,357,875
-------------
PROFESSIONAL SERVICES (1.4%)
Adecco SA......................... 275 69,033
ADT Ltd.*......................... 1,664 38,064
Apcoa Parking AG.................. 3,000 321,679
Asatsu, Inc. ..................... 21,000 667,300
Associated First Capital Corp. .. 71,600 3,159,350
Ceridian Corp.*................... 141,400 5,726,700
Content Beheer N.V.*+............. 53,000 2,023,546
Cordiant PLC*..................... 200,000 352,899
Equity Corporation
International*................... 22,700 454,000
Ha-Lo Industries, Inc.*........... 57,937 1,593,268
Interim Services, Inc.*........... 13,800 489,900
Meitec Corp....................... 55,800 1,064,830
Nackebro Fastighets AB*........... 310 5,319
Secom Co. ........................ 2,000 121,060
SGS Holdings...................... 25 61,449
Telespectrum Worldwide, Inc.* .... 60,000 952,500
WPP Group PLC..................... 100,000 435,127
-------------
17,536,024
-------------
TRUCKING, SHIPPING (0.2%)
Brambles Industries Ltd. ......... 30,000 585,407
Comfort Group Ltd. ............... 160,000 141,785
Irish Continental Group........... 30,000 211,063
Kawasaki Kisen*................... 55,000 125,378
Mitsui O.S.K. Lines Ltd.*......... 19,000 45,445
Nippon Express Co. Ltd............ 25,000 171,401
Nippon Yusen K.K.................. 17,000 76,919
Peninsular & Oriental Steam
Navigation Co.................... 10,466 105,783
Western Bulk Shipping+............ 31,500 150,889
Yamato Transport ................. 110,000 1,139,798
-------------
2,753,868
-------------
TOTAL BUSINESS SERVICES (5.3%) .. 69,254,579
-------------
CAPITAL GOODS
AEROSPACE (0.9%)
Boeing Co......................... 65,350 6,951,606
British Aerospace................. 5,576 122,269
Coltec Industries, Inc.*.......... 128,000 2,416,000
General Electric Co. PLC.......... 36,076 236,083
Rolls-Royce....................... 22,528 99,376
United Technologies Corp.......... 32,600 2,151,600
-------------
11,976,934
-------------
BUILDING & CONSTRUCTION (0.7%)
ABB AG ........................... 550 684,161
American Standard Companies,
Inc.*............................ 59,900 2,291,175
CSR Ltd........................... 16,900 59,105
Cubiertas Y Mzov SA............... 3,824 294,769
Daiwa House Industry Co........... 9,000 115,793
Hitachi Plant Engineering &
Construction Co.................. 40,000 236,940
Hochtief AG....................... 1,500 58,975
Japan Industrial Land
Development...................... 15,000 284,949
Kajima Corp. ..................... 33,000 235,938
Kaneshita Construction Co. ...... 28,000 265,953
Kumagai Gumi Co................... 13,000 32,217
MacMahon Holdings Ltd............. 700,000 623,162
Mancon BHD*....................... 47,999 146,344
Mitsui Home Co. Ltd............... 42,000 518,608
Nanno Construction Co. Ltd. ...... 26,000 154,909
Nawarat Patanakarn Public Co. ... 80,000 93,582
Nishimatsu Construction Co. ..... 5,000 43,606
Obayashi Corp..................... 12,000 81,029
Ohmoto Gumi Co. Ltd............... 15,000 215,007
Oriental Construction Co. ........ 17,000 218,720
Paul Y.-ITC Construction
Holdings......................... 400,000 95,675
Paul Y.-ITC Construction
Holdings--Warrants* ............. 80,000 1,432
Penta Ocean Construction.......... 10,000 44,556
PS Corp........................... 31,200 522,649
Sanyo Engineering & Construction,
Inc.............................. 23,000 204,559
Sekisui House Ltd. ............... 13,000 132,458
Shimizu Corp...................... 15,000 112,037
Sho Bond Construction............. 39,900 1,074,933
Suido Kiko Kaisha................. 3,000 21,242
Taisei Corp. ..................... 20,000 103,618
Toda Construction................. 32,000 243,157
United Engineers Malaysia BHD .... 11,000 99,307
Wesco, Inc........................ 9,050 113,311
YTL Corp. BHD..................... 11,000 59,236
-------------
9,483,112
-------------
94
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
BUILDING MATERIALS & FOREST
PRODUCTS (0.6%)
Blue Circle Industries............ 13,338 $ 81,115
Boral Ltd. ....................... 40,000 113,823
BPB PLC........................... 90,000 591,276
Buckeye Cellulose Corp.*.......... 18,600 495,225
Chichibu Onoda Cement Co.......... 11,000 46,827
Cie de St. Gobain................. 2,100 297,080
Dahl International AB*+........... 50,000 1,052,177
Fujikura Ltd. .................... 68,000 544,893
Furukawa Electric Co.............. 13,000 61,627
Heidelberg Zement AG.............. 1,000 80,712
Holderbank Financiere Glarus AG . 80 57,139
Hughes Supply, Inc................ 19,500 840,938
Lafarge Corp...................... 4,750 284,991
Martin Marietta Materials, Inc. .. 59,200 1,376,400
Nichiha Corp...................... 52,700 932,864
Portland Valderrivas SA*.......... 5,000 336,857
Redland PLC....................... 9,480 59,520
Rexan PLC......................... 13,121 81,032
RMC Group PLC..................... 4,518 77,204
Sumitomo Forestry Co. ............ 8,000 97,401
Wolseley PLC...................... 10,088 79,842
-------------
7,588,943
-------------
ELECTRICAL EQUIPMENT (0.9%)
Alcatel Alsthom................... 5,000 401,658
Daikin Industries Ltd............. 5,000 44,469
General Electric Co............... 93,900 9,284,363
Kinden Corp....................... 5,000 63,466
Omron Corp. ...................... 62,000 1,167,084
Schneider SA...................... 2,250 104,033
Siemens AG........................ 10,400 482,693
Sumitomo Electric Industries ..... 17,000 237,803
Yaskawa Electric Corp.*........... 72,000 249,927
-------------
12,035,496
-------------
MACHINERY (0.8%)
Amada Co. Ltd. ................... 5,000 38,857
Asahi DiamondIndustryCo.Ltd. .... 35,000 317,330
Construcciones Auxiliar Ferro .... 3,000 113,776
Ebara Corp........................ 5,000 65,193
Enshu*............................ 60,000 180,295
Fag Kugelfischer Georg Schaefer .. 3,200 43,774
Fanuc Co.......................... 5,900 189,008
IHC Caland N.V.................... 10,000 570,966
Ishikawajima Harima Heavy
Industries....................... 80,000 355,755
Kalmar Industries AB+............. 12,000 184,773
Kawasaki Heavy Industries......... 126,000 521,147
Keyence Corp. .................... 6,000 740,869
Komatsu Ltd....................... 29,000 237,890
Kubota Corp....................... 33,000 159,287
Makino Milling Machine Co. ...... 50,000 319,057
Mitsubishi Heavy Industries Ltd. . 180,000 1,429,928
Namura Shipbuilding Co............ 39,000 127,968
Nireco............................ 12,000 136,776
Nitta Corp........................ 39,000 488,300
Nitto Kohki Co. Ltd............... 20,200 723,858
Rofin-Sinar Technologies, Inc.* .. 20,000 235,000
SMC Corp.......................... 17,400 1,170,417
Sodick Co.*....................... 126,000 1,044,469
Thai Engine Manufacturing Public
Co.*............................. 100,000 775,949
Toyoda Automatic Loom Works ...... 5,000 93,688
-------------
10,264,330
-------------
TOTAL CAPITAL GOODS (3.9%) ...... 51,348,815
-------------
CONSUMER CYCLICALS
AIRLINES (0.4%)
British Airways................... 45,000 466,777
Cathay Pacific Airways............ 41,000 64,671
Delta Air Lines, Inc.............. 1,100 77,963
Japan Air Lines Co.*.............. 24,000 127,450
KLM............................... 14,000 393,602
Lufthansa AG...................... 5,500 74,272
Mesa Airlines, Inc.*.............. 57,000 384,750
Northwest Airlines Corp.
(Class A)* ...................... 78,300 3,063,488
Qantas Airways Ltd................ 100,000 166,919
Singapore Airlines Ltd. .......... 73,000 662,546
-------------
5,482,438
-------------
APPAREL, TEXTILE (1.3%)
Adidas AG+........................ 5,500 475,370
Carli Gry International A/S* ..... 20,000 958,033
Designer Holdings Ltd.*........... 40,500 653,063
First Sign International
Holdings Ltd..................... 1,300,000 415,993
King Co.*......................... 67,000 301,416
Kuraray Co. Ltd................... 6,000 55,436
Mohawk Industries, Inc.*.......... 39,200 862,400
Nine West Group, Inc.*............ 32,800 1,521,100
Polymer Group, Inc.*.............. 38,600 535,575
Reebok International Ltd.......... 193,000 8,106,000
Renown, Inc.*..................... 120,000 320,180
Stage Stores, Inc.*............... 34,100 622,325
Teijin Ltd........................ 18,000 78,646
Tommy Hilfiger Corp.*............. 18,500 888,000
Warnaco Group, Inc. (Class A) .... 26,900 796,913
-------------
16,590,450
-------------
AUTO RELATED (0.4%)
Asahi Glass Co. Ltd............... 35,000 329,419
Autoliv AB........................ 6,000 263,081
Autoliv AB (ADS)*+................ 6,000 259,500
Bridgestone Corp.................. 14,000 265,953
Bridgestone Metalpha ............. 15,000 128,227
FCC Co. Ltd....................... 10,000 271,997
LucasVarity PLC................... 17,320 66,018
Mabuchi Motor Co.................. 14,200 714,843
Michelin (CGDE), (Class B)........ 2,400 129,563
Miller Industries, Inc.*.......... 27,750 555,000
Minebea Co........................ 75,000 626,889
NGK Spark Plug Co................. 14,000 153,527
Nippondenso Co. Ltd............... 21,000 505,915
Team Rental Group, Inc.*.......... 59,300 956,213
Toyoda Gosei*..................... 30,000 208,013
-------------
5,434,158
-------------
95
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
AUTOS & TRUCKS (0.3%)
Fiat Spa.......................... 67,500 $ 204,253
Daimler-Benz AG*.................. 18,250 1,251,218
Honda Motor Corp.................. 34,000 971,764
Isuzu Motors Ltd.................. 30,000 133,408
Perusahaan Otomobl Nasional BHD .. 9,000 57,018
Peugeot SA........................ 700 78,790
Toyota Motor Corp................. 15,000 431,310
-------------
3,127,761
-------------
FOOD SERVICES, LODGING (1.2%)
AAPC Limited...................... 400,000 241,634
Accor SA.......................... 550 69,644
Brinker International, Inc.* ..... 198,700 3,179,200
Doubletree Corp.*................. 30,627 1,378,215
Fujita Kanko, Inc................. 3,000 55,695
Host Marriott Corp.*.............. 200,300 3,204,800
Innkeepers USA Trust.............. 52,300 725,663
Interstate Hotels Co.*............ 35,100 991,575
Jurys Hotel Group PLC............. 100,000 466,203
La Quinta Motor Inns, Inc......... 191,600 3,664,350
QPQ Corp.*........................ 16,400 38,950
QPQ Corp.--Warrants*.............. 16,400 2,050
Sanyo Pax Co. Ltd................. 35,000 607,461
Suburban Lodges of America* ...... 38,300 612,800
Thistle Hotels PLC*............... 131,600 409,181
-------------
15,647,421
-------------
HOUSEHOLD FURNITURE,
APPLIANCES (1.2%)
Elamex S.A. de C.V.*.............. 76,700 738,238
Electrolux B...................... 1,100 63,879
First Brands Corp................. 115,000 3,263,125
Industrie Natuzzi (ADR)........... 36,200 832,600
MatsushitaElectricIndustrialCo. . 20,000 326,397
Nippon Electric Glass............. 26,000 399,620
Philips Electronics............... 3,000 121,482
Sanyo Electric Co. Ltd............ 108,000 447,630
Sharp Corp. ...................... 17,000 242,207
Sunbeam Corp. .................... 360,500 9,282,875
Tostem Corp....................... 3,000 82,894
Toto.............................. 5,000 56,990
-------------
15,857,937
-------------
LEISURE RELATED (1.7%)
Aristocrat Leisure Ltd............ 60,000 155,950
Canal Plus........................ 350 77,306
Carnival Corp. ................... 11,300 372,900
Cinar Films, Inc. (Class B)* ..... 15,000 390,000
Cyrk, Inc.*....................... 195,000 2,535,000
Disney (Walt) Co.................. 95,791 6,669,448
Enix Corp.* ...................... 12,900 291,840
Granada Group PLC................. 17,347 256,013
Harman International
Industries, Inc.................. 21,800 1,212,625
ITT Corp.*........................ 85,600 3,712,900
Japan Airport Terminal Co......... 44,000 539,504
KTM Motorradholding AG*........... 3,420 191,097
Learning Company, Inc.*........... 101,300 1,456,188
Mars Engineering Corp.*........... 9,000 229,255
Namco Ltd......................... 28,000 858,302
Nelvana Limited*+................. 18,000 299,069
Nintendo Co. ..................... 14,000 1,002,159
Rank Group PLC.................... 32,498 242,453
Resorts World BHD................. 24,000 109,285
Sega Enterprises Ltd.............. 2,000 67,352
SMH AG............................ 100 61,636
Tag Heuer International SA
(ADR)*........................... 50,200 809,475
Thorn EMI......................... 4,927 116,478
Toei Co........................... 33,000 212,572
Toho Co. ......................... 400 58,026
Tokyo Dome Corp................... 3,000 52,327
Tourism Holdings Ltd.............. 70,000 133,614
-------------
22,112,774
-------------
PHOTO & OPTICAL (0.1%)
Fuji Photo Film Co................ 12,000 395,821
Noritsu Koki Co. Ltd.............. 21,000 988,257
-------------
1,384,078
-------------
RETAIL--GENERAL (2.9%)
Ahold N.V......................... 1,789 111,771
AutoZone, Inc.*................... 317,900 8,742,250
Boots Co. PLC..................... 26,111 269,503
British Airport Author PLC........ 120,000 1,000,108
Carrefour......................... 825 536,803
Centros Comerciales Pryca SA ..... 7,000 148,387
CompUSA, Inc.*.................... 285,000 5,878,125
Consolidated Stores Corp.*........ 22,500 722,813
Daiei, Inc........................ 14,000 106,986
Dai-Ichi Corp..................... 9,000 181,850
Dayton Hudson Corp................ 102,600 4,027,050
Dixons Group PLC*................. 160,000 1,486,971
Doshisha Co. ..................... 7,000 114,843
Eiden Sakakiya Co. Ltd. .......... 28,000 282,877
Federated Department Stores,
Inc.*............................ 99,800 3,405,675
Fingerhut Companies, Inc.......... 160,000 1,960,000
Fu Hui Jewellery*................. 250,000 23,272
Great Universal Stores............ 28,714 301,043
Harvey Nichols Group PLC*+........ 30,600 179,804
Hennes & Mauritz AB
(B Shares)....................... 500 69,216
Homac Corp. ...................... 11,400 206,718
Home Wide Corp, Inc............... 16,000 143,684
Isetan Co......................... 64,000 828,944
Karstadt AG....................... 150 49,909
Kokuyo Co. ....................... 2,000 49,391
Marks & Spencer................... 60,611 509,819
Marui Co. Ltd..................... 7,000 126,328
Metro AG* ........................ 950 74,392
Nissen Corp. Ltd. ................ 5,700 39,867
Paris Miki, Inc................... 20,000 721,872
Petco Animal Supplies, Inc.* ..... 37,900 786,425
Pinault Printemps................. 350 138,826
Promodes.......................... 300 84,707
Rinascente........................ 13,000 75,418
Rinascente--Warrants*............. 650 287
Sainsbury (J) PLC................. 7,365 48,954
Sato Corp. ....................... 35,700 696,676
Shaddy Co. Ltd. .................. 3,000 47,923
Sriwani Holdings BHD.............. 400,000 1,077,014
96
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Swank International Manufacturing 300,000 $ 45,381
St. Dupont*+...................... 29,100 987,106
Takihyo Co. Ltd................... 27,000 326,397
Warehouse Group Ltd. ............. 200,900 482,889
Xebio Co.......................... 9,800 291,944
-------------
37,390,218
-------------
TOTAL CONSUMER CYCLICALS (9.5%) 123,027,235
-------------
CONSUMER NONCYCLICALS
BEVERAGES (0.9%)
Asahi Breweries Ltd............... 8,000 82,894
Bass Breweries.................... 13,487 189,689
Cadbury Schweppes PLC............. 18,792 158,548
Carlsberg 'A'..................... 900 60,845
Coca-Cola Amatil Ltd. ............ 7,600 81,250
Coca-Cola Co...................... 122,000 6,420,250
Fraser & Neave.................... 30,000 308,726
Grand Metropolitan................ 85,339 671,032
Guinness PLC...................... 164,568 1,289,791
Heineken N.V. .................... 801 141,698
Kirin Brewery Co.................. 16,000 157,499
Lion Nathan Ltd. ................. 60,000 143,794
Louis Dreyfus Citrus*+............ 43,500 1,425,267
Louis Vuitton Moet Hennessy ...... 1,500 418,907
Panamerican Beverages............. 9,000 421,875
Quilmes Industrial Quins (ADR) ... 33,300 303,863
-------------
12,275,928
-------------
CONTAINERS (0.4%)
Crown Cork & Seal Co., Inc. ...... 75,000 4,078,125
Hub Group, Inc. (Class A)*........ 28,900 773,075
Toyo Seikan Kaisha................ 3,000 72,274
-------------
4,923,474
-------------
DRUGS (4.7%)
Amgen, Inc.*...................... 61,800 3,360,375
Astra AB (A Shares)............... 13,000 642,451
Biogen, Inc.*..................... 150,000 5,812,500
Centocor, Inc.*................... 152,200 5,441,150
Daiichi Pharmaceutical Co......... 5,000 80,304
Eisai Co. Ltd..................... 5,000 98,437
Geltex Pharmaceuticals, Inc.* .... 58,200 1,411,350
Glaxo Wellcome PLC ............... 32,082 521,018
Hafslund Nycomed ASA
(B Shares) ...................... 11,700 80,300
Medicis Pharmaceutical Corp.
(Class A)*....................... 13,500 594,000
MedImmune, Inc.*.................. 32,800 557,600
Merck & Co., Inc.................. 103,000 8,162,750
Novartis AG*...................... 1,571 1,799,285
Novo-Nordisk AS (ADR)
(B Shares) ...................... 3,000 565,647
Nycomed ASA (B Shares)*........... 11,700 180,078
Pfizer, Inc. ..................... 136,200 11,287,575
Revco D.S., Inc.*................. 88,000 3,256,000
Roche Holdings AG Genusscheine ... 201 1,564,001
Rohto Pharmaceutical Co........... 7,000 67,697
Santen Pharmaceutical Co.......... 50,000 1,036,180
Schering AG....................... 1,250 105,521
Smithkline Beecham PLC............ 130,169 1,805,124
Smithkline Beecham PLC (ADR) ..... 46,000 3,128,000
Taisho Pharmaceutical Co.......... 31,000 730,766
Takeda Chemical Industries........ 11,000 230,809
United Natural Foods, Inc.* ...... 39,200 666,400
Warner-Lambert Co................. 81,500 6,112,500
Yamanouchi Pharmaceutical......... 54,000 1,109,749
Zeneca Group PLC.................. 30,000 846,700
-------------
61,254,267
-------------
FOODS (1.1%)
Ajinomoto Co., Inc................ 12,000 122,269
BSN Gervais Danone................ 1,250 174,183
Campbell Soup Co.................. 62,635 5,026,459
Fyffes PLC........................ 900,000 1,678,329
Nabisco Holdings Corp.
(Class A)........................ 125,040 4,860,930
Nestle AG......................... 630 676,362
Nippon Meat Packers, Inc.......... 4,000 51,809
Nissin Food Products Co........... 3,000 63,984
Nutrica Verenigde Bedrijven
N.V.+............................ 2,600 394,817
Oie Sangyo Co. Ltd. .............. 6,000 77,714
PT Sekar Bumi..................... 182,500 115,898
Shriram Industrial Enterprises
Ltd. (GDR)*+..................... 24,000 3,600
Tingyi Holdings Corp.*............ 500,000 130,907
Viscofan Envoltura................ 9,000 131,814
Warabeya Nichiyo Co. Ltd.*........ 18,000 153,873
Yamakazi Baking Co. .............. 4,000 63,898
-------------
13,726,846
-------------
HOSPITAL SUPPLIES & SERVICES (2.0%)
Cochlear Ltd...................... 130,000 369,923
Columbia/HCAHealthcareCorp....... 211,500 8,618,625
Compdent Corp.*................... 18,900 666,225
Coventry Corp.*................... 56,100 519,802
Enterprises Systems, Inc.*........ 39,700 932,950
National Surgery Centers, Inc.* .. 21,800 828,400
Oxford Health Plans, Inc.*........ 64,000 3,748,000
Pacificare Health Systems, Inc.
(Class B)*....................... 50,300 4,288,075
Rotech Medical Corp.*............. 35,700 749,700
Scandinavian Mobility
International, Inc.+............. 27,600 454,760
Steris Corp.*..................... 97,500 4,241,250
Tamro Group ...................... 17,500 116,866
-------------
25,534,576
RETAIL--FOOD (0.2%)
Daimon Co. Ltd.................... 14,000 224,851
Ito Yokado Co. Ltd. .............. 10,000 435,196
Jusco Co.......................... 9,000 305,414
McBride PLC....................... 60,000 139,789
Ministop Co. Ltd.................. 5,500 134,401
Santa Isabel S.A. (ADR)........... 27,400 619,925
Seven-Eleven Japan Ltd............ 12,000 702,530
Tesco PLC......................... 48,646 295,424
-------------
2,857,530
-------------
97
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
SOAPS & TOILETRIES (1.0%)
BIC............................... 600 $ 89,968
Colgate Palmolive Co.............. 61,660 5,688,135
Gillette Corp..................... 74,850 5,819,588
KAO Corp. ........................ 10,000 116,570
L'Oreal........................... 1,605 604,446
Shiseido Co....................... 42,000 485,968
Unilever.......................... 16,865 409,247
Unilever N.V. CVA................. 2,553 451,333
-------------
13,665,255
-------------
TOBACCO (1.6%)
BAT Industries.................... 100,000 829,997
Imperial Tobacco PLC*............. 39,999 258,329
Loews Corp........................ 45,000 4,241,250
Philip Morris Cos., Inc. ......... 120,500 13,571,313
RJ Reynolds BHD................... 200,000 542,467
Rothmans of Pall Mall BHD......... 6,000 62,958
Swedish Match Co. AB*............. 360,000 1,267,012
-------------
20,773,326
-------------
TOTAL CONSUMER NONCYCLICALS (11.9%) 155,011,202
-------------
CREDIT SENSITIVE
BANKS (1.9%)
ABN Amro Holdings................. 3,879 252,220
Akita Bank........................ 18,000 111,907
Asahi Bank Ltd.................... 58,000 515,845
Banca Commerciale Italiana........ 35,000 63,684
Banco Bilbao Vizcaya SA........... 4,050 218,845
Banco Latinoamericano de
Exportaciones S.A. (E Shares) ... 9,500 482,125
Banco Popular..................... 1,000 196,564
Banco Santander Chile (ADR) ...... 16,000 240,000
Banco Santander SA................ 2,691 172,377
Bancomer B Local*................. 50,000 19,944
Bank Austria AG................... 920 67,975
Bank of Tokyo-Mitsubishi Bank .... 72,000 1,336,672
Banque Nationale de Paris......... 2,250 87,077
Barclays Bank .................... 48,309 827,995
Chase Manhattan Corp.............. 15,000 1,338,750
Cie Fin Paribas Series A ......... 1,400 94,682
CS Holdings....................... 4,550 467,408
Dai-Ichi Kangyo Bank.............. 10,000 144,202
Den Danske Bank................... 1,300 104,891
Deutsche Bank AG.................. 13,300 620,574
Dresdner Bank AG.................. 2,900 86,691
First Union Corp.................. 128,500 9,509,000
Fokus Bank........................ 8,000 55,157
Fuji Bank Ltd. ................... 63,000 919,351
Generale de Banque................ 200 71,763
Grupo Financiero Bantorte (Class
B)*.............................. 22,500 22,637
Hang Seng Bank.................... 39,000 473,980
HSBC Holdings PLC (H.K.$)......... 20,000 427,953
HSBC Holdings PLC................. 20,000 435,813
International Bank of Asia........ 270,000 179,779
Istituto Bancario San Paolo di
Torino........................... 15,000 91,966
Istituto Mobilare Italiano........ 10,000 85,703
Kredietbank....................... 170 55,770
Lloyds TSB Group PLC.............. 115,481 851,660
Malayan Banking Berhad............ 18,000 199,564
Mediobanca Spa.................... 10,000 53,960
Mitsubishi Trust&BankingCorp. ... 23,000 307,832
National Australia Bank Ltd. ..... 37,700 443,495
Overseas Union Bank Ltd........... 40,000 308,726
Sakura Bank Ltd. ................. 82,000 586,271
Schweizerische Bankgesellschaft .. 610 534,576
Shizuoka Bank..................... 44,000 467,317
Skandinaviska Enskilda Banken
(Series A)....................... 8,000 82,121
Societe Generale.................. 1,400 151,373
Sparbanken Sverige AB
(A Shares)....................... 16,000 274,519
Sumitomo Bank Ltd. ............... 68,000 980,572
Svenska Handelsbanken
(Series A) ...................... 3,100 89,101
Toho Bank ........................ 20,000 121,233
Union Bank of Hong Kong*.......... 20,000 25,212
-------------
25,256,832
-------------
FINANCIAL SERVICES (3.6%)
Aames Financial Corp.............. 20,300 728,263
American Express Co............... 177,300 10,017,450
Beneficial Corp................... 51,750 3,279,656
CMIC Finance & Securities Co.
Ltd. ............................ 200,000 288,544
Credit Local de France............ 3,500 304,905
Credit Saison Co. ................ 64,000 1,431,310
Daiwa Securities Co. Ltd. ........ 19,000 168,984
Dean Witter Discover & Co. ...... 119,600 7,923,500
Groupe Bruxelles Lambert SA ...... 450 57,986
Hambrecht & Quist Group*.......... 33,200 717,950
Hong Leong Finance Ltd. .......... 50,000 116,487
ING Groep N.V..................... 12,194 438,763
Invesco........................... 60,000 266,730
JCG Holdings...................... 60,000 58,569
MBNA Corp......................... 189,500 7,864,250
Merrill Lynch & Co., Inc.......... 85,000 6,927,500
Nichiei Co. Ltd. ................. 20,000 1,469,649
Nomura Securities Co.............. 41,000 616,009
Oxford Resources Corp.
(Class A)*....................... 35,000 1,080,625
Promise Co. Ltd................... 12,500 615,232
RAC Financial Group, Inc.*........ 25,300 534,463
Sanyo Shinpan Finance Co. Ltd. ... 9,000 563,423
Schroders PLC..................... 3,875 100,570
Takefuji Corp.*................... 6,500 468,656
Union Acceptance Corp.
(Class A)*....................... 50,600 898,150
Yamaichi Securities............... 70,000 311,286
-------------
47,248,910
-------------
INSURANCE (3.1%)
Aegon N.V......................... 15,000 955,370
Allianz AG Holding................ 600 1,080,062
AMEV N.V.......................... 17,000 594,973
Assicurazioni Generali............ 14,300 271,035
Commercial Union PLC.............. 10,726 125,591
Corporacion Mapfre Cia
Inter SA......................... 12,000 731,682
98
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Fortis AG......................... 740 $ 118,814
General Accident.................. 8,971 117,797
Gio Australia Holdings Ltd.* ..... 100,000 255,942
Istituto Naz Delle Assicurazioni . 60,000 78,161
ITT Hartford Group, Inc........... 23,600 1,593,000
Koa Fire & Marine................. 35,000 169,847
Legal & General Group............. 23,090 147,146
Life Re Corp...................... 150,000 5,793,750
MGIC Investment Corp. ............ 66,400 5,046,400
Mitsui Marine &
Fire Insurance Co................ 13,000 69,934
Pacific & Orient BHD.............. 150,000 362,304
PennCorp Financial Group, Inc. ... 126,100 4,539,600
PMI Group, Inc.................... 10,900 603,588
Prudential Corp................... 42,249 355,732
Royal & Sun Alliance Insurance
Group PLC........................ 33,539 255,390
Schweizerische Ruckversicherungs
Gesellschaft .................... 420 448,397
Skanska AB (Series B)............. 1,800 79,584
Sumitomo Marine & Fire Insurance
Co. ............................. 10,000 62,171
TIG Holdings, Inc. ............... 141,000 4,776,375
Tokio Marine & Fire
Insurance Co. ................... 34,000 320,007
Travelers Group, Inc.............. 248,534 11,277,230
-------------
40,229,882
-------------
REAL ESTATE (0.4%)
British Land Co................... 8,416 74,538
Cheung Kong Holdings.............. 35,000 311,106
City Developments Ltd............. 95,000 855,428
Daibiru Corp...................... 28,000 258,700
DBS Land.......................... 17,000 62,567
Diligentia AB*.................... 800 12,611
IOI Corp. BHD..................... 100,000 153,633
JP Realty, Inc. .................. 22,100 571,838
Land Securities PLC............... 9,978 127,174
Lend Lease Corp. Ltd.............. 4,100 79,517
Macerich Co. ..................... 20,900 546,013
MEPC PLC.......................... 8,200 60,825
Mitsubishi Estate Co.............. 71,000 729,557
Mitsui Fudosan.................... 20,000 200,328
New World Development Co.......... 29,000 195,908
Sap Holdings*..................... 40,000 191,645
Sun Hung Kai Properties........... 23,000 281,757
Wharf Holdings.................... 17,000 84,841
-------------
4,797,986
-------------
UTILITY--ELECTRIC (1.1%)
British Energy PLC*............... 418,000 1,052,631
China Light & Power Co. Ltd. ..... 11,000 48,924
Cinergy Corp...................... 46,600 1,555,275
Edison Spa........................ 15,000 94,932
Electrabel........................ 870 206,100
Endesa............................ 5,741 408,906
Enersis S.A. (ADR)................ 6,000 166,500
FPL Group, Inc.................... 75,700 3,482,200
Gas Y Electridad SA (Series 2) ... 5,000 319,899
Hidroelectrica del Cantabrico .... 15,000 572,927
Iberdrola II...................... 30,000 425,504
Iberdrola SA...................... 55,303 784,388
Kansai Electric Power Co., Inc. .. 22,400 464,209
National Grid Group PLC........... 150,027 502,457
National Power PLC................ 120,560 1,009,938
Powergen PLC (ADR)................ 1,250 49,375
RWE AG............................ 4,800 200,884
Tenaga Nasional BHD............... 49,000 234,765
Tohoku Electric Power Co., Inc. .. 11,500 228,391
Tokyo Electric Power Co., Inc. ... 28,000 614,109
Tractebel Investment
International Capital............ 220 102,534
Tractebel Investment
International Capital--
Warrants*........................ 220 0
United Utilities PLC.............. 8,965 95,373
Veba AG........................... 19,550 1,124,366
Viag AG........................... 500 195,769
-------------
13,940,356
-------------
UTILITY--GAS (0.0%)
Scottish Power PLC................ 13,327 80,363
Thames Water...................... 7,439 78,055
-------------
158,418
-------------
UTILITY--TELEPHONE (0.9%)
British Telecommunications........ 121,891 823,761
Empresas Telex-Chile S.A. (ADR) .. 40,000 185,000
Frontier Corp..................... 106,000 2,398,250
Hellenic Telecommunication
Organization SA.................. 17,000 292,773
Kon. PTT Nederland+............... 40,000 1,524,890
LCI International, Inc.*.......... 55,594 1,195,271
PT Indonesian Satellite (ADR) .... 6,000 164,250
Singapore Telecommunications Ltd. 20,000 47,166
Tele Danmark AS (B Shares)........ 2,000 110,412
Telecom Corp. of New Zealand ..... 23,300 118,927
Telecom Italia Spa................ 37,500 97,404
Telefonica de Espana SA........... 23,566 547,694
Telefonica del Peru S.A. (ADR) ... 32,000 604,000
Telekom Malaysia BHD.............. 28,000 249,456
Telephone & Data Systems, Inc. ... 42,100 1,526,125
WorldCom, Inc.*................... 80,115 2,087,997
-------------
11,973,376
-------------
TOTAL CREDIT SENSITIVE (11.0%) .. 143,605,760
-------------
ENERGY
COAL & GAS PIPELINES (0.3%)
British Gas....................... 100,557 386,733
Nabors Industries, Inc.*.......... 170,000 3,272,500
OMV AG............................ 5,000 563,844
-------------
4,223,077
-------------
OIL--DOMESTIC (1.4%)
Apache Corp....................... 138,100 4,885,288
Costilla Energy, Inc.*............ 69,500 946,938
KCS Energy, Inc. ................. 22,400 800,800
Louis Dreyfus Natural Gas Corp.* 139,100 2,382,088
Louisiana Land & Exploration
Corp. ........................... 92,200 4,944,225
Ultramar Diamond Shamrock Corp. . 19,482 616,118
99
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
Union Pacific Resources Group,
Inc.............................. 108,439 $ 3,171,841
XCL Corp.*........................ 200,000 37,500
-------------
17,784,798
-------------
OIL--INTERNATIONAL (1.2%)
British Petroleum Co. PLC......... 100,804 1,209,675
Canadian Occidental............... 6,000 96,000
Cosmo Oil Co. Ltd................. 11,000 52,906
Elf Aquitaine..................... 8,250 750,983
ENI Spa........................... 108,500 556,852
ENI Spa (ADR)..................... 5,000 258,125
Exxon Corp........................ 92,800 9,094,400
Japan Energy Corp................. 19,000 51,679
Mitsubishi Oil Co................. 8,000 47,872
Nippon Oil Co. Ltd. .............. 22,000 113,030
Norsk Hydro AS.................... 2,100 113,785
Oil Search Ltd.................... 340,000 662,110
Petrofina SA...................... 290 92,393
Repsol SA......................... 12,748 489,368
Royal Dutch Petroleum Co.......... 8,553 1,498,687
Tatneft (ADR)*.................... 7,000 336,000
Total Campagnie Francaise......... 900 73,200
-------------
15,497,065
-------------
OIL--SUPPLIES & CONSTRUCTION (3.1%)
Baker Hughes, Inc................. 221,250 7,633,125
BJ Services Co.*.................. 148,600 7,578,600
Bouygues Offshore SA (ADR)* ...... 80,000 1,030,000
Coflexip (ADR)*................... 11,000 288,750
Halliburton Co.................... 50,000 3,012,500
Noble Drilling Corp.*............. 180,700 3,591,413
Parker Drilling Co.*.............. 235,100 2,262,838
Rowan Cos., Inc................... 59,800 1,352,975
Schlumberger, Ltd. ............... 76,800 7,670,400
Transocean Offshore, Inc.......... 105,000 6,575,625
-------------
40,996,226
-------------
RAILROADS (1.2%)
Burlington Northern Santa Fe ..... 46,900 4,050,988
Canadian Pacific Ltd.............. 216,000 5,724,000
East Japan Railway Co............. 55 247,431
Genesee & Wyoming, Inc.
(Class A)*....................... 29,600 1,028,600
Hankyu Corp....................... 40,000 198,601
Kinki Nippon Railroad Co. ........ 28,650 178,862
Odakyu Electric Railway Co. ...... 4,000 24,005
Tobu Railway Co. Ltd.............. 14,000 68,543
Tokyu Corp........................ 20,000 113,634
Union Pacific Corp................ 69,000 4,148,625
-------------
15,783,289
-------------
TOTAL ENERGY (7.2%).............. 94,284,455
-------------
TECHNOLOGY
ELECTRONICS (4.9%)
Altera Corp.*..................... 92,000 6,687,250
Austria Mikro Systeme
International+................... 1,430 110,412
BMC Industries, Inc............... 43,900 1,382,850
Cable & Wireless ................. 32,650 271,553
Cisco Systems, Inc.*.............. 224,800 14,302,890
Electrocomponents PLC............. 8,375 66,284
Exabyte Corp.*.................... 45,400 607,225
Fujimi, Inc....................... 6,100 328,676
Hirose Electric Co. Ltd. ......... 15,000 869,096
Hitachi Ltd. ..................... 58,000 540,886
HMT Technology Corp.*............. 33,800 507,528
Hoya Corp......................... 29,000 1,139,366
IDT Corp.* ....................... 43,000 473,000
Insight Enterprises, Inc.*........ 18,000 504,000
Intel Corp........................ 50,000 6,546,875
Intergraph Corp.*................. 100,000 1,025,000
Kent Electronics Corp.*........... 29,500 759,625
Kyocera Corp...................... 1,000 62,343
Murata Manufacturing Co. Ltd. ... 5,000 166,221
National Semiconductor Corp.* .... 30,000 731,250
NEC Corp.......................... 11,000 132,976
Network General Corp.*............ 25,500 771,375
Rohm Co. Ltd...................... 11,000 721,872
Seagate Technology, Inc.*......... 132,577 5,236,792
Sony Corp......................... 8,000 524,307
Systemsoft Corp.*................. 38,500 572,688
TDK Corp.......................... 11,000 717,123
Teradyne, Inc.*................... 50,000 1,218,750
Texas Instruments, Inc. .......... 28,000 1,785,000
Tokyo Electron.................... 14,000 429,151
Uniphase Corp.*................... 11,800 619,500
Westell Technologies Inc.*........ 22,700 519,263
Yokogawa Electric Corp............ 160,000 1,381,573
3Com Corp.*....................... 155,000 11,373,120
3D Labs, Inc. Ltd.*............... 18,300 420,900
-------------
63,506,720
-------------
OFFICE EQUIPMENT (0.8%)
Applix, Inc.*..................... 29,500 645,313
Canon, Inc........................ 14,000 309,472
Compaq Computer Corp.*............ 62,770 4,660,673
Oce-Van De Grinten N.V. .......... 460 49,921
Read-Rite Corp.*.................. 39,800 1,004,950
Ricoh Elemex Corp. ............... 7,000 97,919
Sterling Software, Inc.*.......... 67,800 2,144,175
Storage Technology Corp.*......... 30,200 1,438,275
Sun Microsystems, Inc.*........... 20,000 513,750
-------------
10,864,448
-------------
OFFICE EQUIPMENT SERVICES (2.8%)
Accugraph Corp. (Class A)*........ 30,000 23,882
Comverse Technology, Inc.*........ 54,100 2,045,656
Electronic Data Systems Corp. .... 83,700 3,620,025
First Data Corp................... 100,600 3,671,900
Fuji Soft Corp.................... 12,000 366,808
Informix Corp.*................... 410,000 8,353,750
Istar Internet, Inc.*+............ 38,000 127,661
Merkantildata A/S................. 2,000 36,751
Microsoft Corp.*.................. 50,800 4,197,350
Misys PLC......................... 25,000 478,169
Oracle Corp.*..................... 214,550 8,957,463
Premisys Communications, Inc.* ... 13,400 452,250
SAP AG............................ 1,600 218,872
Sterling Commerce, Inc.*.......... 101,448 3,576,042
Structural Dynamics Research
Corp. (Class A)*................. 27,800 556,000
-------------
36,682,579
-------------
100
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- -------------------------------- ----------- --------------
TELECOMMUNICATIONS (3.1%)
Act Networks, Inc.*............... 17,800 $ 649,700
Architel Systems Corp.*........... 30,300 186,989
BCE Mobile Communications, Inc.* . 4,000 118,605
Cable Design Technologies*........ 21,000 653,625
Cellular Communications Puerto
Rico, Inc.*...................... 3,600 71,100
Comnet Cellular, Inc.*............ 21,600 602,100
DDI Corp. ........................ 129 853,242
Deutsche Telekom AG (ADR)*........ 272,000 5,542,000
DSC Communications Corp.*......... 71,650 1,280,744
Ericsson (L.M.) Telephone Co.
(Series B)....................... 14,700 454,849
Filtronic Comtek PLC.............. 300,000 1,896,402
Forval Corp....................... 3,000 116,829
ICG Communications, Inc.*......... 83,686 1,474,966
KoreaMobileTelecommunications
Corp. (ADR)...................... 127,720 1,644,395
MFS Communications Co., Inc.* .... 72,639 3,958,825
Millicom International Cellular
SA*.............................. 13,300 427,263
NetCom Systems AB (B Shares)* .... 44,000 712,988
NetscapeCommunicationsCorp.*..... 63,700 3,622,938
Nokia Corp. (ADR)................. 95,500 5,503,188
Rogers Cantel Mobile
Communications (Class B)*........ 6,000 118,970
Scientific Atlanta, Inc........... 310,500 4,657,500
Spectrum Network Systems*+........ 440,000 153,883
Tadiran Telecommunications Ltd. .. 66,600 1,490,175
Telecom Italia Mobile Spa......... 125,000 316,029
Vanguard Cellular Systems, Inc.
(Class A)*....................... 100,000 1,575,000
Vodafone Group.................... 215,846 911,473
Winstar Communications, Inc.* .... 33,600 705,600
Xircom*........................... 32,500 706,875
-------------
40,406,253
-------------
TOTAL TECHNOLOGY (11.6%)......... 151,460,000
-------------
DIVERSIFIED
MISCELLANEOUS (1.2%)
Allied Signal, Inc................ 116,500 7,805,500
Austral Enterprises BHD........... 23,999 44,853
BTR PLC........................... 78,068 379,817
Cie Generale des Eaux............. 9,450 1,171,119
Crean (James) PLC-Units........... 40,000 125,451
Damskibs AS (Class B)............. 5 128,672
GKN PLC........................... 5,325 91,314
Hanson PLC........................ 133,335 186,159
Hutchison Whampoa................. 78,000 612,645
Indonesia Fund, Inc.*............. 4,000 39,000
International UNP Holdings* ...... 143,000 29,242
International UNP
Holdings-Warrants* .............. 125,000 0
Invesco Funding LLC*.............. 12,000 53,346
Lyonnais des Eaux Dumez........... 1,000 93,071
Mitsubishi Corp................... 71,000 735,688
Mitsui & Co. ..................... 39,000 316,553
Montedison Spa*................... 74,000 50,443
Pilkington PLC.................... 17,397 46,641
Sime Darby BHD.................... 180,000 709,167
Smiths Industries................. 5,559 76,280
Sophus Berendsen A/S 'B'.......... 385 49,571
Sumitomo Corp..................... 22,000 173,439
Taiwan Fund....................... 5,000 111,250
Tomkins PLC....................... 70,000 321,977
U.S. Industries, Inc.*............ 76,000 2,612,500
Williams Holdings PLC............. 10,569 62,193
-------------
TOTAL DIVERSIFIED (1.2%)......... 16,025,891
-------------
TOTAL COMMON STOCKS AND OTHER
INVESTMENTS (64.2%)
(Cost $748,000,811).............. 836,210,956
-------------
PREFERRED STOCKS:
CONSUMER CYCLICALS
AIRLINES (0.1%)
Continental Airlines Finance
Trust
8.5% Conv. ...................... 7,500 502,500
-------------
APPAREL, TEXTILE (0.0%)
Designer Finance Trust
6.0% Conv. ...................... 9,600 444,000
-------------
RETAIL--GENERAL (0.0%)
Fielmann AG....................... 4,200 132,375
-------------
TOTAL CONSUMER CYCLICALS (0.1%) 1,078,875
-------------
CONSUMER NONCYCLICALS (0.0%)
CONTAINERS
Crown Cork & Seal Co., Inc.
4.5% Conv. ...................... 9,500 494,000
-------------
CREDIT SENSITIVE
FINANCIAL SERVICES (0.0%)
Money Store
6.5% Conv. ...................... 16,500 451,688
-------------
INSURANCE (0.1%)
PennCorp Financial Group, Inc.
7.0% Conv.+...................... 15,500 922,250
-------------
TOTAL CREDIT SENSITIVE (0.1%) ... 1,373,938
-------------
TECHNOLOGY
TELECOMMUNICATIONS (0.3%)
MFS Communications Co., Inc.
8.0% Conv. ...................... 25,800 2,354,250
Nokia Oy Cum...................... 16,775 973,550
-------------
TOTAL TECHNOLOGY (0.3%).......... 3,327,800
-------------
TOTAL PREFERRED STOCKS (0.5%)
(Cost 4,659,785)................. 6,274,613
-------------
PRINCIPAL
AMOUNT
------------
LONG-TERM DEBT SECURITIES
:
BASIC MATERIALS (0.7%)
CHEMICALS
Reliance Industries Ltd.
10.5%, 08/06/46+................. $7,950,000 8,562,548
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.1%)
United Waste Systems, Inc.
4.5% Conv., 06/01/01+............ 710,000 859,100
--------------
LONG-TERM DEBT SECURITIES
101
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- -------------------------------- ------------- --------------
PRINTING, PUBLISHING &
BROADCASTING (0.7%)
Time WarnerCommunicationsCo. ...
9.15%, 02/01/23................. $ 8,035,000 $ 8,707,353
--------------
PROFESSIONAL SERVICES (0.1%)
Career Horizons, Inc.
7.0% Conv., 11/01/02............ 305,000 598,181
First Financial Management Corp.
5.0% Conv., 12/15/99............ 985,000 1,656,031
--------------
2,254,212
--------------
TOTAL BUSINESS SERVICES (0.9%) . 11,820,665
--------------
CAPITAL GOODS (0.1%)
MACHINERY
DII Group, Inc.
6.0% Conv., 10/15/02+........... 740,000 703,000
--------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.1%)
Nine West Group, Inc.
5.5% Conv., 07/15/03+........... 1,165,000 1,159,175
--------------
FOOD SERVICES, LODGING (0.1%)
HFS, Inc.
4.5% Conv., 10/01/99............ 450,000 1,489,500
--------------
RETAIL--GENERAL (0.2%)
Saks Holdings, Inc.
5.5% Conv., 09/15/06............ 705,000 648,600
U.S. Office Products Co.:
5.5% Conv., 02/01/01............ 965,000 1,254,500
5.5% Conv. Sub. Note,
05/15/03+....................... 35,000 32,550
--------------
1,935,650
--------------
TOTAL CONSUMER CYCLICALS (0.4%) 4,584,325
--------------
CONSUMER NONCYCLICALS
DRUGS (0.1%)
MedImmune, Inc.
7.0% Conv. Sub., 07/01/03+ ..... 780,000 840,450
Quintiles Transnational Corp.
4.25% Conv., 05/31/00+.......... 690,000 724,500
--------------
1,564,950
--------------
HOSPITAL SUPPLIES & SERVICES (0.3%)
American Medical Response, Inc.
5.25% Conv., 02/01/01+.......... 755,000 813,513
Healthsouth Corp.
5.0% Conv., 04/01/01............ 405,000 837,844
Phycor, Inc.
4.5% Conv., 02/01/03............ 695,000 676,756
Tenet Healthcare Corp.
6.0% Conv., 12/01/05............ 665,000 698,250
--------------
3,026,363
--------------
TOTAL CONSUMER NONCYCLICALS (0.4%) 4,591,313
--------------
CREDIT SENSITIVE
BANKS (1.3%)
Deutsche Bank
6.7%, 12/13/06.................. $ 8,000,000 $ 7,850,880
St. George Bank Ltd.
7.15%, 10/15/05+................ 9,525,000 9,509,951
--------------
17,360,831
--------------
FINANCIAL SERVICES (0.2%)
Aames Financial Corp.
5.5% Conv., 03/15/06+........... 530,000 716,163
Leasing Solutions, Inc.
6.875% Conv., 10/01/03.......... 1,045,000 1,045,000
RAC Financial Group, Inc.
7.25% Conv. Sub., 08/15/03+ .... 505,000 674,806
Safeguard Scientifics
6.0% Conv., 02/01/06+........... 475,000 517,750
--------------
2,953,719
--------------
FOREIGN GOVERNMENT (1.1%)
Province of Quebec
7.5%, 07/15/23.................. 5,500,000 5,472,775
Republic of Poland
4.0% PDI, 10/27/14 (a).......... 11,000,000 9,295,000
--------------
14,767,775
--------------
INSURANCE (0.8%)
Conseco Finance Trust II
8.7%, 11/15/26.................. 5,000,000 5,025,850
Corporacion Mapfre
8.5% Conv., 02/27/99 ........ Peseta 4,700,000 36,230
John Hancock Mutual Life
Insurance Co.
7.375%, 02/15/24+............... $ 5,000,000 4,819,350
Penn Treaty American Corp.
6.25% Conv., 12/01/03+.......... 700,000 759,500
--------------
10,640,930
--------------
MORTGAGE RELATED (3.4%)
Federal Home Loan
Mortgage Corp.
7.0%, 09/01/11.................. 10,152,376 10,149,209
Federal National Mortgage
Association:
6.5%, 01/01/11.................. 934,876 917,932
6.0%, 04/01/11.................. 12,327,153 11,853,334
6.5%, 08/01/11.................. 8,894,098 8,732,893
7.0%, 05/01/26.................. 10,215,115 9,994,857
7.0%, 08/01/26.................. 2,456,571 2,403,603
--------------
44,051,828
--------------
UTILITY--ELECTRIC (0.4%)
California Energy Co., Inc.
9.5%, 09/15/06.................. 4,760,000 4,926,600
--------------
UTILITY--GAS (0.7%)
RAS Laffan Liquid Natural Gas
8.294%, 09/15/14+............... 8,500,000 8,637,828
--------------
102
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------ ------------ --------------
U.S. GOVERNMENT (10.4%)
U.S. Treasury:
7.25% Note, 02/15/98............ $24,450,000 $ 24,778,556
6.375% Note, 05/15/99........... 53,490,000 53,958,035
6.75%, Note 04/30/00............ 4,000,000 4,076,252
6.5% Note, 08/31/01............. 7,000,000 7,076,566
6.25% Note, 10/31/01............ 10,230,000 10,236,394
5.75% Note, 08/15/03............ 32,825,000 31,840,250
6.5% Note, 08/15/05............. 4,015,000 4,042,603
--------------
136,008,656
--------------
TOTAL CREDIT SENSITIVE (18.3%) . 239,348,167
--------------
ENERGY
COAL & GAS PIPELINES (0.1%)
Nabors Industries, Inc.
5.0% Conv., 05/15/06............ 545,000 675,800
Swift Energy Co.
6.25% Conv., 11/15/06........... 515,000 565,213
--------------
1,241,013
--------------
OIL--SUPPLIES & CONSTRUCTION (0.0%)
Seacor Holdings
5.375% Conv. Sub. Notes,
11/15/06+....................... 495,000 574,200
--------------
TOTAL ENERGY (0.1%) ............ 1,815,213
--------------
TECHNOLOGY
ELECTRONICS (1.1%)
Altera Corp.
5.75% Conv. Sub. Note,
06/15/02+....................... 1,330,000 2,058,175
Applied Magnetics Corp.:
7.0% Conv. Sub., 03/15/06 ...... 1,530,000 2,708,100
7.0% Conv. Sub. Euro, 03/15/06 . 100,000 177,000
C-Cube Microsystems, Inc.
5.875% Conv., 11/01/05.......... 705,000 912,975
Checkpoint Systems, Inc.
5.25% Conv., 11/01/05+.......... 310,000 452,988
LSI Logic Corp.
5.5% Conv., 03/15/01+........... 570,000 1,251,150
Plasma & Materials
Technologies, Inc.
7.125% Conv., 10/15/01+......... 920,000 901,600
Sanmina Corporation
5.5% Conv., 08/15/02+........... 1,030,000 2,153,988
SCI Systems, Inc.
5.0%, Conv., 05/01/06........... 1,085,000 1,239,613
S3 Incorporated
5.75% Conv. Sub. Note,
10/01/03+....................... 505,000 552,975
3Com Corp.
10.25% Conv., 11/01/01+......... 865,000 1,909,488
--------------
14,318,052
--------------
TELECOMMUNICATIONS (0.2%)
Bay Networks, Inc.
5.25%, 05/15/03+................ $ 375,000 $ 338,438
BBN Corp.
6.0% Conv., 04/01/12............ 1,235,000 1,197,950
Comverse Technology, Inc.
5.75% Conv. Sub., 10/01/06+ .... 1,175,000 1,217,594
--------------
2,753,982
--------------
TOTAL TECHNOLOGY (1.3%) ........ 17,072,034
--------------
DIVERSIFIED
MISCELLANEOUS (0.1%)
Brierley Investment Ltd.
9.0% Conv. Sub. Note, 06/30/98 . 14,000 12,075
Thermo Electron Corp.
5.0% Conv. Euro, 04/15/01 ...... 845,000 1,675,213
--------------
TOTAL DIVERSIFIED (0.1%) ...... 1,687,288
--------------
TOTAL LONG-TERM DEBT SECURITIES (22.3%)
(Amortized Cost $282,739,720) .. 290,184,553
--------------
SHORT-TERM DEBT SECURITIES:
CERTIFICATES OF DEPOSIT
Canadian Imperial Bank of
Commerce
5.44%, due 03/31/97............. 25,000,000 25,009,103
Sanwa Bank Ltd.
5.495%, due 01/22/97............ 2,000,000 1,999,802
--------------
TOTAL CERTIFICATES OF DEPOSIT (2.1%) 27,008,905
--------------
COMMERCIAL PAPER
ASCC Commercial Paper:
5.34%, due 02/27/97............. 31,000,000 30,737,895
5.37%, due 03/27/97............. 700,000 691,290
Associates Corp. of North
America
5.75%, due 01/02/97............. 400,000 399,936
Dresdner U.S. Finance, Inc.
5.31%, due 04/10/97............. 5,000,000 4,927,263
Enterprise Funding Corp.
5.45%, due 03/03/97............. 5,034,000 4,989,048
Koch Industries
6.9%, due 01/02/97.............. 18,300,000 18,296,493
Morgan Stanley Group, Inc.
6.79%, due 01/02/97............. 2,900,000 2,899,453
Old Line Funding Corp.
5.5%, due 02/27/97.............. 15,200,000 15,067,632
Suntrust Banks, Inc.:
5.3%, due 03/03/97.............. 13,000,000 12,883,473
5.35%, due 03/31/97............. 10,000,000 9,869,219
--------------
TOTAL COMMERCIAL PAPER (7.7%) 100,761,702
--------------
TIME DEPOSITS
Canadian Imperial Bank of
Commerce
6.0%, due 01/02/97.............. 6,100,000 6,100,000
103
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------ ------------ --------------
Harris Trust & Savings
6.5%, due 01/02/97.............. $ 4,400,000 $ 4,400,000
Sumitomo Bank Ltd.
6.5%, due 01/02/97.............. 1,500,000 1,500,000
Toronto Dominion Bank
6.25%, due 01/02/97............. 18,400,000 18,400,000
--------------
TOTAL TIME DEPOSITS (2.3%) ..... 30,400,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (12.1%)
(Amortized Cost $158,157,826) .. 158,170,607
--------------
TOTAL INVESTMENTS (99.1%)
(Cost/Amortized Cost $1,193,558,142) 1,290,840,729
OTHER ASSETS
LESS LIABILITIES (0.9%)......... 11,274,254
--------------
NET ASSETS (100.0%).............. $1,302,114,983
==============
DISTRIBUTION OF INVESTMENTS BY GLOBAL REGION
As a Percentage of Total Investments
Canada................... 0.6%
Japan.................... 5.9
Latin America............ 0.3
New Zealand & Australia . 1.3
Scandinavia.............. 1.3
Southeast Asia........... 1.0
United Kingdom........... 2.8
United States**.......... 81.3
Other European
Countries............... 5.5
-------
100.0%
=======
- ------------
* Non-income producing.
** Includes Short-Term Debt Securities of 12.3%.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $63,744,015
or 4.9% of net assets.
(a) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at December 31, 1996.
Glossary:
ADR--American Depository Receipt
GDR--Global Depository Receipt
PDI--Past Due Interest Bond
See Notes to Financial Statements.
104
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Organization and Significant Accounting Policies
The Hudson River Trust (the "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 (the "1940 Act"), as amended, as an open-end management
investment company. The Trust issues shares of beneficial interest currently
divided among thirteen Portfolios (the "Portfolios"): Money Market,
Intermediate Government Securities, Quality Bond, High Yield, Growth and
Income, Equity Index, Common Stock, Global, International, Aggressive Stock,
Conservative Investors, Balanced and Growth Investors. Effective October 2,
1996, the Trust made available a second class of shares, Class IB, for each
of the Trust's Portfolios. In connection with the Class IB shares offering,
the existing class of shares has been redesignated Class IA. The Class IB
shares are subject to distribution fees imposed under a distribution plan
(the "Distribution Plan") adopted pursuant to Rule 12b-1 under the 1940 Act.
Under the Trust's multiple class distribution system, both classes of shares
have identical voting, dividend, liquidation, and other rights, other than
the payment of distribution fees under the Distribution Plan.
Class IA shares 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 January 1, 1997, Equitable
Variable was merged into Equitable. Class IB shares are offered to an
insurance company separate account of Equitable.
The investment objectives of each Portfolio are as follows:
Money Market Portfolio -- High level of current income, preserve its
assets and maintain liquidity. The Portfolio pursues this objective by
investing in primarily high quality U.S. dollar denominated money market
instruments.
Intermediate Government Securities Portfolio -- 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.
Quality Bond Portfolio -- High current income consistent with preservation
of capital by investing primarily in investment grade fixed income
securities. The Portfolio reserves the right to invest in convertible debt
securities, preferred stocks and dividend-paying common stocks.
High Yield Portfolio -- High return by maximizing current income and, to
the extent consistent with that objective, capital appreciation. The
Portfolio pursues 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."
Growth and Income Portfolio -- 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.
Equity Index Portfolio -- Total return before expenses that approximates
the total return performance of the Standard & Poor's Corporation 500 Index,
including reinvestment of dividends, at a risk level consistent with that of
the Index.
Common Stock Portfolio -- Long-term growth of its capital and increase
income. The Portfolio pursues this objective by investing primarily in common
stock and other equity-type instruments.
Global Portfolio -- Long-term growth of capital. The Portfolio pursues
this objective by investing primarily in equity securities of non-United
States companies as well as United States issuers.
105
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
International Portfolio -- 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.
Aggressive Stock Portfolio -- Long-term growth of capital. The Portfolio
pursues 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.
Conservative Investors Portfolio -- High total return without, in the
investment adviser's opinion, undue risk to principal. The Portfolio pursues
this objective by investing in a diversified mix of publicly traded equity
and debt securities.
Balanced Portfolio -- High return through both appreciation of capital and
current income. The Portfolio pursues this objective by investing in a
diversified portfolio of publicly traded equity and debt securities and
short-term money market instruments.
Growth Investors Portfolio -- Highest total return consistent with the
investment adviser's determination of reasonable risk. The Portfolio pursues
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 preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
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.
106
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
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.
Expenses attributable to a single Portfolio are charged to that Portfolio.
Expenses of the Trust are charged to each Portfolio in proportion to net
assets.
The Board of Trustees has approved the lending of portfolio securities,
through its custodian bank Chase Manhattan Bank, N.A. ("Chase") acting as
lending agent, to certain broker-dealers in exchange for negotiated lenders'
fees. Any such loan of portfolio securities will be continuously secured by
collateral at least equal to the value of the security loaned. All loans will
be collateralized in the form of cash or U.S. Government securities. Chase
will indemnify the Portfolios from any loss resulting from a borrower's
failure to return a loaned security when due. At December 31, 1996, the value
of securities loaned and collateral received were as follows:
VALUE OF VALUE OF
SECURITIES COLLATERAL
PORTFOLIO LOANED RECEIVED*
- ---------------------------------- ------------- -------------
Intermediate Government
Securities........................ $ 17,601,878 $ 18,301,550
Quality Bond ...................... 27,315,488 28,167,188
Growth and Income ................. 1,943,750 2,000,000
Equity Index ...................... 1,288,680 1,356,953
Common Stock ...................... 102,898,955 105,377,860
Global ............................ 69,205,867 72,320,750
International ..................... 12,267,188 12,820,136
Aggressive Stock .................. 195,608,196 200,344,604
Conservative Investors ............ 23,376,066 24,170,813
Balanced .......................... 133,571,671 138,838,707
Growth Investors .................. 88,709,978 90,833,147
- ------------
* Including U.S. Government securities valued at $919,250, $743,460 and
$1,827,086 for the Global, International and Growth Investors
Portfolios, respectively.
Chase invests the cash collateral and retains a portion of the interest
earned. During the year ended December 31, 1996, the Intermediate Government
Securities, Quality Bond, High Yield, Growth and Income, Equity Index, Common
Stock, Global, International, Aggressive Stock, Conservative Investors,
Balanced and Growth Investors Portfolios received $37,318, $27,425, $8,919,
$3,183, $1,082, $78,441, $210,691, $33,846, $405,162, $97,871, $306,462 and
$274,815, respectively, of security loan fees, net of rebates paid. Such net
fees are included in interest income in the accompanying Statements of
Operations.
107
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
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.
The Portfolios do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
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 at least 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.
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.
108
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
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:
For the year ended December 31, 1996, in conformity with Statement of
Position 93-2 Determination, Disclosure and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies, the reclassification arising from current book/tax differences
resulted in increases (decreases) to the components of net assets as follows:
</TABLE>
<TABLE>
<CAPTION>
QUALITY EQUITY
BOND HIGH YIELD INDEX COMMON STOCK GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Paid-in capital...................... $ -- $ -- $ (7,525) $ (988,124) $ (220,445)
Undistributed (overdistributed) net
investment income................... 42,229 449,873 (284,528) (8,723,430) 1,186,161
Accumulated net realized gain
(loss).............................. (42,229) (449,873) 292,053 9,711,554 (965,716)
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------ -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Paid-in capital...................... $ -- $ -- $ -- $ -- $ --
Undistributed (overdistributed) net
investment income .................. 352,064 3,794 (8,654) (35,347) 842,896
Accumulated net realized gain
(loss).............................. (352,064) (3,794) 8,654 35,347 (842,896)
</TABLE>
2. Management of the Trust
Alliance Capital Management L.P. (Alliance), a publicly traded limited
partnership, indirectly majority-owned by Equitable, is the investment
adviser. The investment advisory fees are as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY 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%
FIRST NEXT OVER
$500 MILLION $1 BILLION $1.5 BILLION
---------------- ---------------- ----------------
International Portfolio.................................... .90% .85% .80%
</TABLE>
109
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
3. Distribution Plan
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act for the Class IB shares of the Trust.
Under the Plan, the Trust pays a distribution fee to Equitable Distributors,
Inc. ("Distributor"), an indirect, wholly-owned subsidiary of the Equitable,
at an annual rate of up to 0.50% of each Portfolio's average daily net assets
attributable to Class IB shares. The Trustees currently limit payments at an
annual rate equal to 0.25% of average daily net assets attributable to its
Class IB shares. In accordance with the Plan, payments are made for services
rendered to the Trust with respect to Class IB shares regardless of the level
of expenditures incurred by the Distributor. The Plan provides that the
Distributor will use such payments for services rendered and expenses borne
in connection with activities primarily intended to result in the sale of the
Trust's Class IB shares.
4. Investment Transactions
Investment security transactions, excluding short-term debt securities,
for the Intermediate Government Securities, Quality Bond, High Yield, Growth
and Income, Equity Index, Common Stock, Global, International, Aggressive
Stock, Conservative Investors, Balanced and Growth Investors Portfolios for
the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
INTER-
MEDIATE GROWTH
GOVERNMENT QUALITY AND
SECURITIES BOND HIGH YIELD INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
COST OF PURCHASES:
Stocks and long-term corporate debt
securities ........................... $ -- $253,934,635 $781,128,281 $248,681,019
U.S. Government securities ............ 250,043,480 417,690,775 -- --
NET PROCEEDS OF SALES AND REDEMPTIONS:
Stocks and long-term corporate debt
securities ........................... -- 274,718,651 720,651,732 129,315,154
U.S. Government securities............. 227,916,328 400,265,960 -- --
</TABLE>
<TABLE>
<CAPTION>
EQUITY COMMON
INDEX STOCK GLOBAL INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
COST OF PURCHASES:
Stocks and long-term corporate debt
securities............................ $206,816,773 $3,642,874,019 $657,898,998 $145,560,889
U.S. Government securities............. -- -- -- --
NET PROCEEDS OF SALES AND REDEMPTIONS:
Stocks and long-term corporate debt
securities ........................... 43,594,778 3,133,001,586 441,217,164 38,206,577
U.S. Government securities............. -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
STOCK INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
COST OF PURCHASES:
Stocks and long-term corporate debt
securities............................ $3,743,831,253 $185,088,283 $1,502,532,357 $1,459,573,841
U.S. Government securities............. -- 288,281,378 1,071,280,407 608,182,035
NET PROCEEDS OF SALES AND REDEMPTIONS:
Stocks and long-term corporate debt
securities ........................... 3,319,337,126 135,333,021 1,618,684,625 1,138,232,981
U.S. Government securities............. -- 313,973,715 1,026,954,569 711,943,608
</TABLE>
No activity is shown for the Money Market Portfolio since it trades
exclusively in short-term debt securities.
110
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
Transactions in options written for the year ended December 31, 1996 are
summarized as follows:
<TABLE>
<CAPTION>
COMMON STOCK
PORTFOLIO
----------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------- ---------------
<S> <C> <C>
Options outstanding--January 1, 1996................ 72,400 $ 31,689,532
Options written..................................... 745,200 310,976,384
Options terminated in closing purchase
transactions....................................... (350,625) (151,830,550)
Options expired..................................... (31,650) (12,066,500)
Options exercised .................................. (274,125) (110,161,066)
----------- ---------------
Options outstanding--December 31, 1996 ............. 161,200 $ 68,607,800
=========== ===============
</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,
1996, the Quality Bond, Global, International, Conservative Investors,
Balanced 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/
QUALITY BOND PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- ------------------------------------- ---------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
Swedish Krona, expiring 01/22/97 ..... 59,511 $ 8,802,011 $ 8,764,492 $(37,519)
FOREIGN CURRENCY SALE CONTRACTS
Australian Dollars, expiring
01/28/97............................. 17,266 13,541,486 13,632,563 (91,077)
Swedish Krona, expiring 01/22/97 ..... 9,003 9,279,351 9,003,162 276,189
---------------
$147,593
===============
</TABLE>
<TABLE>
<CAPTION>
CONTRACT COST ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
GLOBAL PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- ------------------------------------------------ ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
Deutsche Marks, expiring 01/02/97-01/03/97 ..... 171 $ 109,716 $ 110,421 $ 705
FOREIGN CURRENCY SALE CONTRACTS
Deutsche Marks, expiring 01/21/97................ 20,000 13,740,113 13,368,627 371,486
Japanese Yen, expiring 03/12/97.................. 2,055,000 19,731,483 18,738,032 993,451
Netherland Guilders, expiring 01/21/97-04/28/97 55,662 33,596,109 32,897,910 698,199
---------------
$2,063,841
===============
</TABLE>
<TABLE>
<CAPTION>
CONTRACT COST ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
INTERNATIONAL PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- ----------------------------------------------- ---------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY SALE CONTRACTS
Deutsche Marks, expiring 01/21/97-04/30/97 ..... 2,600 $1,739,380 $1,714,504 $ 24,876
Japanese Yen, expiring 03/12/97................. 404,800 3,886,767 3,691,074 195,693
Netherland Guilders, expiring
01/21/97-04/28/97.............................. 7,970 4,675,150 4,642,843 32,307
---------------
$252,876
===============
</TABLE>
111
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
<TABLE>
<CAPTION>
CONTRACT COST ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
CONSERVATIVE INVESTORS PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- ------------------------------------------ ---------- ------------- --------- ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
British Pounds, expiring
01/03/97-01/07/97......................... 36 $35,639 $35,740 $101
FOREIGN CURRENCY SALE CONTRACTS
Hong Kong Dollars, expiring 01/03/97 ...... 174 22,522 22,529 (7)
Malaysian Ringgit, expiring 01/02/97 ...... 13 4,946 4,951 (5)
---------------
$ 89
===============
</TABLE>
<TABLE>
<CAPTION>
CONTRACT COST ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
BALANCED PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- --------------------------------------------- ---------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
British Pounds, expiring 01/07/97............. 146 $250,112 $250,127 $ 15
FOREIGN CURRENCY SALE CONTRACTS
Hong Kong Dollars, expiring 01/30/97 ......... 1,420 183,435 183,485 (50)
Malaysian Ringgit, expiring
01/02/97-01/06/97............................ 71 28,001 28,024 (23)
---------------
$(58)
===============
</TABLE>
<TABLE>
<CAPTION>
CONTRACT COST ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
GROWTH INVESTORS PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- ----------------------------------------------- ---------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
Japanese Yen, expiring 01/06/97................. 20,600 $ 177,939 $ 177,908 $ (31)
FOREIGN CURRENCY SALE CONTRACTS
Deutsche Marks, expiring 01/21/97-04/30/97 ..... 7,600 5,049,513 4,994,213 55,300
French Francs, expiring 01/03/97................ 600 115,196 115,418 (222)
Japanese Yen, expiring 03/12/97................. 716,700 6,881,535 6,535,060 346,475
Netherland Guilders, expiring
01/21/97-04/28/97.............................. 12,488 7,444,730 7,334,434 110,296
---------------
$511,818
===============
</TABLE>
As of December 31, 1996, 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 GROWTH
MONEY GOVERNMENT QUALITY AND
MARKET SECURITIES BOND HIGH YIELD INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Aggregate gross unrealized
appreciation ....................... $ 161,362 $ 901,616 $ 2,230,258 $ 8,181,913 $ 29,363,104
Aggregate gross unrealized
depreciation ....................... (3,841) (280,447) (69,964) (3,017,609) (1,811,069)
-------------- ------------- -------------- -------------- -------------
Net unrealized appreciation .......... $ 157,521 $ 621,169 $ 2,160,294 $ 5,164,304 $ 27,552,035
============== ============= ============== ============== =============
Federal income tax cost of
investments ......................... $450,833,231 $92,000,197 $151,122,493 $192,384,980 $204,211,023
============== ============= ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
EQUITY COMMON
INDEX STOCK GLOBAL INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation . $ 66,168,971 $1,832,534,355 $187,742,897 $ 13,964,200
Aggregate gross unrealized depreciation (3,933,846) (210,788,064) (56,564,269) (9,944,597)
-------------- -------------- -------------- ---------------
Net unrealized appreciation ............. $ 62,235,125 $1,621,746,291 $131,178,628 $ 4,019,603
============== ============== ============== ===============
Federal income tax cost of investments .. $320,809,131 $5,047,205,980 $860,653,361 $145,299,176
============== ============== ============== ===============
</TABLE>
112
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
STOCK INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation . $ 586,112,647 $ 14,217,803 $ 148,244,711 $ 136,653,070
Aggregate gross unrealized depreciation (97,924,279) (4,914,681) (34,205,650) (42,072,029)
-------------- -------------- -------------- ---------------
Net unrealized appreciation ............. $ 488,188,368 $ 9,303,122 $ 114,039,061 $ 94,581,041
============== ============== ============== ===============
Federal income tax cost of investments .. $3,402,294,383 $266,337,374 $1,513,082,539 $1,196,259,689
============== ============== ============== ===============
</TABLE>
During the year ended December 31, 1996, the Quality Bond, High Yield and
Growth and Income Portfolios utilized available capital loss carryforwards of
$395,138, $1,100,531 and $474,588, respectively.
The Intermediate Government Securities Portfolio had net capital loss
carryforwards of $9,831,366 (of which $9,349,227 expires in the year 2002 and
$482,139 expires in the year 2004) and the Quality Bond Portfolio had net
capital loss carryforwards of $4,993,809 which expires 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.
5. Capital Share Transactions
At December 31, 1996, 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 two classes, designated Class
IA and Class IB for each Portfolio.
Transactions in Shares were as follows:
<TABLE>
<CAPTION>
INTERMEDIATE
MONEY MARKET GOVERNMENT SECURITIES
PORTFOLIO PORTFOLIO
------------------------------ ----------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Class IA
Shares sold......... 49,765,857 38,608,910 3,938,806 3,178,905
Shares issued in
reinvestment of
dividends and
distributions ..... 1,878,824 1,793,866 496,768 391,277
-------------- -------------- ------------- -------------
Total shares
issued............. 51,644,681 40,402,776 4,435,574 3,570,182
Shares redeemed..... (44,125,860) (34,441,594) (2,495,957) (1,464,671)
-------------- -------------- ------------- -------------
Net increase
(decrease)......... 7,518,821 5,961,182 1,939,617 2,105,511
============== ============== ============= =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Class IA
Shares sold......... 2,872,392 2,039,780 7,067,122 4,920,577
Shares issued in
reinvestment of
dividends and
distributions ..... 1,135,383 941,017 2,737,878 1,087,864
------------- ------------- ------------- -------------
Total shares
issued............. 4,007,775 2,980,797 9,805,000 6,008,441
Shares redeemed..... (4,048,559) (1,231,693) (2,158,843) (2,047,031)
------------- ------------- ------------- -------------
Net increase
(decrease)......... (40,784) 1,749,104 7,646,157 3,961,410
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND
INCOME EQUITY INDEX COMMON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------- ---------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------ ----------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Class IA
Shares sold................... 9,026,248 5,330,789 16,152,780 12,811,615 43,446,898 32,314,046
Shares issued in reinvestment
of dividends and
distributions ............... 1,157,520 173,344 1,372,168 243,074 39,581,929 20,247,043
------------ ----------- ------------- ------------- -------------- --------------
Total shares issued........... 10,183,768 5,504,133 17,524,948 13,054,689 83,028,827 52,561,089
Shares redeemed .............. (730,115) (375,025) (4,670,841) (4,148,263) (15,634,826) (15,886,663)
------------ ----------- ------------- ------------- -------------- --------------
Net increase ................. 9,453,653 5,129,108 12,854,107 8,906,426 67,394,001 36,674,426
============ =========== ============= ============= ============== ==============
</TABLE>
113
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL AGGRESSIVE STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------------------- ---------------------------
APRIL 3,
YEAR ENDED YEAR ENDED 1995* YEAR ENDED
DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Class IA
Shares sold................... 15,536,853 15,621,046 12,450,977 2,781,575 28,813,436 24,290,758
Shares issued in reinvestment
of dividends and
distributions ............... 3,493,773 1,875,847 409,789 46,457 18,391,950 8,689,767
------------- ------------- ------------- ------------- ------------- -------------
Total shares issued........... 19,030,626 17,496,893 12,860,766 2,828,032 47,205,386 32,980,525
Shares redeemed............... (3,682,913) (4,317,611) (2,284,561) (190,166) (15,090,379) (17,101,621)
------------- ------------- ------------- ------------- ------------- -------------
Net increase ................. 15,347,713 13,179,282 10,576,205 2,637,866 32,115,007 15,878,904
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH
INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------- ---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Class IA
Shares sold................... 4,420,391 4,574,632 3,826,284 3,451,513 17,024,570 16,117,087
Shares issued in reinvestment
of dividends and
distributions ............... 1,758,154 1,178,017 11,161,085 5,393,327 9,635,249 2,104,190
------------- ----------- ------------- ------------- ------------- -------------
Total shares issued........... 6,178,545 5,752,649 14,987,369 8,844,840 26,659,819 18,221,277
Shares redeemed............... (3,042,720) (983,364) (7,431,615) (7,393,399) (1,643,924) (1,144,340)
------------- ----------- ------------- ------------- ------------- -------------
Net increase.................. 3,135,825 4,769,285 7,555,754 1,451,441 25,015,895 17,076,937
============= =========== ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET HIGH YIELD COMMON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------- -----------------
OCTOBER 2, 1996* OCTOBER 2, 1996* OCTOBER 2, 1996*
TO TO TO
DECEMBER 31, 1996 DECEMBER 31, 1996 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Class IB
Shares sold ................................................. 353,450 64,659 64,063
Shares issued in reinvestment of dividends and distributions 3,389 3,757 4,203
----------------- ----------------- -----------------
Total shares issued ......................................... 356,839 68,416 68,266
Shares redeemed.............................................. (43,566) -- --
----------------- ----------------- -----------------
Net increase ................................................ 313,273 68,416 68,266
================= ================= =================
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE STOCK GROWTH INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------- -----------------
OCTOBER 2, 1996* OCTOBER 2, 1996* OCTOBER 2, 1996*
TO TO TO
DECEMBER 31, 1996 DECEMBER 31, 1996 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Class IB
Shares sold ................................................. 16,657 16,059 26,902
Shares issued in reinvestment of dividends and distributions 486 1,035 571
----------------- ----------------- -----------------
Total shares issued ......................................... 17,143 17,094 27,473
Shares redeemed ............................................. -- -- (5)
----------------- ----------------- -----------------
Net increase ................................................ 17,143 17,094 27,468
================= ================= =================
</TABLE>
- ------------
* Commencement of operations.
114
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Concluded)
December 31, 1996
6. 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 were
affiliates during the year ended December 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
MARKET VALUE MARKET VALUE REALIZED
DECEMBER 31, PURCHASES SALES AT DECEMBER 31, DIVIDEND GAIN
1995 AT COST COST 1996 INCOME (LOSS)
-------------- ------------- ------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK PORTFOLIO:
CBL & Associates Properties,
Inc. ...................... $ 23,864,100 $ -- $ 389,999 $ 27,872,550 $1,826,496 $ 71,285
Ceridian Corp. ............. -- 147,330,475 -- 148,432,500 -- --
Chris Craft Industries, Inc.
(Class B) ................. 52,926,452 -- 699,730 49,849,843 -- 2,150,539
Essex Property Trust, Inc.
(a) ....................... 7,026,250 -- 1,419,599 8,583,375 439,632 230,986
Regency Realty Corp. ....... 13,260,075 -- 2,791,249 16,372,125 1,194,671 344,155
-------------- ------------- ------------- -------------- ------------ --------------
$ 97,076,877 $251,110,393 $3,460,799 $ 2,796,965
============== ============= ============= ============== ============ ==============
AGGRESSIVE STOCK PORTFOLIO:
Aames Financial Corp. ...... $ -- $ 42,877,524 $ -- $ 39,907,350 $ -- $ --
AK Steel Holding Corp. ..... -- 51,253,111 -- 52,554,637 143,860 --
Diamond Shamrock, Inc. (b) . 10,981,350 113,128,651 123,878,953 -- 1,074,864 791,010
DT Industries, Inc. ........ -- 20,039,150 -- 20,366,500 -- --
Evergreen Media Corp. (Class
A) ........................ -- 70,859,044 -- 62,782,500 -- --
Harman International
Industries, Inc. .......... -- 76,411,622 -- 83,281,750 62,520 --
Healthwise of America, Inc.
(c) ....................... 36,899,265 -- 21,053,272 -- -- --
Nine West Group, Inc. ...... 87,810,000 60,430,963 16,605,324 144,356,100 -- 9,981,987
Office Max, Inc. ........... 62,813,337 33,646,805 99,154,141 -- -- (11,304,560)
Playboy Enterprises, Inc.
(Class B) .................. 7,798,800 -- 7,372,638 -- -- 2,788,044
Polymer Group, Inc. ........ -- 46,201,327 -- 35,167,575 -- --
Riscorp, Inc. (Class A) .... -- 30,178,057 30,178,058 -- -- (20,701,356)
Rowan Cos., Inc. (a) ....... 40,817,325 8,147,199 7,648,972 85,646,937 -- 14,436,064
Suburban Lodges of America . -- 17,834,953 -- 15,078,400 -- --
Sun Healthcare Group, Inc. . 34,501,950 -- 60,385,693 -- -- (29,805,407)
Telephone & Data Systems,
Inc. ...................... 117,753,450 2,325,847 5,708,538 104,508,750 1,153,200 598,524
Ultramar Diamond Shamrock
Corp. (b) ................. -- 126,586,516 -- 132,338,671 -- --
United Healthcare (c) ...... -- 21,053,272 21,053,272 -- -- 13,682,853
USA Waste Services, Inc. (a) 47,349,825 61,436,395 25,853,037 109,073,062 977,490 10,711,824
Xtra Corp. ................. 50,417,750 8,070,269 -- 59,701,350 -- --
-------------- ------------- ------------- -------------- ------------ --------------
$497,143,052 $944,763,582 $3,411,934 $ (8,821,017)
============== ============= ============= ============== ============ ==============
GLOBAL PORTFOLIO:
Nelvana Ltd. (a) ........... $ 1,889,495 $ -- $ 59,767 $ 2,159,942 $ -- $ 60,876
============== ============= ============= ============== ============ ==============
</TABLE>
- ------------
(a) Holdings represented less than 5% of outstanding shares at December 31,
1996, although ownership was above 5% for a period of time during the
year.
(b) Exchanged for Ultramar Diamond Shamrock Corp.
(c) Exchanged for United Healthcare.
115
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS
December 31, 1996
SELECTED DATA FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD(C)
MONEY MARKET PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
---------------------------------------------------------- --------------
OCTOBER 2,
YEAR ENDED DECEMBER 31, 1996 TO
---------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993* 1992 1996
---------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) ... $ 10.16 $ 10.14 $ 10.12 $ 10.11 $ 10.13 $10.16
---------- ---------- ---------- ---------- ---------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.54 0.57 0.41 0.30 0.37 0.11
Net realized and unrealized gain (loss) on
investments............................... (0.01) -- -- -- (0.01) 0.01
---------- ---------- ---------- ---------- ---------- --------------
Total from investment operations........... 0.53 0.57 0.41 0.30 0.36 0.12
---------- ---------- ---------- ---------- ---------- --------------
LESS DIVIDENDS:
Dividends from net investment income ...... (0.52) (0.55) (0.39) (0.29) (0.38) (0.02)
Dividends in excess of net investment
income.................................... -- -- -- -- -- (0.10)
---------- ---------- ---------- ---------- ---------- --------------
Total dividends............................ (0.52) (0.55) (0.39) (0.29) (0.38) (0.12)
---------- ---------- ---------- ---------- ---------- --------------
Net asset value, end of period ............. $ 10.17 $ 10.16 $ 10.14 $ 10.12 $ 10.11 $10.16
========== ========== ========== ========== ========== ==============
Total return (d)............................ 5.33% 5.74% 4.02% 3.00% 3.57% 1.29%
========== ========== ========== ========== ========== ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........... $463,422 $386,691 $325,391 $248,460 $268,584 $3,184
Ratio of expenses to average net assets .... 0.43% 0.44% 0.42% 0.42% 0.43% 0.67%(b)
Ratio of net investment income to average
net assets................................. 5.17% 5.53% 4.01% 2.91% 3.63% 4.94%(b)
</TABLE>
INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO(E):
<TABLE>
<CAPTION>
CLASS IA
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993* 1992
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) ... $ 9.47 $ 8.87 $ 10.08 $ 10.53 $ 10.73
--------- --------- --------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.54 0.58 0.65 0.59 0.60
Net realized and unrealized gain (loss) on
investments............................... (0.19) 0.57 (1.08) 0.51 (0.02)
--------- --------- --------- ---------- ----------
Total from investment operations .......... 0.35 1.15 (0.43) 1.10 0.58
--------- --------- --------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ...... (0.53) (0.55) (0.78) (0.68) (0.60)
Distributions from realized gains.......... -- -- -- (0.87) (0.18)
--------- --------- --------- ---------- ----------
Total dividends and distributions ........ (0.53) (0.55) (0.78) (1.55) (0.78)
--------- --------- --------- ---------- ----------
Net asset value, end of period.............. $ 9.29 $ 9.47 $ 8.87 $ 10.08 $ 10.53
========= ========= ========= ========== ==========
Total return (d)............................ 3.78% 13.33% (4.37)% 10.58% 5.53%
========= ========= ========= ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........... $88,384 $71,780 $48,518 $158,511 $293,587
Ratio of expenses to average net assets .... 0.56% 0.57% 0.56% 0.53% 0.52%
Ratio of net investment income to average
net assets................................. 5.73% 6.15% 6.75% 5.43% 5.63%
Portfolio turnover rate..................... 318% 255% 133% 254% 316%
</TABLE>
116
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
QUALITY BOND PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------
YEAR ENDED DECEMBER 31, OCTOBER 1, 1993
---------------------------------- TO DECEMBER 31,
1996 1995 1994 1993
---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (a)...................... $9.61 $ 8.72 $ 9.82 $ 10.00
---------- ---------- ---------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................................ 0.57 0.57 0.66 0.11
Net realized and unrealized gain (loss) on investments and
foreign currency transactions............................... (0.07) 0.88 (1.16) (0.16)
---------- ---------- ---------- -----------------
Total from investment operations............................. 0.50 1.45 (0.50) (0.05)
---------- ---------- ---------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income......................... (0.60) (0.56) (0.55) (0.12)
Dividends in excess of net investment income................. (0.02) -- -- --
Distributions in excess of realized gains.................... -- -- -- (0.01)
Tax return of capital distributions.......................... -- -- (0.05) --
---------- ---------- ---------- -----------------
Total dividends and distributions............................ (0.62) (0.56) (0.60) (0.13)
---------- ---------- ---------- -----------------
Net asset value, end of period ............................... $9.49 $ 9.61 $ 8.72 $ 9.82
========== ========== ========== =================
Total return (d).............................................. 5.36% 17.02% (5.10)% (0.51)%
========== ========== ========== =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............................. $155,023 $157,443 $127,575 $104,832
Ratio of expenses to average net assets....................... 0.59% 0.59% 0.59% 0.69%(b)
Ratio of net investment income to average net assets.......... 6.06% 6.13% 7.17% 4.62%(b)
Portfolio turnover rate....................................... 431% 411% 222% 77%
</TABLE>
HIGH YIELD PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
------------------------------------------------------- --------------
OCTOBER 2,
YEAR ENDED DECEMBER 31, 1996 TO
------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993* 1992 1996
---------- ---------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) ... $ 9.64 $ 8.91 $10.08 $ 9.15 $ 8.96 $10.25
---------- ---------- --------- --------- --------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 1.02 0.98 0.89 0.94 0.89 0.19
Net realized and unrealized gain (loss) on
investments............................... 1.07 0.73 (1.17) 1.10 0.19 0.15
---------- ---------- --------- --------- --------- --------------
Total from investment operations........... 2.09 1.71 (0.28) 2.04 1.08 0.34
---------- ---------- --------- --------- --------- --------------
LESS DISTRIBUTIONS:
Dividends from net investment income ...... (0.98) (0.94) (0.88) (0.92) (0.89) (0.03)
Dividends in excess of net investment
income.................................... (0.03) (0.04) (0.01) -- -- (0.25)
Distributions from realized gains.......... (0.70) -- -- (0.19) -- (0.01)
Distributions in excess of realized gains . -- -- -- -- -- (0.29)
---------- ---------- --------- --------- --------- --------------
Total dividends and distributions.......... (1.71) (0.98) (0.89) (1.11) (0.89) (0.58)
---------- ---------- --------- --------- --------- --------------
Net asset value, end of period ............. $ 10.02 $ 9.64 $8.91 $ 10.08 $ 9.15 $10.01
========== ========== ========= ========= ========= ==============
Total return (d)............................ 22.89% 19.92% (2.79)% 23.15% 12.31% 3.32%
========== ========== ========= ========= ========= ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........... $199,360 $118,129 $73,895 $67,169 $47,687 $ 685
Ratio of expenses to average net assets .... 0.59% 0.60% 0.61% 0.63% 0.60% 0.82%(b)
Ratio of net investment income to average
net assets................................. 9.93% 10.34% 9.23% 9.52% 9.58% 8.71%(b)
Portfolio turnover rate..................... 485% 350% 248% 280% 177% 485%
</TABLE>
117
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
GROWTH AND INCOME PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
---------------------------------------------------
YEAR ENDED DECEMBER 31, OCTOBER 1, 1993
-------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
---------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (a) ............... $ 11.70 $ 9.70 $ 9.95 $10.00
---------- --------- --------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.24 0.33 0.31 0.03
Net realized and unrealized gain (loss) on investments 2.05 1.97 (0.36) (0.06)
---------- --------- --------- -----------------
Total from investment operations ...................... 2.29 2.30 (0.05) (0.03)
---------- --------- --------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.23) (0.30) (0.20) (0.02)
Dividends in excess of net investment income ......... -- -- -- (0.00)
Distributions from realized gains...................... (0.75) -- -- --
Tax return of capital distributions ................... -- -- -- (0.00)
---------- --------- --------- -----------------
Total dividends and distributions ..................... (0.98) (0.30) (0.20) (0.02)
---------- --------- --------- -----------------
Net asset value, end of period ......................... $ 13.01 $ 11.70 $ 9.70 $ 9.95
========== ========= ========= =================
Total return (d) ....................................... 20.09% 24.07% (0.58)% (0.25)%
========== ========= ========= =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...................... $232,080 $98,053 $31,522 $1,456
Ratio of expenses to average net assets................. 0.58% 0.60% 0.78% 2.70%(b)
Ratio of net investment income to average net asset ... 1.94% 3.11% 3.13% 1.12%(b)
Portfolio turnover rate ................................ 88% 65% 52% 48%
Average commission rate paid (f)........................ $0.0604 -- -- --
</TABLE>
EQUITY INDEX PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------
YEAR ENDED DECEMBER 31, MARCH 1, 1994
---------------------- TO
1996 1995 DECEMBER 31, 1994
---------- ---------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period (a) ............... $13.13 $ 9.87 $10.00
---------- ---------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.27 0.26 0.20
Net realized and unrealized gain (loss) on investments 2.65 3.32 (0.09)
---------- ---------- -----------------
Total from investment operations...................... 2.92 3.58 0.11
---------- ---------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income ................. (0.25) (0.22) (0.20)
Distributions from realized gains .................... (0.64) (0.09) (0.03)
Distributions in excess of realized gains ............ -- (0.01) (0.01)
---------- ---------- -----------------
Total dividends and distributions .................... (0.89) (0.32) (0.24)
---------- ---------- -----------------
Net asset value, end of period ......................... $15.16 $13.13 $ 9.87
========== ========== =================
Total return (d) ....................................... 22.39% 36.48% 1.08%
========== ========== =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...................... $386,249 $165,785 $36,748
Ratio of expenses to average net assets ................ 0.39% 0.48% 0.49%(b)
Ratio of net investment income to average net assets .. 1.91% 2.16% 2.42%(b)
Portfolio turnover rate ................................ 15% 9% 7%
Average commission rate paid (f)........................ $0.0306 -- --
</TABLE>
118
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
COMMON STOCK PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
-------------------------------------------------------------------- --------------
OCTOBER 2,
YEAR ENDED DECEMBER 31, 1996 TO
-------------------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993* 1992 1996
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (a)...................... $16.48 $ 13.36 $ 14.65 $ 13.49 $ 14.18 $17.90
------------ ------------ ------------ ------------ ------------ --------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ......... 0.15 0.20 0.20 0.23 0.24 0.02
Net realized and unrealized
gain (loss) on
investments and foreign
currency
transactions.................. 3.73 4.12 (0.51) 3.10 0.20 1.52
------------ ------------ ------------ ------------ ------------ --------------
Total from investment
operations.................... 3.88 4.32 (0.31) 3.33 0.44 1.54
------------ ------------ ------------ ------------ ------------ --------------
LESS DISTRIBUTIONS:
Dividends from net investment
income........................ (0.15) (0.20) (0.19) (0.23) (0.24) (0.00 )
Dividends in excess of net
investment
income........................ -- (0.02) (0.01) (0.00) -- (0.03 )
Distributions from realized
gains......................... (1.76) (0.95) (0.77) (1.94) (0.89) (0.16 )
Distributions in excess of
realized gains ............... (0.22) (0.03) -- -- -- (1.03 )
Tax return of capital
distributions ................ -- -- (0.01) -- -- --
------------ ------------ ------------ ------------ ------------ --------------
Total dividends and
distributions................. (2.13) (1.20) (0.98) (2.17) (1.13) (1.22 )
------------ ------------ ------------ ------------ ------------ --------------
Net asset value, end of period .. $18.23 $ 16.48 $ 13.36 $ 14.65 $ 13.49 $18.22
============ ============ ============ ============ ============ ==============
Total return (d)................. 24.28% 32.45% (2.14)% 24.84% 3.22% 8.49 %
============ ============ ============ ============ ============ ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ........................ $6,625,390 $4,879,677 $3,466,245 $3,125,128 $2,307,292 $1,244
Ratio of expenses to average net
assets ......................... 0.38% 0.38% 0.38% 0.38% 0.38% 0.63 %(b)
Ratio of net investment income to
average net assets ............. 0.85% 1.27% 1.40% 1.55% 1.73% 0.61 %(b)
Portfolio turnover rate ......... 55% 61% 52% 82% 71% 55 %
Average commission rate paid (f) $0.0565 -- -- -- -- $0.0565
</TABLE>
119
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
GLOBAL PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
----------------------------------------------------------- --------------
OCTOBER 2,
YEAR ENDED DECEMBER 31, 1996 TO
----------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993* 1992 1996
------------ ---------- ---------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period
(a) ................................. $15.74 $ 13.87 $ 13.62 $ 11.41 $ 11.64 $ 16.57
------------ ---------- ---------- ---------- --------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............... 0.21 0.26 0.20 0.08 0.14 0.02
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions .............. 2.05 2.32 0.52 3.58 (0.20) 0.81
------------ ---------- ---------- ---------- --------- --------------
Total from investment operations .... 2.26 2.58 0.72 3.66 (0.06) 0.83
------------ ---------- ---------- ---------- --------- --------------
LESS DISTRIBUTIONS:
Dividends from net investment
income .............................. (0.21) (0.25) (0.17) (0.15) (0.11) --
Dividends in excess of net
investment income .................. (0.08) -- -- -- -- (0.11)
Distributions from realized gains .. (0.79) (0.42) (0.28) (1.30) (0.06) (0.10)
Distributions in excess of realized
gains ............................... -- (0.03) (0.00) (0.00) -- (0.28)
Tax return of capital distributions (0.00) (0.01) (0.02) -- -- (0.00)
------------ ---------- ---------- ---------- --------- --------------
Total dividends and distributions .. (1.08) (0.71) (0.47) (1.45) (0.17) (0.49)
------------ ---------- ---------- ---------- --------- --------------
Net asset value, end of period ....... $16.92 $ 15.74 $ 13.87 $ 13.62 $ 11.41 $ 16.91
============ ========== ========== ========== ========= ==============
Total return (d) .................... 14.60% 18.81% 5.23% 32.09% (0.50)% 4.98%
============ ========== ========== ========== ========= ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ... $997,041 $686,140 $421,698 $141,257 $49,171 $ 290
Ratio of expenses to average net
assets ............................. 0.60% 0.61% 0.69% 0.84% 0.70% 0.86%(b)
Ratio of net investment income to
average net assets ................. 1.28% 1.76% 1.41% 0.62% 1.20% 0.48%(b)
Portfolio turnover rate ............. 59% 67% 71% 150% 216% 59%
Average commission rate paid (f) ..... $0.0418 -- -- -- -- $0.0418
</TABLE>
INTERNATIONAL PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
------------------------------------
APRIL 3, 1995
YEAR ENDED TO
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period (a) ............. $10.87 $10.00
----------------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .............................. 0.13 0.14
Net realized and unrealized gain on investments .... 0.94 0.98
----------------- -----------------
Total from investment operations.................... 1.07 1.12
----------------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............... (0.10) (0.07)
Dividends in excess of net investment income ....... (0.09) (0.13)
Distributions from realized gains .................. (0.25) (0.05)
----------------- -----------------
Total dividends and distributions .................. (0.44) (0.25)
----------------- -----------------
Net asset value, end of period ....................... $11.50 $10.87
================= =================
Total return (d) ..................................... 9.82% 11.29%
================= =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .................... $151,907 $28,684
Ratio of expenses to average net assets .............. 1.06% 1.03%(b)
Ratio of net investment income to average net assets 1.10% 1.71%(b)
Portfolio turnover rate .............................. 48% 56%
Average commission rate paid (f) ..................... $0.0251 --
</TABLE>
120
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
AGGRESSIVE STOCK PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
------------------------------------------------------------------- --------------
OCTOBER 2,
YEAR ENDED DECEMBER 31, 1996 TO
------------------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993* 1992 1996
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (a)...................... $35.68 $ 30.63 $31.89 $ 29.81 $ 33.82 $ 37.28
------------ ------------ ------------ ------------ ------------ --------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .......... 0.09 0.10 0.04 0.09 0.17 (0.01)
Net realized and unrealized gain
(loss) on investments ......... 7.52 9.54 (1.26) 4.91 (1.25) 0.85
------------ ------------ ------------ ------------ ------------ --------------
Total from investment operations 7.61 9.64 (1.22) 5.00 (1.08) 0.84
------------ ------------ ------------ ------------ ------------ --------------
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.09) (0.10) (0.04) (0.09) (0.18) --
Dividends in excess of net
investment income.............. (0.00) -- -- -- -- (0.02)
Distributions from realized
gains .......................... (7.33) (4.49) -- (2.75) (2.75) (0.23)
Distributions in excess of
realized gains ................ (0.02) -- -- (0.07) -- (2.04)
Tax return of capital
distributions................... -- -- (0.00) (0.01) -- --
------------ ------------ ------------ ------------ ------------ --------------
Total dividends and
distributions................... (7.44) (4.59) (0.04) (2.92) (2.93) (2.29)
------------ ------------ ------------ ------------ ------------ --------------
Net asset value, end of period .. $35.85 $ 35.68 $ 30.63 $ 31.89 $ 29.81 $ 35.83
============ ============ ============ ============ ============ ==============
Total return (d)................. 22.20% 31.63% (3.81)% 16.77% (3.16)% 2.32%
============ ============ ============ ============ ============ ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)......................... $3,865,256 $2,700,515 $1,832,164 $1,557,332 $1,210,576 $ 613
Ratio of expenses to average net
assets ......................... 0.48% 0.49% 0.49% 0.49% 0.50% 0.73%(b)
Ratio of net investment income
(loss) to average net assets ... 0.24% 0.28% 0.12% 0.28% 0.57% (0.10)%(b)
Portfolio turnover rate ......... 108% 127% 92% 89% 68% 108%
Average commission rate paid (f) $0.0263 -- -- -- -- $0.0263
</TABLE>
CONSERVATIVE INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993* 1992
----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) .... $11.52 $ 10.15 $ 11.12 $ 10.94 $ 11.29
----------- ---------- ---------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.50 0.60 0.55 0.52 0.64
Net realized and unrealized gain (loss) on
investments................................. 0.07 1.43 (1.00) 0.65 (0.01)
----------- ---------- ---------- ---------- ---------
Total from investment operations............. 0.57 2.03 (0.45) 1.17 0.63
----------- ---------- ---------- ---------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income ....... (0.51) (0.59) (0.52) (0.50) (0.62)
Dividends in excess of net investment
income...................................... -- -- -- (0.00) --
Distributions from realized gains ........... (0.27) (0.07) -- (0.49) (0.36)
Distributions in excess of realized gains ... (0.02) -- -- -- --
----------- ---------- ---------- ---------- ---------
Total dividends and distributions............ (0.80) (0.66) (0.52) (0.99) (0.98)
----------- ---------- ---------- ---------- ---------
Net asset value, end of period................ $11.29 $ 11.52 $ 10.15 $ 11.12 $ 10.94
=========== ========== ========== ========== =========
Total return (d) ............................. 5.21% 20.40% (4.10)% 10.76% 5.64 %
=========== ========== ========== ========== =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............. $282,402 $252,101 $173,691 $114,418 $70,675
Ratio of expenses to average net assets ..... 0.61% 0.59% 0.59% 0.60% 0.61%
Ratio of net investment income to average net
assets ...................................... 4.48% 5.48% 5.22% 4.49% 5.77%
Portfolio turnover rate ...................... 181% 287% 228% 178% 136%
Average commission rate paid (f) ............. $0.0488 -- -- -- --
</TABLE>
121
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
BALANCED PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993* 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) ..... $16.76 $14.87 $16.67 $16.19 $18.48
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................ 0.53 0.54 0.45 0.50 0.56
Net realized and unrealized gain (loss) on
investments................................. 1.31 2.36 (1.78) 1.46 (1.11 )
------------ ------------ ------------ ------------ ------------
Total from investment operations............. 1.84 2.90 (1.33) 1.96 (0.55 )
------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.53) (0.54) (0.44) (0.50 ) (0.55 )
Dividends in excess of net investment
income...................................... -- -- (0.03) -- --
Distributions from realized gains............ (1.40) (0.47) -- (0.95 ) (1.19 )
Distributions in excess of realized gains ... (0.03) -- -- (0.03 ) --
Tax return of capital distributions ......... -- -- (0.00) -- --
------------ ------------ ------------ ------------ ------------
Total dividends and distributions............ (1.96) (1.01) (0.47) (1.48 ) (1.74 )
------------ ------------ ------------ ------------ ------------
Net asset value, end of period ............... $16.64 $16.76 $14.87 $16.67 $16.19
============ ============ ============ ============ ============
Total return (d).............................. 11.68% 19.75% (8.02)% 12.28 % (2.85 )%
============ ============ ============ ============ ============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............. $1,637,856 $1,523,142 $1,329,820 $1,364,640 $1,076,670
Ratio of expenses to average net assets ...... 0.41% 0.40% 0.39% 0.39 % 0.40 %
Ratio of net investment income to average net
assets....................................... 3.15% 3.33% 2.87% 2.99 % 3.30 %
Portfolio turnover rate....................... 177% 186% 115% 99 % 91 %
Average commission rate paid (f) ............. $0.0516 -- -- -- --
</TABLE>
GROWTH INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
------------------------------------------------------------ --------------
OCTOBER 2,
YEAR ENDED DECEMBER 31, 1996 TO
------------------------------------------------------------ DECEMBER 31,
1996 1995 1994 1993* 1992 1996
------------ ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period
(a).................................... $17.68 $ 14.66 $ 15.61 $ 14.69 $ 15.17 $ 16.78
------------ ---------- ---------- ---------- ---------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................ 0.40 0.57 0.50 0.43 0.44 0.07
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions .............. 1.66 3.24 (0.98) 1.79 0.28 0.71
------------ ---------- ---------- ---------- ---------- --------------
Total from investment operations ..... 2.06 3.81 (0.48) 2.22 0.72 0.78
------------ ---------- ---------- ---------- ---------- --------------
LESS DISTRIBUTIONS:
Dividends from net investment income . (0.40 ) (0.54) (0.46) (0.42) (0.41) (0.02 )
Dividends in excess of net investment
income ............................. (0.03 ) (0.01) (0.01) -- -- (0.09 )
Distributions from realized gains .... (2.10 ) (0.24) -- (0.88) (0.79) (0.02 )
Distributions in excess of realized
gains ............................... (0.01 ) -- -- -- -- (0.24 )
------------ ---------- ---------- ---------- ---------- --------------
Total dividends and distributions .... (2.54 ) (0.79) (0.47) (1.30) (1.20) (0.37 )
------------ ---------- ---------- ---------- ---------- --------------
Net asset value, end of period ......... $17.20 $ 17.68 $ 14.66 $ 15.61 $ 14.69 $ 17.19
============ ========== ========== ========== ========== ==============
Total return (d)........................ 12.61 % 26.37% (3.15)% 15.26% 4.85% 4.64 %
============ ========== ========== ========== ========== ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...... $1,301,643 $896,134 $492,478 $278,467 $148,650 $ 472
Ratio of expenses to average net
assets................................ 0.57 % 0.56% 0.59% 0.62% 0.60% 0.84 %(b)
Ratio of net investment income to
average net assets.................... 2.31 % 3.43% 3.32% 2.71% 3.00% 1.69 %(b)
Portfolio turnover rate ................ 190 % 107% 131% 118% 129% 190 %
Average commission rate paid (f) ...... $0.0495 -- -- -- -- $0.0495
</TABLE>
122
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Concluded)
December 31, 1996
* 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.
(a) Date as of which funds were first allocated to the Portfolios are as
follows:
Class IA:
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
International Portfolio--April 3, 1995
Class IB:
Money Market, High Yield, Common Stock, Global, Aggressive Stock
and Growth Investors Portfolios--October 2, 1996.
(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.
(f) For fiscal years beginning on or after September 1, 1995, a portfolio
is required to disclose its average commission rate paid per share for
security trades on which commissions are charged.
123
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders 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, Growth and Income Portfolio, Equity Index
Portfolio, Common Stock Portfolio, Global Portfolio, International Portfolio,
Aggressive Stock Portfolio, Conservative Investors Portfolio, Balanced
Portfolio and Growth Investors Portfolio (constituting The Hudson River
Trust, hereafter referred to as the "Trust") at December 31, 1996, the
results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended
and the financial highlights for each of the periods presented, 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, 1996 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 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 10036
February 10, 1997
124
<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
<PAGE>
THE HUDSON RIVER TRUST
1345 Avenue of the Americas -- New York, New York 10105
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
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, 1997 relating to Class IB shares and retained for future reference. This
Statement of Additional Information relates to the Trust's Class IB shares. A
separate Statement of Additional Information relates to the Trust's Class IA
shares.
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 ... 7
Management of the Trust................................................. 21
Investment Advisory and Other Services.................................. 26
Brokerage Allocation.................................................... 28
Trust Expenses and Other Charges........................................ 30
Purchase and Pricing of Securities...................................... 30
Certain Tax Considerations.............................................. 32
Portfolio Performance................................................... 33
Other Services.......................................................... 35
Financial Statements ................................................... 38
Appendix A--Description of Commercial Paper Ratings..................... A-1
</TABLE>
- ------------------------------------------------------------------------------
HRT-SAI (5/97) Copyright 1997. 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 reorganized as a
Massachusetts business trust. Shares of each Portfolio are divided into two
classes: Class IA shares and Class IB shares. Class IA shares are offered at
net asset value pursuant to a separate Statement of Additional Information
and a related prospectus and are not subject to fees imposed under any
distribution plan. Class IB shares are offered at net asset pursuant to this
Statement of Additional Information and a related prospectus and are subject
to distribution fees imposed under a distribution plan (the "Distribution
Plan") adopted pursuant to Rule 12b-1 under the Investment Company Act. Prior
to October 1, 1996, the Trust offered only Class IA shares.
The two classes of shares are offered under the Trust's multiple class
distribution system approved by the Trust's Board of Trustees on June 7, 1996
and are designed to allow promotion of insurance products that invest in the
Trust through alternative distribution channels. Under the Trust's
multi-class system, shares of each class of a Portfolio represent an equal
pro rata interest in the assets of that Portfolio and, generally, have
identical voting, dividend, liquidation, and other rights, other than with
respect to the payment of distribution fees under the Distribution Plan.
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").
Class IB shares are sold only to an insurance company separate account of The
Equitable Life Assurance Society of the United States ("Equitable").
Currently, the Trust's shareholders of Class IA shares are 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,
regardless of whether they are affiliated with Equitable. As of March 31,
1997, Equitable owned approximately 99.7% of the Trust's outstanding Class IA
shares and all of the Trust's outstanding class IB shares and, as a result,
may be deemed to control the Trust.
As a "series" investment company, 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 Alliance Common Stock and Alliance
Money Market Portfolios are the successors to Separate Accounts I and II of
Equitable Variable Life Insurance Company, formerly a wholly owned subsidiary
of Equitable that was merged into Equitable as of January 1, 1997 ("Equitable
Variable"). (See "Description of Reorganization and Other Matters"). The
Alliance Balanced and Alliance Aggressive Stock Portfolios received their
initial funding on January 27, 1986 from Equitable Variable. The Alliance
High Yield Portfolio received its initial funding on January 2, 1987. The
Alliance Global Portfolio received its initial funding on August 27, 1987.
The Alliance Conservative Investors and Alliance Growth Investors Portfolios
received their initial funding on October 2, 1989. The Alliance Intermediate
Government Securities Portfolio received its initial funding on April 1,
1991. The Alliance Quality Bond and Alliance Growth and Income Portfolios
received their initial funding on October 1, 1993. The Alliance Equity Index
Portfolio received its initial funding on March 1, 1994. The Alliance
International Portfolio received its initial funding on April 3, 1995. The
Alliance Small Cap Portfolio is expected to receive its initial funding on
May 1, 1997.
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, 1997, 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 any class of the outstanding shares of a Portfolio.
2
<PAGE>
<TABLE>
<CAPTION>
QUALITY BOND GLOBAL
PORTFOLIO PORTFOLIO
------------------------ -----------------------
UNITS % OF UNITS % OF
OWNED PORTFOLIO OWNED PORTFOLIO
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Boatmen's Trust Co.*.......... 11,475,054 64.8
Equitable Realty Assets
Corp......................... 3,674,844 5.9
</TABLE>
[FN]
- ------------
* Boatmen's Trust Co., Trustee under Master Trust Agreement for SBC
Communications, Inc. Deferred Compensation Plans and other Executive
Benefit Plans.
CLASS IB
<TABLE>
<CAPTION>
MONEY MARKET GLOBAL COMMON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------- -------------------- ---------------------
UNITS % OF UNITS % OF UNITS % OF
OWNED PORTFOLIO OWNED PORTFOLIO OWNED PORTFOLIO
-------- ----------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
PAINE WEBBER ... 74,962 9.1 44,923 11.8 102,446 10.2
KEWPIE DUNCAN .. 49,644 6.0
JAMES AND JANET
VANDERVELD..... 20,973 5.5
RAYMOND JAMES
AND
ASSOCIATES..... 20,732 5.4 52,613 5.2
WALTER CERSKI ..
</TABLE>
(TABLE RESTUBED FROM ABOVE)
<TABLE>
<CAPTION>
GROWTH
INVESTORS AGGRESSIVE STOCK HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------- -------------------- --------------------
UNITS % OF UNITS % OF UNITS % OF
OWNED PORTFOLIO OWNED PORTFOLIO OWNED PORTFOLIO
-------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
PAINE WEBBER ... 35,907 8.5 24,603 8.1 61,490 13.1
KEWPIE DUNCAN ..
JAMES AND JANET
VANDERVELD..... 24,887 5.3
RAYMOND JAMES
AND
ASSOCIATES..... 16,121 5.7
WALTER CERSKI .. 39,664 8.4
</TABLE>
The principal addresses of Boatmen's Trust Co., Equitable Realty Asset Corp.,
Paine Webber, Kewpie Duncan, James and Janet Vanderveld, Raymond James and
Associates and Walter Cerski are 175 East Houston Street, San Antonio, Texas,
9000 Central Park Avenue, Atlanta, Georgia, 1200 Harbor Boulevard, Union
City, New Jersey, P.O. Box 122, Aspermont, Texas, 1042 Willow Creek Road,
Prescott, Arizona, 880 Carillon Parkway, St. Petersburg, Florida, and 15165
Chamisal Drive, Chesterfield, Missouri, respectively.
Were such a substantial 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.
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. The Trust has agreed to be bound by the procedures
set forth in Section 16(c) of the Investment Company Act, and accordingly,
shareholders of record of not less than two-thirds of the outstanding shares
of the Trust (including both Class IA and Class IB shares) 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 by the Trust 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.
3
<PAGE>
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.
At a meeting held on April 9, 1997, the shareholders of the Trust approved
the amendment and restatement of the Trust's Agreement and Declaration of
Trust. On April 16, 1997 the Agreement and Declaration of Trust was amended
and restated, and filed with the office of the Secretary of the Commonwealth
of Massachusetts.
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 Alliance 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 Alliance High Yield and Alliance
Intermediate Government Securities Portfolios. 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
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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
holdings in that industry exceed 25% of the Portfolio's assets. However, this
restriction does not apply to investments by the Alliance 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 the collateral underlying the repurchase agreements consists
exclusively of U.S. Government securities and such repurchase agreements are
fully collateralized.
Further, as a matter of operating policy, the Alliance 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
Alliance 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
Alliance 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
its total assets, at the time a Second Tier Security is 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 net 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 Alliance Global and Alliance International Portfolios may
trade in foreign exchange without limitation in connection with their
foreign currency hedging strategies; and the Alliance High Yield,
Alliance Quality Bond, Alliance Growth and Income, Alliance Conservative
Investors, Alliance Balanced, Alliance Common Stock, Alliance Aggressive
Stock, Alliance Growth Investors and Alliance Small Cap Growth
Portfolios may trade in foreign exchange in connection with their
foreign currency hedging strategies, provided the amount of foreign
exchange underlying such 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
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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 that the Portfolios (other than the Alliance 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 APPLICABLE TO THE ALLIANCE COMMON STOCK,
ALLIANCE BALANCED, ALLIANCE AGGRESSIVE STOCK AND ALLIANCE CONSERVATIVE
INVESTORS PORTFOLIOS
The Alliance Common Stock, Alliance Balanced, Alliance Aggressive Stock and
Alliance 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.
ADDITIONAL INVESTMENT RESTRICTIONS APPLICABLE TO THE ALLIANCE MONEY MARKET
PORTFOLIO
The Alliance 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 Alliance 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 APPLICABLE TO THE ALLIANCE HIGH YIELD AND
ALLIANCE GROWTH INVESTORS PORTFOLIOS
The Alliance High Yield and Alliance 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 ("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 (A) fixed income
securities which, in the opinion of the Trust's
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investment adviser, have similar characteristics to securities which are
rated B3 or higher by Moody's or B-or higher by S&P, or (B) 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 Alliance 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 debt instruments 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 the Portfolio's holding period.
Repurchase agreements may exhibit 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 U.S. Government obligations,
certificates of deposit, or bankers' acceptances with registered
broker-dealers, U.S. Government securities dealers or domestic banks whose
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% (10%, in the
case of the Alliance Money Market Portfolio) of the Portfolio's net assets
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 Alliance
considers 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
liquid assets 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.
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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 a 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, 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 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).
WARRANTS
All the Portfolios, except the Alliance 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 in parallel with 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 Alliance Intermediate Government Securities and
Alliance Equity Index Portfolios, may invest in foreign securities. Each of
the Alliance Common Stock, Alliance Balanced, Alliance Quality Bond, Alliance
Aggressive Stock and Alliance Small Cap Growth 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 Alliance
Money Market Portfolio may invest up to 20% of its assets in foreign money
market instruments denominated in U.S. dollars. The Alliance Conservative
Investors Portfolio may invest up to 15% of its assets in foreign securities,
the Alliance Growth Investors Portfolio may invest up to 30% of its assets in
foreign securities, and the Alliance Growth and Income Portfolio may invest
up to 25% of its assets in foreign securities. The Alliance High Yield
Portfolio may purchase foreign securities, provided the value of issues
denominated in foreign currencies shall not exceed 20% of the Portfolio's
total assets and the value of issues denominated in U.S. 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 a foreign currency changes with fluctuations in 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.
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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 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 Alliance 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
mortgage-backed securities issued by the U.S. 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 Alliance 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,
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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 loan institutions, 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 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 Alliance 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. Alliance 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 Alliance 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 retail installment loans, leases or revolving credit receivables
are subject to prepayment, which may reduce the overall return to certificate
holders. Certificate holders may also experience delays
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in payment on the certificates if the full amounts due on underlying retail
installment loans, leases or revolving credit receivables are not realized by
the Trust because of unanticipated legal or administrative costs of enforcing
the contracts, retail installment loans, leases or revolving credit
receivables or because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, retail installment loans, leases or
revolving credit receivables 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 U.S. 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, 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
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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.
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
U.S. or foreign banks payable in U.S. dollars are known as Eurodollar
deposits. Eurodollar securities also include 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 U.S. and
foreign banks are subject to 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.
U.S. 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 U.S. 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 Alliance High Yield Portfolio, as described in the Prospectus, intends to
invest primarily in debt securities offering high current income. The
Alliance Growth Investors Portfolio may invest up to 15% of its total assets
in such high yield debt securities, and the Alliance 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 Alliance 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 risks associated with acquiring the securities of such issuers generally
are 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, 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.
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The Alliance High Yield, Alliance Growth and Income and Alliance 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 exists, it may be 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.
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 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 securities 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 Alliance'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 and quality of management, its sensitivity to
economic conditions and trends, its operating history 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 Alliance 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.
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OPTIONS ON SECURITIES
Writing Call Options. Each Portfolio, other than the Alliance Money Market
and Alliance 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 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 liquid
securities having a value equal to or greater than the exercise price of the
option.
The Portfolios, except the Alliance Money Market and Alliance 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.
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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 Alliance Money Market and
Alliance 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 purchased.
SECURITIES INDEX OPTIONS
The Portfolios, except the Alliance Money Market and Alliance 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 liquid securities 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 included in the index. For example, some securities index options
are based on a broad market index such as the S&P 500 or the New York Stock
Exchange ("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; NYSE; 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. The
principal risk of purchasing securities index options 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.
The principal risk of writing securities index options 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.
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OVER-THE-COUNTER OPTIONS
Options traded in the over-the-counter market may not be as actively traded
as those traded 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, in the
opinion of Alliance, 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 Portfolios
have established standards of creditworthiness for these primary dealers, the
Portfolios may still be subject to the risk that firms participating in such
transactions will fail to meet their obligations. With respect to agreements
concerning the over-the-counter options a Portfolio has written, the
Portfolio will 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 Alliance 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 Commodity Futures Trading Commission
("CFTC").
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 may be 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 Alliance Money Market, Alliance Equity Index and
Alliance Intermediate Government Securities 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 in 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 in part, by gains on futures
contracts purchased by a Portfolio. In order to achieve desired asset mix
parameters, the Alliance Conservative Investors and Alliance 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 Alliance
Conservative Investors and Alliance 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. In the case of the Alliance
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
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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.
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 futures contract 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
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 Alliance Money Market Portfolio, may
also purchase and write exchange-traded call and put options on futures
contracts 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 liquid securities 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 the 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 so long as the Portfolio is obligated as the
writer of the call, the Portfolio owns 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
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account, while the loss suffered by the writer of the option will be debited
to its futures margin 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.
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, except the Alliance
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 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
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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.
FOREIGN CURRENCY OPTIONS, FOREIGN CURRENCY FUTURES CONTRACTS AND OPTIONS ON
FUTURES
The Portfolios, other than the Alliance Money Market, Alliance Intermediate
Government Securities and Alliance 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 currencies or on foreign
currency futures contracts only if they are "covered." A put option 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 liquid assets equal at all times to the aggregate exercise price of
the put. A call option on a foreign currency or on a foreign currency futures
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.
Although the purchase of an option on foreign currency may constitute an
effective hedge against fluctuations in exchange rates in the event of
exchange 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, thus 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.
19
<PAGE>
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 foreign currency exchange rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
When a Portfolio invests in foreign securities, the securities are usually
denominated in a 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 U.S. dollar. To control
the effects of this exchange risk, all of the Portfolios, except the Alliance
Money Market, Alliance Equity Index and Alliance Intermediate Government
Securities 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 fix the U.S. 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 U.S. 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 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. The Portfolios will only enter
forward currency contracts with counter parties that, in the opinion of
Alliance do not present undue credit risk.
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 involves
certain risks. A lack of correlation between the index or instrument
underlying an option or futures contract and the assets or liabilities 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 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. Accordingly, a
Portfolio may be required to maintain a position until exercise or
expiration, which could result in losses. If, in the event of an adverse
movement, the Portfolio could not close a futures position, it would be
required to continue to make daily cash payments of variation margin. If a
Portfolio could not close an option position, an option holder would be able
to realize profits or limit losses only by exercising the 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 or offset 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 and/or securities price
movements, as well as on the expense of hedging.
20
<PAGE>
MANAGEMENT OF THE TRUST
As of March 31, 1997, 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, ADDRESS AND AGE PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ---------------------- --------------------------------------------
<S> <C>
*John D. Carifa (52)................... President, Chief Operating Officer and a Director of ACMC;
Alliance Capital Management L.P. Chairman and Chief Executive Officer of Alliance's Mutual Fund
1345 Avenue of the Americas Division. Currently a Director and Trustee of all other
New York, NY 10105 registered investment companies (the "Alliance Mutual Funds")
sponsored by Alliance, and Director of Frontier Trust Company, a
subsidiary of Equitable.
Richard W. Couper (74)................ President Emeritus of the Woodrow Wilson National Fellowship
The Burke Library Foundation and President Emeritus of the New York Public
Hamilton College Library.
P.O. Box 345
Clinton, NY 13323-0345
Brenton W. Harries (69)............... Director of Enhance Reinsurance Co. since December 1986. Mr.
14 Point Road Harries 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)(67) ..... Currently a consultant specializing in retailing, finance and
200 East 57th Street real estate. Former Chairman and Chief Executive Officer of
Penthouse D Brooks Fashion Stores, Inc. (specialty clothing stores); Former
New York, NY 10022 Chairman, President and Chief Operating Officer of Allied Stores
Corporation (department and specialty stores), 1987; Executive
Vice President and Director, Allied Stores Corporation from June
1984 to June 1987.
William L. Mannion (66)............... Retired. Former Group Senior Vice President of Operations of
45 Bonnie Way American Ultramar Limited until December, 1986; President and
Allendale, NJ 07401 Chief Executive Officer of Tittston Petroleum, Inc., from
January 1978 to July 1985; Director of the East Jersey Railroad
and the Bayonne Terminal Warehouse from July 1978 to May 1983.
Alton G. Marshall (75)................ Senior Fellow, Nelson A. Rockefeller Institute of Government
136 E. 79th Street since January 1991. President of Alton G. Marshall Associates,
New York, NY 10021 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.
21
<PAGE>
<CAPTION>
NAME, ADDRESS AND AGE PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ---------------------- --------------------------------------------
<S> <C>
Clifford L. Michel (57)............... Partner of the law firm of Cahill Gordon & Reindel since January
St. Bernard's Road 1972. President, Chief Executive Officer and Director of Wenonah
Gladstone, NJ 07934 Development Company (investment holding company) since 1976.
Director since 1987 and Member of the Human Resources,
Environmental and Safety, and Executive Committees since 1987 of
Placer Dome Inc. (mining). Director, Faber-Castell Corporation
from 1988-1994 (writing instruments). President of Board of
Trustees of St. Mark's School from 1988 to 1993. Chairman of the
Board of Trustees of Morristown Memorial Hospital (and Memorial
Health Foundation) from 1991 to 1996. Director, Vice Chairman
and Treasurer of Atlantic Health Systems, Inc. and Atlantic
Hospital since 1996.
*Peter D. Noris (41)................... Executive Vice President (since May 1995) and Chief Investment
The Equitable Life Assurance Officer of Equitable (since July 1995); Executive Vice
Society of the United States President, The Equitable Companies Incorporated ("Equitable
787 Seventh Avenue Companies")(since May 1995); Director of Alliance Capital
New York, NY 10019 Management Corporation ("ACMC"), the general partner of
Alliance, since July 1995. Prior thereto, Vice President of
Salomon Brothers Inc., from 1992 to 1995. Principal of Morgan
Stanley & Co. Inc., from 1984 to 1992.
Donald J. Robinson (62)............... Senior Partner of the law firm of Orrick, Herrington & Sutcliffe
599 Lexington Avenue from July 1987 to December 1994; Member of the Executive
New York, NY 10022 Committee of the firm from January to December 1994; Senior
Counsel of the firm since January 1995. Trustee of the Museum of
the City of New York from 1977 to 1995.
</TABLE>
*Trustees Carifa and Noris 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 and
director of ACMC and Alliance. Mr. Noris is deemed an "interested person" of
the Trust by virtue of his position as an officer of Equitable and a director
of ACMC.
Trustees Couper, Harries and Robinson are trustees (but not "interested
persons") of The Alliance Portfolios, a mutual fund. Trustee Robinson is also
a director or trustee (but not an "interested person") of 37 other mutual
funds advised by Alliance. 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.
Trustee Michel is a director or trustee (but not an "interested person") of
37 other mutual funds advised by Alliance. Trustee Hassler is a director (but
not an "interested person") of Alliance Real Estate Investment Fund, Inc.
COMMITTEES OF THE BOARD
The Trust has a standing audit committee consisting of Trustees Mannion,
Couper, Harries, Hassler, Marshall, Michel and Robinson. 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.
22
<PAGE>
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 Noris. 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, Michel
and Robinson. The conflicts committee's function is to take any action
necessary to resolve conflicts among shareholders.
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION FROM
AGGREGATE RETIREMENT THE ALLIANCE FUND
COMPENSATION BENEFITS ACCRUED ESTIMATED ANNUAL COMPLEX,
FROM THE AS PART OF TRUST BENEFITS UPON INCLUDING THE
TRUSTEE TRUST EXPENSES RETIREMENT TRUST(1)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John D. Carifa $ -0- $-0- $-0- $ -0-
- ------------------------------------------------------------------------------------------
Richard W. Couper $59,000(2) $-0- $-0- $ 85,000
- ------------------------------------------------------------------------------------------
Brenton W. Harries $59,000 $-0- $-0- $ 86,000
- ------------------------------------------------------------------------------------------
Howard E. Hassler $85,000 $-0- $-0- $ 86,750
- ------------------------------------------------------------------------------------------
William L. Mannion $66,000(2) $-0- $-0- $ 66,000
- ------------------------------------------------------------------------------------------
Alton G. Marshall $61,000 $-0- $-0- $134,500
- ------------------------------------------------------------------------------------------
Clifford L. Michel(3) $20,068 $-0- $-0- $146,068
- ------------------------------------------------------------------------------------------
Peter D. Noris $ -0- $-0- $-0- $ -0-
- ------------------------------------------------------------------------------------------
Donald J. Robinson $63,000(2) $-0- $-0- $137,250
- ------------------------------------------------------------------------------------------
<FN>
- ------------
(1) As of December 31, 1996, there were 110 investment companies in the Alliance Fund Complex.
(2) Completely deferred.
(3) Appointed as Trustee on October 16, 1996.
</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 $29,000, plus an additional fee of $4,000 per board meeting and $2,000 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 $7,000. 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, 1996 the Trust paid total retainer and
meeting fees of $413,068 (including deferrals of $188,000).
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.
23
<PAGE>
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 AND AGE POSITION WITH TRUST PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
------------ ------------------- -------------------------------------------
<S> <C> <C>
Mark D. Gersten (46) Treasurer and Chief Financial Senior Vice President, Alliance Fund
Officer Services, Inc. ("AFS"), with which he has
been associated since prior to 1991.
Thomas R. Manley (45) Controller and Chief Vice President, ACMC (May 1996 to present);
Accounting Officer Assistant Vice President, ACMC (July 1993 to
May 1996); Assistant Vice President,
Equitable Capital Management Corporation
("ECMC")(March 1991 to July 1993).
Bruce Calvert (50) Vice President Vice Chairman and Chief Investment Officer
of ACMC, with which he has been associated
since prior to 1991.
Kathleen A. Corbet (37) 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 (52) 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).
Wayne D. Lyski (55) Vice President Executive Vice President, ACMC, with which
he has been associated since prior to 1991.
24
<PAGE>
<CAPTION>
NAME AND AGE POSITION WITH TRUST PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
------------ ------------------- -------------------------------------------
<S> <C> <C>
Michael S. Martin (50) Vice President Senior Vice President, Equitable (June 1985
to present); Chairman, EQF (May 1992 to
present); Chief Executive Officer, EQF
(January 1994 to present); formerly, Vice
President, Equitable Variable (May 1996 to
December 1996); Chairman and Chief Executive
Officer, EquiSource of New York (January
1992 to October 1994) and Frontier (April
1992 to October 1994); Vice President and
Treasurer, Equitable Distributors, Inc.
(August 1993 to February 1995). Director of
several Equitable-affiliated companies.
Samuel B. Shlesinger (49) Vice President Senior Vice President, Equitable (November
1986 to present); Senior Vice President,
Equitable Variable (February 1988 to
December 1996); President and Chief
Executive Officer, Equitable of Colorado
(October 1985 to present).
Alden M. Stewart (51) Vice President Executive Vice President, ACMC (July 1993 to
present); ECMC since prior to 1991.
Edmund P. Bergan, Jr. (46) Secretary Senior Vice President and General Counsel,
AFD, with which he has been associated since
prior to 1991.
</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. Alliance's principal executive officer is Dave H.
Williams, its Chairman and Chief Executive Officer.
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, 1996, ACMC, Inc. and Equitable Capital
Management Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, owned in the aggregate approximately 57% of the issued and
outstanding units representing assignments of beneficial ownership of limited
partnership interests in the Adviser ("Units"), and approximately 33% and 10%
of the Units were owned by the public and employees of the Adviser and its
subsidiaries, respectively, calculated. 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. The principal offices of Alliance are located at
1345 Avenue of the Americas, New York, New York 10105.
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 and 1290 Avenue of the Americas, New York, New York 10019,
respectively.
AXA, a French insurance holding company, currently owns approximately 63.9%
of the outstanding voting shares of common stock of The Equitable Companies.
As a majority shareholder of 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 holding
company for an international group of insurance and related financial
services companies. AXA is the eleventh largest insurance group in the world
based on worldwide revenues in 1994 and the second largest French insurance
group based on worldwide gross premiums in 1994. AXA is also engaged in asset
management, investment banking, securities trading and financial services
activities principally in the United States, as well as in Western Europe and
the Asia Pacific area.
ADVISORY AGREEMENT
The 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 NEXT NEXT
$750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
-------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Alliance Conservative Investors .475% .425% .375% .350% .325%
Alliance Balanced .............. .450% .400% .350% .325% .300%
Alliance Growth Investors ..... .550% .500% .450% .425% .400%
Alliance Common Stock .......... .475% .425% .375% .355% .345%
Alliance Global ................ .675% .600% .550% .530% .520%
Alliance Aggressive Stock ..... .625% .575% .525% .500% .475%
Alliance Small Cap Growth ...... .900% .850% .825% .800% .775%
Alliance Money Market .......... .350% .325% .300% .280% .270%
Alliance Intermediate
Government Securities ......... .500% .475% .450% .430% .420%
Alliance High Yield ............ .600% .575% .550% .530% .520%
Alliance Growth and Income .... .550% .525% .500% .480% .470%
Alliance Quality Bond .......... .525% .500% .475% .455% .445%
Alliance Equity Index .......... .325% .300% .275% .255% .245%
Alliance International ......... .900% .825% .800% .780% .770%
</TABLE>
- ------------
* On assets in excess of $10 billion, the management fee for the Alliance
Common Stock Portfolio is reduced to 0.335% of average daily net
assets.
Because of undertakings made by Equitable Variable in connection with the
Reorganization, Equitable reimburses the Alliance Common Stock and Alliance
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 reimburses the Alliance High Yield,
Alliance Aggressive Stock and Alliance 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 Alliance Common Stock, Alliance Money Market and
Alliance 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 Alliance Aggressive Stock Division for the portion
that exceeds a .41% effective rate. Policies sold by insurers other than
Equitable and newer policy designs of Equitable bear the advisory fees
without adjustment. For a discussion of the Reorganization, see "General
Information," above.
In 1996, the Trust paid advisory fees of $59,901,466 to Alliance. In 1995,
the Trust paid advisory fees of $40,636,168 to Alliance. In 1994, the Trust
paid advisory fees of $31,614,475 to Alliance.
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 Agreement and
Declaration of Trust, By-laws, Prospectus and Statement of Additional
Information from time to time in effect. In connection therewith, Alliance
provides investment research and supervision of the Trust's
27
<PAGE>
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.
At the Trust's request, Alliance provides, without charge, personnel, who may
be the Trust's officers, to render such clerical, administrative and other
services, other than investor services or accounting services, to the Trust
and also furnishes to the Trust, without charge, such office facilities,
which may be Alliance's own offices, as may be required to perform its
investment advisory and portfolio management services. 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 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.
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
28
<PAGE>
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.
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 Alliance 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 Alliance 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 Alliance Money Market Portfolio transactions will generally
be with issuers or market makers where no commissions are charged. 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. In 1995 the Trust paid an aggregate of $21,329,056 in
brokerage commissions of which $18,468,344 was paid to brokers relating to
transactions aggregating $8,928,306,482 which were directed to them in part
for research services provided by them. In 1996 the Trust paid an aggregate
of $27,895,553 in brokerage commissions of which $25,576,822 was paid to
brokers relating to transactions aggregating $12,956,909,742 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
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<PAGE>
of securities in a public offering, if such securities are underwritten by
DLJ or its affiliates. During the years ended December 31, 1994 and December
31, 1995, the Trust paid no brokerage commissions to DLJ, and during the
fiscal year ended December 31, 1996, the Trust paid $2,500 to Autranet, Inc.,
an affiliate of DLJ, in accordance with the procedures described above.
TRUST EXPENSES AND OTHER CHARGES
Pursuant to the Trust's Investment Advisory Agreement, the Trust is obligated
to pay all of the its operating expenses not specifically assumed by
Alliance. A daily adjustment will be made in the values under certain
Contracts outstanding and offered by Equitable when the management separate
accounts of Equitable and Equitable Variable 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 bear such expenses
without adjustment. Although Equitable do not expect the Trust to incur any
federal income or excise tax liability (see "Dividends, Distributions and
Taxes" in the Prospectus), Equitable reserves the right to exclude any such
taxes from such adjustments.
The expenses borne by the Trust include or could include taxes; brokerage
commissions; interest charges; securities lending fees; fees and expenses of
the registration or qualification of a Portfolio's securities under federal
or state securities laws; fees of the Portfolio's custodian, transfer agent,
independent accountants, and legal counsel; all expenses of shareholders' and
trustees' meetings; all expenses of the preparation, typesetting, printing
and mailing to existing shareholders of prospectuses, prospectus supplements,
statements of additional information, proxy statements, and annual and
semi-annual reports; any proxy solicitor's fees and expenses; costs of
fidelity bonds and Trustees' liability insurance premiums as well as
extraordinary expenses such as indemnification payments or damages awarded in
litigation or settlements made; any membership fees of the Investment Company
Institute and similar organizations; costs of maintaining the Trust's
corporate existence and the compensation of Trustees who are not directors,
officers, or employees of Alliance or its affiliates.
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 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
30
<PAGE>
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 NYSE 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. (Eastern time) close respectively of the NYSE and the
Options Price Reporting Authority; for bonds the close of trading 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 generally 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 held by the Money Market Portfolio which
mature in 60 days or less are valued at amortized cost, which
approximates market value. Short-term debt securities held by 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.
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.
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<PAGE>
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 for assistance in valuing the assets of the Trust. Alliance
will continuously monitor the performance of such pricing 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,
1996 only the Alliance 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 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;
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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 U.S. 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
Investment operations commenced with respect to Class IB shares of the
Alliance Aggressive Stock, Alliance Common Stock, Alliance Growth Investors,
Alliance Global, Alliance High Yield and Alliance Money Market Portfolios on
October 2, 1996.
At any time in the future, yields and total returns may be higher or lower
than past yields or returns and there can be no assurance that any historical
results will continue. All returns assume reinvestment of distributions at
net asset value and represent past performance; they do not guarantee future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ALLIANCE MONEY MARKET PORTFOLIO YIELD
The Alliance 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 Alliance 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 Alliance 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.
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Alliance 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 Alliance Money Market Portfolio, maturities and rates of return on
investments, among other factors. In addition, the value of shares of the
Alliance Money Market Portfolio will fluctuate and not remain constant.
The Alliance 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 Alliance
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 Alliance Money Market Portfolio yield also does not reflect insurance
company charges and fees applicable to Contracts.
The seven-day current yield for Class IB shares of the Alliance Money Market
Portfolio was 4.93% for the period ended December 31, 1996. The effective
yield for that period was 5.02%.
ALLIANCE QUALITY BOND, ALLIANCE INTERMEDIATE GOVERNMENT SECURITIES AND
ALLIANCE HIGH YIELD PORTFOLIO YIELDS
Yields of the Alliance Quality Bond, Alliance Intermediate Government
Securities and Alliance 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.
The 30-day yield for Class IB shares of the Alliance High Yield Portfolio for
the period ended December 31, 1996 was 10.42%.
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. These total returns do not reflect insurance company charges
and fees applicable to the Contracts.
The cumulative total return through December 31, 1996 for Class IB shares of
the Alliance Common Stock Portfolio since October 2, 1997 was 8.49%.
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The cumulative total return through December 31, 1996 for Class IB
shares of the Alliance High Yield Portfolio since October 2, 1996 was 3.32%.
The cumulative total return through December 31, 1996 for Class IB
shares of the Alliance Global Portfolio since October 2, 1996 was 4.98%.
The cumulative total return through December 31, 1996 for Class IB
shares of the Alliance Aggressive Stock Portfolio since October 2, 1996 was
2.32%, respectively.
The cumulative total return through December 31, 1996 for Class IB
shares of the Alliance Growth Investors Portfolio since October 2, 1996 was
4.64%, respectively.
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.
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OTHER SERVICES
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036,
serves as the Trust's independent accountant. The financial statements of the
Alliance Common Stock, Alliance Money Market, Alliance Balanced, Alliance
Aggressive Stock, Alliance High Yield, Alliance Global, Alliance Conservative
Investors, Alliance Growth Investors, Alliance Intermediate Government
Securities, Alliance Quality Bond, Alliance Growth and Income, Alliance
International and Alliance Equity Index Portfolios for the year ended
December 31, 1996, which are included in this SAI, have been audited by Price
Waterhouse LLP, the Trust's independent accountant 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, 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, 1996, Equitable received no
compensation for providing such services for the Trust.
UNDERWRITER
The Trust has a distribution agreement with Equitable Distributors, Inc. (the
"Class IB Distributor"), an indirect wholly-owned subsidiary of Equitable and
an affiliate of Alliance, in respect of the Class IB shares. The address for
the Class IB Distributor is 787 Seventh Avenue, New York, New York 10019.
The Trust's distribution agreement in respect of Class IB shares dated July
8, 1996 (the "Class IB Underwriting Agreement"), will remain in effect until
July 8, 1997, and from year to year thereafter only if its continuance is
approved annually by (1) a majority of the Trustees who are not parties to
such agreement or "interested persons" (as defined in the Investment Company
Act) of the Trust or a Portfolio and who have no direct or indirect financial
interest in the operation of the distribution plan adopted under Rule 12b-1
of the Investment Company Act (the "Distribution Plan") or any such related
agreement (the "Independent Trustees") and (2) either by vote of a majority
of the Trustees or a majority of the outstanding voting securities of the
Trust.
The Class IB Distributor will pay for printing and distributing prospectuses
or reports prepared for its use in connection with the offering of the Class
IB shares to prospective investors and preparing, printing and mailing any
other literature or advertising in connection with the offering of the Class
IB shares to prospective investors. The Class IB Distributor will pay all
fees and expenses in connection with its qualification and registration as a
broker or dealer under Federal and state laws and of any activity which is
primarily intended to result in the sale of Class IB shares issued by the
Trust, unless the Distribution Plan in effect for Class IB shares provides
that the Trust or another entity shall bear some or all of such expenses.
As agent, the Class IB Distributor currently offers shares of each Portfolio
on a continuous basis to the separate accounts of insurance companies
offering the Contracts in all states in which the Portfolio or the
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Trust may from time to time be registered or where permitted by applicable
law. The Class IB Underwriting Agreement provides that the Class IB
Distributor accepts orders for shares at net asset value without sales
commission or load being charged. The Class IB Distributor has made no firm
commitment to acquire shares of any Portfolio.
A description of the Distribution Plan and related services and fees
thereunder is provided in the prospectus. On June 7, 1996, the Board of
Trustees of the Trust unanimously approved the Distribution Plan. In
connection with its consideration of the Distribution Plan, the Board of
Trustees was furnished with drafts of the Distribution Plan and the related
materials, including information related to the advantages and disadvantages
of Rule 12b-1 plans currently being used in the mutual fund industry
generally and with other competing funding vehicles for variable annuity and
variable life contracts. Legal counsel for the Independent Trustees provided
additional information, summarized the provisions of the proposed
Distribution Plan and discussed the legal and regulatory considerations in
adopting such Distribution Plan.
The Board considered various factors in connection with its decision as to
whether to approve the Distribution Plan, including (a) the nature and causes
of the circumstances which make implementation of the Distribution Plan
necessary and appropriate; (b) the way in which the Distribution Plan would
address those circumstances, including the nature and potential amount of
expenditures; (c) the nature of the anticipated benefits; (d) the possible
benefits of the Distribution Plan to any other person relative to those of
the Trust; (e) the effect of the Distribution Plan on existing owners of
variable annuity contracts and variable life insurance policies; (f) the
merits of possible alternative plans or pricing structures; (g) competitive
conditions in the variable products industry; and (h) the relationship of the
Distribution Plan to other distribution efforts of the Trust.
Based upon its review of the foregoing factors and the materials presented to
it, and in light of its fiduciary duties under relevant state law and the
Investment Company Act, the Board determined, in the exercise of its business
judgment, that the Distribution Plan is reasonably likely to benefit the
Trust and the shareholders of its Portfolios.
The Board realizes that there is no assurance that the expenditure of Trust
assets to finance distribution of Class IB shares of the Trust will have the
anticipated results. However, the Board believes there is a reasonable
likelihood that one or more of such benefits will result, and since the Board
will be in a position to monitor the distribution expenses of the Class IB
shares of the Trust, it will be able to evaluate the benefit of such
expenditures in deciding whether to continue the Distribution Plan.
The Distribution Plan and any Rule 12b-1 related agreement that is entered
into by the Trust or the Class IB Distributor in connection with the
Distribution Plan will continue in effect for a period of more than one year
only so long as its continuance is specifically approved at least annually by
a vote of a majority of the Trust's Board of Trustees, and of a majority of
the Independent Trustees, cast in person at a meeting called for the purpose
of voting on the Distribution Plan, or the Rule 12b-1 related agreement, as
applicable. In addition, the Distribution Plan and any Rule 12b-1 related
agreement may be terminated as to Class IB shares of a Portfolio at any time,
and in the case of any Rule 12b-1 related agreement, upon 60 days' written
notice, without penalty, by vote of a majority of the outstanding Class IB
shares of that Portfolio or by vote of a majority of the Independent
Trustees. The Distribution Plan also provides that it may not be amended to
increase materially the amount (to more than .50% of average daily net assets
annually) that may be spent for distribution of Class IB shares of a
Portfolio without the approval of Class IB shareholders of that Portfolio.
The Trustees currently limit payments under the Distribution Plan to .25% of
a Portfolio's aggregate average daily net assets attributable to the Class IB
shares. The Distribution Plan provides that a portion of the distribution
services fee in an amount not to exceed .25% of the aggregate average daily
net assets of a Portfolio attributable to Class IB shares constitutes a
service fee that the Class IB Distributor will use for personal service
and/or the maintenance of shareholder accounts. The Distribution Plan also
provides that Alliance may use its own resources, which may include
management fees received by Alliance from the Trust or other investment
companies which it manages and Alliance's past profits, to finance the
distribution of the Portfolios' shares.
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For services rendered by the Class IB Distributor in connection with the
distribution of Class IB shares pursuant to the Distribution Plan, the Class
IB Distributor received $63 with respect to the Class IB shares of Alliance
Aggressive Stock Portfolio, $134 with respect to the Class IB shares of
Alliance Common Stock Portfolio, $78 with respect to the Class IB shares of
Alliance Growth Investors Portfolio, $49 with respect to the Class IB shares
of Alliance Global Portfolio, $58 with respect to the Class IB shares of
Alliance High Yield Portfolio and $254 with respect to the Class IB shares of
Alliance Money Market Portfolio, for the period October 2, 1996 to December
31, 1996.
The Class IB Distributor has informed the Trust that expenses incurred by
it and costs allocated to it in connection with activities primarily intended
to result in the sale of Class IB shares were as follows for the period
October 2, 1996 to December 31, 1996:
AMOUNT OF EXPENSE AND ALLOCATED COST
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE
AGGRESSIVE ALLIANCE GROWTH ALLIANCE ALLIANCE ALLIANCE
CATEGORY OF EXPENSE STOCK COMMON STOCK INVESTORS GLOBAL HIGH YIELD MONEY MARKET
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Advertising/Marketing .... $ 63 $ 134 $ 78 $ 49 $ 58 $ 254
Printing and Mailing of
Prospectuses and
Semi-Annual and Annual
Reports to Other than
Current Shareholders .... 0 0 0 0 0 0
Compensation to
Underwriters ............ 0 0 0 0 0 0
Compensation to Dealers .. 0 0 0 0 0 0
Compensation to Sales
Personnel ............... 0 0 0 0 0 0
Interest, Carrying or
Other Financing Charges . 0 0 0 0 0 0
Other (includes personnel
cost of those home office
employees involved in the
distribution effort and
the travel-related
expenses incurred by the
marketing personnel
conducting seminars) .... 0 0 0 0 0 0
</TABLE>
38
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT GROWTH AND
MONEY MARKET SECURITIES QUALITY BOND HIGH YIELD INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at value (Notes 1 and 4) $450,990,752 $ 92,621,366 $153,282,787 $197,549,284 $231,763,058
Cash ................................ 171,525 124,732 176,934 2,017,705 125,387
Foreign cash ........................ -- -- -- -- --
Receivable for securities sold ...... -- -- 5,071,875 -- 461,289
Deposits received for securities
lending ............................ -- 18,301,550 28,167,188 -- 2,000,000
Receivable from Separate Accounts for
Trust shares sold .................. 14,190,878 817,649 64,327 1,043,413 229,252
Unrealized appreciation of forward
currency
contracts (Notes 1 and 4) .......... -- -- 147,593 -- --
Dividends, interest and other
receivables ........................ 1,458,902 822,759 1,476,344 3,556,124 754,268
-------------- -------------- -------------- -------------- --------------
Total assets ...................... 466,812,057 112,688,056 188,387,048 204,166,526 235,333,254
-------------- -------------- -------------- -------------- --------------
LIABILITIES:
Options written at value (Premiums
received:
Common Stock
Portfolio--$68,607,800)(Notes 1 and
4) ................................ -- -- -- -- --
Payable to custodian ................ -- -- -- -- --
Payable for securities purchased .... -- 5,942,099 5,081,250 3,997,946 1,117,681
Payable for securities loaned ....... -- 18,301,550 28,167,188 -- 2,000,000
Payable to Separate Accounts for
Trust shares redeemed .............. -- -- -- -- --
Unrealized depreciation of forward
currency
contracts (Notes 1 and 4) .......... -- -- -- -- --
Variation margin payable on futures
contracts .......................... -- -- -- -- --
Distribution fees payable ........... 254 -- -- 58 --
Investment advisory fees payable .... 144,177 38,264 85,952 94,624 108,563
Trustees' fees payable .............. 24,024 5,014 4,226 5,132 2,919
Accrued expenses .................... 37,408 16,704 24,960 23,301 23,703
-------------- -------------- -------------- -------------- --------------
Total liabilities ................. 205,863 24,303,631 33,363,576 4,121,061 3,252,866
-------------- -------------- -------------- -------------- --------------
NET ASSETS .......................... $466,606,194 $ 88,384,425 $155,023,472 $200,045,465 $232,080,388
============== ============== ============== ============== ==============
Investments at cost ................. $450,833,231 $ 92,000,197 $151,005,932 $192,006,772 $204,211,023
============== ============== ============== ============== ==============
COMPONENTS OF NET ASSETS (NOTE 1):
Paid in capital .................... $466,405,482 $ 97,591,462 $157,812,746 $195,004,416 $204,516,556
Accumulated undistributed
(overdistributed) net
investment income ................. 43,191 3,160 (220,079) 23,927 11,797
Accumulated net realized loss ....... -- (9,831,366) (4,993,810) (525,390) --
Unrealized appreciation on
investments and
foreign currency denominated assets
and liabilities ................... 157,521 621,169 2,424,615 5,542,512 27,552,035
-------------- -------------- -------------- -------------- --------------
NET ASSETS .......................... $466,606,194 $ 88,384,425 $155,023,472 $200,045,465 $232,080,388
============== ============== ============== ============== ==============
CLASS IA SHARES:
Net Assets .......................... $463,422,535 $ 88,384,425 $155,023,472 $199,360,473 $232,080,388
============== ============== ============== ============== ==============
Shares outstanding (Note 5) .......... 45,575,983 9,517,076 16,343,116 19,900,343 17,833,887
============== ============== ============== ============== ==============
Net asset value, offering and
redemption
price per share (Note 1) ........... $ 10.17 $ 9.29 $ 9.49 $ 10.02 $ 13.01
============== ============== ============== ============== ==============
CLASS IB SHARES:
Net Assets ........................... $ 3,183,659 $ 684,992
============== ==============
Shares outstanding (Note 5) ......... 313,273 68,416
============== ==============
Net asset value, offering and
redemption
price per share (Note 1) ............ $ 10.16 $ 10.01
============== ==============
</TABLE>
See Notes to Financial Statements.
39
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
EQUITY INDEX COMMON STOCK GLOBAL INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$383,044,256 $6,668,952,271 $ 991,831,989 $149,318,779 $3,890,482,751 $275,640,496 $1,627,121,599 $1,290,840,729
188,834 1,501,081 456,313 -- 2,364,412 5,139,961 4,172,088 480,215
-- -- 2,258,618 1,672,592 -- -- 465 1,008,532
-- 65,341,050 3,867,161 613,862 2,337,046 156,273 2,937,003 3,246,261
1,356,953 105,377,860 72,320,750 12,820,136 200,344,604 24,170,813 138,838,707 90,833,147
2,643,610 9,646,997 1,281,713 1,519,154 -- -- 768,754 3,693,911
-- -- 2,063,841 252,876 -- 89 -- 511,818
701,269 8,133,115 1,216,101 205,847 350,639 2,100,127 9,549,968 5,129,713
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
387,934,922 6,858,952,374 1,075,296,486 166,403,246 4,095,879,452 307,207,759 1,783,388,584 1,395,744,326
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- 70,867,650 -- -- -- -- -- --
-- -- -- 534,429 -- 8,074 -- --
-- 53,373,896 4,987,613 971,883 21,101,356 182,066 5,921,615 2,011,774
1,356,953 105,377,860 72,320,750 12,820,136 200,344,604 24,170,813 138,838,707 90,833,147
-- -- -- -- 6,662,427 250,025 -- --
-- -- -- -- -- -- 58 --
152,250 -- -- -- -- -- -- --
-- 134 49 -- 63 -- -- 78
127,671 2,040,224 452,415 115,412 1,530,928 136,367 525,339 588,404
5,276 205,484 19,851 1,520 93,747 7,170 61,689 25,366
43,591 453,547 184,324 53,031 276,910 50,843 185,672 170,574
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
1,685,741 232,318,795 77,965,002 14,496,411 230,010,035 24,805,358 145,533,080 93,629,343
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$386,249,181 $6,626,633,579 $ 997,331,484 $151,906,835 $3,865,869,417 $282,402,401 $1,637,855,504 $1,302,114,983
============== ============== ============== ============== ============== ============== ============== ==============
$320,617,584 $5,041,593,068 $ 858,568,339 $144,374,839 $3,396,898,743 $265,933,643 $1,509,715,325 $1,193,558,142
============== ============== ============== ============== ============== ============== ============== ==============
$324,019,332 $5,094,665,983 $ 865,441,879 $147,381,465 $3,377,717,888 $273,073,244 $1,523,732,949 $1,207,265,289
(5,276) (194,316) (3,212,284) (614,431) (58,479) 9,815 (190,700) (1,135,946)
(22,547) (92,937,401) (258,562) (50,107) (5,374,000) (387,954) (3,096,172) (1,817,216)
62,257,672 1,625,099,313 135,360,451 5,189,908 493,584,008 9,707,296 117,409,427 97,802,856
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$386,249,181 $6,626,633,579 $ 997,331,484 $151,906,835 $3,865,869,417 $282,402,401 $1,637,855,504 $1,302,114,983
============== ============== ============== ============== ============== ============== ============== ==============
$386,249,181 $6,625,390,070 $ 997,041,626 $151,906,835 $3,865,256,884 $282,402,401 $1,637,855,504 $1,301,642,871
============== ============== ============== ============== ============== ============== ============== ==============
25,484,413 363,529,982 58,938,705 13,214,071 107,805,909 25,019,109 98,455,586 75,693,420
============== ============== ============== ============== ============== ============== ============== ==============
$ 15.16 $ 18.23 $ 16.92 $ 11.50 $ 35.85 $ 11.29 $ 16.64 $ 17.20
============== ============== ============== ============== ============== ============== ============== ==============
$ 1,243,509 $ 289,858 $ 612,533 $ 472,112
============== ============== ============== ==============
68,266 17,143 17,094 27,468
============== ============== ============== ==============
$ 18.22 $ 16.91 $ 35.83 $ 17.19
============== ============== ============== ==============
</TABLE>
40
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF OPERATIONS
Year Ended December 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT GROWTH AND
MONEY MARKET SECURITIES QUALITY BOND HIGH YIELD INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income*(Note 1):
Dividends (including $3,460,799 and
$3,411,934 from affiliated companies
for the Common Stock and Aggressive
Stock Portfolios, respectively)......... $ -- $ -- $ -- $ 175,797 $ 3,034,669
Interest ................................ 20,638,163 5,024,881 11,293,429 16,214,440 933,842
-------------- -------------- -------------- ------------- ------------
Total income............................ 20,638,163 5,024,881 11,293,429 16,390,237 3,968,511
-------------- -------------- -------------- ------------- ------------
Expenses (Notes 1, 2 and 3):
Investment advisory fee.................. 1,472,114 399,460 935,462 856,390 864,549
Custody fees............................. 13,550 21,460 26,840 23,922 15,532
Distribution fees--Class IB ............. 254 -- -- 58 --
Printing and mailing expenses ........... 57,975 12,134 26,374 21,783 19,986
Professional fees ....................... 14,254 9,190 9,007 8,368 8,214
SEC registration fees ................... 4,987 217 434 217 1,084
Trustees' fees .......................... 12,178 3,159 5,643 4,849 4,554
Miscellaneous ........................... 6,858 3,678 3,801 3,069 2,594
-------------- -------------- -------------- ------------- ------------
Total expenses.......................... 1,582,170 449,298 1,007,561 918,656 916,513
-------------- -------------- -------------- ------------- ------------
NET INVESTMENT INCOME ..................... 19,055,993 4,575,583 10,285,868 15,471,581 3,051,998
-------------- -------------- -------------- ------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)
(NOTES 1 AND 4):
Realized Gain (Loss):
On securities (including $2,796,965,
$(8,821,017) and $60,876 from
affiliated companies for the Common
Stock, Aggressive Stock and Global
Portfolios, respectively) .............. -- (453,637) 939,845 12,420,138 12,181,263
On options written ...................... -- -- -- -- --
On foreign currency transactions ....... -- -- (68,186) -- --
On futures contracts .................... -- -- -- -- --
-------------- -------------- -------------- ------------- ------------
Realized gain (loss)--net ................ -- (453,637) 871,659 12,420,138 12,181,263
-------------- -------------- -------------- ------------- ------------
Change in Unrealized
Appreciation/Depreciation:
On securities............................ (7,886) (1,025,808) (1,868,060) 3,447,403 16,443,384
On options written ...................... -- -- -- -- --
On foreign currency transactions ....... -- -- 118,525 -- --
On futures contracts .................... -- -- -- -- --
-------------- -------------- -------------- ------------- ------------
Unrealized appreciation/depreciation--net (7,886) (1,025,808) (1,749,535) 3,447,403 16,443,384
-------------- -------------- -------------- ------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)--NET . (7,886) (1,479,445) (877,876) 15,867,541 28,624,647
-------------- -------------- -------------- ------------- ------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS................................ $19,048,107 $ 3,096,138 $ 9,407,992 $31,339,122 $31,676,645
============== ============== ============== ============= ============
</TABLE>
- ------------
* Net of foreign taxes withheld on dividends of $3,042, $32,886,
$357,439, $1,103,645, $180,624, $53,371, $457,582 and $359,641 for the
Growth and Income, Equity Index, Common Stock, Global, International,
Conservative Investors, Balanced and Growth Investors Portfolios,
respectively, and on interest of $103 and $95 for the Global and Growth
Investors Portfolios, respectively.
See Notes to Financial Statements.
41
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
EQUITY INDEX COMMON STOCK GLOBAL INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,341,057 $ 64,326,955 $ 10,411,663 $1,229,599 $ 7,463,840 $ 1,138,588 $ 10,683,609 $ 9,229,448
462,343 6,192,091 5,565,223 877,635 16,908,426 12,897,917 45,681,532 22,850,498
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
6,803,400 70,519,046 15,976,886 2,107,234 24,372,266 14,036,505 56,365,141 32,079,946
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
1,034,043 20,314,128 4,491,125 875,316 15,504,789 1,517,920 5,820,114 5,816,056
51,343 136,065 447,082 137,463 62,332 90,112 296,359 313,381
-- 134 49 -- 63 -- -- 78
36,406 843,481 122,011 11,232 491,450 41,649 251,544 157,430
11,364 149,352 25,827 6,667 90,030 11,695 46,552 32,235
1,951 -- 5,637 -- -- 434 -- 6,721
8,755 185,691 26,046 2,830 108,798 8,948 54,329 34,735
3,192 78,424 9,756 1,652 39,802 4,952 24,921 13,196
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
1,147,054 21,707,275 5,127,533 1,035,160 16,297,264 1,675,710 6,493,819 6,373,832
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
5,656,346 48,811,771 10,849,353 1,072,074 8,075,002 12,360,795 49,871,322 25,706,114
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
13,813,315 517,703,619 42,673,209 2,763,980 651,849,153 6,717,096 128,577,417 130,296,769
-- 69,528,454 -- -- -- -- -- --
-- (23,974) 2,323,828 287,769 (2,878) (27,275) (184,947) 903,574
1,381,635 -- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
15,194,950 587,208,099 44,997,037 3,051,749 651,846,275 6,689,821 128,392,470 131,200,343
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
41,401,218 651,940,355 57,875,656 4,019,520 (19,577,800) (4,721,625) (3,423,214) (21,124,616)
-- (15,633,132) -- -- -- -- -- --
-- (216) 2,507,509 225,883 -- 443 3,153 575,473
(172,800) -- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
41,228,418 636,307,007 60,383,165 4,245,403 (19,577,800) (4,721,182) (3,420,061) (20,549,143)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
56,423,368 1,223,515,106 105,380,202 7,297,152 632,268,475 1,968,639 124,972,409 110,651,200
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$62,079,714 $1,272,326,877 $116,229,555 $8,369,226 $640,343,477 $14,329,434 $174,843,731 $136,357,314
============== ============== ============== ============== ============== ============== ============== ==============
</TABLE>
42
<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,
1996 1995 1996 1995
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .............................. $ 19,055,993 $ 18,312,330 $ 4,575,583 $ 3,659,738
Realized gain (loss)--net........................... -- -- (453,637) 1,061,357
Change in unrealized appreciation/depreciation of
investments and foreign currency denominated
assets and liabilities--net ....................... (7,886) 145,252 (1,025,808) 2,579,005
--------------- --------------- -------------- --------------
Net increase in net assets from operations ........ 19,048,107 18,457,582 3,096,138 7,300,100
--------------- --------------- -------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE
1):
Class IA:
Dividends from net investment income .............. (19,050,946) (18,199,892) (4,575,583) (3,633,574)
Dividends in excess of net investment income ..... (25,232) -- (19,617) --
Distributions from realized gains.................. -- -- -- --
Distributions in excess of realized gains ........ -- -- -- --
Tax return of capital distributions ............... -- -- -- --
--------------- --------------- -------------- --------------
Total Class IA dividends and distributions ........ (19,076,178) (18,199,892) (4,595,200) (3,633,574)
--------------- --------------- -------------- --------------
Class IB:
Dividends from net investment income............... (5,047) -- -- --
Dividends in excess of net investment income ...... (29,384) -- -- --
Distributions from realized gains.................. -- -- -- --
Distributions in excess of realized gains ......... -- -- -- --
--------------- --------------- -------------- --------------
Total Class IB dividends and distributions ........ (34,431) -- -- --
--------------- --------------- -------------- --------------
Decrease in net assets from dividends and
distributions ..................................... (19,110,609) (18,199,892) (4,595,200) (3,633,574)
--------------- --------------- -------------- --------------
SHARE TRANSACTIONS (NOTES 1 AND 5):
Class IA:
Shares sold........................................ 508,537,942 394,575,427 36,879,548 29,533,754
Shares issued in reinvestment of dividends and
distributions..................................... 19,076,178 18,199,892 4,595,200 3,633,574
Shares redeemed.................................... (450,848,823) (351,733,059) (23,371,086) (13,571,893)
--------------- --------------- -------------- --------------
Total Class IA transactions ........................ 76,765,297 61,042,260 18,103,662 19,595,435
--------------- --------------- -------------- --------------
Class IB:
Shares sold ....................................... 3,624,653 -- -- --
Shares issued in reinvestment of dividends and
distributions..................................... 34,431 -- -- --
Shares redeemed.................................... (446,631) -- -- --
--------------- --------------- -------------- --------------
Total Class IB transactions ........................ 3,212,453 -- -- --
--------------- --------------- -------------- --------------
Net increase (decrease) in net assets derived from
share transactions................................. 79,977,750 61,042,260 18,103,662 19,595,435
--------------- --------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS.................... 79,915,248 61,299,950 16,604,600 23,261,961
NET ASSETS, BEGINNING OF PERIOD...................... 386,690,946 325,390,996 71,779,825 48,517,864
--------------- --------------- -------------- --------------
NET ASSETS, END OF PERIOD* .......................... $ 466,606,194 $ 386,690,946 $ 88,384,425 $ 71,779,825
=============== =============== ============== ==============
</TABLE>
- ------------
* Including accumulated undistributed (overdistributed) net investment
income of $43,191 and $97,807 for the Money Market Portfolio; $3,160 and
$22,777 for the Intermediate Government Securities Portfolio; $(220,079)
and $63,771 for the Quality Bond Portfolio; $23,927 and $22,557 for the
High Yield Portfolio; $11,797 and $10,278 for the Growth and Income
Portfolio; $(5,276) and $(851) for the Equity Index Portfolio, as of
December 31, 1996 and December 31, 1995, respectively.
See Notes to Financial Statements.
43
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND INCOME
QUALITY BOND PORTFOLIO HIGH YIELD PORTFOLIO PORTFOLIO EQUITY INDEX PORTFOLIO
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995 1996 1995
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10,285,868 $ 8,846,857 $ 15,471,581 $ 9,874,042 $ 3,051,998 $ 1,929,904 $ 5,656,346 $ 1,847,863
871,659 3,312,031 12,420,138 1,037,899 12,181,263 (78,675) 15,194,950 1,143,375
(1,749,535) 10,351,408 3,447,403 6,108,056 16,443,384 11,348,703 41,228,418 21,464,214
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
9,407,992 22,510,296 31,339,122 17,019,997 31,676,645 13,199,932 62,079,714 24,455,452
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(10,285,868) (8,729,254) (15,469,541) (9,874,042) (3,050,479) (1,919,557) (5,656,346) (1,841,475)
(326,079) -- (432,568) (385,462) -- -- (4,427) --
-- -- (11,348,200) -- (11,682,352) -- (15,093,505) (1,143,375)
-- -- -- -- -- -- -- (84,099)
-- -- -- -- -- -- (7,525) (123)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(10,611,947) (8,729,254) (27,250,309) (10,259,504) (14,732,831) (1,919,557) (20,761,803) (3,069,072)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- (2,040) -- -- -- -- --
-- -- (15,935) -- -- -- -- --
-- -- (908) -- -- -- -- --
-- -- (18,516) -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- (37,399) -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(10,611,947) (8,729,254) (27,287,708) (10,259,504) (14,732,831) (1,919,557) (20,761,803) (3,069,072)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
27,205,153 18,946,820 71,897,677 46,607,272 111,512,120 57,426,026 230,679,439 153,767,030
10,611,947 8,729,254 27,250,309 10,259,504 14,732,831 1,919,557 20,761,803 3,069,072
(39,032,520) (11,589,738) (21,997,075) (19,393,315) (9,161,198) (4,095,508) (72,295,253) (49,185,409)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(1,215,420) 16,086,336 77,150,911 37,473,461 117,083,753 55,250,075 179,145,989 107,650,693
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- 677,158 -- -- -- -- --
-- -- 37,399 -- -- -- -- --
-- -- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- 714,557 -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(1,215,420) 16,086,336 77,865,468 37,473,461 117,083,753 55,250,075 179,145,989 107,650,693
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(2,419,375) 29,867,378 81,916,882 44,233,954 134,027,567 66,530,450 220,463,900 129,037,073
157,442,847 127,575,469 118,128,583 73,894,629 98,052,821 31,522,371 165,785,281 36,748,208
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$155,023,472 $157,442,847 $200,045,465 $118,128,583 $232,080,388 $98,052,821 $386,249,181 $165,785,281
============== ============== ============== ============== ============== ============== ============== ==============
</TABLE>
44
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
<TABLE>
<CAPTION>
COMMON STOCK PORTFOLIO GLOBAL PORTFOLIO
------------------------------ ------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .............................. $ 48,811,771 $ 53,432,936 $ 10,849,353 $ 9,803,075
Realized gain--net ................................. 587,208,099 262,461,526 44,997,037 17,804,800
Change in unrealized appreciation/depreciation of
investments and foreign currency denominated
assets and liabilities--net ....................... 636,307,007 845,152,888 60,383,165 72,106,049
-------------- -------------- -------------- --------------
Net increase in net assets from operations ........ 1,272,326,877 1,161,047,350 116,229,555 99,713,924
-------------- -------------- -------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE
1):
Class IA:
Dividends from net investment income .............. (44,580,327) (53,432,936) (10,849,259) (9,500,310)
Dividends in excess of net investment income ...... -- (6,567,658) (4,499,020) --
Distributions from realized gains.................. (587,198,121) (262,461,526) (42,474,239) (17,804,800)
Distributions in excess of realized gains ........ (71,434,343) (8,497,379) -- (1,081,237)
Tax return of capital distributions ............... (988,016) -- (220,411) (546,316)
-------------- -------------- -------------- --------------
Total Class IA dividends and distributions ........ (704,200,807) (330,959,499) (58,042,929) (28,932,663)
-------------- -------------- -------------- --------------
Class IB:
Dividends from net investment income............... (326) -- (94) --
Dividends in excess of net investment income ...... (4,564) -- (2,076) --
Distributions from realized gains.................. (9,978) -- (1,502) --
Distributions in excess of realized gains ........ (62,273) -- (4,502) --
Tax return of capital distributions................ (108) -- (31) --
-------------- -------------- -------------- --------------
Total Class IB dividends and distributions ........ (77,249) -- (8,205) --
-------------- -------------- -------------- --------------
Decrease in net assets from dividends and
distributions ..................................... (704,278,056) (330,959,499) (58,051,134) (28,932,663)
-------------- -------------- -------------- --------------
SHARE TRANSACTIONS (NOTES 1 AND 5):
Class IA:
Shares sold ....................................... 756,034,799 509,750,491 255,537,439 229,097,991
Shares issued in reinvestment of dividends and
distributions .................................... 704,200,807 330,959,499 58,042,929 28,932,663
Shares redeemed ................................... (282,642,349) (257,365,702) (60,861,388) (64,369,805)
-------------- -------------- -------------- --------------
Total Class IA transactions ........................ 1,177,593,257 583,344,288 252,718,980 193,660,849
-------------- -------------- -------------- --------------
Class IB:
Shares sold ....................................... 1,237,252 -- 285,485 --
Shares issued in reinvestment of dividends and
distributions .................................... 77,249 -- 8,205 --
Shares redeemed ................................... -- -- -- --
-------------- -------------- -------------- --------------
Total Class IB transactions ........................ 1,314,501 -- 293,690 --
-------------- -------------- -------------- --------------
Net increase in net assets derived from share
transactions....................................... 1,178,907,758 583,344,288 253,012,670 193,660,849
-------------- -------------- -------------- --------------
INCREASE IN NET ASSETS............................... 1,746,956,579 1,413,432,139 311,191,091 264,442,110
NET ASSETS, BEGINNING OF PERIOD ..................... 4,879,677,000 3,466,244,861 686,140,393 421,698,283
-------------- -------------- -------------- --------------
NET ASSETS, END OF PERIOD* .......................... $6,626,633,579 $4,879,677,000 $997,331,484 $686,140,393
============== ============== ============== ==============
</TABLE>
- ------------
* Including accumulated undistributed (overdistributed) net investment
income of $(194,316) and $8,246,095 for the Common Stock Portfolio;
$(3,212,284) and $455,586 for the Global Portfolio; $(614,431) and
$6,487 for the International Portfolio; $(58,479) and $(4,129) for the
Aggressive Stock Portfolio; $9,815 and $63,026 for the Conservative
Investors Portfolio; $(190,700) and $86,599 for the Balanced Portfolio,
as of December 31, 1996 and December 31, 1995, respectively.
** Commencement of Operations.
See Notes to Financial Statements.
45
<PAGE>
<TABLE>
<CAPTION>
CONSERVATIVE INVESTORS
INTERNATIONAL PORTFOLIO AGGRESSIVE STOCK PORTFOLIO PORTFOLIO BALANCED PORTFOLIO
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
APRIL 3,
1995**
YEAR ENDED TO YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995 1996 1995
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,072,074 $ 142,455 $ 8,075,002 $ 6,203,510 $ 12,360,795 $ 11,574,771 $ 49,871,322 $ 47,303,460
3,051,749 266,775 651,846,275 346,368,084 6,689,821 11,270,671 128,392,470 64,616,058
4,245,403 944,505 (19,577,800) 262,696,319 (4,721,182) 16,138,395 (3,420,061) 144,740,180
-------------- -------------- -------------- -------------- -------------- -------------- --------------
8,369,226 1,353,735 640,343,477 615,267,913 14,329,434 38,983,837 174,843,731 256,659,698
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(1,072,074) (142,455) (8,075,028) (6,203,510) (12,360,795) (11,510,223) (49,871,322) (47,099,230)
(972,982) (240,038) (50,994) (43,012) (44,557) -- (241,952) --
(2,651,391) (118,651) (651,842,635) (300,293,392) (6,689,821) (1,556,393) (128,392,470) (41,562,533)
-- -- (1,362,771) -- (396,608) -- (2,491,886) --
-- -- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(4,696,447) (501,144) (661,331,428) (306,539,914) (19,491,781) (13,066,616) (180,997,630) (88,661,763)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- -- -- -- -- -- --
-- -- (452) -- -- -- -- --
-- -- (3,630) -- -- -- -- --
-- -- (32,780) -- -- -- -- --
-- -- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- (36,862) -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(4,696,447) (501,144) (661,368,290) (306,539,914) (19,491,781) (13,066,616) (180,997,630) (88,661,763)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
141,011,557 29,365,420 1,093,061,087 843,611,785 50,046,532 50,112,293 64,030,181 55,178,023
4,696,447 501,144 661,331,428 306,539,914 19,491,781 13,066,616 180,997,630 88,661,763
(26,157,811) (2,035,292) (568,654,477) (590,529,129) (34,074,560) (10,686,445) (124,160,136) (118,515,605)
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
119,550,193 27,831,272 1,185,738,038 559,622,570 35,463,753 52,492,464 120,867,675 25,324,181
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- 604,481 -- -- -- -- --
-- -- 36,862 -- -- -- -- --
-- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- 641,343 -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
119,550,193 27,831,272 1,186,379,381 559,622,570 35,463,753 52,492,464 120,867,675 25,324,181
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
123,222,972 28,683,863 1,165,354,568 868,350,569 30,301,406 78,409,685 114,713,776 193,322,116
28,683,863 -- 2,700,514,849 1,832,164,280 252,100,995 173,691,310 1,523,141,728 1,329,819,612
- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$151,906,835 $28,683,863 $3,865,869,417 $2,700,514,849 $282,402,401 $252,100,995 $1,637,855,504 $1,523,141,728
============== ============== ============== ============== ============== ============== ============== ==============
</TABLE>
46
<PAGE>
THE HUDSON RIVER TRUST
STATEMENTS OF CHANGES IN NET ASSETS (Concluded)
<TABLE>
<CAPTION>
GROWTH INVESTORS
PORTFOLIO
------------------------------
YEAR ENDED
DECEMBER 31,
1996 1995
-------------- --------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .............................. $ 25,706,114 $ 23,451,903
Realized gain--net ................................. 131,200,343 20,094,016
Change in unrealized appreciation/depreciation of
investments and foreign currency denominated
assets and liabilities--net ....................... (20,549,143) 114,933,862
-------------- --------------
Net increase in net assets from operations ........ 136,357,314 158,479,781
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE
1):
Class IA:
Dividends from net investment income .............. (25,705,569) (23,451,903)
Dividends in excess of net investment income ...... (2,082,361) (429,740)
Distributions from realized gains.................. (131,199,726) (11,896,371)
Distributions in excess of realized gains ......... (570,518) --
-------------- --------------
Total Class IA dividends and distributions ........ (159,558,174) (35,778,014)
-------------- --------------
Class IB:
Dividends from net investment income .............. (545) --
Dividends in excess of net investment income ...... (2,449) --
Distributions from realized gains ................. (617) --
Distributions in excess of realized gains ......... (6,239) --
-------------- --------------
Total Class IB dividends and distributions ........ (9,850) --
-------------- --------------
Decrease in net assets from dividends and
distributions ..................................... (159,568,024) (35,778,014)
-------------- --------------
SHARE TRANSACTIONS (NOTES 1 AND 5):
Class IA:
Shares sold ....................................... 297,495,728 264,281,654
Shares issued in reinvestment of dividends and
distributions .................................... 159,558,174 35,778,014
Shares redeemed ................................... (28,339,916) (19,105,124)
-------------- --------------
Total Class IA transactions ........................ 428,713,986 280,954,544
-------------- --------------
Class IB:
Shares sold ....................................... 468,087 --
Shares issued in reinvestment of dividends and
distributions .................................... 9,850 --
Shares redeemed ................................... (90) --
-------------- --------------
Total Class IB transactions ........................ 477,847 --
-------------- --------------
Net increase in net assets derived from
share transactions ................................ 429,191,833 280,954,544
-------------- --------------
INCREASE IN NET ASSETS .............................. 405,981,123 403,656,311
NET ASSETS, BEGINNING OF PERIOD ..................... 896,133,860 492,477,549
-------------- --------------
NET ASSETS, END OF PERIOD* .......................... $1,302,114,983 $896,133,860
============== ==============
</TABLE>
- ------------
* Including accumulated undistributed (overdistributed) net investment
income of $(1,135,946) and $105,968 for the Growth Investors Portfolio,
as of December 31, 1996 and December 31, 1995, respectively.
See Notes to Financial Statements.
47
<PAGE>
THE HUDSON RIVER TRUST
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EFFECTIVE
PRINCIPAL VALUE ANNUAL
AMOUNT (NOTE 1) YIELD*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM DEBT SECURITIES:
BANK NOTES
Bank of New York:
Due 03/24/97.......................................... $10,000,000 $10,001,699 5.48%
Due 04/01/97.......................................... 5,000,000 5,000,441 5.47
--------------
TOTAL BANK NOTES (3.2%) ............................. 15,002,140
--------------
CERTIFICATES OF DEPOSIT
Bayerische Vereinsbank AG
Due 07/29/97.......................................... 15,000,000 15,004,438 5.50
Caisse Nationale de Credit Agricole
Due 09/05/97.......................................... 15,000,000 15,008,047 5.47
First National Bank-Chicago
Due 06/18/97.......................................... 10,000,000 10,006,299 5.51
Bank of Tokyo-Mitsubishi Bank Ltd., N.Y.
Due 04/30/97.......................................... 17,000,000 17,006,022 5.72
Norinchukin Bank Ltd.:
Due 04/07/97.......................................... 8,000,000 8,004,587 5.47
Due 04/23/97.......................................... 9,000,000 9,009,161 5.46
Sumitomo Bank Ltd.
Due 01/27/97.......................................... 17,000,000 17,004,514 5.78
--------------
TOTAL CERTIFICATES OF DEPOSIT (19.5%) ............... 91,043,068
--------------
COMMERCIAL PAPER
Alamo Funding
Due 01/30/97.......................................... 17,500,000 17,425,285 5.53
Allianz of America Financial Corp.
Due 04/24/97.......................................... 8,000,000 7,867,916 5.53
Atlas Funding Corp.:
Due 01/21/97.......................................... 16,400,000 16,351,893 5.51
Due 02/04/97.......................................... 1,253,000 1,246,764 5.50
Barton Capital Corp.:
Due 01/31/97.......................................... 13,600,000 13,540,273 5.50
Due 06/16/97.......................................... 3,876,000 3,781,990 5.55
Beta Finance, Inc.:
Due 03/10/97.......................................... 5,000,000 4,950,228 5.52
Due 03/13/97.......................................... 5,000,000 4,948,032 5.52
Due 06/02/97.......................................... 6,000,000 5,866,747 5.54
BHF Delaware, Inc.
Due 03/10/97.......................................... 5,000,000 4,950,228 5.52
Briarcliff Capital Corp.
Due 01/24/97.......................................... 1,910,000 1,903,557 5.51
Centauri Corp.:
Due 03/13/97.......................................... 6,300,000 6,234,272 5.54
Due 04/11/97.......................................... 11,200,000 11,036,356 5.52
Chase Manhattan Bank
Due 03/14/97.......................................... 5,000,000 4,947,300 5.52
Enterprise Funding Corp.
Due 03/03/97.......................................... 1,290,000 1,278,481 5.51
Eureka Corp.
Due 02/03/97.......................................... 14,000,000 13,932,368 5.50
General Electric Capital Corp.
Due 03/03/97.......................................... 5,000,000 4,955,182 5.54
Greenwich Asset Funding, Inc.
Due 03/24/97.......................................... 8,835,000 8,728,945 5.52
International Securitization
Due 02/20/97.......................................... 7,715,000 7,658,531 5.51
48
<PAGE>
<CAPTION>
THE HUDSON RIVER TRUST
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- --------------------------------------------------------------------------------------------------
EFFECTIVE
PRINCIPAL VALUE ANNUAL
AMOUNT (NOTE 1) YIELD*
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Jefferson Smurfit Corp.:
Due 02/19/97.......................................... $ 5,000,000 $ 4,964,135 5.51%
Due 03/18/97.......................................... 4,100,000 4,054,385 5.52
Morgan (J.P.) & Co.
Due 03/05/97.......................................... 5,000,000 4,953,888 5.52
Morgan Stanley Group, Inc.
Due 02/12/97.......................................... 17,500,000 17,391,588 5.55
Old Line Funding Corp.:
Due 02/24/97.......................................... 10,000,000 9,920,950 5.51
Due 03/11/97.......................................... 7,500,000 7,424,244 5.52
Premium Funding-Series B
Due 02/18/97.......................................... 2,000,000 1,985,947 5.51
Premium Funding-Series A & E:
Due 02/05/97.......................................... 10,108,000 10,056,211 5.50
Due 02/14/97.......................................... 5,400,000 5,365,218 5.51
Ranger Funding Corp.:
Due 02/04/97.......................................... 6,189,000 6,158,196 5.50
Due 02/13/97.......................................... 5,000,000 4,968,526 5.51
Receivable Capital Corp.
Due 05/01/97.......................................... 12,100,000 11,887,847 5.53
Riverwood Funding Corp.
Due 02/14/97.......................................... 17,500,000 17,387,281 5.51
R.O.S.E. Funding Ltd.
Due 03/26/97.......................................... 17,500,000 17,284,804 5.52
Sigma Finance Corp.:
Due 02/10/97.......................................... 5,800,000 5,766,038 5.51
Due 04/09/97.......................................... 4,500,000 4,435,565 5.52
Three Rivers Funding:
Due 01/21/97.......................................... 3,859,000 3,847,680 5.51
Due 01/27/97.......................................... 8,046,000 8,015,318 5.51
Working Capital Management, Inc.
Due 01/13/97.......................................... 17,500,000 17,468,675 5.60
--------------
TOTAL COMMERCIAL PAPER (65.4%) ...................... 304,940,844
--------------
VARIABLE RATE LIBOR
General Electric Capital Corp.
Due 06/27/97.......................................... 5,000,000 4,997,351 5.72
Goldman Sachs & Co.
Due 01/13/97.......................................... 15,000,000 15,000,406 5.73
Merrill Lynch & Co., Inc.
Due 03/24/97.......................................... 15,000,000 14,998,479 5.76
--------------
TOTAL VARIABLE RATE LIBOR (7.5%) .................... 34,996,236
--------------
VARIABLE RATE SECURITIES (1.1%)
General Electric Capital Corp.
Due 05/12/97.......................................... 5,000,000 5,008,464 5.21
--------------
TOTAL INVESTMENTS IN SHORT-TERM DEBT SECURITIES
(96.7%)
(Amortized Cost $450,833,231) ........................ 450,990,752
OTHER ASSETS LESS LIABILITIES (3.3%)................... 15,615,442
--------------
NET ASSETS (100.0%) ................................... $466,606,194
==============
</TABLE>
- ------------
* Based on market values at the close of business on December 31, 1996.
See Notes to Financial Statements.
49
<PAGE>
THE HUDSON RIVER TRUST
INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
LONG-TERM DEBT SECURITIES:
COLLATERALIZED MORTGAGE
OBLIGATIONS (0.5%)
Federal Home Loan
Mortgage Corp.
5.75% PAC-1(11), 10/15/11 .... $ 454,373 $ 453,379
-------------
MORTGAGE RELATED (28.8%)
Federal Home Loan
Mortgage Corp:
7.0% TBA, 12/10/11............ 5,900,000 5,898,159
9.5%, 01/01/20 ............... 4,951 5,329
Federal National Mortgage
Association:
8.031%, 05/01/27 (a).......... 1,639,402 1,718,307
7.0% 7 Year Balloon,
04/01/03...................... 503,023 504,284
7.0% 7 Year Balloon,
05/01/03...................... 775,588 777,531
7.0% 7 Year Balloon,
06/01/03...................... 4,828,104 4,840,203
7.0% 7 Year Balloon,
07/01/03...................... 1,084,899 1,087,619
7.0% 7 Year Balloon,
08/01/03...................... 2,059,778 2,064,938
Government National Mortgage
Association:
8.0%, 06/15/23................ 961,303 980,530
8.0%, 11/15/23................ 287,762 293,518
8.0%, 07/15/24................ 294,082 299,964
8.0%, 09/15/24................ 362,341 369,588
8.0%, 10/15/24................ 271,178 276,602
8.0%, 11/15/24................ 278,497 284,067
8.0%, 03/15/25................ 326,433 332,962
8.0%, 04/15/25................ 321,914 328,353
8.0%, 05/15/25................ 1,496,347 1,526,276
8.0%, 05/15/26................ 714,987 729,289
8.0%, 07/15/26................ 3,051,008 3,112,030
-------------
25,429,549
-------------
U.S. GOVERNMENT & AGENCIES (68.5%)
Federal Home Loan Bank
5.5%, 01/10/01 ............... $ 4,500,000 $ 4,373,955
Resolution Funding S.T.R.I.P.S
Zero Coupon Deb., 04/15/99 ... 5,000,000 4,367,750
Tennessee Valley Authority
6.5%, 08/20/01 ............... 5,400,000 5,422,787
U.S. Treasury:
6.125% Note, 08/31/98......... 6,800,000 6,819,128
6.0% Note, 08/15/99........... 14,000,000 13,995,630
5.5% Note, 12/31/00........... 6,600,000 6,447,375
6.625% Note, 06/30/01......... 3,200,000 3,251,002
6.25% Note, 10/31/01.......... 4,000,000 4,002,500
5.875% Note, 11/30/01......... 3,700,000 3,645,658
11.875% Bond, 11/15/03........ 6,300,000 8,213,625
-------------
60,539,410
-------------
TOTAL LONG-TERM DEBT SECURITIES (97.8%)
(Amortized Cost $85,801,169) . 86,422,338
-------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT AGENCIES
Federal Home Loan Bank
5.0%, due 01/02/97............ 500,000 499,931
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97............ 5,700,000 5,699,097
-------------
TOTAL U.S. GOVERNMENT
AGENCIES (7.0%) ............. 6,199,028
-------------
TOTAL SHORT-TERM DEBT SECURITIES (7.0%)
(Amortized Cost $6,199,028) .. 6,199,028
-------------
TOTAL INVESTMENTS (104.8%)
(Amortized Cost $92,000,197) . 92,621,366
OTHER ASSETS LESS LIABILITIES (-4.8%) (4,236,941)
-------------
NET ASSETS (100.0%)............ $88,384,425
=============
- ------------
(a) Adjustable rate mortgage; stated interest rate in effect at December
31, 1996.
See Notes to Financial Statements.
50
<PAGE>
THE HUDSON RIVER TRUST
QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
LONG-TERM DEBT SECURITIES:
BASIC MATERIALS
CHEMICALS (8.7%)
Reliance Industries Ltd.
10.375%, 06/24/16+............. $ 6,700,000 $ 7,253,554
Soc Quimica Y Minera
7.7%, 09/15/06+................ 6,000,000 6,154,620
--------------
TOTAL BASIC MATERIALS (8.7%) .. 13,408,174
--------------
CREDIT SENSITIVE
BANKS (4.3%)
Zion's First National Bank
8.536%, 12/15/26+.............. 6,500,000 6,704,945
--------------
FOREIGN GOVERNMENT (13.5%)
Government of Australia
7.0%, 04/15/00................. 17,250,000 13,819,508
Republic of Poland
4.0% PDI, 10/27/14(a).......... 8,500,000 7,182,500
--------------
21,002,008
--------------
INSURANCE (3.3%)
Conseco Finance Trust II
8.7%, 11/15/26................. 5,050,000 5,076,109
--------------
MORTGAGE RELATED (23.6%)
Chase Manhattan Grantor Trust
5.2%, 02/15/02................. 5,926,867 5,874,854
Federal Home Loan
Mortgage Corp.
7.0%, 09/01/11................. 7,735,144 7,732,731
Federal National Mortgage
Association:
6.5%, 05/01/11................. 13,074,403 12,837,429
6.5%, 08/01/11................. 2,124,701 2,086,191
7.0%, 05/01/26................. 8,269,379 8,091,075
--------------
36,622,280
--------------
UTILITY--ELECTRIC (4.7%)
Empresa Electrica del Norte
7.75%, 03/15/06+............... $ 7,165,000 $ 7,223,538
--------------
UTILITY--GAS (3.3%)
RAS Laffan Liquid Natural Gas
8.294%, 09/15/14+.............. 5,000,000 5,081,075
--------------
U.S. GOVERNMENT (34.1%)
U.S. Treasury:
6.375% Note, 05/15/99.......... 25,290,000 25,511,288
6.25% Note, 10/31/01........... 14,735,000 14,744,209
5.75% Note, 08/15/03........... 13,000,000 12,610,000
--------------
52,865,497
--------------
TOTAL CREDIT SENSITIVE
(86.8%)........................ 134,575,452
--------------
TOTAL LONG-TERM DEBT SECURITIES (95.5%)
(Amortized Cost $145,706,771) . 147,983,626
--------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT AGENCIES (3.4%)
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97............. 5,300,000 5,299,161
--------------
TOTAL SHORT-TERM DEBT SECURITIES (3.4%)
(Amortized Cost $5,299,161) ... 5,299,161
--------------
TOTAL INVESTMENTS (98.9%)
(Amortized Cost $151,005,932) . 153,282,787
OTHER ASSETS
LESS LIABILITIES (1.1%)........ 1,740,685
--------------
NET ASSETS (100.0%)............. $155,023,472
==============
<PAGE>
- ------------
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $32,417,732
or 20.9% of net assets.
(a) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at December 31, 1996.
Glossary:
PDI--Past Due Interest Bond
See Notes to Financial Statements.
51
<PAGE>
THE HUDSON RIVER TRUST
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS AND WARRANTS:
BUSINESS SERVICES (0.0%)
PRINTING, PUBLISHING &
BROADCASTING
Pegasus Media & Communications
(Class B)*..................... 150 $ 45,000
-------------
CAPITAL GOODS (0.0%)
BUILDING & CONSTRUCTION
Capital Pacific Holdings,
Inc.--
Warrants*...................... 11,850 17,775
-------------
CONSUMER CYCLICALS
RETAIL--GENERAL (0.0%)
Eye Care Centers of America--
Warrants*...................... 5,000 20,000
Florists Transworld Corp.
(Class B)*+.................... 18,750 18,750
-------------
TOTAL CONSUMER CYCLICALS (0.0%) 38,750
-------------
CONSUMER NONCYCLICALS
HOSPITAL SUPPLIES & SERVICES (0.0%)
Wright Medical Technology,
Inc.--Warrants*................ 618 80,340
-------------
SOAPS & TOILETRIES (0.1%)
Renaissance Cosmetics--
Warrants*+ .................... 2,000 100,000
-------------
TOTAL CONSUMER NONCYCLICALS (0.1%) 180,340
-------------
TOTAL COMMON STOCKS
AND WARRANTS (0.1%)
(Cost $157,935)................ 281,865
-------------
PREFERRED STOCKS:
BUSINESS SERVICES (3.4%)
PRINTING, PUBLISHING &
BROADCASTING
Cablevision Systems Corp.
11.125%, Series M (a).......... 75,495 6,775,676
-------------
TOTAL PREFERRED STOCKS (3.4%)
(Cost $7,042,039).............. 6,775,676
-------------
PRINCIPAL
AMOUNT
------
LONG-TERM DEBT SECURITIES:
BASIC MATERIALS
CHEMICALS (4.9%)
Kaiser Aluminum & Chemical
10.875%, 10/15/06+............. $4,000,000 4,240,000
-------------
Trans Resources, Inc.
11.875% Sr. Sub. Note
Series B, 07/01/02............. 5,500,000 5,527,500
-------------
9,767,500
-------------
METALS & MINING (1.3%)
Great Lakes Carbon Corp.
10.0%, 01/01/06................ 2,500,000 2,650,000
-------------
PAPER (3.4%)
FSW International
12.5%, 11/01/06+............... 4,000,000 4,240,000
Maxxam Group Holdings, Inc.
12.0%, 08/01/03+ .............. 2,500,000 2,550,000
-------------
6,790,000
-------------
STEEL (3.3%)
AK Steel Corp.
9.125%, 12/15/06+............. $4,000,000 $ 4,103,752
Ivaco, Inc.
11.5%, 09/15/05 .............. 2,500,000 2,487,500
--------------
6,591,252
--------------
TOTAL BASIC MATERIALS
(12.9%)....................... 25,798,752
--------------
BUSINESS SERVICES
PRINTING, PUBLISHING &
BROADCASTING (16.3%)
All American Communications,
Inc.
10.875%, 10/15/01............. 4,000,000 4,060,000
Albritton Communications
9.75%, 11/30/07............... 5,000,000 4,850,000
Goss Graphic Systems, Inc.
12.0%, 10/15/06 .............. 5,250,000 5,407,500
Grupo Televisa S.A.
Zero Coupon, 05/15/08 (b) .... 9,000,000 5,940,000
Park Broadcasting, Inc.
11.75%, 05/15/04+............. 5,000,000 5,875,000
Telemundo Group, Inc.
7.0%, 02/15/06 (c)............ 6,735,000 6,499,275
--------------
32,631,775
--------------
TRUCKING, SHIPPING (2.1%)
Ryder Trucks Inc.
10.0%, 12/01/06+.............. 4,000,000 4,160,000
--------------
TOTAL BUSINESS SERVICES (18.4%) 36,791,775
--------------
CAPITAL GOODS
AEROSPACE (1.8%)
Hawk Corp.
10.25%, 12/01/03+............. 3,500,000 3,570,000
--------------
MACHINERY (2.1%)
Dictaphone Corp.
11.75%, 08/01/05.............. 4,500,000 4,140,000
--------------
TOTAL CAPITAL GOODS (3.9%) ... 7,710,000
--------------
CONSUMER CYCLICALS
AIRLINES (1.0%)
Continental Airlines, Inc.
9.5%, 12/15/01+ .............. 2,000,000 2,030,000
--------------
AUTO RELATED (1.5%)
Harvard Industries, Inc.
12.0%, 07/15/04............... 3,500,000 3,027,500
--------------
LEISURE RELATED (4.2%)
American Skiing Corp.
12.0%, 07/15/06+.............. 4,000,000 4,210,000
Waterford Gaming LLC
12.75%, 11/15/03+............. 4,000,000 4,170,000
--------------
8,380,000
--------------
RETAIL--GENERAL (2.1%)
Pantry, Inc.
12.0%, 11/15/00............... 4,500,000 4,241,250
--------------
TOTAL CONSUMER CYCLICALS (8.8%) 17,678,750
--------------
52
<PAGE>
THE HUDSON RIVER TRUST
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
CONSUMER NONCYCLICALS
CONTAINERS (3.0%)
Gaylord Container Corp.
11.5%, 05/15/01............... $3,500,000 $ 3,780,000
MVE, Inc.
12.5%, 02/15/02............... 2,000,000 2,160,000
--------------
5,940,000
--------------
HOSPITAL SUPPLIES & SERVICES (3.1%)
Quest Diagnostic, Inc.
10.75%, 12/15/06.............. 3,452,000 3,624,600
Unison Healthcare Corp.
12.25%, 11/01/06+............. 2,500,000 2,562,500
--------------
6,187,100
--------------
TOTAL CONSUMER NONCYCLICALS (6.1%) 12,127,100
--------------
CREDIT SENSITIVE
FOREIGN GOVERNMENT (1.2%)
Republic of Russia
Floater, 12/15/20 (d)......... 4,000,000 2,335,000
--------------
UTILITY--ELECTRIC (1.5%)
AES China Generating Co.
10.125%, 12/15/06............. 3,000,000 3,120,000
--------------
TOTAL CREDIT SENSITIVE
(2.7%)........................ 5,455,000
--------------
ENERGY
OIL--DOMESTIC (7.9%)
Abraxas Petroleum Corp.
11.5%, 11/01/04+.............. 3,500,000 3,718,750
National Energy Group
10.75%, 11/01/06+............. 6,500,000 6,760,000
TransTexas Gas Corp.
Zero Coupon, 12/31/03 (b) .... 9,512,000 5,231,600
--------------
15,710,350
--------------
OIL--SUPPLIES & CONSTRUCTION (4.6%)
Deeptech International, Inc.
12.0%, 12/15/00............... 3,500,000 3,675,000
Transamerican Refining Corp.
Zero Coupon, 02/15/02 (b) .... 6,750,000 5,568,750
--------------
9,243,750
--------------
TOTAL ENERGY (12.5%).......... 24,954,100
--------------
TECHNOLOGY
ELECTRONICS (11.8%)
Advanced Micro Devices
11.0%, 08/01/03............... 6,000,000 6,510,000
Anacomp, Inc.
13.0%, 06/04/02 (e)........... $4,500,000 $ 4,826,250
Sullivan Graphic, Inc.
12.75%, 08/01/05.............. 5,000,000 4,825,000
Unisys Corp.:
12.0%, 04/15/03............... 5,000,000 5,325,000
11.75%, 10/15/04.............. 2,000,000 2,135,000
--------------
23,621,250
--------------
TELECOMMUNICATIONS (12.8%)
CAI Wireless Systems, Inc.
12.25%, 09/15/02.............. 4,880,000 2,244,800
Celestica International, Inc.
10.5%, 12/31/06+.............. 2,500,000 2,625,000
Colt Telecom Group PLC
Zero Coupon, 12/15/06 (b) .... 7,000,000 4,200,000
Ionica Corp. PLC
13.5%, 08/15/06+ (f).......... 6,000,000 6,720,000
Lodgenet Entertainment
10.25%, 12/15/06+............. 2,500,000 2,506,250
Nextel Communications
Zero Coupon, 08/15/04 (b) .... 7,000,000 4,777,500
Phonetel Technologies, Inc.
12.0%, 12/15/06............... 2,500,000 2,587,500
--------------
25,661,050
--------------
TOTAL TECHNOLOGY (24.6%) ..... 49,282,300
--------------
TOTAL LONG-TERM DEBT SECURITIES (89.9%)
(Amortized Cost
$174,112,832)................. 179,797,777
--------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT AGENCIES
Federal Home Loan Bank
5.26%, due 01/15/97........... 2,300,000 2,295,296
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97............ 8,400,000 8,398,670
--------------
TOTAL U.S. GOVERNMENT
AGENCIES (5.4%).............. 10,693,966
--------------
TOTAL SHORT-TERM DEBT SECURITIES (5.4%)
(Amortized Cost $10,693,966) . 10,693,966
--------------
TOTAL INVESTMENTS (98.8%)
(Cost/Amortized Cost $192,006,772) 197,549,284
OTHER ASSETS
LESS LIABILITIES (1.2%)....... 2,496,181
--------------
NET ASSETS (100.0%)............ $200,045,465
==============
- ------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $64,160,002
or 32.1% of net assets.
(a) Dividends may be paid-in-kind or in cash until a specific date;
thereafter, all payments will be in cash.
(b) Debt security initially issued in zero coupon form which converts to
coupon form at a specific rate and date.
(c) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at December 31, 1996.
(d) Security purchased on a when issued basis.
(e) Paid-in-kind.
(f) Consists of more than one class of securities traded together as a
unit; generally bonds with attached stocks or warrants.
See Notes to Financial Statements.
53
<PAGE>
THE HUDSON RIVER TRUST
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS:
BASIC MATERIALS (1.2%)
CHEMICALS
Dow Chemical Co. ............... 35,000 $ 2,743,125
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.6%)
WMX Technologies, Inc. ......... 40,000 1,305,000
--------------
PRINTING, PUBLISHING &
BROADCASTING (3.3%)
Comcast Corp. (Class A) SPL .... 92,000 1,638,750
LibertyMediaGroup(ClassA)* ... 62,000 1,770,875
Lin Television Corp.*........... 26,000 1,098,500
New York Times Co............... 41,000 1,558,000
Time Warner, Inc................ 44,000 1,650,000
--------------
7,716,125
--------------
TRUCKING, SHIPPING (0.5%)
Xtra Corp....................... 26,500 1,149,438
--------------
TOTAL BUSINESS SERVICES
(4.4%)......................... 10,170,563
--------------
CAPITAL GOODS
BUILDING MATERIALS & FOREST
PRODUCTS (0.7%)
Louisiana Pacific Corp. ........ 75,000 1,584,375
--------------
ELECTRICAL EQUIPMENT (1.3%)
General Electric Co............. 30,000 2,966,250
--------------
TOTAL CAPITAL GOODS (2.0%) ... 4,550,625
--------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.8%)
Reebok International Ltd. ...... 45,000 1,890,000
--------------
AUTO RELATED (1.7%)
Goodyear Tire & Rubber Co. ..... 76,500 3,930,188
--------------
FOOD SERVICES, LODGING (0.4%)
Brinker International, Inc.* ... 60,000 960,000
--------------
HOUSEHOLD FURNITURE,
APPLIANCES (1.0%)
Black & Decker Corp............. 42,500 1,280,313
Sunbeam Corp. .................. 38,000 978,500
--------------
2,258,813
--------------
RETAIL--GENERAL (3.7%)
AutoZone, Inc.*................. 51,200 1,408,000
Dayton Hudson Corp.............. 58,000 2,276,500
Federated Department Stores,
Inc.*.......................... 38,000 1,296,750
Price/Costco, Inc.*............. 75,000 1,884,374
Sears, Roebuck & Co. ........... 40,000 1,845,000
--------------
8,710,624
--------------
TOTAL CONSUMER CYCLICALS (7.6%) 17,749,625
--------------
CONSUMER NONCYCLICALS
BEVERAGES (2.6%)
Anheuser Busch, Inc. ........... 53,000 2,120,000
Pepsico, Inc.................... 135,700 3,969,225
--------------
6,089,225
--------------
FOODS (5.7%)
Campbell Soup Co................ 90,000 7,222,500
General Mills, Inc. ............ 35,000 2,218,124
Nabisco Holdings Corp.
(Class A)...................... 54,000 $ 2,099,250
Whitman Corp.................... 76,000 1,738,500
--------------
13,278,374
--------------
DRUGS (7.0%)
Amgen, Inc.*.................... 12,700 690,570
Bristol-Myers Squibb Co......... 25,000 2,718,750
Centocor, Inc.*................. 101,000 3,610,750
Merck & Co., Inc................ 115,200 9,129,600
--------------
16,149,670
--------------
HOSPITAL SUPPLIES & SERVICES (1.3%)
Abbott Laboratories............. 60,000 3,045,000
--------------
RETAIL--FOOD (0.5%)
Kroger Co.*..................... 23,000 1,069,500
--------------
SOAPS & TOILETRIES (0.5%)
Gillette Corp................... 14,000 1,088,500
--------------
TOBACCO (5.6%)
American Brands, Inc............ 42,000 2,084,250
Philip Morris Cos., Inc. ...... 56,500 6,363,313
RJR Nabisco Holdings Corp. ..... 135,500 4,607,000
--------------
13,054,563
--------------
TOTAL CONSUMER NONCYCLICALS (23.2%) 53,774,832
--------------
CREDIT SENSITIVE
BANKS (5.7%)
Chase Manhattan Corp............ 25,200 2,249,100
First Union Corp................ 58,000 4,292,000
Morgan (J.P.) & Co., Inc. ...... 24,000 2,343,000
Wells Fargo & Co. .............. 16,200 4,369,950
--------------
13,254,050
--------------
FINANCIAL SERVICES (2.0%)
Dean Witter Discover & Co. .... 21,000 1,391,250
Merrill Lynch & Co., Inc. ...... 40,000 3,260,000
--------------
4,651,250
--------------
INSURANCE (5.5%)
General Re Corp................. 26,400 4,164,600
ITT Hartford Group, Inc......... 56,600 3,820,500
PMI Group, Inc.................. 48,600 2,691,225
Travelers Group, Inc............ 45,333 2,056,985
--------------
12,733,310
--------------
UTILITY--ELECTRIC (4.2%)
Cinergy Corp.................... 60,000 2,002,500
FPL Group, Inc.................. 43,000 1,978,000
Houston Industries, Inc......... 60,000 1,357,500
NIPSCO Industries, Inc.......... 28,000 1,109,500
Pinnacle West Capital Corp. .... 36,000 1,143,000
Texas Utilities Co.............. 55,000 2,241,250
--------------
9,831,750
--------------
UTILITY--GAS (1.2%)
Consolidated Natural Gas Co. .. 50,000 2,762,500
--------------
UTILITY--TELEPHONE (5.2%)
AT&T Corp....................... 254,100 11,053,349
LCI International, Inc.*........ 39,610 851,615
--------------
11,904,964
--------------
TOTAL CREDIT SENSITIVE
(23.8%)........................ 55,137,824
--------------
54
<PAGE>
THE HUDSON RIVER TRUST
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
ENERGY
COAL & GAS PIPELINES (0.9%)
MCN Corp. ...................... 70,000 $ 2,021,250
--------------
OIL--DOMESTIC (0.3%)
Apache Corp..................... 22,000 778,250
--------------
OIL--INTERNATIONAL (5.6%)
Exxon Corp...................... 80,000 7,840,000
Mobil Corp...................... 42,300 5,171,175
--------------
13,011,175
--------------
OIL--SUPPLIES & CONSTRUCTION (0.3%)
Transocean Offshore, Inc. ...... 9,900 619,988
--------------
RAILROADS (1.4%)
Canadian Pacific Ltd............ 39,000 1,033,500
Union Pacific Corp.............. 39,000 2,344,875
--------------
3,378,375
--------------
TOTAL ENERGY (8.5%)............ 19,809,038
--------------
TECHNOLOGY
ELECTRONICS (3.9%)
Atmel Corp.*.................... 90,000 2,981,250
National Semiconductor Corp.* .. 153,000 3,729,375
Seagate Technology, Inc.* ...... 12,811 506,035
Tyco International Ltd. ........ 33,900 1,792,463
--------------
9,009,123
--------------
OFFICE EQUIPMENT (2.8%)
Compaq Computer Corp.*.......... 25,000 1,856,250
International Business Machines
Corp. ......................... 20,000 3,020,000
Xerox Corp...................... 30,000 1,578,750
--------------
6,455,000
--------------
TELECOMMUNICATIONS (4.1%)
ICG Communications, Inc.* ...... 21,552 379,854
MFS Communications Co., Inc.* .. 1,045 56,953
Nokia Corp. (ADR)............... 62,000 3,572,750
Scientific Atlanta, Inc......... 100,000 1,500,000
Teleport Communications Group,
Inc. (Class A)*................ 79,700 2,430,850
Vodafone Group PLC (ADR)........ 41,000 1,696,374
--------------
9,636,781
--------------
TOTAL TECHNOLOGY (10.8%) ..... 25,100,904
--------------
DIVERSIFIED (0.7%)
MISCELLANEOUS
Allied Signal, Inc.............. 27,000 1,809,000
--------------
TOTAL COMMON STOCKS (82.2%)
(Cost $168,673,703)............ 190,845,536
--------------
PREFERRED STOCKS:
CONSUMER CYCLICALS
AIRLINES (0.2%)
Continental Air Finance Trust
8.5% Conv. .................... 7,500 502,500
--------------
APPAREL, TEXTILE (0.2%)
Designer Finance Trust
6.0% Conv. .................... 6,900 319,125
--------------
TOTAL CONSUMER CYCLICALS (0.4%) 821,625
--------------
CONSUMER NONCYCLICALS (0.5%)
CONTAINERS
Crown Cork & Seal Co., Inc.
4.5% Conv. ................... 23,100 $1,201,200
--------------
CREDIT SENSITIVE
BANKS (0.3%)
First Chicago NBD Corp.
5.75% Conv. Series B.......... 7,600 685,900
--------------
FINANCIAL SERVICES (0.1%)
Money Store
6.5% Conv. ................... 12,000 328,500
--------------
INSURANCE (0.3%)
PennCorp Financial Group, Inc.
7.0% Conv.+ .................. 10,050 597,975
--------------
TOTAL CREDIT SENSITIVE
(0.7%)........................ 1,612,375
--------------
TECHNOLOGY (0.7%)
TELECOMMUNICATIONS
MFS Communications Co., Inc.
8.0% Conv..................... 18,700 1,706,375
--------------
TOTAL PREFERRED STOCKS (2.3%)
(Cost $4,309,492) ............ 5,341,575
--------------
PRINCIPAL
AMOUNT
------
LONG-TERM DEBT SECURITIES:
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.3%)
United Waste Systems, Inc.
4.5% Conv., 06/01/01+........... $490,000 592,900
--------------
PROFESSIONAL SERVICES (0.9%)
Career Horizons, Inc.
7.0% Conv., 11/01/02............ 220,000 431,475
Danka Business Systems PLC
6.75% Conv., 04/01/02........... 470,000 634,500
First Financial Management Corp.
5.0% Conv., 12/15/99............ 655,000 1,101,218
--------------
2,167,193
--------------
TOTAL BUSINESS SERVICES (1.2%) 2,760,093
--------------
CAPITAL GOODS (0.2%)
MACHINERY
DII Group, Inc.
6.0% Conv., 10/15/02+........... 510,000 484,500
--------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.3%)
Nine West Group, Inc.
5.5% Conv., 07/15/03+........... 790,000 786,050
--------------
FOOD SERVICES, LODGING (0.5%)
HFS, Inc.
4.5% Conv., 10/01/99............ 320,000 1,059,200
--------------
RETAIL--GENERAL (0.5%)
Saks Holdings, Inc.
5.5% Conv., 09/15/06............ 500,000 460,000
U.S. Office Products Co.
5.5% Conv. Sub. Notes,
02/01/01........................ 490,000 637,000
--------------
1,097,000
--------------
TOTAL CONSUMER CYCLICALS (1.3%) 2,942,250
--------------
55
<PAGE>
THE HUDSON RIVER TRUST
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- -------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- -------------------------------------------------------------
CONSUMER NONCYCLICALS
DRUGS (0.5%)
MedImmune, Inc.
7.0% Conv. Sub., 07/01/03+ .... $ 500,000 $ 538,750
Quintiles Transnational Corp.
4.25% Conv., 05/31/00+......... 505,000 530,250
--------------
1,069,000
--------------
HOSPITAL SUPPLIES & SERVICES (0.9%)
American Medical Response, Inc.
5.25% Conv., 02/01/01+......... 545,000 587,237
Healthsouth Corp.
5.0% Conv., 04/01/01........... 270,000 558,563
Phycor, Inc.
4.5% Conv., 02/01/03........... 540,000 525,825
Tenet Healthcare Corp.
6.0% Conv., 12/01/05........... 415,000 435,750
--------------
2,107,375
--------------
TOTAL CONSUMER NONCYCLICALS (1.4%) 3,176,375
--------------
CREDIT SENSITIVE
FINANCIAL SERVICES (0.9%)
Aames Financial Corp.
5.5% Conv., 03/15/06+.......... 330,000 445,913
Leasing Solutions, Inc.
6.875% Conv., 10/01/03......... 760,000 760,000
RAC Financial Group, Inc.
7.25% Conv. Sub., 08/15/03+ ... 365,000 487,731
Safeguard Scientifics
6.0% Conv., 02/01/06+.......... 345,000 376,050
--------------
2,069,694
--------------
INSURANCE (0.3%)
Penn Treaty American Corp.
6.25% Conv., 12/01/03+......... 660,000 716,100
--------------
TOTAL CREDIT SENSITIVE (1.2%) 2,785,794
--------------
ENERGY
COAL & GAS PIPELINES (0.4%)
Nabors Industries, Inc.
5.0% Conv., 05/15/06........... 395,000 489,800
Swift Energy Co.
6.25% Conv., 11/15/06.......... 375,000 411,563
--------------
901,363
--------------
OIL--SUPPLIES & CONSTRUCTION (0.2%)
Seacor Holdings
5.375% Conv. Sub. Notes,
11/15/06+...................... 370,000 429,200
--------------
TOTAL ENERGY (0.6%) ........... 1,330,563
--------------
TECHNOLOGY
ELECTRONICS (4.3%)
Altera Corp.
5.75% Conv. Sub. Note,
06/15/02+...................... 905,000 1,400,487
Applied Magnetics Corp.:
7.0% Conv. Sub., 03/15/06 ..... $1,135,000 $ 2,008,950
7.0% Conv. Sub. Euro,
03/15/06....................... 100,000 177,000
C-Cube Microsystems, Inc.
5.875% Conv., 11/01/05......... 500,000 647,500
Checkpoint Systems, Inc.
5.25% Conv., 11/01/05+......... 215,000 314,169
LSI Logic Corp.
5.5% Conv., 03/15/01+.......... 425,000 932,875
Plasma & Materials
Technologies, Inc.
7.125% Conv., 10/15/01+........ 645,000 632,100
Sanmina Corporation
5.5% Conv., 08/15/02+.......... 750,000 1,568,438
SCI Systems, Inc.
5.0% Conv., 05/01/06........... 780,000 891,150
S3 Incorporated
5.75% Conv. Sub. Note,
10/01/03+...................... 350,000 383,250
3Com Corp.
10.25% Conv., 11/01/01+........ 495,000 1,092,712
--------------
10,048,631
--------------
TELECOMMUNICATIONS (0.9%)
Bay Networks, Inc.
5.25%, 05/15/03+............... 270,000 243,675
BBN Corp.
6.0% Conv., 04/01/12........... 710,000 688,700
Comverse Technology, Inc.
5.75% Conv. Sub., 10/01/06+ ... 1,020,000 1,056,975
--------------
1,989,350
--------------
TOTAL TECHNOLOGY (5.2%) ...... 12,037,981
--------------
DIVERSIFIED (0.4%)
MISCELLANEOUS
Thermo Electron Corp.
5.0% Conv. Euro, 04/15/01 ..... 585,000 1,159,763
--------------
TOTAL LONG-TERM DEBT SECURITIES (11.5%)
(Amortized Cost $22,329,200) .. 26,677,319
--------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT AGENCIES
Federal Home Loan Bank
5.25%, due 01/02/97............ 3,000,000 2,999,563
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97............. 5,900,000 5,899,065
--------------
TOTAL U.S. GOVERNMENT
AGENCIES (3.9%) .............. 8,898,628
--------------
TOTAL SHORT-TERM DEBT SECURITIES (3.9%)
(Amortized Cost $8,898,628) ... 8,898,628
--------------
TOTAL INVESTMENTS (99.9%)
(Cost/Amortized Cost $204,211,023) 231,763,058
OTHER ASSETS
LESS LIABILITIES (0.1%)........ 317,330
--------------
NET ASSETS (100.0%) ............ $232,080,388
==============
- ------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $14,197,337
or 6.1% of net assets.
Glossary:
ADR--American Depository Receipt
See Notes to Financial Statements.
56
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ----------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ----------------------------------------------------------------
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS (2.5%)
Air Products & Chemicals, Inc. ... 7,400 $ 511,525
Avery Dennison Corp. .............. 7,200 254,700
Dow Chemical Co. .................. 16,100 1,261,837
Dupont (E.I.) de Nemours & Co. ... 37,300 3,520,187
Eastman Chemical Company........... 5,400 298,350
Ecolab, Inc. ...................... 5,000 188,125
FMC Corp.*......................... 2,600 182,325
Goodrich (B.F.) Co. ............... 4,400 178,200
Grace (W.R.) & Co. ................ 6,400 331,200
Hercules, Inc. .................... 6,800 294,100
Millipore Corp. ................... 5,000 206,875
Monsanto Co. ...................... 38,900 1,512,238
Nalco Chemical Co.................. 5,100 184,238
Rohm & Haas Co. ................... 4,200 342,825
Union Carbide Corp. ............... 8,400 343,350
--------------
9,610,075
--------------
CHEMICALS--SPECIALTY (0.3%)
Great Lakes Chemical Corp. ........ 4,400 205,700
Morton International, Inc. ........ 10,100 411,575
Raychem Corp. ..................... 3,000 240,375
Sigma-Aldrich Corp. ............... 3,600 224,775
--------------
1,082,425
--------------
METALS & MINING (1.2%)
Alcan Aluminium Ltd................ 900 30,262
Alcan Aluminium Ltd. (Canada) ..... 14,800 499,908
Aluminum Co. of America............ 12,400 790,500
Barrick Gold Corp. ................ 23,500 675,625
Cyprus Amax Minerals Co. .......... 7,900 184,663
Engelhard Corp. ................... 9,450 180,731
Freeport-McMoRan
Copper & Gold, Inc. (Class B) .... 13,600 406,300
Homestake Mining Co. .............. 11,700 166,725
Inco Ltd. ......................... 12,000 382,500
Newmont Mining Corp. .............. 6,948 310,923
Phelps Dodge Corp. ................ 4,600 310,500
Placer Dome, Inc. ................. 17,000 369,750
Reynolds Metals Co. ............... 4,300 242,412
Santa Fe Pacific Gold Corp. ...... 12,420 190,958
--------------
4,741,757
--------------
PAPER (1.3%)
Champion International Corp. ..... 6,400 276,800
Georgia Pacific Corp. ............. 6,100 439,200
International Paper Co. ........... 20,225 816,584
James River Corp................... 6,000 198,750
Kimberly Clark Corp. .............. 19,022 1,811,846
Mead Corp. ........................ 3,500 203,438
Moore Corp. Ltd. .................. 9,100 185,412
Stone Container Corp. ............. 12,400 184,450
Temple Inland, Inc. ............... 3,900 211,087
Union Camp Corp. .................. 4,800 229,200
Westvaco Corp. .................... 7,500 215,625
Willamette Industries, Inc. ...... 3,900 271,538
--------------
5,043,930
--------------
STEEL (0.3%)
Allegheny Teledyne, Inc. .......... 10,600 $ 243,800
Bethlehem Steel Corp.*............. 13,600 122,400
Nucor Corp. ....................... 6,100 311,100
USX-U.S. Steel Group............... 6,300 197,663
Worthington Industries, Inc. ..... 8,400 152,250
--------------
1,027,213
--------------
TOTAL BASIC MATERIALS (5.6%) ..... 21,505,400
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.4%)
Browning-Ferris Industries, Inc. . 14,100 370,125
Johnson Controls, Inc. ............ 2,800 232,050
WMX Technologies, Inc. ............ 32,300 1,053,788
--------------
1,655,963
--------------
PRINTING, PUBLISHING &
BROADCASTING (1.9%)
Comcast Corp. (Class A) SPL........ 21,600 384,750
Deluxe Corp. ...................... 6,500 212,875
Donnelley (R.R.) & Sons Co. ...... 10,000 313,750
Dow Jones & Co., Inc. ............. 6,400 216,800
Dun & Bradstreet Corp. ............ 12,100 287,375
Gannett Co. ....................... 9,300 696,338
Jostens, Inc. ..................... 8,692 183,619
King World Productions, Inc.* ..... 5,200 191,750
Knight-Ridder, Inc. ............... 6,600 252,450
McGraw-Hill Companies, Inc. ...... 6,600 304,425
New York Times Co. ................ 6,900 262,200
TCI Group (Class A)*............... 44,000 574,750
Time Warner, Inc. ................. 37,700 1,413,750
Times Mirror Co. (Class A)......... 6,600 328,350
Tribune Co. ....................... 4,100 323,387
U.S. West Media Group*............. 41,400 765,900
Viacom, Inc. (Class A)*............ 1,000 34,500
Viacom, Inc. (Class B)*............ 22,500 784,687
--------------
7,531,656
--------------
PROFESSIONAL SERVICES (0.4%)
Block (H&R), Inc. ................. 7,200 208,800
Ceridian Corp.*.................... 5,000 202,500
Cognizant Corp. ................... 11,400 376,200
Interpublic Group Cos., Inc. ..... 5,400 256,500
Service Corp. International........ 15,400 431,215
--------------
1,475,215
--------------
TRUCKING, SHIPPING (0.3%)
Federal Express Corp.*............. 7,800 347,100
Laidlaw, Inc. (Class B)............ 20,800 239,200
Ryder System, Inc. ................ 6,700 188,437
--------------
774,737
--------------
TOTAL BUSINESS SERVICES (3.0%) ... 11,437,571
--------------
CAPITAL GOODS
AEROSPACE (2.2%)
Boeing Co. ........................ 24,267 2,581,402
General Dynamics Corp. ............ 4,600 324,300
Lockheed Martin Corp. ............. 12,704 1,162,416
McDonnell Douglas Corp. ........... 14,000 896,000
Northrop Grumman Corp. ............ 4,000 331,000
Raytheon Co. ...................... 15,600 750,750
57
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------- ----------- --------------
Rockwell International Corp. ..... 15,900 $ 967,913
TRW, Inc. ......................... 8,400 415,800
United Technologies Corp. ......... 15,900 1,049,400
--------------
8,478,981
--------------
BUILDING MATERIALS & FOREST
PRODUCTS (0.7%)
Armstrong World Industries, Inc. . 2,900 201,550
Crane Co. ......................... 6,600 191,400
Louisiana Pacific Corp. ........... 8,600 181,675
Masco Corp. ....................... 11,500 414,000
Owens Corning...................... 4,600 196,075
PPG Industries, Inc. .............. 12,100 679,113
Sherwin Williams Co. .............. 5,800 324,800
Weyerhaeuser Co. .................. 13,300 630,087
--------------
2,818,700
--------------
ELECTRICAL EQUIPMENT (3.5%)
Emerson Electric Co. .............. 14,800 1,431,900
General Electric Co. .............. 110,100 10,886,138
Grainger (W.W.), Inc. ............. 3,700 296,925
Thomas & Betts Corp................ 4,200 186,375
Westinghouse Electric Corp. ...... 28,100 558,487
--------------
13,359,825
--------------
MACHINERY (1.3%)
Case Corp. ........................ 4,900 267,050
Caterpillar, Inc. ................. 12,700 955,675
Cooper Industries, Inc. ........... 7,200 303,300
Cummins Engine, Inc. .............. 4,400 202,400
Deere & Co......................... 17,200 698,750
Dover Corp. ....................... 7,500 376,875
Fluor Corp. ....................... 5,800 363,950
Foster Wheeler Corp. .............. 5,100 189,338
General Signal Corp. .............. 4,500 192,375
Harnischfeger Industries Corp. ... 4,100 197,312
Illinois Tool Works, Inc........... 8,200 654,975
Ingersoll Rand Co. ................ 7,300 324,850
Pall Corp.......................... 8,200 209,100
Parker-Hannifin Corp. ............. 5,300 205,375
--------------
5,141,325
--------------
TOTAL CAPITAL GOODS (7.7%)........ 29,798,831
--------------
CONSUMER CYCLICALS
AIRLINES (0.3%)
AMR Corp.*......................... 5,700 502,313
Delta Air Lines, Inc............... 4,700 333,113
Southwest Airlines Co. ............ 9,100 201,337
USAir Group, Inc.*................. 7,400 172,975
--------------
1,209,738
--------------
APPAREL, TEXTILE (0.6%)
Fruit of the Loom, Inc.*........... 5,000 189,375
Liz Claiborne, Inc. ............... 4,700 181,537
National Service Industries, Inc. 5,200 194,350
Nike, Inc. (Class B)............... 18,600 1,111,350
Reebok International Ltd. ......... 5,200 218,400
Russell Corp. ..................... 6,500 193,375
VF Corp. .......................... 4,200 283,500
--------------
2,371,887
--------------
AUTO RELATED (0.5%)
Cooper Tire & Rubber Co. .......... 7,400 $ 146,150
Dana Corp. ........................ 6,200 202,275
Eaton Corp. ....................... 5,600 390,600
Echlin, Inc. ...................... 5,500 173,938
Genuine Parts Co................... 8,500 378,250
Goodyear Tire & Rubber Co.......... 9,100 467,512
Snap-On, Inc. ..................... 5,050 179,906
--------------
1,938,631
--------------
AUTOS & TRUCKS (1.8%)
Chrysler Corp. .................... 47,800 1,577,400
Ford Motor Co. .................... 77,800 2,479,875
General Motors Corp. .............. 49,600 2,765,200
Paccar, Inc........................ 2,800 190,400
--------------
7,012,875
--------------
FOOD SERVICES, LODGING (0.9%)
Harrah's Entertainment, Inc.* ..... 10,500 208,688
HFS, Inc.*......................... 8,700 519,825
Marriott International, Inc. ..... 8,500 469,625
McDonald's Corp. .................. 45,500 2,058,875
Wendy's International, Inc. ...... 9,000 184,500
--------------
3,441,513
--------------
HOUSEHOLD FURNITURE,
APPLIANCES (0.4%)
Black & Decker Corp. .............. 6,200 186,775
Maytag Corp. ...................... 9,100 179,725
Newell Co. ........................ 10,500 330,750
Rubbermaid, Inc. .................. 10,800 245,700
Stanley Works...................... 6,600 178,200
Whirlpool Corp. ................... 5,200 242,450
Zenith Electronics Corp.*.......... 1,205 13,104
--------------
1,376,704
--------------
LEISURE RELATED (1.5%)
American Greetings Corp. .......... 7,100 201,463
Brunswick Corp. ................... 7,700 184,800
CUC International, Inc.*........... 26,050 618,687
Disney (Walt) Co. ................. 45,100 3,140,087
Hasbro, Inc. ...................... 6,400 248,800
Hilton Hotels Corp. ............... 16,400 428,450
ITT Corp.*......................... 8,100 351,338
Mattel, Inc........................ 17,743 492,368
--------------
5,665,993
--------------
PHOTO & OPTICAL (0.6%)
Allergan, Inc. .................... 5,400 192,375
Bausch & Lomb, Inc................. 5,200 182,000
Eastman Kodak Co. ................. 21,400 1,717,350
Polaroid Corp. .................... 4,100 178,350
--------------
2,270,075
--------------
RETAIL--GENERAL (3.7%)
Circuit City Stores, Inc. ......... 7,100 213,888
CVS Corp. ......................... 7,000 289,625
Dayton Hudson Corp. ............... 14,400 565,200
Dillard Department Stores, Inc.
(Class A)......................... 7,600 234,650
Federated Department Stores,
Inc.*............................. 13,800 470,925
58
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Gap, Inc. ......................... 18,900 $ 569,362
Harcourt General, Inc. ............ 4,600 212,175
Home Depot, Inc. .................. 32,000 1,604,000
K-Mart Corp.*...................... 32,200 334,075
Limited, Inc. ..................... 18,000 330,750
Lowe's Cos., Inc. ................. 11,500 408,250
May Department Stores Co. ......... 16,800 785,400
Nordstrom, Inc..................... 5,400 191,362
Penney (J.C.), Inc................. 15,400 750,750
Pep Boys Manny Moe & Jack.......... 5,500 169,125
Price/Costco, Inc.*................ 13,100 329,138
Rite Aid Corp. .................... 8,200 325,950
Sears, Roebuck & Co. .............. 26,100 1,203,863
Tandy Corp. ....................... 4,300 189,200
TJX Cos., Inc...................... 5,300 251,088
Toys R Us, Inc.*................... 18,300 549,000
Tupperware Corp. .................. 4,200 225,225
Wal-Mart Stores, Inc. ............. 152,700 3,493,012
Walgreen Co. ...................... 16,400 656,000
Woolworth Corp.*................... 9,400 205,625
--------------
14,557,638
--------------
TOTAL CONSUMER CYCLICALS (10.3%) 39,845,054
--------------
CONSUMER NONCYCLICALS
BEVERAGES (3.7%)
Anheuser Busch, Inc. .............. 33,700 1,348,000
Brown Forman Corp. (Class B) ...... 4,700 215,025
Coca-Cola Co. ..................... 165,900 8,730,488
Pepsico, Inc. ..................... 103,100 3,015,675
Seagram Ltd. ...................... 25,200 976,500
--------------
14,285,688
--------------
CONTAINERS (0.2%)
Bemis, Inc. ....................... 5,300 195,437
Crown Cork & Seal Co., Inc. ...... 8,300 451,313
--------------
646,750
--------------
DRUGS (6.3%)
ALZA Corp. (Class A)*.............. 7,300 188,888
American Home Products Corp. ..... 42,400 2,485,700
Amgen, Inc.*....................... 17,600 957,000
Bristol-Myers Squibb Co. .......... 33,300 3,621,375
Lilly (Eli) & Co. ................. 36,700 2,679,100
Merck & Co., Inc. ................. 80,400 6,371,700
Pharmacia & Upjohn, Inc. .......... 33,890 1,342,891
Pfizer, Inc. ...................... 42,800 3,547,050
Schering Plough Corp. ............. 24,700 1,599,325
Warner-Lambert Co. ................ 18,100 1,357,500
--------------
24,150,529
--------------
FOODS (2.5%)
Archer Daniels Midland Co. ........ 36,074 793,628
Campbell Soup Co. ................. 15,500 1,243,875
ConAgra, Inc. ..................... 16,000 796,000
CPC International, Inc. ........... 9,500 736,250
General Mills, Inc. ............... 10,400 659,100
Heinz (H.J.) Co. .................. 24,350 870,513
Hershey Foods Corp. ............... 10,200 446,250
Kellogg Co. ....................... 14,000 918,750
Pioneer Hi Bred International,
Inc. ............................. 5,500 385,000
Quaker Oats Co. ................... 9,000 343,125
Ralston Purina Group............... 7,000 513,625
Sara Lee Corp. .................... 32,100 $ 1,195,725
Whitman Corp. ..................... 9,000 205,875
Wrigley (Wm.), Jr. Co. ............ 7,700 433,125
--------------
9,540,841
--------------
HOSPITAL SUPPLIES & SERVICES (3.6%)
Abbott Laboratories................ 51,600 2,618,700
Baxter International, Inc. ........ 18,100 742,100
Becton Dickinson & Co. ............ 8,300 360,012
Biomet, Inc. ...................... 12,400 187,550
Boston Scientific Corp.*........... 11,800 708,000
Columbia/HCA Healthcare Corp. ..... 44,600 1,817,450
Guidant Corp. ..................... 4,900 279,300
Humana, Inc.*...................... 11,200 214,200
Johnson and Johnson................ 88,500 4,402,875
Medtronic, Inc. ................... 15,900 1,081,200
Mallinckrodt, Inc. ................ 5,100 225,037
Saint Jude Medical, Inc.*.......... 5,750 245,093
Tenet Healthcare Corp.*............ 14,400 315,000
United Healthcare Corp. ........... 12,300 553,500
U.S. Surgical Corp. ............... 5,200 204,750
--------------
13,954,767
--------------
RETAIL--FOOD (0.6%)
Albertsons, Inc. .................. 16,800 598,500
American Stores Co. ............... 9,700 396,488
Giant Food, Inc. (Class A)......... 5,500 189,750
Kroger Co.*........................ 8,400 390,600
Supervalu, Inc. ................... 6,800 192,950
Sysco Corp. ....................... 11,900 388,238
Winn Dixie Stores, Inc. ........... 10,100 319,412
--------------
2,475,938
--------------
SOAPS & TOILETRIES (2.9%)
Avon Products, Inc. ............... 9,500 542,688
Clorox Co. ........................ 3,700 371,387
Colgate Palmolive Co. ............. 9,800 904,050
Gillette Corp. .................... 29,800 2,316,950
International Flavors &
Fragrances, Inc. ................. 7,700 346,500
Procter & Gamble Co................ 45,600 4,902,000
Unilever N.V. ..................... 10,700 1,875,175
--------------
11,258,750
--------------
TOBACCO (2.0%)
American Brands, Inc. ............. 11,300 560,763
Loews Corp. ....................... 7,600 716,300
Philip Morris Cos., Inc. .......... 54,000 6,081,750
UST, Inc. ......................... 13,300 430,587
--------------
7,789,400
--------------
TOTAL CONSUMER NONCYCLICALS (21.8%) 84,102,663
--------------
CREDIT SENSITIVE
BANKS (7.5%)
Ahmanson (H.F.) & Co. ............. 7,000 227,500
Banc One Corp. .................... 28,380 1,220,340
Bank of Boston Corp. .............. 10,100 648,925
Bank of New York Co. .............. 26,000 877,500
BankAmerica Corp. ................. 23,800 2,374,050
Bankers Trust New York Corp. ..... 5,700 491,625
Barnett Banks, Inc. ............... 12,900 530,513
Boatmen's Bancshares, Inc. ........ 10,300 664,350
Chase Manhattan Corp. ............. 29,140 2,600,745
59
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Citicorp........................... 31,200 $ 3,213,600
Comerica, Inc. .................... 7,100 371,863
CoreStates Financial Corp. ........ 14,800 767,750
Fifth Third Bancorp................ 7,000 439,687
First Bank Systems................. 8,900 607,425
First Chicago NBD Corp. ........... 21,149 1,136,759
First Union Corp. ................. 18,845 1,394,530
Golden West Financial Corp. ...... 4,100 258,812
Great Western Financial Corp. .... 9,700 281,300
KeyCorp. .......................... 14,900 752,450
Mellon Bank Corp. ................. 8,600 610,600
Morgan (J.P.) & Co., Inc. ......... 12,400 1,210,550
National City Corp. ............... 14,700 659,663
NationsBank Corp. ................. 19,100 1,867,025
Norwest Corp. ..................... 24,600 1,070,100
PNC Bank Corp. .................... 22,600 850,325
Republic New York Corp. ........... 3,900 318,337
Suntrust Banks, Inc. .............. 14,800 728,900
U.S. Bancorp....................... 10,000 449,375
Wachovia Corp. .................... 11,000 621,500
Wells Fargo & Co. ................. 6,200 1,672,450
--------------
28,918,549
--------------
FINANCIAL SERVICES (2.0%)
American Express Co. .............. 31,400 1,774,100
Beneficial Corp. .................. 3,600 228,150
Dean Witter Discover & Co. ........ 10,700 708,875
Fleet Financial Group, Inc. ...... 17,379 866,778
Green Tree Financial Corp. ........ 9,100 351,488
Household International, Inc. .... 6,400 590,400
MBIA, Inc. ........................ 2,900 293,625
MBNA Corp. ........................ 14,750 612,125
Merrill Lynch & Co., Inc. ......... 10,900 888,350
Morgan Stanley Group, Inc. ........ 10,100 576,962
Salomon, Inc. ..................... 7,200 339,300
Transamerica Corp. ................ 4,400 347,600
--------------
7,577,753
--------------
INSURANCE (3.8%)
Aetna, Inc. ....................... 9,943 795,440
Allstate Corp. .................... 29,238 1,692,149
American General Corp. ............ 13,400 547,725
American International Group, Inc. 30,950 3,350,338
Aon Corp. ......................... 7,100 441,088
Chubb Corp. ....................... 11,500 618,125
CIGNA Corp. ....................... 5,000 683,125
General Re Corp. .................. 5,400 851,850
ITT Hartford Group, Inc. .......... 7,700 519,750
Jefferson-Pilot Corp. ............. 4,700 266,137
Lincoln National Corp. Industries . 6,900 362,250
Marsh & McLennan Cos., Inc. ...... 4,700 488,800
MGIC Investment Corp. ............. 4,200 319,200
Providian Corp. ................... 6,200 318,525
Safeco Corp. ...................... 8,300 327,331
Saint Paul Cos., Inc. ............. 5,500 322,438
Torchmark Corp..................... 4,600 232,300
Travelers Group, Inc............... 42,500 1,928,438
UNUM Corp. ........................ 4,800 346,800
USF&G Corp. ....................... 9,100 189,962
USLIFE Corp. ...................... 5,800 192,850
--------------
14,794,621
--------------
MORTGAGE RELATED (1.0%)
Federal Home Loan
Mortgage Corp. ................... 11,900 $ 1,310,488
Federal National Mortgage
Association....................... 72,400 2,696,900
--------------
4,007,388
--------------
UTILITY--ELECTRIC (2.8%)
American Electric Power, Inc. .... 12,400 509,950
Baltimore Gas & Electric Co. ...... 9,800 262,150
Carolina Power & Light Co.......... 10,100 368,650
Central & South West Corp.......... 14,000 358,750
Cinergy Corp. ..................... 10,513 350,871
Consolidated Edison Co. N.Y., Inc. 15,600 456,300
Dominion Resources, Inc. .......... 12,000 462,000
DTE Energy Co. .................... 9,600 310,800
Duke Power Co. .................... 13,400 619,750
Edison International............... 28,800 572,400
Entergy Corp. ..................... 15,300 424,575
FPL Group, Inc. ................... 12,100 556,600
GPU, Inc........................... 8,000 269,000
Houston Industries, Inc............ 15,600 352,950
Niagara Mohawk Power Co.*.......... 17,900 176,763
Northern States Power Co........... 4,900 224,787
Ohio Edison Co. ................... 10,100 229,775
Pacific Gas & Electric Co. ........ 27,400 575,400
Pacificorp......................... 19,600 401,800
Peco Energy Co. ................... 14,800 373,700
PP&L Resources, Inc. .............. 11,500 264,500
Public Service Enterprise Group ... 15,800 430,550
Southern Co. ...................... 44,700 1,011,337
Texas Utilities Co................. 14,900 607,175
Unicom Corporation................. 14,300 387,887
Union Electric Co. ................ 6,800 261,800
--------------
10,820,220
--------------
UTILITY--GAS (0.4%)
Columbia Gas System, Inc........... 3,900 248,137
Consolidated Natural Gas Co. ..... 6,300 348,075
ENRON Corp. ....................... 16,900 728,813
Nicor, Inc. ....................... 5,200 185,900
Peoples Energy Corp. .............. 5,800 196,475
--------------
1,707,400
--------------
UTILITY--TELEPHONE (5.8%)
Alltel Corp. ...................... 13,400 420,425
Ameritech Corp. ................... 36,400 2,206,750
AT&T Corp.......................... 107,400 4,671,900
Bell Atlantic Corp. ............... 29,000 1,877,750
BellSouth Corp. ................... 65,900 2,660,712
GTE Corp. ......................... 63,800 2,902,900
NYNEX Corp. ....................... 29,200 1,405,250
Pacific Telesis Group.............. 28,400 1,043,700
SBC Communications, Inc............ 40,000 2,070,000
Sprint Corp. ...................... 28,500 1,136,437
U.S. West Communications Group .... 31,700 1,022,325
WorldCom, Inc.*.................... 28,300 737,569
--------------
22,155,718
--------------
TOTAL CREDIT SENSITIVE (23.3%) ... 89,981,649
--------------
60
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
ENERGY
COAL & GAS PIPELINES (0.8%)
Burlington Resources, Inc. ........ 8,200 $ 413,075
Coastal Corp. ..................... 7,000 342,125
Pacific Enterprises Ltd. .......... 6,400 194,400
Panenergy Corp. ................... 10,000 450,000
Praxair, Inc. ..................... 10,400 479,700
Sonat, Inc. ....................... 5,700 293,550
Tenneco, Inc. ..................... 11,300 509,913
Williams Cos., Inc. ............... 10,350 388,125
--------------
3,070,888
--------------
OIL--DOMESTIC (2.2%)
Amerada Hess Corp. ................ 6,100 353,037
Amoco Corp. ....................... 32,600 2,624,300
Ashland, Inc. ..................... 4,800 210,600
Atlantic Richfield Co. ............ 10,600 1,404,500
Kerr McGee Corp. .................. 3,300 237,600
Louisiana Land & Exploration Corp. 3,300 176,963
Occidental Petroleum Corp. ........ 22,900 535,288
Oryx Energy Co.*................... 8,000 198,000
Pennzoil Co........................ 3,300 186,450
Phillips Petroleum Co. ............ 17,300 765,524
Sun, Inc. ......................... 7,600 185,250
Union Pacific Resources Group,
Inc. ............................. 16,408 479,934
Unocal Corp. ...................... 16,400 666,250
USX-Marathon Group................. 19,800 472,725
--------------
8,496,421
--------------
OIL--INTERNATIONAL (5.7%)
Chevron Corp. ..................... 43,300 2,814,500
Exxon Corp. ....................... 82,700 8,104,600
Mobil Corp. ....................... 26,100 3,190,725
Royal Dutch Petroleum Co. (ADR) ... 35,500 6,061,625
Texaco, Inc. ...................... 17,500 1,717,188
--------------
21,888,638
--------------
OIL--SUPPLIES & CONSTRUCTION (0.9%)
Baker Hughes, Inc. ................ 9,500 327,750
Dresser Industries, Inc. .......... 11,600 359,600
Halliburton Co. ................... 8,300 500,075
McDermott International, Inc. .... 11,900 197,838
Rowan Cos., Inc.*.................. 8,900 201,363
Schlumberger, Ltd. ................ 16,300 1,627,962
Western Atlas, Inc.*............... 3,900 276,412
--------------
3,491,000
--------------
RAILROADS (0.9%)
Burlington Northern Santa Fe ...... 10,151 876,793
Conrail, Inc. ..................... 5,647 562,582
CSX Corp. ......................... 14,400 608,400
Norfolk Southern Corp. ............ 8,300 726,250
Union Pacific Corp. ............... 16,200 974,025
--------------
3,748,050
--------------
TOTAL ENERGY (10.5%).............. 40,694,997
--------------
TECHNOLOGY
ELECTRONICS (5.0%)
Advanced Micro Devices, Inc.* ..... 9,900 254,925
AMP, Inc........................... 14,500 556,438
Applied Materials, Inc.*........... 11,900 $ 427,656
Bay Networks, Inc.*................ 13,700 285,988
Cabletron Systems, Inc.*........... 10,300 342,475
Cisco Systems, Inc.*............... 43,200 2,748,600
EMC Corp.*......................... 15,400 510,125
General Instrument Corp.*.......... 9,100 196,788
Harris Corp. ...................... 3,000 205,875
Intel Corp. ....................... 54,300 7,109,906
ITT Industries, Inc. .............. 8,400 205,800
LSI Logic Corp.*................... 8,900 238,075
Micron Technology, Inc............. 13,800 401,925
Motorola, Inc. .................... 39,200 2,405,900
National Semiconductor Corp.* ..... 9,200 224,250
Perkin-Elmer Corp.................. 3,600 211,950
Seagate Technology, Inc.*.......... 14,200 560,900
Tektronix, Inc. ................... 3,700 189,625
Texas Instruments, Inc. ........... 12,600 803,250
Tyco International, Ltd. .......... 10,400 549,900
3Com Corp.*........................ 11,500 843,812
--------------
19,274,163
--------------
OFFICE EQUIPMENT (3.7%)
Amdahl Corp.*...................... 14,400 174,600
Apple Computer, Inc.*.............. 8,600 179,525
Compaq Computer Corp.*............. 17,900 1,329,075
Dell Computer Corp.*............... 11,900 632,188
Digital Equipment Corp.*........... 10,300 374,663
Hewlett-Packard Co. ............... 67,300 3,381,825
Honeywell, Inc..................... 8,400 552,300
International Business Machines
Corp. ............................ 34,300 5,179,300
Pitney Bowes, Inc.................. 9,800 534,100
Sun Microsystems, Inc.*............ 24,300 624,206
Unisys Corp.*...................... 3,200 21,600
Xerox Corp. ....................... 21,500 1,131,437
--------------
14,114,819
--------------
OFFICE EQUIPMENT SERVICES (3.2%)
Autodesk, Inc. .................... 6,700 187,600
Automatic Data Processing, Inc. .. 19,300 827,488
Computer Associates International,
Inc. ............................. 24,250 1,206,438
Computer Sciences Corp.*........... 5,100 418,838
First Data Corp. .................. 29,800 1,087,700
Microsoft Corp.*................... 79,200 6,543,900
Novell, Inc.*...................... 25,700 243,345
Oracle Corp.*...................... 43,525 1,817,169
Silicon Graphics, Inc.*............ 12,500 318,750
--------------
12,651,228
--------------
TELECOMMUNICATIONS (1.6%)
AirTouch Communications, Inc.* .... 33,300 840,825
Andrew Corp.*...................... 4,175 221,536
Cox Communications Inc.
(Class A)*........................ 95 2,197
DSC Communications Corp.*.......... 10,300 184,113
Lucent Technologies, Inc........... 42,094 1,946,848
MCI Communications Corp............ 45,400 1,484,012
Northern Telecommunications Ltd. . 17,100 1,058,062
Tellabs, Inc.*..................... 12,600 474,075
--------------
6,211,668
--------------
TOTAL TECHNOLOGY (13.5%).......... 52,251,878
--------------
61
<PAGE>
THE HUDSON RIVER TRUST
EQUITY INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
DIVERSIFIED
MISCELLANEOUS (1.4%)
Alco Standard Corp. ............... 8,800 $ 454,300
Allied Signal, Inc. ............... 18,800 1,259,600
Corning, Inc. ..................... 15,200 703,000
Minnesota Mining & Manufacturing
Co. .............................. 27,700 2,295,637
Textron, Inc. ..................... 5,500 518,375
--------------
TOTAL DIVERSIFIED (1.4%).......... 5,230,912
--------------
TOTAL COMMON STOCKS (97.1%)
(Cost $312,422,283)............... 374,848,955
--------------
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT & AGENCIES
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97.......... $7,700,000 $ 7,698,780
U.S. Treasury
5.0%, due 02/20/97** ....... 500,000 496,521
-------------
TOTAL U.S. GOVERNMENT &
AGENCIES (2.1%)............ 8,195,301
-------------
TOTAL SHORT-TERM DEBT SECURITIES (2.1%)
(Amortized Cost
$8,195,301)................. 8,195,301
-------------
TOTAL INVESTMENTS (99.2%) ...
(Cost/Amortized Cost $320,617,584) 383,044,256
OTHER ASSETS
LESS LIABILITIES (0.8%) .... 3,204,925
-------------
NET ASSETS (100.0%).......... $386,249,181
=============
- ------------------
Financial Futures Contracts outstanding at December 31, 1996:
<TABLE>
<CAPTION>
EXPIRATION NUMBER ORIGINAL VALUE AT UNREALIZED
DESCRIPTION DATE OF CONTRACTS VALUE 12/31/96 DEPRECIATION
- -------------------- ------------ -------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
LONG S&P 500 INDEX* 3/97 21 $7,986,250 $7,817,250 $(169,000)
</TABLE>
- ------------
* Non-income producing.
** Security segregated as collateral on financial futures contracts.
See Notes to Financial Statements.
62
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS AND WARRANTS:
BASIC MATERIALS
CHEMICALS (1.0%)
Grace (W.R.) & Co. ............... 356,100 $ 18,428,175
Monsanto Co....................... 1,245,000 48,399,375
--------------
TOTAL BASIC MATERIALS (1.0%) .... 66,827,550
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.4%)
WMX Technologies, Inc. ........... 900,000 29,362,500
--------------
PRINTING, PUBLISHING &
BROADCASTING (4.0%)
Chris Craft Industries, Inc.
(Class B)*++ .................... 1,190,444 49,849,843
Comcast Corp. (Class A) SPL ...... 1,031,800 18,378,938
Liberty Media Group (Class A)* ... 1,523,309 43,509,513
TCI Group (Class A)*.............. 9,094,236 118,793,458
TCI Satellite Entertainment, Inc.
(Class A)*....................... 919,423 9,079,302
Time Warner, Inc.................. 190,000 7,125,000
U.S. West Media Group*............ 855,000 15,817,500
--------------
262,553,554
--------------
PROFESSIONAL SERVICES (2.4%)
ADT Ltd.*......................... 446,000 10,202,250
Ceridian Corp.*++................. 3,665,000 148,432,500
Cognizant Corp. .................. 130,000 4,290,000
--------------
162,924,750
--------------
TOTAL BUSINESS SERVICES (6.8%) .. 454,840,804
--------------
CAPITAL GOODS
AEROSPACE (0.4%)
LoralSpace&Communications*(a) 1,540,000 28,297,500
--------------
ELECTRICAL EQUIPMENT (0.6%)
Westinghouse Electric Corp. ..... 1,785,000 35,476,875
--------------
TOTAL CAPITAL GOODS (1.0%) ...... 63,774,375
--------------
CONSUMER CYCLICALS
AIRLINES (0.5%)
Delta Air Lines, Inc.............. 200,000 14,175,000
Northwest Airlines Corp.
(Class A)*....................... 93,300 3,650,363
UAL Corp.*........................ 291,700 18,231,250
--------------
36,056,613
--------------
LEISURE RELATED (3.6%)
CUC International, Inc.*(a) ...... 6,618,700 157,194,125
Disney (Walt) Co.................. 153,000 10,652,625
Hasbro, Inc....................... 336,100 13,065,888
ITT Corp.*........................ 1,322,600 57,367,775
--------------
238,280,413
--------------
PHOTO & OPTICAL (1.0%)
Eastman Kodak Co. ................ 837,700 67,225,425
--------------
RETAIL--GENERAL (6.3%)
AutoZone, Inc.*................... 4,470,100 122,927,750
CompUSA, Inc.*(a)................. 3,167,600 65,331,750
Home Depot, Inc................... 701,000 $ 35,137,625
Lowe's Cos., Inc.................. 1,741,400 61,819,700
Sears, Roebuck & Co. ............. 1,950,500 89,966,813
Wal-Mart Stores, Inc. ............ 1,766,000 40,397,250
--------------
415,580,888
--------------
TOTAL CONSUMER CYCLICALS (11.4%) 757,143,339
--------------
CONSUMER NONCYCLICALS
BEVERAGES (0.2%)
Pepsico, Inc...................... 421,000 12,314,250
--------------
DRUGS (4.6%)
Amgen, Inc.*...................... 150,000 8,156,250
Astra AB (A Shares)............... 1,290,000 63,750,955
Merck & Co., Inc.................. 1,849,200 146,549,100
Pfizer, Inc. ..................... 925,000 76,659,375
Schering Plough Corp.............. 200,000 12,950,000
--------------
308,065,680
--------------
HOSPITAL SUPPLIES &
SERVICES (2.3%)
Abbott Laboratories .............. 1,150,000 58,362,500
Boston Scientific Corp.*.......... 70,100 4,206,000
Healthsource, Inc.*............... 83,000 1,089,375
Medtronic, Inc.................... 992,900 67,517,200
Saint Jude Medical, Inc.*......... 114,600 4,884,825
United Healthcare Corp............ 333,500 15,007,500
--------------
151,067,400
--------------
TOBACCO (5.0%)
Loews Corp........................ 2,068,500 194,956,125
Philip Morris Cos., Inc. ......... 1,180,300 132,931,288
--------------
327,887,413
--------------
TOTAL CONSUMER NONCYCLICALS (12.1%) 799,334,743
--------------
CREDIT SENSITIVE
BANKS (5.6%)
Chase Manhattan Corp.............. 1,183,768 105,651,294
CoreStates Financial Corp. ...... 295,000 15,303,125
First Chicago NBD Corp............ 891,700 47,928,875
First Union Corp.................. 1,055,000 78,070,000
Morgan (J.P.) & Co., Inc.......... 84,900 8,288,363
NationsBank Corp.................. 1,178,000 115,149,500
--------------
370,391,157
--------------
FINANCIAL SERVICES (2.3%)
American Express Co............... 1,505,000 85,032,500
Dean Witter Discover & Co. ...... 556,583 36,873,624
Household International, Inc. .... 103,000 9,501,750
MBNA Corp. ....................... 527,300 21,882,950
--------------
153,290,824
--------------
INSURANCE (13.2%)
Allstate Corp..................... 1,851,647 107,164,070
American International Group,
Inc. ............................ 2,540,050 274,960,413
ITT Hartford Group, Inc. ......... 1,128,600 76,180,500
PMI Group, Inc.................... 808,700 44,781,763
63
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Progressive Corp. ................ 1,213,800 $ 81,779,775
TIG Holdings, Inc. ............... 1,159,800 39,288,225
Travelers Group, Inc. ............ 5,535,665 251,180,799
--------------
875,335,545
--------------
MORTGAGE RELATED (0.4%)
Federal National Mortgage
Association...................... 693,000 25,814,250
--------------
REAL ESTATE (2.9%)
CBL & Associates Properties,
Inc.++ .......................... 1,077,200 27,872,550
Essex Property Trust, Inc. ...... 292,200 8,583,375
First Industrial Realty Trust .... 213,000 6,469,875
Macerich Co. ..................... 717,500 18,744,688
Manufactured Home Communities .... 338,000 7,858,500
Regency Realty Corp.++............ 623,700 16,372,125
Simon Debartolo Group, Inc. ...... 1,443,000 44,733,000
Spieker Properties, Inc........... 1,307,200 47,059,200
Summit Properties, Inc............ 519,100 11,485,088
Sun Communities, Inc. ............ 161,000 5,554,500
--------------
194,732,901
--------------
UTILITY--TELEPHONE (0.2%)
BellSouth Corp. .................. 10,824 437,019
Frontier Corp. ................... 500,000 11,312,500
--------------
11,749,519
--------------
TOTAL CREDIT SENSITIVE (24.6%). 1,631,314,196
--------------
ENERGY
OIL--DOMESTIC (0.5%)
Union Pacific Resources Group,
Inc. ............................ 1,026,477 30,024,452
--------------
OIL--SUPPLIES & CONSTRUCTION (0.5%)
Western Atlas, Inc.*.............. 458,800 32,517,450
--------------
RAILROADS (2.3%)
Canadian Pacific Ltd. ............ 2,833,300 75,082,450
Union Pacific Corp................ 1,340,371 80,589,806
--------------
155,672,256
--------------
TOTAL ENERGY (3.3%).............. 218,214,158
--------------
TECHNOLOGY
ELECTRONICS (22.3%)
Altera Corp.*..................... 50,000 3,634,375
Bay Networks, Inc.*(a)............ 860,200 17,956,675
Cabletron Systems, Inc.*(a) ...... 1,305,700 43,414,525
Cisco Systems, Inc.*(a)........... 6,383,000 406,118,375
EMC Corp.*(a)..................... 3,590,900 118,948,563
General Instrument Corp.*......... 1,782,410 38,544,616
Intel Corp.(a).................... 2,752,800 360,444,750
Micron Technology, Inc............ 100,000 2,912,500
National Semiconductor Corp.*(a) . 2,319,400 56,535,375
Seagate Technology, Inc.*(a) ..... 1,210,000 47,795,000
Texas Instruments, Inc.(a) ...... 773,800 49,329,750
3Com Corp.*(a).................... 4,513,900 331,207,413
--------------
1,476,841,917
--------------
OFFICE EQUIPMENT (1.8%)
Compaq Computer Corp.*(a)......... 500,000 $ 37,125,000
Sterling Software, Inc.*.......... 586,200 18,538,575
Xerox Corp........................ 1,202,500 63,281,563
--------------
118,945,138
--------------
OFFICE EQUIPMENT SERVICES (3.8%)
Electronic Data Systems Corp. .... 2,100,000 90,825,000
Informix Corp.*(a)................ 1,696,900 34,574,338
Microsoft Corp.*.................. 854,000 70,561,750
Oracle Corp.*(a).................. 557,200 23,263,100
Sterling Commerce, Inc.*.......... 933,582 32,908,766
--------------
252,132,954
--------------
TELECOMMUNICATIONS (8.4%)
AirTouch Communications, Inc.* ... 2,444,600 61,726,150
Deutsche Telekom AG (ADR)* ...... 1,142,600 23,280,475
DSC Communications Corp.*......... 2,016,100 36,037,788
Mannesmann AG (ADR)............... 185,700 80,222,400
MCI Communications Corp........... 421,000 13,761,438
MFS Communications Co., Inc.*(a) . 6,226,764 339,358,630
Teleport Communications Group,
Inc. (Class A)*.................. 20,000 610,000
--------------
554,996,881
--------------
TOTAL TECHNOLOGY (36.3%)......... 2,402,916,890
--------------
DIVERSIFIED
MISCELLANEOUS (0.2%)
Anixter International, Inc.* ..... 812,434 13,100,498
Hanson (ADR)--Warrants
(Class B)*....................... 77,475,857 605,319
--------------
TOTAL DIVERSIFIED (0.2%)......... 13,705,817
--------------
TOTAL COMMON STOCKS AND WARRANTS
(96.7%)
(Cost $4,791,317,138)............ 6,408,071,872
--------------
PREFERRED STOCKS:
TECHNOLOGY (0.7%)
TELECOMMUNICATIONS
MFS Communications Co., Inc.
8.0% Conv. ...................... 487,000 44,438,750
--------------
TOTAL PREFERRED STOCKS (0.7%)
(Cost $34,577,944)............... 44,438,750
--------------
PRINCIPAL
AMOUNT
------------
LONG-TERM DEBT SECURITIES:
TECHNOLOGY (0.0%)
ELECTRONICS
3Com Corp.
10.25% Conv., 11/01/01+.......... $900,000 1,986,750
--------------
TOTAL LONG-TERM DEBT SECURITIES (0.0%)
(Amortized Cost $1,247,499) ..... 1,986,750
--------------
64
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
SHORT-TERM DEBT SECURITIES:
BANKERS' ACCEPTANCES (0.2%)
Industrial Bank of Japan-L.A.
5.73%, due 01/16/97........... $10,000,000 $ 9,976,125
--------------
COMMERCIAL PAPER
Alamo Funding
5.45%, due 02/13/97........... 20,000,000 19,869,806
Associates Corp. of North
America
5.75%, due 01/02/97........... 25,000,000 24,996,007
Greenwich Asset Funding, Inc.
5.4%, due 04/04/97............ 12,200,000 12,034,222
Morgan Stanley Group, Inc.
6.79%, due 01/02/97........... 50,000,000 49,990,569
Three Rivers Funding
5.85%, due 01/27/97........... 2,800,000 2,788,170
--------------
TOTAL COMMERCIAL PAPER (1.7%) 109,678,774
--------------
TIME DEPOSITS
Sumitomo Bank Ltd.
6.0%, due 01/02/97............ 69,800,000 69,800,000
Toronto Dominion Bank
6.25%, due 01/02/97........... 25,000,000 25,000,000
--------------
TOTAL TIME DEPOSITS (1.4%) ... 94,800,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (3.3%)
(Amortized Cost
$214,450,487)................. 214,454,899
--------------
TOTAL INVESTMENTS (100.7%)
(Cost/Amortized Cost $5,041,593,068) 6,668,952,271
--------------
NUMBER OF
CONTRACTS(B)
------------
CALL OPTIONS WRITTEN*(c):
Bay Networks, Inc.:
January @ $26.5625...... 2,000 (12,000)
January @ $26.625....... 1,500 (9,000)
Cabletron Systems, Inc.:
March @ $35.50.......... 2,000 (462,000)
March @ $40.75.......... 3,000 (129,000)
Cisco Systems, Inc.:
January @ $63.375....... 2,500 (680,000)
January @ $65........... 1,500 (96,000)
January @ $65........... 2,000 (248,000)
February @ $63.375...... 2,000 (734,000)
February @ $65.375...... 4,000 (1,140,000)
February @ $67.375...... 1,500 (386,400)
March @ $63.25.......... 1,500 (852,000)
March @ $66.25.......... 3,000 (1,257,000)
Compaq Computer Corp.:
January @ $72.875....... 1,000 (359,000)
January @ $73........... 1,000 (360,000)
January @ $74........... 1,000 (290,000)
February @ $66.375...... 1,000 (969,500)
February @ $78.94....... 1,000 (290,000)
CompUSA, Inc.:
February @ $22.4375 .... 2,000 (270,000)
February @ $22.625...... 4,000 (248,000)
February @ $22.625...... 2,000 (262,000)
February @ $23.......... 4,000 (464,000)
February @ $23.125...... 6,000 (425,400)
- ---------------------------------------------------------------
NUMBER OF VALUE
CONTACTS(B) (NOTE 1)
- ---------------------------------------------------------------
March @ $21.50.......... 1,500 $ (291,000)
March @ $22.375......... 2,000 (248,000)
March @ $22.6875........ 4,000 (536,000)
CUC International, Inc.:
January @ $26.17........ 2,250 (20,250)
January @ $27.17........ 3,000 (9,000)
February @ $24.875...... 1,500 (159,000)
February @ $24.875...... 1,000 (99,000)
February @ $25.......... 1,000 (96,000)
February @ $25.875...... 1,500 (76,350)
March @ $22.75.......... 1,500 (358,500)
March @ $24.75 ......... 3,000 (426,000)
March @ $25.25.......... 1,000 (96,800)
EMC Corp.
January @ $26.50........ 2,000 (1,422,000)
Informix Corp.:
January @ $20.75........ 2,450 (306,250)
January @ $27........... 2,000 (12,000)
February @ $20.625...... 1,000 (160,000)
February @ $20.75....... 1,500 (258,000)
February @ $21.375...... 2,000 (236,000)
March @ $20.875......... 3,000 (713,700)
March @ $21.625......... 2,000 (392,000)
Intel Corp.:
January @ $104.75....... 1,000 (2,633,000)
January @ $109.75....... 2,000 (4,356,000)
February @ $121......... 2,000 (2,854,000)
February @ $121.375..... 1,000 (1,461,000)
February @ $122.875..... 1,000 (1,365,000)
March @ $127.875........ 1,000 (1,110,000)
March @ $132.50......... 1,000 (889,000)
Loral Space & Communications:
February @ $17.25....... 2,000 (336,000)
February @ $18.50....... 1,000 (131,000)
February @ $18.75....... 1,500 (166,500)
MFS Communications Co., Inc.:
January @ $45.125....... 2,000 (1,950,000)
January @ $49.95........ 3,500 (2,082,500)
January @ $50.375....... 1,500 (849,000)
February @ $48.625...... 2,000 (1,594,000)
February @ $48.75....... 1,000 (792,000)
February @ $48.875...... 2,000 (1,546,000)
February @ $49.......... 1,500 (1,168,500)
February @ $49.375...... 1,500 (1,035,000)
February @ $50.50....... 1,500 (870,000)
February @ $50.50....... 2,000 (1,294,000)
February @ $51.125...... 1,500 (876,000)
March @ $48.125......... 1,500 (1,219,500)
National Semiconductor Corp.
January @ $19.375....... 2,000 (1,011,400)
Oracle Corp.
March @ $43.50.......... 2,000 (604,000)
Seagate Technology, Inc.
February @ $37.6875..... 2,000 (720,000)
Texas Instruments, Inc.:
January @ $50.50........ 2,000 (2,694,000)
February @ $54.50....... 1,500 (1,485,000)
3Com Corp.:
January @ $62.50........ 2,000 (2,276,600)
January @ $62.75........ 2,000 (2,318,200)
January @ $64........... 1,500 (1,591,050)
65
<PAGE>
THE HUDSON RIVER TRUST
COMMON STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- ---------------------------------------------------------------
NUMBER OF VALUE
CONTRACTS(B) (NOTE 1)
- ---------------------------------------------------------------
January @ $65.59............. 2,000 $ (1,602,000)
January @ $65.875............ 1,500 (1,212,300)
February @ $69.75............ 1,500 (1,089,150)
February @ $71............... 1,500 (912,900)
February @ $72............... 1,500 (880,500)
February @ $73.33............ 1,500 (906,000)
February @ $75.125........... 2,000 (927,800)
February @ $75.50............ 1,000 (449,000)
March @ $79.125.............. 2,000 (798,000)
March @ $79.20............... 2,000 (770,000)
March @ $79.25............... 2,000 (790,000)
March @ $80.................. 2,000 (730,000)
March @ $81.125.............. 2,000 (662,600)
---------------
TOTAL CALL OPTIONS WRITTEN (-1.1%)
(Premiums Received $68,607,800) (70,867,650)
---------------
OTHER ASSETS
LESS LIABILITIES (0.4%)...... 28,548,958
---------------
NET ASSETS (100.0%)........... $6,626,633,579
===============
- ------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $1,986,750
or 0.03% of net assets.
++ Affiliated company as defined under the Investment Company Act of 1940
(see Note 6).
(a) Partially held as collateral on outstanding written call options.
(b) One contract relates to 100 shares.
(c) Covered call option contracts written in connection with securities
held.
Glossary:
ADR--American Depository Receipt
See Notes to Financial Statements.
66
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS AND OTHER
INVESTMENTS:
BASIC MATERIALS
CHEMICALS (1.4%)
Bayer AG........................... 40,000 $ 1,623,343
Dainippon Ink & Chemical, Inc. .... 160,000 592,695
GP Batteries International Ltd. .. 850,000 2,822,000
GP Batteries International
Ltd.--Rights*..................... 12,500 6,250
Grace (W.R.) & Co. ................ 39,000 2,018,250
Indo Gulf Fertilisers (GDR)........ 150,000 105,000
Ishihara Sangyo Ltd.*.............. 438,000 1,058,976
Millennium Chemicals, Inc.*........ 7,142 126,771
Mitsubishi Chemical Corp........... 44,000 142,475
Royal Plastics Group Ltd.*+........ 50,000 925,689
Sanyo Chemicals.................... 96,000 737,760
Sekisui Chemical Co. Ltd. ......... 144,000 1,454,797
Shin-Etsu Chemical Ltd. ........... 39,000 710,560
SKW Trostberg AG................... 45,000 1,222,966
Tessenderlo Chemie................. 1,000 429,789
--------------
13,977,321
--------------
CHEMICALS--SPECIALTY (1.3%)
SGL Carbon AG+..................... 91,100 11,491,103
UCAR International, Inc.*.......... 40,000 1,505,000
--------------
12,996,103
--------------
METALS & MINING (0.5%)
Broken Hill Proprietary Co. Ltd. .. 100,000 1,424,371
Great Central Mines Ltd.*.......... 408,900 1,163,551
Johnson Matthey PLC................ 40,000 376,882
Plutonic Resources Ltd............. 50,000 232,494
Western Mining Corp. Ltd. ......... 200,000 1,260,632
Westralian Sands Ltd. ............. 280,000 890,232
--------------
5,348,162
--------------
PAPER (0.4%)
Asia Pacific Resources
International Holdings Ltd.
(Class A)*........................ 70,000 393,750
Enso Oy (Series R)................. 124,000 998,006
Fletcher Forestry Shares........... 17,026 28,527
Grupo Industrial Durango (ADR)* ... 70,000 743,750
Mayr-Melnhof Karton Aktien
AG*+.............................. 24,000 1,174,791
Nippon Paper Industries Co. ...... 32,000 149,210
Oji Paper Co. Ltd. ................ 71,000 449,383
--------------
3,937,417
--------------
STEEL (0.6%)
Acerinox S.A....................... 2,002 289,509
British Steel...................... 400,000 1,099,810
Hitachi Metals Ltd................. 158,000 1,256,524
SSAB Svenskt Stal (Class B)........ 6,000 100,305
Sumitomo Metal Industries.......... 1,196,000 2,943,269
--------------
5,689,417
--------------
TOTAL BASIC MATERIALS (4.2%) ..... 41,948,420
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (1.5%)
B.U.S. Berzelius
Umwelt-Service AG................. 76,700 947,037
Daiseki Co. Ltd.................... 32,000 $ 762,628
Matsuda Sangyo Co. Ltd............. 23,000 593,817
Powerscreen International.......... 640,000 6,194,570
Tomra Systems ASA.................. 335,000 5,234,994
WMX Technologies, Inc. ............ 50,000 1,631,250
--------------
15,364,296
--------------
PRINTING, PUBLISHING &
BROADCASTING (2.7%)
Carlton Communications PLC......... 130,000 1,145,807
Comcast Corp. (Class A) SPL........ 57,000 1,015,313
Elsevier N.V. ..................... 180,000 3,040,525
Liberty Media Group
(Class A)*........................ 94,050 2,686,303
Mirror Group Newspapers PLC ...... 250,000 922,933
Nippon Television Network Corp. .. 12,300 3,717,296
Reed International................. 60,000 1,132,188
Takara Printing Co................. 4,000 32,467
TCI Group (Class A)*............... 482,709 6,305,390
TCI Satellite Entertainment, Inc.
(Class A)*........................ 47,800 472,025
Television Broadcasts.............. 50,000 199,754
Time Warner, Inc................... 15,750 590,625
Tokyo Broadcasting System.......... 170,000 2,598,221
TVI Televisao Independente*........ 4,700 13,948
Ver Ned Uitgeversbedr Ver
Bezit N.V......................... 150,000 3,132,504
--------------
27,005,299
--------------
PROFESSIONAL SERVICES (3.2%)
ADT Ltd.*.......................... 140,993 3,225,215
Apcoa Parking AG................... 20,000 2,144,528
Asatsu, Inc. ...................... 62,500 1,986,012
Ceridian Corp.*.................... 264,700 10,720,350
Content Beheer N.V.*+.............. 168,000 6,414,258
Dauphin O.T.A.*.................... 150 9,309
Goudsmit (Eduard) N.V.*............ 17,000 1,514,477
Meitec Corp. ...................... 163,600 3,121,976
Prosegur Compania Seguridad SA .... 4,310 39,868
WPP Group PLC...................... 600,000 2,610,764
--------------
31,786,757
--------------
TRUCKING, SHIPPING (1.1%)
Brambles Industries Ltd. .......... 140,000 2,731,899
Irish Continental Group............ 153,500 1,079,937
Kawasaki Kisen*.................... 292,000 665,642
Koninklijke Nedlloyd Groep N.V. .. 80,000 2,193,621
Western Bulk Shipping+ ............ 94,500 452,668
Yamato Transport .................. 343,000 3,554,097
--------------
10,677,864
--------------
TOTAL BUSINESS SERVICES (8.5%) ... 84,834,216
--------------
CAPITAL GOODS
AEROSPACE (0.4%)
Loral Space & Communications* ..... 163,000 2,995,125
Swire Pacific Ltd. (Class A) ...... 100,000 953,520
--------------
3,948,645
--------------
67
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
BUILDING & CONSTRUCTION (2.2%)
ABB AG ............................ 3,000 $ 3,731,789
Bam Groep Holdings................. 1,000 56,113
Bufete Industrial S.A. (ADR)* ..... 19,000 403,750
Fomento de Construcciones Y
Contratas SA...................... 1,000 93,272
Hitachi Plant Engineering &
Construction Co................... 135,000 799,672
Japan Industrial Land Development . 50,000 949,832
Kajima Corp. ...................... 121,000 865,107
Kaneshita Construction Co. ........ 127,000 1,206,286
MacMahon Holdings Ltd. ............ 2,000,000 1,780,464
Metacorp Berhard................... 308,000 786,617
Mitsui Home Co. Ltd................ 127,000 1,568,172
Nanno Construction Co. Ltd......... 53,000 315,776
National House Industrial Co. .... 22,000 292,548
Ohmoto Gumi Co. Ltd................ 61,000 874,363
Oriental Construction Co. ......... 60,300 775,814
Paul Y.-ITC Construction Holdings . 500,000 119,594
Paul Y.-ITC Construction
Holdings--Warrants*............... 100,000 1,791
Penta Ocean Construction........... 37,000 164,856
PS Corp. .......................... 109,700 1,837,648
Sacos Corp. ....................... 22,900 209,602
Sanyo Engineering & Construction,
Inc. ............................. 25,000 222,347
Sho Bond Construction.............. 119,700 3,224,799
Suido Kiko Kaisha.................. 42,000 297,384
Toda Construction.................. 114,000 866,246
Wesco, Inc......................... 46,150 577,821
--------------
22,021,663
--------------
BUILDING MATERIALS & FOREST
PRODUCTS (1.2%)
Boral Ltd. ........................ 180,000 512,201
BPB PLC ........................... 540,000 3,547,659
Fujikura Ltd. ..................... 211,000 1,690,769
Lafarge Canada..................... 7,000 122,056
Lafarge Corp....................... 33,000 1,979,936
Macmillan Bloedel Ltd.............. 30,000 393,281
Nichiha Corp....................... 154,500 2,734,867
Portland Valderrivas SA*........... 12,899 869,024
Sumitomo Forestry Co. ............. 30,000 365,253
--------------
12,215,046
--------------
ELECTRICAL EQUIPMENT (0.7%)
Alcatel Alsthom.................... 20,000 1,606,630
Omron Corp. ....................... 184,000 3,463,604
Vae Eisenbahnsys AG................ 3,000 340,523
Yaskawa Electric Corp.*............ 267,000 926,811
--------------
6,337,568
--------------
MACHINERY (3.0%)
Asahi Diamond
Industry Co. Ltd. ................ 108,000 979,190
BT Industries AB+.................. 70,000 1,303,674
Construcciones Auxiliar Ferro ..... 9,425 357,446
Danieli & Co.*..................... 32,200 265,349
Enshu*............................. 60,000 180,295
Fag Kugelfischer Georg Schaefer ... 16,200 $ 221,608
IHC Caland N.V..................... 52,000 2,969,024
Ishikawajima Harima Heavy
Industries Co. Ltd................ 164,000 729,298
Kalmar Industries AB+.............. 70,000 1,077,840
Kawasaki Heavy Industries.......... 380,000 1,571,712
Keppel Corp. ...................... 76,000 592,010
Keyence Corp. ..................... 14,000 1,728,694
Makino Milling Machine Co. ........ 76,000 484,967
Mitsubishi Heavy Industries Ltd. .. 515,000 4,091,184
Namura Shipbuilding Co............. 106,000 347,811
Nippon Seiko K.K. ................. 4,000 24,247
Nireco............................. 24,000 273,552
Nitta Corp......................... 122,000 1,527,502
Nitto Kohki Co. Ltd................ 62,000 2,221,743
Siebe PLC.......................... 90,000 1,668,217
SMC Corp........................... 50,600 3,403,627
Sodick Co.*........................ 380,000 3,149,987
Thai Engine Manufacturing Public
Co. Ltd.*......................... 87,000 675,076
--------------
29,844,053
--------------
TOTAL CAPITAL GOODS (7.5%)........ 74,366,975
--------------
CONSUMER CYCLICALS
AIRLINES (1.1%)
Air Canada*........................ 100,000 452,803
British Airways.................... 150,000 1,555,923
Continental Airlines, Inc.
(Class B)*........................ 38,000 1,073,500
Delta Air Lines, Inc............... 12,000 850,500
KLM................................ 100,000 2,811,444
Northwest Airlines Corp.
(Class A)*........................ 27,100 1,060,288
Qantas Airways Ltd................. 15,000 25,038
Singapore Airlines Ltd. ........... 250,000 2,268,992
UAL Corp.*......................... 16,500 1,031,250
--------------
11,129,738
--------------
APPAREL, TEXTILE (0.4%)
Adidas AG+......................... 13,000 1,123,603
Carli Gry International A/S* ...... 30,000 1,437,049
First Sign International
Holdings Ltd. .................... 2,630,000 841,586
King Co.*.......................... 55,000 247,431
Morishita Co. Ltd.................. 6,000 42,069
Renown, Inc.*...................... 27,000 72,040
--------------
3,763,778
--------------
AUTO RELATED (1.0%)
Asahi Glass Co. Ltd................ 73,000 687,074
Autoliv AB......................... 20,000 876,937
Autoliv AB (ADS)*+................. 23,700 1,025,025
Bridgestone Metalpha .............. 7,000 59,839
FCC Co. Ltd........................ 18,000 489,595
Mabuchi Motor Co. ................. 44,300 2,230,110
Michelin (CGDE), (Class B)......... 40,000 2,159,391
Minebea Co. ....................... 230,000 1,922,459
Toyoda Gosei*...................... 5,000 34,669
--------------
9,485,099
--------------
68
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
AUTOS & TRUCKS (0.6%)
Honda Motor Corp. ................. 157,000 $ 4,487,264
Isuzu Motors Ltd. ................. 127,000 564,761
Toyota Motor Corp. ................ 49,000 1,408,946
--------------
6,460,971
--------------
FOOD SERVICES, LODGING (0.6%)
AAPC Limited ...................... 1,500,000 906,129
Accor SA .......................... 12,000 1,519,514
International Fast Food Corp.* ... 8,000 1,040
Jurys Hotel Group PLC ............. 400,000 1,864,810
QPQ Corp.* ........................ 32,700 77,663
QPQ Corp.--Warrants* .............. 32,700 4,088
Sanyo Pax Co. Ltd. ................ 48,000 833,089
Thistle Hotels PLC* ............... 249,200 774,832
--------------
5,981,165
--------------
HOUSEHOLD FURNITURE,
APPLIANCES (0.9%)
Hunter Douglas N.V. ............... 30,000 2,021,810
Industrie Natuzzi (ADR) ........... 114,000 2,622,000
Matsushita Electric Industrial
Co. .............................. 60,000 979,190
Nippon Electric Glass ............. 79,000 1,214,230
Philips Electronics ............... 10,000 404,941
Sanyo Electric Co. Ltd. ........... 377,000 1,562,559
Sharp Corp. ....................... 37,000 527,157
--------------
9,331,887
--------------
LEISURE RELATED (2.9%)
Cinar Films, Inc. (Class B)* ..... 48,000 1,248,000
CUC International, Inc.* .......... 375,800 8,925,250
Enix Corp.* ....................... 10,200 230,757
Hasbro, Inc. ...................... 13,000 505,375
ITT Corp.* ........................ 67,700 2,936,488
Japan Airport Terminal Co. ........ 130,200 1,596,442
KTM Motorradholding AG* ........... 10,440 583,350
Mars Engineering Corp.* ........... 32,900 838,054
Namco Ltd. ........................ 85,100 2,608,626
Nelvana Limited*+ ................. 130,000 2,159,942
Nintendo Co. ...................... 43,700 3,128,167
Rank Group PLC .................... 100,000 746,055
Tag Heuer International SA (ADR)* 143,200 2,309,100
Tourism Holdings Ltd. ............. 600,000 1,145,259
--------------
28,960,865
--------------
PHOTO & OPTICAL (0.4%)
Luxottica Group (ADR) ............. 20,000 1,040,000
Noritsu Koki Co. Ltd. ............. 63,000 2,964,770
--------------
4,004,770
--------------
RETAIL--GENERAL (5.7%)
Asda Group PLC* ................... 400,000 842,845
AutoZone, Inc.* ................... 253,600 6,974,000
British Airport Author PLC ........ 500,000 4,167,116
Centros Comerciales Pryca SA ..... 75,000 1,589,858
CompUSA, Inc.* .................... 179,700 3,706,313
Dai-Ichi Corp. .................... 35,000 707,193
Dixons Group PLC* ................. 450,000 4,182,105
Doshisha Co. ...................... 47,000 771,091
Eiden Sakakiya Co. Ltd. ........... 84,000 848,631
Fu Hui Jewellery* ................. 450,000 $ 41,890
Gucci Group N.V. .................. 15,000 958,125
Homac Corp. ....................... 35,700 647,353
Home Centers Ltd.* ................ 142,800 660,450
Home Wide Corp, Inc. .............. 18,000 161,644
House of Fraser PLC ............... 750,000 1,972,206
Isetan Co. ........................ 190,000 2,460,927
Lowe's Cos., Inc. ................. 24,300 862,650
Matsuyadenki Co. Industries ...... 6,000 56,472
MFI Furniture PLC ................. 100,000 319,493
Nissen Corp. Ltd. ................. 40,300 281,867
Paris Miki, Inc. .................. 60,900 2,198,100
Rinascente ........................ 175,000 1,015,247
Rinascente--Warrants* ............. 8,750 3,859
Sato Corp. ........................ 105,700 2,062,706
Sears, Roebuck & Co. .............. 107,300 4,949,213
Siam Makro Public Co. Ltd. ........ 50,000 210,559
Sriwani Holdings BHD .............. 680,000 1,830,925
Swank International Manufacturing 1,000,000 151,270
St. Dupont*+ ...................... 64,400 2,184,523
Thorn PLC* ........................ 500,000 2,154,223
Vendex International N.V. ......... 14,400 615,602
Wal-Mart Stores, Inc. ............. 165,000 3,774,375
Warehouse Group Ltd. .............. 846,250 2,034,072
Xebio Co. ......................... 30,600 911,579
--------------
56,308,482
--------------
TOTAL CONSUMER CYCLICALS (13.6%) 135,426,755
--------------
CONSUMER NONCYCLICALS
BEVERAGES (1.4%)
Grand Metropolitan ................ 300,000 2,358,939
Guinness PLC ...................... 650,000 5,094,331
Lion Nathan Ltd. .................. 592,000 1,418,764
Louis Dreyfus Citrus*+ ............ 71,500 2,342,681
Panamerican Beverages ............. 30,000 1,406,250
Quilmes Industrial Quins (ADR) .... 131,100 1,196,288
--------------
13,817,253
--------------
DRUGS (5.1%)
Astra AB (A Shares) ............... 40,000 1,976,774
Biogen, Inc.* ..................... 59,000 2,286,250
Hafslund Nycomed ASA
(B Shares)........................ 80,000 549,060
Merck & Co., Inc. ................. 107,600 8,527,300
Novartis AG (ADR) ................. 20,000 1,141,710
Novartis AG* ...................... 1,110 1,271,296
Novo-Nordisk AS (ADR)
(B Shares)........................ 17,500 3,299,607
Nycomed ASA (B Shares)* ........... 90,000 1,385,214
Pfizer, Inc. ...................... 54,000 4,475,250
Roche Holdings AG Genusscheine ... 800 6,224,879
Santen Pharmaceutical Co. ......... 150,000 3,108,540
Schering Plough Corp. ............. 13,000 841,750
Smith & Nephew PLC* ............... 500,000 1,550,356
Smithkline Beecham PLC ............ 200,000 2,773,509
Taisho Pharmaceutical Co. ......... 95,000 2,239,444
Takeda Chemical Industries ........ 30,000 629,479
Yamanouchi Pharmaceutical ......... 198,000 4,069,079
Zeneca Group PLC .................. 180,000 5,080,198
--------------
51,429,695
--------------
69
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
FOODS (0.7%)
Fyffes PLC ........................ 2,700,000 $ 5,034,988
Nestle AG ......................... 500 536,795
Nutrica Verenigde Bedrijven N.V. .. 2,900 440,373
Oie Sangyo Co. Ltd. ............... 4,000 51,809
Shriram Industrial Enterprises
Ltd. (GDR)*+ ..................... 165,000 24,750
Viscofan Envoltura ................ 60,000 878,758
--------------
6,967,473
--------------
HOSPITAL SUPPLIES & SERVICES (1.1%)
Abbott Laboratories ............... 38,500 1,953,875
Boston Scientific Corp.* .......... 23,000 1,380,000
Cochlear Ltd. ..................... 50,000 142,278
Coloplast A/S B ................... 800 91,047
Medtronic, Inc. ................... 56,400 3,835,200
Quest Medical, Inc.* .............. 164,543 1,275,208
Saint Jude Medical, Inc.* ......... 46,600 1,986,325
Scandinavian Mobility
International, Inc.+ ............. 13,700 225,732
Tamro Group ....................... 10,000 66,780
--------------
10,956,445
--------------
RETAIL--FOOD (0.6%)
Casino Guichard-Perrachon ......... 13,590 632,812
Daimon Co. Ltd. ................... 45,400 729,160
Familymart Co. .................... 4,900 195,898
Loblaw Companies Ltd. ............. 90,000 930,071
McBride PLC ....................... 350,000 815,436
Ministop Co. Ltd. ................. 19,800 483,844
Seven-Eleven Japan Ltd. ........... 41,000 2,400,311
--------------
6,187,532
--------------
SOAPS & TOILETRIES (0.2%)
Shiseido Co. ...................... 146,000 1,689,319
--------------
TOBACCO (1.9%)
BAT Industries .................... 300,000 2,489,991
Imperial Tobacco PLC* ............. 200,000 1,291,677
Loews Corp. ....................... 97,800 9,217,650
RJ Reynolds BHD ................... 200,000 542,467
Swedish Match Co. AB* ............. 1,100,000 3,871,426
Tabacalera SA ..................... 40,000 1,723,599
--------------
19,136,810
--------------
TOTAL CONSUMER NONCYCLICALS (11.0%) 110,184,527
--------------
CREDIT SENSITIVE
BANKS (5.0%)
Akita Bank ........................ 75,000 466,281
Asahi Bank Ltd. ................... 164,000 1,458,596
Banco Comercial Portuguese SA ..... 60,000 791,596
Banco Latinoamericano de
Exportaciones S.A. ............... 60,000 3,045,000
Banco Popular ..................... 5,000 982,822
Banco Santander-Chile (ADR) ...... 15,000 225,000
Bancomer B Local* ................. 1,000,000 398,882
Bank of Tokyo-Mitsubishi Bank .... 209,000 3,880,062
Bankinter-Banco Interc Espana .... 1,000 155,170
Barclays Bank ..................... 140,000 2,399,539
Chase Manhattan Corp. ............. 68,288 6,094,704
First Chicago NBD Corp. ........... 67,000 $ 3,601,250
First Union Corp. ................. 88,000 6,512,000
Fokus Bank ........................ 58,000 399,890
Grupo Financiero Bantorte (Class
B)* .............................. 178,750 179,840
Hachijuni Bank .................... 59,000 560,401
HSBC Holdings PLC (H.K.$).......... 80,000 1,711,811
Mitsubishi Trust & Banking Corp. . 93,000 1,244,711
Morgan (J.P.) & Co., Inc. ......... 5,200 507,650
NationsBank Corp. ................. 67,000 6,549,250
Overseas Chinese Bank ............. 60,000 746,087
Overseas Union Bank Ltd. .......... 180,000 1,389,266
Shizuoka Bank ..................... 149,000 1,582,506
Sparbanken Sverige AB
(A Shares) ....................... 148,000 2,539,304
Standard Chartered PLC ............ 150,000 1,847,578
Toho Bank ......................... 77,000 466,747
Union Bank of Norway .............. 8,600 270,132
--------------
50,006,075
--------------
FINANCIAL SERVICES (4.7%)
American Express Co. .............. 143,000 8,079,500
Americredit Corp.* ................ 296,700 6,082,350
CMIC Finance & Securities Co. Ltd. 724,700 1,045,539
Credit Local de France ............ 25,000 2,177,893
Credit Saison Co. ................. 181,600 4,061,342
Dean Witter Discover & Co. ........ 35,900 2,378,375
Hong Leong Finance Ltd. ........... 160,000 372,758
Household International, Inc. .... 20,700 1,909,575
Invesco ........................... 400,000 1,778,198
JCG Holdings ...................... 142,000 138,613
MBNA Corp. ........................ 48,000 1,992,000
Mercury Finance Co. ............... 472,950 5,793,638
Nichiei Co. Ltd. .................. 57,500 4,225,240
Promise Co. Ltd. .................. 35,800 1,762,024
PT Bunas Finance Indonesia* ...... 377,000 399,026
Sanyo Shinpan Finance Co. Ltd. ... 27,100 1,696,529
Takefuji Corp.* ................... 20,200 1,456,437
Yamaichi Securities ............... 343,000 1,525,300
--------------
46,874,337
--------------
INSURANCE (5.3%)
Acceptance Industries Cos., Inc.* . 110,100 2,174,475
Aegon N.V. ........................ 95,000 6,050,679
American International
Group, Inc. ...................... 96,250 10,419,063
AMEV N.V. ......................... 125,000 4,374,804
Corporacion Mapfre
Cia Inter SA ..................... 70,853 4,320,154
Irish Life PLC .................... 100,000 459,421
Koa Fire & Marine ................. 109,000 528,953
Pacific & Orient BHD .............. 220,000 531,380
PennCorp Financial Group, Inc. ... 35,700 1,285,200
PMI Group, Inc. ................... 36,500 2,021,188
Progressive Corp. ................. 61,500 4,143,563
Travelers Group, Inc. ............. 293,133 13,300,910
Twentieth Century Industries ..... 211,000 3,560,625
--------------
53,170,415
--------------
70
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
MORTGAGE RELATED (0.1%)
Federal National Mortgage
Association ...................... 15,000 $ 558,750
--------------
REAL ESTATE (2.5%)
Arden Realty Group, Inc. .......... 98,500 2,733,375
Castle & Cooke, Inc.* ............. 85,000 1,349,375
Cheung Kong Holdings .............. 90,000 799,987
Chubu Sekiwa Real Estate .......... 23,000 295,916
City Developments Ltd. ............ 270,000 2,431,216
Daibiru Corp. ..................... 90,000 831,534
JP Realty, Inc. ................... 87,300 2,258,888
Macerich Co. ...................... 151,700 3,963,163
Mitsubishi Estate Co. ............. 218,000 2,240,048
Prentiss Properties Trust ......... 85,000 2,125,000
Sap Holdings* ..................... 66,000 316,215
Spieker Properties, Inc. .......... 37,700 1,357,200
Storage USA, Inc. ................. 28,000 1,053,500
Summit Properties, Inc. ........... 72,000 1,593,000
Sun Communities, Inc. ............. 41,000 1,414,500
--------------
24,762,917
--------------
UTILITY--ELECTRIC (2.8%)
British Energy PLC* ............... 1,672,000 4,210,526
Enersis S.A. (ADR) ................ 45,000 1,248,750
EVN ............................... 8,394 1,263,659
Gas Y Electridad SA (Series 2) ... 5,000 319,899
Hidroelectrica del Cantabrico .... 56,000 2,138,928
Iberdrola II ...................... 150,000 2,127,520
Iberdrola SA ...................... 250,000 3,545,866
Korea Electric Power (ADR) ........ 100,000 2,050,000
National Grid Group PLC ........... 1,100,000 3,684,022
National Power PLC ................ 450,000 3,769,677
Veba AG ........................... 60,000 3,450,741
--------------
27,809,588
--------------
UTILITY--GAS (0.4%)
General de Aguas d'Barcelona ..... 90,000 3,746,285
--------------
UTILITY--TELEPHONE (1.3%)
Empresas Telex-Chile S.A. (ADR) .. 119,000 550,375
Frontier Corp. .................... 42,000 950,250
Hellenic Telecommunication
Organization SA .................. 48,880 841,808
Kon. PTT Nederland+ ............... 120,000 4,574,671
PT Indonesian Satellite (ADR) .... 40,000 1,095,000
Stet Societa Finanz Telefon ...... 40,000 181,953
Tele Danmark AS (B Shares) ........ 6,000 331,235
Telefonica de Espana SA ........... 100,000 2,324,084
Telephone & Data Systems, Inc. ... 61,700 2,236,625
--------------
13,086,001
--------------
TOTAL CREDIT SENSITIVE (22.1%) ... 220,014,368
--------------
ENERGY
COAL & GAS PIPELINES (0.7%)
Nabors Industries, Inc.* .......... 121,000 2,329,250
OMV AG ............................ 40,000 4,510,754
--------------
6,840,004
--------------
OIL--DOMESTIC (0.1%)
Union Pacific Resources
Group, Inc. ...................... 39,465 $ 1,154,351
XCL Corp.* ........................ 700,000 131,250
--------------
1,285,601
--------------
OIL--INTERNATIONAL (0.6%)
Canadian Occidental ............... 10,000 160,000
ENI Spa ........................... 666,000 3,418,093
Repsol SA ......................... 65,000 2,495,211
Yukong Ltd. (GDR)+ ................ 25,000 156,250
--------------
6,229,554
--------------
OIL--SUPPLIES & CONSTRUCTION (0.6%)
Bouygues Offshore SA (ADR)* ...... 148,000 1,905,500
Coflexip (ADR)* ................... 70,117 1,840,571
Tubos de Acero de Mexico SA (ADR)* 112,400 1,784,350
--------------
5,530,421
--------------
RAILROADS (1.0%)
Canadian Pacific Ltd. ............. 218,400 5,787,600
Union Pacific Corp. ............... 63,633 3,825,934
--------------
9,613,534
--------------
TOTAL ENERGY (3.0%) .............. 29,499,114
--------------
TECHNOLOGY
ELECTRONICS (8.8%)
Austria Mikro Systeme
International..................... 4,000 308,844
Aval Data ......................... 14,000 112,426
Cabletron Systems, Inc.* .......... 54,100 1,798,825
Cisco Systems, Inc.* .............. 338,000 21,505,250
Cypress Semiconductor Corp.* ..... 120,000 1,695,000
EMC Corp.* ........................ 160,000 5,300,000
Fujimi, Inc. ...................... 500 26,941
Hirose Electric Co. Ltd............ 45,400 2,630,464
Hoya Corp. ........................ 86,000 3,378,810
Intel Corp. ....................... 144,500 18,920,458
National Semiconductor Corp.* .... 86,000 2,096,250
NEC Corp. ......................... 35,000 423,107
Rohm Co. Ltd. ..................... 31,000 2,034,367
Seagate Technology, Inc.* ......... 97,000 3,831,500
Seatex Garex ASA* ................. 81,700 443,963
TDK Corp. ......................... 35,000 2,281,755
Texas Instruments, Inc. ........... 38,100 2,428,875
Tokyo Electron .................... 38,000 1,164,839
Yokogawa Electric Corp. ........... 471,000 4,067,006
3Com Corp.* ....................... 182,500 13,390,938
--------------
87,839,618
--------------
OFFICE EQUIPMENT (1.2%)
Canon, Inc. ....................... 50,000 1,105,259
Compaq Computer Corp.* ............ 45,000 3,341,250
Ricoh Elemex Corp. ................ 21,000 293,757
Sterling Software, Inc.* .......... 169,600 5,363,600
Xerox Corp. ....................... 47,400 2,494,425
--------------
12,598,291
--------------
71
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
OFFICE EQUIPMENT SERVICES (2.7%)
Accugraph Corp. (Class A)* .... 6,200 $ 4,936
Electronic Data Systems Corp. . 119,000 5,146,750
Fuji Soft Corp. ................ 32,500 993,438
Informix Corp.* ................ 67,000 1,365,125
Istar Internet, Inc.*+ ......... 12,500 41,994
Micro Warehouse, Inc.* ......... 60,900 715,575
Microsoft Corp.* ............... 66,000 5,453,250
Misys PLC ...................... 130,000 2,486,479
Oracle Corp.* .................. 44,800 1,870,400
Sterling Commerce, Inc.* ...... 236,660 8,342,265
Turbon International AG ........ 30,000 779,828
--------------
27,200,040
--------------
TELECOMMUNICATIONS (5.4%)
BCE Mobile Communications,
Inc.* ......................... 16,000 474,420
Cellular Communications Puerto
Rico, Inc.* ................... 7,600 150,100
Cox Communications, Inc.
(Class A)* .................... 17,000 393,125
DDI Corp. ...................... 401 2,652,327
Deutsche Telekom AG (ADR)* .... 232,000 4,727,000
Filtronic Comtek PLC ........... 1,210,000 7,648,820
Forval Corp. ................... 8,000 311,545
Korea Mobile Telecommunications
Corp. (ADR) ................... 362,560 4,667,960
MFS Communications Co., Inc.* . 361,145 19,682,400
NetCom Systems AB (B Shares)* .. 85,600 1,387,085
Rogers Cantel Mobile
Communications (Class B)* .... 20,000 396,567
Tadiran Telecommunications Ltd. 199,800 4,470,525
Teleport Communications Group,
Inc. (Class A)* ............... 60,500 1,845,250
United States Cellular Corp.* . 40,600 1,131,725
Vodafone Group ................. 900,000 3,800,512
--------------
53,739,361
--------------
TOTAL TECHNOLOGY (18.1%) ..... 181,377,310
--------------
DIVERSIFIED
MISCELLANEOUS (1.6%)
Alba ........................... 8,000 809,074
BTR PLC ........................ 200,000 973,041
Cie Generale des Eaux .......... 30,000 3,717,838
Crean (James) PLC--Units ...... 385,000 1,207,465
Hanson PLC ..................... 500,000 698,088
Indonesia Fund, Inc.* .......... 20,000 195,000
International UNP Holdings* ... 450,000 92,021
International UNP
Holdings--Warrants* ........... 225,000 0
Invesco Funding LLC* ........... 80,000 355,640
Mitsubishi Corp. ............... 186,000 1,927,295
Sime Darby BHD ................. 800,000 3,151,851
Taiwan Fund .................... 40,000 890,000
Tomkins PLC .................... 500,000 2,299,837
--------------
TOTAL DIVERSIFIED (1.6%) ..... 16,317,150
--------------
TOTAL COMMON STOCKS AND OTHER
INVESTMENTS (89.6%)
(Cost $766,444,974) ........... 893,968,835
--------------
PREFERRED STOCKS:
CONSUMER CYCLICALS (0.0%)
RETAIL--GENERAL
Fielmann AG .................... 8,000 $ 252,145
--------------
CONSUMER NONCYCLICALS (0.1%)
DRUGS
Fresenius AG* .................. 4,000 830,517
--------------
TECHNOLOGY
TELECOMMUNICATIONS (0.5%)
MFS Communications Co., Inc.
8.0% Conv. .................... 22,000 2,007,500
Nokia Oy Cum ................... 44,000 2,553,574
--------------
TOTAL TECHNOLOGY (0.5%) ...... 4,561,074
--------------
TOTAL PREFERRED STOCKS (0.6%)
(Cost $3,075,940) ............. 5,643,736
--------------
PRINCIPAL
AMOUNT
------
LONG-TERM DEBT SECURITIES:
CONSUMER NONCYCLICALS (0.2%)
FOODS
Burns, Philp & Co., Ltd.
5.5% Conv., 04/30/04 .......... $2,000,000 1,756,250
--------------
CREDIT SENSITIVE (0.0%)
INSURANCE
Corporacion Mapfre
8.5% Conv., 02/27/99 .......Peseta 29,910,000 230,558
--------------
TECHNOLOGY
ELECTRONICS (0.9%)
Altera Corp.
5.75% Conv. Sub. Note,
06/15/02+ ..................... $1,305,000 2,019,488
3Com Corp.
10.25% Conv., 11/01/01+ ...... 3,000,000 6,622,500
--------------
TOTAL TECHNOLOGY (0.9%) ...... 8,641,988
--------------
DIVERSIFIED (0.0%)
MISCELLANEOUS
Brierley Investment Ltd.
9.0% Conv. Sub. Note,
06/30/98....................... 27,900 24,063
--------------
TOTAL LONG-TERM DEBT SECURITIES (1.1%)
(Amortized Cost $7,465,869) .. 10,652,859
--------------
SHORT-TERM DEBT SECURITIES:
BANKERS' ACCEPTANCES (1.0%)
Industrial Bank of Japan-L.A.
5.73%, due 01/16/97 ........... 10,000,000 9,976,125
--------------
COMMERCIAL PAPER
BHF Delaware Inc.
5.64%, due 03/10/97 ........... 5,000,000 4,950,228
Chase Manhattan Bank
5.59%, due 03/14/97 ........... 5,000,000 4,947,300
Dresdner U.S. Finance, Inc.
5.31%, due 04/10/97 ........... 5,000,000 4,927,263
Enterprise Funding Corp.
5.48%, due 03/03/97 ........... 1,300,000 1,288,391
International Securitization
5.45%, due 03/18/97 ........... 7,000,000 6,922,121
Koch Industries
6.9%, due 01/02/97 ............ 1,800,000 1,799,655
72
<PAGE>
THE HUDSON RIVER TRUST
GLOBAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
Premium Funding--Series B
5.5%, due 02/18/97 ........... $ 8,241,000 $ 8,180,566
--------------
TOTAL COMMERCIAL PAPER (3.3%) 33,015,524
--------------
TIME DEPOSITS
Bank of Tokyo-
Mitsubishi Bank Ltd., N.Y.
5.5%, due 03/04/97 ........... 28,000,000 27,974,910
Toronto Dominion Bank
6.25%, due 01/02/97 .......... 10,600,000 10,600,000
--------------
TOTAL TIME DEPOSITS (3.8%) .. 38,574,910
--------------
TOTAL SHORT-TERM DEBT SECURITIES (8.1%)
(Amortized Cost $81,581,556) 81,566,559
--------------
TOTAL INVESTMENTS (99.4%)
(Cost/Amortized Cost $858,568,339) 991,831,989
OTHER ASSETS
LESS LIABILITIES (0.6%)....... 5,499,495
--------------
NET ASSETS (100.0%) ........... $997,331,484
==============
- ------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $45,781,555
or 4.6% of net assets.
Glossary:
ADR--Amercian Depository Receipt
GDR--Global Depository Receipt
See Notes to Financial Statements.
73
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS AND OTHER
INVESTMENTS:
ARGENTINA
KTM Motorradholding AG* .......... 2,340 $ 130,751
Quilmes Industrial Quins (ADR) ... 19,000 173,375
---------------
TOTAL ARGENTINA (0.2%) .......... 304,126
---------------
AUSTRALIA
AAPC Ltd. ........................ 100,000 60,409
Aristocrat Leisure Ltd. .......... 160,000 415,866
Boral Ltd. ....................... 50,000 142,278
Brambles Industries Ltd. ......... 20,000 390,271
Broken Hill Proprietary Co. Ltd. . 21,000 299,118
Cochlear Ltd. .................... 90,000 256,101
Gio Australia Holdings Ltd.* .... 200,000 511,883
Great Central Mines Ltd.* ........ 100,000 284,556
Guinness Peat Group .............. 13,200 7,554
National Australia Bank Ltd. .... 4,900 57,643
News Corp. Ltd. .................. 5,900 31,139
Oil Search Ltd. .................. 500,000 973,691
Orogen Minerals Ltd. (GDS)*+ .... 60,000 1,758,000
Plutonic Resources Ltd. .......... 20,000 92,997
Qantas Airways Ltd. .............. 70,000 116,843
QBE Insurance Group Ltd. ......... 63,998 337,260
QCT Resources, Inc. .............. 200,000 270,249
Reinsurance Australia Corp.* .... 40,000 155,791
Spectrum Network Systems*+ ...... 600,000 209,840
Western Mining Corp. Ltd. ........ 22,000 138,670
Westralian Sands Ltd. ............ 14,000 44,512
---------------
TOTAL AUSTRALIA (4.3%) .......... 6,554,671
---------------
AUSTRIA
EVN-Energie Versorgung Niederland 800 120,435
OMV AG ........................... 600 67,661
VA Technologie AG* ............... 3,000 470,886
---------------
TOTAL AUSTRIA (0.4%) ............ 658,982
---------------
BELGIUM
Electrabel ....................... 250 59,224
Generale de Banque ............... 120 43,058
Petrofina SA ..................... 110 35,046
Tractebel Investment
International Capital ........... 70 32,625
Tractebel Investment
International Capital--
Warrants* ....................... 70 0
---------------
TOTAL BELGIUM (0.1%) ............ 169,953
---------------
CANADA
Accugraph Corp. (Class A)* ...... 5,000 3,980
Architel Systems Corp.* .......... 30,300 186,989
Istar Internet, Inc.*+ ........... 12,000 40,314
Loblaw Companies Ltd. ............ 20,000 206,682
Prime Resource Group, Inc. ...... 20,000 141,683
Renaissance Energy Ltd.* ......... 2,000 68,139
Rofin-Sinar Technologies, Inc.* . 40,000 470,000
Transat A.T., Inc.* .............. 67,500 554,592
---------------
TOTAL CANADA (1.1%) ............. 1,672,379
---------------
CHILE
Empresas Telex-Chile S.A. (ADR) . 20,000 $ 92,500
Enersis S.A. (ADR) ............... 1,000 27,750
Santa Isabel S.A. (ADR) .......... 17,000 384,625
---------------
TOTAL CHILE (0.3%) .............. 504,875
---------------
DENMARK
Carli Gry International A/S* .... 15,600 747,266
Coloplast A/S B .................. 4,000 455,235
Den Danske Bank .................. 400 32,274
Scandinavian Mobility
International, Inc.+ ............ 6,000 98,861
Tele Danmark AS (B Shares) ...... 1,000 55,206
---------------
TOTAL DENMARK (0.9%) ............ 1,388,842
---------------
FINLAND
KCI Konecranes International* ... 20,000 630,824
Nokia Corp. (ADR) ................ 3,000 172,875
---------------
TOTAL FINLAND (0.5%) ............ 803,699
---------------
FRANCE
Accor SA ......................... 8,000 1,013,010
Alcatel Alsthom .................. 3,500 281,160
Banque Nationale de Paris ........ 700 27,091
Bouygues Offshore SA (ADR)* ..... 40,000 515,000
BSN Gervais Danone ............... 500 69,673
Carrefour ........................ 225 146,401
Cie de St. Gobain ................ 250 35,367
Cie Fin Paribas (Series A) ...... 750 50,723
Cie Generale des Eaux ............ 6,000 743,568
Coflexip (ADR)* .................. 3,000 78,750
Credit Local de France ........... 1,000 87,116
Dauphin O.T.A.* .................. 195 12,102
Elf Aquitaine .................... 2,250 204,814
Havas ............................ 350 24,554
Lafarge Corp. .................... 450 26,999
L'Air Liquide SA ................. 550 85,863
L'Oreal .......................... 495 186,418
Louis Dreyfus Citrus*+ ........... 20,300 665,125
Louis Vuitton Moet Hennessy ..... 500 139,636
Lyonnais des Eaux Dumez .......... 400 37,228
Michelin (CGDE), (Class B) ...... 1,800 97,173
Pernod-Ricard .................... 2,000 110,629
Peugeot SA ....................... 250 28,139
Pinault Printemps ................ 150 59,497
Promodes ......................... 100 28,236
Schneider SA ..................... 800 36,990
Societe Generale ................. 550 59,468
St. Dupont*+ ..................... 34,900 1,183,848
---------------
TOTAL FRANCE (4.0%) ............. 6,034,578
---------------
GERMANY
Adidas AG+ ....................... 3,000 259,293
Allianz AG Holding ............... 150 270,016
Apcoa Parking AG ................. 800 85,781
Bayer AG ......................... 4,500 182,626
B.U.S. Berzelius
Umwelt-Service AG ............... 24,850 306,830
Daimler-Benz AG* ................. 2,000 137,120
74
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Deutsche Bank AG ................. 3,250 $ 151,644
Deutsche Telekom AG (ADR)* ...... 50,000 1,018,750
Dresdner Bank AG ................. 2,850 85,196
Kiekert AG ....................... 1,000 28,789
Linde AG ......................... 50 30,381
Lufthansa AG ..................... 2,000 27,008
Pfeiffer Vacuum Technology (ADR)* 10,000 180,000
RWE AG ........................... 1,850 77,424
SAP AG ........................... 500 68,397
Schering AG ...................... 400 33,767
SGL Carbon AG+ ................... 6,900 870,345
Siemens AG ....................... 2,500 116,032
SKW Trostberg AG ................. 5,000 135,885
Thyssen AG ....................... 150 26,602
Turbon International AG .......... 4,500 116,974
Veba AG .......................... 5,150 296,189
Viag AG .......................... 150 58,731
---------------
TOTAL GERMANY (3.0%) ............ 4,563,780
---------------
GREECE (0.2%)
Hellenic Telecommunication
Organization S.A. ............... 14,070 242,313
---------------
HONG KONG
Aeon Credit Service Co. .......... 924,000 295,675
Associated International Hotels . 10,000 7,499
Cheung Kong Holdings ............. 50,000 444,437
China Apollo Holdings Ltd. ...... 700,000 73,308
China Travel International
Investment Hong Kong Ltd.* ..... 700,000 309,975
First Sign International
Holdings Ltd. ................... 600,000 191,997
Hang Seng Bank ................... 5,000 60,767
HSBC Holdings PLC (H.K.$)......... 14,200 303,846
Hutchison Whampoa ................ 12,000 94,253
Jardine International
Holdings Ltd. ................... 32,000 42,821
JCG Holdings ..................... 250,000 244,036
Television Broadcasts ............ 37,000 147,818
---------------
TOTAL HONG KONG (1.5%) .......... 2,216,432
---------------
INDONESIA
PT Bunas Finance Indonesia* ..... 93,000 98,434
PT Citatah* ...................... 430,000 300,381
PT Indonesian Satellite (ADR) ... 10,000 273,750
PT Kalbe Farma* .................. 350,000 400,085
PT Sekar Bumi .................... 510,000 323,878
---------------
TOTAL INDONESIA (0.9%) .......... 1,396,528
---------------
IRELAND
Crean (James) PLC--Units ......... 5,000 15,681
Fyffes PLC ....................... 600,000 1,118,886
Irish Continental Group .......... 20,000 150,032
Irish Life PLC ................... 50,000 229,711
Jurys Hotel Group PLC ............ 62,000 289,046
---------------
TOTAL IRELAND (1.2%) ............ 1,803,356
---------------
ISRAEL
Home Centers Ltd.* ............... 15,400 71,225
Tadiran Telecommunications Ltd. .. 20,000 447,500
---------------
TOTAL ISRAEL (0.3%) ............. 518,725
---------------
ITALY
Assicurazioni Generali Spa ...... 5,500 $ 104,244
Banca Commerciale Italiana Spa ... 10,000 18,195
Danieli & Co.* ................... 24,800 204,368
Editorale La Repubblica Spa* .... 40,000 55,509
ENI Spa .......................... 30,000 153,968
ENI Spa (ADR) .................... 6,000 309,750
Fiat Spa ......................... 20,000 60,519
Istituto Bancario San Paolo di
Torino .......................... 5,000 30,655
Istituto Mobilare Italiano ...... 2,500 21,426
Istituto Naz Delle Assicurazioni 22,500 29,310
Mediaset Spa* .................... 260,000 1,199,836
Mediolanum Spa*+ ................. 36,000 340,807
Rinascente ....................... 10,000 58,014
Rinascente--Warrants* ............ 500 221
Simint Spa* ...................... 100,000 372,477
Telecom Italia Mobile Spa ........ 40,000 101,129
Telecom Italia Spa ............... 5,000 12,987
Unicem Spa* ...................... 16,000 104,425
---------------
TOTAL ITALY (2.1%) .............. 3,177,840
---------------
JAPAN
Ajinomoto Co., Inc. .............. 3,000 30,567
Akita Bank ....................... 20,000 124,342
Asahi Bank Ltd. .................. 40,000 355,755
Asahi Chemical Industry Co. ..... 6,000 33,987
Asahi Diamond Industry Co. Ltd. . 22,000 199,465
Asahi Glass Co. Ltd. ............. 16,000 150,591
Asatsu, Inc. ..................... 14,000 444,867
Bank of Tokyo-Mitsubishi Bank ... 48,000 891,115
Bridgestone Corp. ................ 4,000 75,987
Bridgestone Metalpha Corp. ...... 12,000 102,582
Canon, Inc. ...................... 10,000 221,052
Capcom Co. Ltd. .................. 8,000 163,716
Chubu Sekiwa Real Estate ......... 5,000 64,330
Credit Saison Co. ................ 44,000 984,026
Daibiru Corp. .................... 21,000 194,025
Dai-Ichi Corp. ................... 6,000 121,233
Dai-Ichi Kangyo Bank ............. 12,000 173,042
Daimon Co. Ltd. .................. 9,000 144,547
Dainippon Ink & Chemical, Inc. .. 27,000 100,017
Dainippon Printing Co. Ltd. ..... 3,000 52,586
Daiseki Co. Ltd. ................. 6,000 142,993
Daiwa House Industry Co. ......... 2,000 25,732
DDI Corp. ........................ 80 529,143
Doshisha Co. ..................... 4,000 65,625
Eiden Sakakiya Co. Ltd. .......... 18,000 181,850
Enix Corp.* ...................... 9,400 212,659
Enshu* ........................... 42,000 126,207
Familymart Co. ................... 3,500 139,927
Fanuc Co. ........................ 900 28,832
FCC Co. Ltd. ..................... 10,000 271,997
Fuji Bank Ltd. ................... 11,000 160,522
Fuji Photo Film Co. .............. 1,000 32,985
Fuji Soft Corp. .................. 7,600 232,312
Fujikura Ltd. .................... 48,000 384,630
Fujimi, Inc. ..................... 5,500 296,347
Hachijuni Bank ................... 9,000 85,485
Hankyu Corp. ..................... 25,000 124,126
75
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ----------- ---------------
Hirose Electric Co. Ltd. ......... 11,000 $ 637,337
Hitachi Ltd. ..................... 16,000 149,210
Hitachi Metals Ltd. .............. 28,000 222,675
Hitachi Plant Engineering &
Construction Co. ................ 24,000 142,164
Hokushin ......................... 600 4,072
Homac Corp. ...................... 7,500 135,999
Home Wide Corp., Inc. ............ 15,000 134,703
Honda Motor Corp. ................ 22,000 628,789
Hoya Corp. ....................... 20,000 785,770
Industrial Bank of Japan ......... 9,720 168,700
Isetan & Co. ..................... 46,000 595,803
Ishihara Sangyo Ltd.* ............ 100,000 241,775
Ishikawajima Harima Heavy
Industries Co. Ltd. ............. 60,000 266,816
Isuzu Motors Ltd. ................ 40,000 177,878
Ito Yokado Co. Ltd. .............. 2,000 87,039
Japan Airport Terminal Co. ...... 32,200 394,819
Japan Industrial Land Development 8,000 151,973
Kajima Corp. ..................... 16,000 114,394
Kaneshita Construction Co. ...... 6,000 56,990
KAO Corp. ........................ 3,000 34,971
Kawasaki Heavy Industries ........ 150,000 620,413
Kawasaki Kisen* .................. 20,000 45,592
Kawasaki Steel ................... 13,000 37,380
Keyence Corp. .................... 4,000 493,912
Kikuchi Co. Ltd. ................. 14,000 181,331
King Co.* ........................ 38,000 170,952
Kinki Nippon Railroad Co. ........ 7,000 43,701
Kirin Brewery Co. ................ 4,000 39,375
Koa Fire & Marine ................ 22,000 106,761
Komatsu Ltd. ..................... 4,000 32,812
Kubota Corp. ..................... 6,000 28,961
Mabuchi Motor Co. ................ 10,000 503,411
Makino Milling Machine Co. ...... 30,000 191,434
Mars Engineering Corp.* .......... 6,000 152,837
Matsuda Sangyo Co. Ltd. .......... 8,000 206,545
Matsushita Electric
Industrial Co. .................. 11,000 179,518
Matsuyadenki Co. Industries ..... 6,000 56,472
Meitec Corp. ..................... 39,000 744,236
Minebea Co. ...................... 50,000 417,926
Ministop Co. Ltd. ................ 4,700 114,852
Misawa Ceramic Corp. ............. 34,000 184,958
Mitsubishi Chemical Corp. ........ 50,000 161,903
Mitsubishi Corp. ................. 44,000 455,919
Mitsubishi Estate Co. ............ 46,000 472,671
Mitsubishi Heavy Industries Ltd. . 100,000 794,405
Mitsubishi Materials Corp. ...... 6,000 24,247
Mitsubishi Trust & Banking Corp. 20,000 267,680
Mitsui Home Co. Ltd. ............. 28,000 345,739
Mitsui & Co. ..................... 6,000 48,700
Murata Manufacturing Co. Ltd. ... 1,000 33,244
Namco Ltd. ....................... 20,000 613,073
Namura Shipbuilding Co. .......... 26,000 85,312
Nanno Construction Co. Ltd. ..... 15,000 89,371
NEC Corp. ........................ 6,000 72,533
NGK Spark Plug Co. ............... 32,000 350,920
Nichiei Co. Ltd. ................. 12,000 881,789
Nichiha Corp. .................... 38,000 672,653
Nintendo Co. ..................... 12,000 $ 858,993
Nippon Denwa Shisetsu* ........... 30,000 277,178
Nippon Electric Glass ............ 20,000 307,400
Nippon Express Co. Ltd. .......... 5,000 34,280
Nippon Kanzai Co. ................ 1,000 25,905
Nippon Paper Industries Co. ..... 18,000 83,931
Nippon Steel Corp. ............... 27,000 79,734
Nippon Television Network Corp. . 2,860 864,347
Nippon Yusen K.K. ................ 4,000 18,099
Nippondenso Co. Ltd. ............. 4,000 96,365
Nireco ........................... 15,000 170,970
Nissen Corp. Ltd. ................ 2,300 16,087
Nitta Corp. ...................... 27,000 338,054
Nitto Kohki Co. Ltd. ............. 15,000 537,518
Nomura Securities Co. ............ 8,000 120,197
Noritsu Koki Co. Ltd. ............ 18,000 847,077
Ohmoto Gumi Co. Ltd. ............. 11,000 157,672
Oie Sangyo Co. Ltd. .............. 12,000 155,427
Oji Paper Co. Ltd. ............... 14,000 88,611
Omron Corp. ...................... 44,000 828,253
Oriental Construction Co. ........ 11,000 141,525
Paris Miki, Inc. ................. 13,500 487,264
Promise Co. Ltd. ................. 9,000 442,967
PS Corp. ......................... 18,900 316,605
Renown, Inc.* .................... 70,000 186,771
Ricoh Elemex Corp. ............... 8,000 111,907
Rohm Co. Ltd. .................... 7,000 459,373
Rohto Pharmaceutical Co. ......... 33,000 319,143
Royal Ltd. ....................... 12,000 274,588
Santen Pharmaceutical Co. ........ 34,000 704,602
Sanyo Chemicals .................. 20,000 153,700
Sanyo Electric Co. Ltd. .......... 60,000 248,683
Sanyo Engineering & Construction,
Inc. ............................ 27,000 240,135
Sanyo Pax Co. Ltd. ............... 23,000 399,188
Sanyo Shinpan Finance Co. Ltd. .. 6,000 375,615
Sato Corp. ....................... 26,000 507,383
Sekisui Chemical Co. Ltd. ........ 22,000 222,261
Sekisui House Ltd. ............... 3,000 30,567
Seven-Eleven Japan Ltd. .......... 7,000 409,809
Shaddy Co. Ltd. .................. 2,000 31,949
Sharp Corp. ...................... 12,000 170,970
Shimizu Corp. .................... 3,000 22,407
Shin-Etsu Chemical Ltd. .......... 5,000 91,097
Shiseido Co. ..................... 32,000 370,262
Shizuoka Bank .................... 30,000 318,625
Sho Bond Construction ............ 28,000 754,339
SMC Corp. ........................ 10,000 672,653
Sodick Co.* ...................... 78,000 646,576
Sony Corp. ....................... 1,000 65,538
Suido Kiko Kaisha ................ 8,000 56,645
Sumitomo Bank Ltd. ............... 12,000 173,042
Sumitomo Chemical Co. Ltd. ...... 7,000 27,744
Sumitomo Forestry Co. ............ 6,000 73,051
Sumitomo Metal Industries ........ 200,000 492,185
Taisei Corp. ..................... 4,000 20,724
Taisho Pharmaceutical Co. ........ 22,000 518,608
Takara Printing Co. .............. 19,000 154,218
Takeda Chemical Industries ...... 8,000 167,861
Takefuji Corp.* .................. 4,000 288,403
Takihyo Co. Ltd. ................. 21,000 253,864
76
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- --------------------------------- ----------- ---------------
TDK Corp. ........................ 8,000 $ 521,544
Toda Construction ................ 18,000 136,776
Toei Co. ......................... 50,000 322,079
Toho Bank ........................ 15,000 90,925
Tokio Marine & Fire
Insurance Co. ................... 6,000 56,472
Tokyo Broadcasting System ........ 41,000 626,630
Tokyo Electric Power Co., Inc. .. 7,000 153,527
Tokyo Electron ................... 10,000 306,537
Tokyu Corp. ...................... 5,000 28,409
Toray Industries, Inc. ........... 6,000 37,043
Toso Co. Ltd. .................... 16,000 248,683
Tostem Corp. ..................... 1,000 27,631
Toyoda Gosei* .................... 20,000 138,675
Toyota Motor Corp. ............... 11,000 316,294
Warabeya Nichiyo Co. Ltd.* ...... 12,000 102,582
Wesco, Inc. ...................... 5,200 65,107
Xebio Co. ........................ 6,000 178,741
Yamaichi Securities .............. 40,000 177,878
Yamanouchi Pharmaceutical ........ 32,000 657,629
Yamato Transport ................. 65,000 673,516
Yaskawa Electric Corp.* .......... 48,000 166,618
Yokogawa Electric Corp. .......... 106,000 915,290
---------------
TOTAL JAPAN (30.3%) ............. 45,982,150
---------------
MALAYSIA
Guinness Anchor BHD .............. 30,000 73,649
Hong Leong Bank BHD .............. 50,000 174,223
IOI Corp. BHD .................... 250,000 384,082
Kim Hin Industry BHD ............. 100,000 167,888
Lingkaran Trans Kota Holdings
BHD*+ ........................... 152,000 312,968
Malayan Banking Berhad ........... 24,000 266,086
Mancon BHD* ...................... 76,666 233,747
Metacorp Berhard ................. 120,000 306,474
Pacific & Orient BHD ............. 80,000 193,229
Resorts World BHD ................ 20,000 91,071
RJ Reynolds BHD .................. 200,000 542,467
Sap Holdings* .................... 60,000 287,468
Sime Darby BHD ................... 150,000 590,972
Sriwani Holdings BHD ............. 180,000 484,657
Star Publications BHD ............ 30,000 118,194
---------------
TOTAL MALAYSIA (2.8%) ........... 4,227,175
---------------
MEXICO
Elamex S.A. de C.V.* ............. 33,300 320,513
Grupo Elektra S.A. de C.V.* ..... 60,000 471,799
Panamerican Beverages ............ 5,000 234,375
---------------
TOTAL MEXICO (0.7%) ............. 1,026,687
---------------
NETHERLANDS
ABN Amro Holdings ................ 1,456 94,672
Aegon N.V. ....................... 8,000 509,531
Akzo Nobel N.V. .................. 330 45,053
AMEV N.V. ........................ 10,000 349,984
Content Beheer N.V.*+ ............ 30,000 1,145,403
Elsevier N.V. .................... 17,310 292,397
Goudsmit (Eduard) N.V.* .......... 6,000 534,521
Gucci Group N.V. ................. 5,000 319,375
Heineken N.V. .................... 233 41,218
Hunter Douglas N.V. .............. 3,000 202,181
IHC Caland N.V. .................. 4,000 228,386
ING Groep N.V. ................... 3,392 122,050
KLM .............................. 2,000 $ 56,229
Kon. PTT Nederland+ .............. 25,000 953,056
Koninklijke Nedlloyd Groep N.V. .. 20,000 548,405
Nutrica Verenigde Bedrijven
N.V.+............................ 1,000 151,853
Royal Dutch Petroleum Co. ........ 2,487 435,781
Toolex Alpha N.V.* ............... 15,000 159,375
Unilever N.V. CVA ................ 742 131,175
Vendex International N.V. ........ 3,600 153,901
Ver Ned Uitgeversbedr
Ver Bezit N.V. .................. 5,000 104,417
---------------
TOTAL NETHERLANDS (4.3%) ........ 6,578,963
---------------
NEW ZEALAND
Lion Nathan Ltd. ................. 15,000 35,948
Tourism Holdings Ltd. ............ 15,000 28,631
Warehouse Group Ltd.* ............ 120,000 288,436
---------------
TOTAL NEW ZEALAND (0.2%) ........ 353,015
---------------
NORWAY
Alvern Norway ASA* ............... 110,000 1,468,453
Hafslund Nycomed ASA
(B Shares) ...................... 5,000 34,316
Merkantildata A/S ................ 1,000 18,375
Norsk Hydro AS ................... 1,100 59,602
Nycomed ASA (B Shares)* .......... 5,000 76,956
Seatex Garex ASA* ................ 100,000 543,406
Tomra Systems .................... 58,000 906,357
Union Bank of Norway ............. 12,000 376,929
---------------
TOTAL NORWAY (2.3%) ............. 3,484,394
---------------
PANAMA (0.3%)
Banco Latinoamericano de
Exportaciones, S.A. (E Shares) .. 10,000 507,500
---------------
PERU
Banco Wiese Limitado (ADR) ...... 10,000 58,750
Telefonica del Peru S.A. (ADR) .. 60,000 1,132,500
---------------
TOTAL PERU (0.8%) ............... 1,191,250
---------------
PORTUGAL
Banco Comercial Portugues SA .... 32,700 431,420
Telecel-Comunicacoes
Pessoai SA* ..................... 15,000 958,044
---------------
TOTAL PORTUGAL (0.9%) ........... 1,389,464
---------------
SINGAPORE
City Developments Ltd. ........... 65,000 585,293
Comfort Group Ltd. ............... 18,000 15,951
Fraser & Neave ................... 50,000 514,543
GP Batteries International Ltd. .. 30,000 99,600
GP Batteries International Ltd.+ . 110,000 365,200
Great Eastern Life
Assurance Co.* .................. 7,000 120,560
Overseas Union Bank Ltd. ......... 20,000 154,363
Singapore Airlines Ltd. .......... 20,000 181,519
SM Summit Holdings Ltd.* ......... 30,000 10,076
---------------
TOTAL SINGAPORE (1.4%) .......... 2,047,105
---------------
SOUTH KOREA
Korea Electric Power (ADR) ...... 10,000 205,000
Korea Mobile Telecommunications
Corp. (ADR) ..................... 63,860 822,198
---------------
TOTAL SOUTH KOREA (0.7%) ........ 1,027,198
---------------
77
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
SPAIN
Banco Bilbao Vizcaya SA .......... 1,627 $ 87,916
Banco de Valencia ................ 30,000 586,224
Banco Popular .................... 200 39,313
Banco Santander SA ............... 1,156 74,050
Centros Comerciales Pryca SA .... 3,000 63,594
Construcciones Auxiliar Ferro ... 500 18,963
Corporacion Mapfre Cia
Inter SA ........................ 10,000 609,735
Cubiertas Y Mzov SA .............. 2,000 154,168
El Aguila SA* .................... 19,000 91,244
Empresa Nacional de
Celulosa SA* .................... 5,000 59,933
Endesa ........................... 1,122 79,915
Gas Y Electridad SA (Series 2) .. 16,000 1,023,676
General de Aguas d'Barcelona .... 6,000 249,752
Hidroelectrica del Cantabrico ... 10,000 381,951
Iberdrola II ..................... 10,000 141,835
Iberdrola SA ..................... 25,668 364,061
Portland Valderrivas SA* ......... 5,424 365,423
Prosegur Compania
Seguridad SA .................... 4,315 39,914
Repsol SA ........................ 4,392 168,599
Tabacalera SA .................... 10,000 430,900
Telefonica de Espana SA .......... 12,358 287,210
Viscofan Envoltura ............... 2,500 36,615
---------------
TOTAL SPAIN (3.5%) .............. 5,354,991
---------------
SWEDEN
Astra AB (A Shares) .............. 2,900 143,316
Autoliv AB ....................... 3,000 131,541
BT Industries AB+ ................ 10,000 186,239
Dahl International AB*+ .......... 33,000 694,437
Ericsson (L.M.) Telephone Co.
(Series B) ...................... 6,400 198,029
Kalmar Industries AB+ ............ 4,000 61,591
Meda AB* ......................... 8,100 153,229
NetCom Systems AB
(B Shares)* ..................... 26,400 427,793
Scandic Hotels AB*+ .............. 71,600 1,196,975
Sparbanken Sverige AB
(A Shares) ...................... 16,000 274,519
Swedish Match Co. AB* ............ 200,000 703,896
---------------
TOTAL SWEDEN (2.8%) ............. 4,171,565
---------------
SWITZERLAND
ABB AG ........................... 210 261,225
CS Holdings ...................... 1,250 128,409
Nestle AG ........................ 180 193,246
Novartis AG* ..................... 528 604,725
Roche Holdings AG Genusscheine .. 52 404,617
Schweizerische Bankgesellschaft . 120 105,163
Schweizerische Ruckversicherungs
Gesellschaft .................... 120 128,114
Tag Heuer International SA (ADR)* 30,200 486,975
---------------
TOTAL SWITZERLAND (1.5%) ........ 2,312,474
---------------
THAILAND
CMIC Finance & Securities
Co. Ltd. ........................ 51,000 73,579
Nation Publishing Group
Co. Ltd. ........................ 130,000 380,176
Nawarat Patanakarn Public Co. ... 30,000 $ 35,093
Siam Makro Public Co. Ltd. ...... 50,000 210,559
Thai Engine Manufacturing Public
Co. Ltd.* ....................... 70,000 543,165
---------------
TOTAL THAILAND (0.8%) ........... 1,242,572
---------------
UNITED KINGDOM
Barclays Bank .................... 20,000 342,791
Bass Breweries ................... 5,132 72,179
BAT Industries ................... 60,000 497,998
BOC Group Co. PLC ................ 2,591 38,772
Boots Co. PLC .................... 5,806 59,926
BPB PLC .......................... 70,000 459,882
British Aerospace ................ 2,120 46,487
British Airport Author PLC ...... 100,000 833,423
British Airways .................. 38,000 394,167
British Energy PLC* .............. 251,400 633,090
British Gas ...................... 25,021 96,229
British Petroleum Co. PLC ........ 29,367 352,412
British Sky Broadcasting
Group PLC ....................... 8,097 72,406
British Steel .................... 20,000 54,991
British Telecommunications ...... 35,150 237,550
BTR PLC .......................... 21,470 104,456
Cable & Wireless ................. 12,409 103,207
Cadbury Schweppes PLC ............ 5,961 50,293
Carlton Communications PLC ...... 20,000 176,278
Commercial Union PLC ............. 2,801 32,797
Cordiant PLC* .................... 170,000 299,964
Dixons Group PLC* ................ 120,000 1,115,228
Filtronic Comtek PLC ............. 180,000 1,137,841
General Accident ................. 2,904 38,132
General Electric Co. PLC ......... 13,890 90,897
GKN PLC .......................... 2,089 35,822
Glaxo Wellcome PLC................ 23,220 377,097
Granada Group PLC ................ 3,225 47,596
Grand Metropolitan ............... 24,736 194,502
Great Universal Stores ........... 3,970 41,622
Guinness PLC ..................... 80,571 631,470
Hanson PLC ....................... 44,569 62,226
Harvey Nichols Group PLC*+ ...... 70,000 411,315
House of Fraser PLC .............. 150,000 394,441
HSBC Holdings PLC ................ 10,000 217,906
Imperial Chemical Industries .... 3,109 40,931
Imperial Tobacco PLC* ............ 49,999 322,913
Invesco .......................... 100,000 444,549
Invesco Funding LLC* ............. 20,000 88,910
Kingfisher PLC ................... 4,084 44,182
Land Securities PLC .............. 3,207 40,875
Legal & General Group PLC ........ 7,475 47,636
Lloyds TSB Group PLC ............. 34,379 253,542
Marks & Spencer .................. 17,109 143,909
McBride PLC ...................... 20,000 46,596
Millennium Chemicals, Inc.* ..... 636 11,289
Mirror Group Newspapers PLC ..... 40,000 147,669
Misys PLC ........................ 12,000 229,521
National Grid Group PLC .......... 280,754 940,276
National Power PLC ............... 100,000 837,706
Peninsular & Oriental Steam
Navigation Co. .................. 3,314 33,496
Powerscreen International ........ 40,000 387,161
Prudential Corp. ................. 8,019 67,519
78
<PAGE>
THE HUDSON RIVER TRUST
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Rank Organisation PLC ............ 12,574 $ 93,809
Reed International ............... 13,000 245,307
Rentokil Group PLC ............... 70,000 526,436
Reuters Holdings ................. 7,496 96,503
RTZ Corp. ........................ 5,510 88,398
Safeway PLC ...................... 6,932 47,976
Scottish Power PLC ............... 5,263 31,736
Smith & Nephew PLC* .............. 100,000 310,071
Smithkline Beecham PLC ........... 40,000 554,702
Tate & Lyle PLC .................. 12,000 97,441
Tesco PLC ........................ 12,625 76,671
Thistle Hotels PLC* .............. 94,000 292,272
Thorn PLC* ....................... 120,000 517,014
Tomkins PLC ...................... 25,000 114,992
Unilever ......................... 4,907 119,074
United Utilities PLC ............. 2,901 30,862
Vodafone Group ................... 150,000 633,419
WPP Group PLC .................... 60,000 261,076
Zeneca Group PLC ................. 10,336 291,716
---------------
TOTAL UNITED KINGDOM (12.1%) .... 18,313,548
---------------
TOTAL COMMON STOCKS
AND OTHER INVESTMENTS (86.4%)
(Cost $126,187,152) ............. 131,221,130
---------------
PREFERRED STOCKS:
GERMANY
Fielmann AG ...................... 9,000 283,663
Fresenius AG* .................... 2,000 415,258
---------------
TOTAL GERMANY (0.5%) ............ 698,921
---------------
FINLAND (0.0%)
Nokia Oy Cum ..................... 1,400 81,250
---------------
TOTAL PREFERRED STOCKS (0.5%)
(Cost $868,953) ................. 780,171
---------------
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
LONG-TERM DEBT SECURITIES:
SPAIN (0.0%)
Corporacion Mapfre
8.5% Conv., 02/27/99.......... 2,520,000 $ 19,425
-------------
Peseta
TOTAL LONG-TERM DEBT SECURITIES (0.0%)
(Amortized Cost $20,681) .................... 19,425
-------------
SHORT-TERM DEBT SECURITIES:
U.S. GOVERNMENT AGENCIES
Federal Home Loan
Mortgage Corp.
5.7%, due 01/02/97 ........... $12,300,000 12,298,053
Federal National Mortgage
Association
5.45%, due 02/13/97 .......... 5,000,000 5,000,000
-------------
TOTAL U.S. GOVERNMENT
AGENCIES (11.4%) ............ 17,298,053
-------------
TOTAL SHORT-TERM DEBT SECURITIES (11.4%)
(Amortized Cost $17,298,053) ................ 17,298,053
-------------
TOTAL INVESTMENTS (98.3%)
(Cost/Amortized $144,374,839) 149,318,779
OTHER ASSETS
LESS LIABILITIES (1.7%) ..... 2,588,056
-------------
NET ASSETS (100.0%) ........... $151,906,835
=============
- ---------------------------------------------
MARKET SECTOR DIVERSIFICATION
As a Percentage of Total Equity Investments
Basic Materials 4.2%
Business Services 10.8
Capital Goods 13.2
Consumer Cyclicals 21.0
Consumer Non-Cyclicals 13.2
Credit Sensitive 21.7
Energy 4.1
Technology 10.0
Diversified 1.8
-------
100.0%
=======
- ------------
* Non-income producing.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $10,905,470
or 7.2% of net assets.
Glossary:
ADR--American Depository Receipt
GDS--Global Depository Share
See Notes to Financial Statements.
79
<PAGE>
THE HUDSON RIVER TRUST
AGGRESSIVE STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS AND WARRANTS:
BASIC MATERIALS
METALS & MINING (2.0%)
Cyprus Amax Minerals Co. ........ 907,300 $ 21,208,138
Kaiser Aluminum Corp.* .......... 780,900 9,077,962
Titanium Metals Corp.* .......... 1,392,200 45,768,575
--------------
76,054,675
--------------
CHEMICALS--SPECIALTY (4.4%)
Crompton & Knowles Corp. ........ 3,404,400 65,534,700
Cytec Industries, Inc.* ......... 2,087,500 84,804,688
IDEXX Laboratories, Inc.* ...... 549,700 19,789,200
--------------
170,128,588
--------------
STEEL (2.2%)
AK Steel Holding Corp.++ ........ 1,326,300 52,554,637
Worthington Industries, Inc. ... 1,949,700 35,338,313
--------------
87,892,950
--------------
TOTAL BASIC MATERIALS (8.6%) .. 334,076,213
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (6.7%)
Philip Environmental, Inc.* .... 1,625,000 23,562,500
Republic Industries, Inc.* ..... 2,694,000 84,019,125
USA Waste Services, Inc.* ...... 3,421,900 109,073,062
Wheelabrator Technologies, Inc. 2,597,800 42,214,250
--------------
258,868,937
--------------
PRINTING, PUBLISHING &
BROADCASTING (4.0%)
Comcast Corp. (Class A) SPL .... 5,147,100 91,682,719
Evergreen Media Corp.
(Class A) *++ .................. 2,511,300 62,782,500
--------------
154,465,219
--------------
TRUCKING, SHIPPING (1.5%)
Xtra Corp.++ .................... 1,376,400 59,701,350
--------------
TOTAL BUSINESS SERVICES
(12.2%)......................... 473,035,506
--------------
CONSUMER CYCLICALS
AIRLINES (3.9%)
America West Airlines, Inc.
(Class B)* ..................... 2,056,800 32,651,700
Continental Airlines, Inc.
(Class B)* ..................... 1,684,500 47,587,125
Delta Air Lines, Inc. ........... 569,700 40,377,488
Northwest Airlines Corp.
(Class A)* ..................... 788,700 30,857,888
--------------
151,474,201
--------------
APPAREL, TEXTILE (8.5%)
Tommy Hilfiger Corp.* ........... 1,127,300 54,110,400
Mohawk Industries, Inc.* ........ 1,230,400 27,068,800
Nine West Group, Inc.*++ ........ 3,112,800 144,356,100
Polymer Group, Inc.*++ .......... 2,534,600 35,167,575
Shaw Industries, Inc. ........... 2,542,100 29,869,675
UNIFI, Inc. ..................... 1,223,900 39,317,787
--------------
329,890,337
--------------
FOOD SERVICES, LODGING (6.4%)
Choice Hotels International,
Inc.* .......................... 1,742,400 30,709,800
Doubletree Corp.* ............... 590,700 26,581,500
Extended Stay America, Inc.* ... 1,573,600 31,668,700
Host Marriott Corp.* ............ 7,650,400 $ 122,406,400
La Quinta Motor Inns, Inc. ..... 649,300 12,417,862
Studio Plus Hotels, Inc.* ...... 478,600 7,537,950
Suburban Lodges of America*++ .. 942,400 15,078,400
--------------
246,400,612
--------------
HOUSEHOLD FURNITURE,
APPLIANCES (2.1%)
Industrie Natuzzi (ADR) ......... 2,169,800 49,905,400
Sunbeam Corp. ................... 1,175,800 30,276,850
--------------
80,182,250
--------------
LEISURE RELATED (5.6%)
Electronic Arts* ................ 762,000 22,812,375
Harman International Industries,
Inc. ++ ........................ 1,497,200 83,281,750
Hasbro, Inc. .................... 1,938,600 75,363,075
ITT Corp.* ...................... 814,500 35,328,938
--------------
216,786,138
--------------
RETAIL--GENERAL (3.1%)
AutoZone, Inc.* ................. 1,460,200 40,155,500
Circuit City Stores, Inc. ...... 2,166,900 65,277,862
Pep Boys Manny Moe & Jack ...... 515,800 15,860,850
--------------
121,294,212
--------------
TOTAL CONSUMER CYCLICALS (29.6%) 1,146,027,750
--------------
CONSUMER NONCYCLICALS
DRUGS (3.8%)
Biogen, Inc.* ................... 1,651,000 63,976,250
Centocor, Inc.* ................. 1,847,400 66,044,550
MedImmune, Inc.* ................ 1,012,100 17,205,700
--------------
147,226,500
--------------
HOSPITAL SUPPLIES & SERVICES (7.9%)
Healthsouth Corp.* .............. 3,124,375 120,678,984
Health Management Associates,
Inc. (Class A)* ................ 1,510,900 33,995,250
Manor Care, Inc. ................ 1,742,400 47,044,800
Saint Jude Medical, Inc.* ...... 2,436,350 103,849,419
--------------
305,568,453
--------------
SOAPS & TOILETRIES (1.8%)
Dial Corp. ...................... 2,653,800 39,143,550
Estee Lauder Cos. (Class A) .... 587,000 29,863,625
--------------
69,007,175
--------------
TOTAL CONSUMER NONCYCLICALS (13.5%) 521,802,128
--------------
CREDIT SENSITIVE
FINANCIAL SERVICES (1.0%)
Aames Financial Corp.++ ......... 1,112,400 39,907,350
--------------
INSURANCE (3.1%)
CNA Financial Corp.* ............ 1,133,100 121,241,700
--------------
UTILITY--TELEPHONE (2.8%)
Telephone & Data Systems,
Inc.++.......................... 2,883,000 104,508,750
--------------
TOTAL CREDIT SENSITIVE (6.9%) . 265,657,800
--------------
ENERGY
OIL--DOMESTIC (4.8%)
Oryx Energy Co.* ................ 2,098,400 51,935,400
Ultramar Diamond Shamrock Corp.
++ ............................. 4,184,622 132,338,671
--------------
184,274,071
--------------
80
<PAGE>
THE HUDSON RIVER TRUST
AGGRESSIVE STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
OIL--SUPPLIES & CONSTRUCTION (4.6%)
Diamond Offshore Drilling,
Inc.*........................... 1,609,184 $ 91,723,488
Rowan Cos., Inc.* ............... 3,785,500 85,646,937
--------------
177,370,425
--------------
TOTAL ENERGY (9.4%) ............ 361,644,496
--------------
TECHNOLOGY
ELECTRONICS (3.0%)
American Power Conversion Corp.* 178,000 4,850,500
DT Industries, Inc. ++ .......... 581,900 20,366,500
Pairgain Technologies, Inc.* ... 183,400 5,582,238
Parametric Technology Corp.* ... 1,351,600 69,438,450
Xylan Corp.* .................... 534,100 15,088,325
--------------
115,326,013
--------------
OFFICE EQUIPMENT (2.0%)
Read-Rite Corp.* ................ 876,100 22,121,525
Storage Technology Corp.* ...... 739,800 35,232,975
Symantec Corp.* ................. 1,490,600 21,613,700
--------------
78,968,200
--------------
OFFICE EQUIPMENT SERVICES (4.1%)
Baan Co. N.V.* .................. 890,000 30,927,500
Fore Systems, Inc.* ............. 1,112,500 36,573,438
Informix Corp.* ................. 1,411,300 28,755,237
Premisys Communications, Inc.* . 872,500 29,446,875
Sterling Commerce, Inc.* ........ 893,448 31,494,042
--------------
157,197,092
--------------
TELECOMMUNICATIONS (4.7%)
American Satellite
Network--Warrants* ............. 49,450 0
Andrew Corp.* ................... 701,200 37,207,425
Glenayre Technologies, Inc.* ... 1,297,400 27,975,188
Millicom International Cellular
S.A.* .......................... 1,314,415 42,225,582
Tellabs, Inc.* .................. 648,400 24,396,050
United States Cellular Corp.* .. 1,033,100 28,797,662
Vanguard Cellular Systems, Inc.
(Class A)* ..................... 1,132,450 17,836,087
--------------
178,437,994
--------------
TOTAL TECHNOLOGY (13.8%) ...... 529,929,299
--------------
TOTAL COMMON STOCKS
AND WARRANTS (94.0%)
(Cost $3,138,615,856) .......... 3,632,173,192
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES:
BANKERS' ACCEPTANCES
Bank of Tokyo
5.52%, due 02/10/97 .......... $14,000,000 $ 13,914,133
Canadian Imperial Bank of
Commerce
5.38%, due 03/27/97 .......... 12,000,000 11,850,400
Industrial Bank of Japan-L.A.
5.73%, due 01/16/97 .......... 10,000,000 9,976,125
-------------
TOTAL BANKERS' ACCEPTANCES (0.9%) 35,740,658
---------------
CERTIFICATES OF DEPOSIT
Canadian Imperial Bank of
Commerce
5.44%, due 03/31/97 .......... 25,000,000 25,009,103
Sumitomo Bank Ltd.
5.51%, due 01/13/97 .......... 5,000,000 4,999,736
---------------
TOTAL CERTIFICATES OF DEPOSIT (0.8%) 30,008,839
---------------
COMMERCIAL PAPER
ASCC Commercial Paper
5.33%, due 03/18/97 .......... 11,300,000 11,174,280
Centauri Corp.
5.4%, due 02/06/97 ........... 9,000,000 8,951,400
Corporate Asset Securitization
Australia
5.55%, due 03/14/97 .......... 9,000,000 8,905,140
Dresdner U.S. Finance, Inc.
5.31%, due 04/10/97 .......... 5,000,000 4,927,263
Eureka Corp.
5.42%, due 02/19/97 .......... 10,000,000 9,926,228
Gotham Funding Corp.
5.45%, due 03/12/97 .......... 10,000,000 9,897,528
Jefferson Smurfit Corp.
5.45%, due 03/04/97 .......... 4,000,000 3,963,696
Morgan Stanley Group, Inc.
6.79%, due 01/02/97 .......... 77,000,000 76,985,477
Sigma Finance Corp.
5.36%, due 04/28/97 .......... 10,000,000 9,829,050
---------------
TOTAL COMMERCIAL PAPER (3.7%) 144,560,062
---------------
TIME DEPOSITS
Canadian Imperial Bank of
Commerce
6.0%, due 01/02/97 ........... 14,000,000 14,000,000
Sumitomo Bank Ltd.
6.5%, due 01/02/97 ........... 34,000,000 34,000,000
---------------
TOTAL TIME DEPOSITS (1.2%) .. 48,000,000
---------------
TOTAL SHORT-TERM DEBT SECURITIES (6.6%)
(Amortized Cost
$258,282,887)................. 258,309,559
---------------
TOTAL INVESTMENTS (100.6%)
(Cost/Amortized Cost $3,396,898,743) 3,890,482,751
OTHER ASSETS
LESS LIABILITIES (-0.6%) .... (24,613,334)
---------------
NET ASSETS (100.0%) ........... $3,865,869,417
===============
- ------------
* Non-income producing.
++ Affiliated company as defined under the Investment Company Act of 1940
(see Note 6).
Glossary:
ADR--American Depository Receipt
See Notes to Financial Statements.
81
<PAGE>
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS AND WARRANTS:
BASIC MATERIALS
CHEMICALS (0.3%)
Akzo Nobel N.V. ................. 1,505 $ 205,467
Bayer AG......................... 5,735 232,747
Freeport-McMoRan, Inc............ 7,500 240,938
Holliday Chemical Holdings PLC .. 23,700 49,939
Olin Corp. ...................... 1,700 63,963
Toagosei Co. Ltd. ............... 5,000 17,701
UBE Industries Ltd. ............. 9,000 25,490
--------------
836,245
--------------
CHEMICALS--SPECIALTY (0.1%)
Cytec Industries, Inc.*.......... 4,000 162,500
NGK Insulators .................. 4,000 37,993
--------------
200,493
--------------
METALS & MINING (0.3%)
Mitsubishi Materials Corp. ...... 7,000 28,288
Nippon Light Metal Co............ 9,000 36,992
Pechiney SA (A Shares)........... 1,446 60,588
Reynolds Metals Co............... 9,300 524,288
Western Mining Corp. Ltd......... 11,494 72,449
--------------
722,605
--------------
PAPER (0.0%)
Fletcher Forestry Shares......... 14,000 23,457
UPM-Kymmene Oy................... 3,510 73,679
--------------
97,136
--------------
STEEL (0.1%)
Nippon Steel Corp................ 24,000 70,875
Nisshin Steel Co. Ltd. .......... 44,000 118,158
NKK Corp.*....................... 28,000 63,103
Pohang Iron & Steel Co. Ltd.
(ADR)........................... 2,000 40,500
Tokyo Steel Manufacturing Co.
Ltd. ........................... 11,000 156,721
Usinor Sacilor................... 5,280 76,831
--------------
526,188
--------------
TOTAL BASIC MATERIALS (0.8%) .. 2,382,667
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.6%)
Republic Industries, Inc.* ...... 5,500 171,531
USA Waste Services, Inc.*........ 26,000 828,750
WMX Technologies, Inc. .......... 19,500 636,188
--------------
1,636,469
--------------
PRINTING, PUBLISHING &
BROADCASTING (0.9%)
British Sky Broadcasting
Group PLC....................... 12,200 109,097
Cablevision Systems Corp.
(Class A)*...................... 6,000 183,750
Dainippon Printing Co. Ltd. ..... 6,000 105,172
Liberty Media Group (Class A)* .. 2,700 77,119
New York Times Co................ 14,500 551,000
Pearson PLC...................... 7,470 95,912
Reed International............... 8,830 166,620
Reuters Holdings................. 14,000 180,235
Schibsted ASA.................... 1,780 32,848
Singapore Press Holdings......... 5,000 98,621
TCI Group (Class A)*............. 10,000 $ 130,625
Television Broadcasts............ 16,000 63,921
Time Warner, Inc................. 7,200 270,000
Viacom, Inc. (Class B)*.......... 14,560 507,780
--------------
2,572,700
--------------
PROFESSIONAL SERVICES (0.3%)
Adecco SA........................ 189 47,444
Associated First Capital Corp. . 7,500 330,938
Ceridian Corp.*.................. 10,000 405,000
ISS International Service
System A/S (Class B)*........... 2,510 66,086
--------------
849,468
--------------
TRUCKING, SHIPPING (0.1%)
Autopistas Concesionaria
Espanola........................ 4,260 58,780
Bergesen Dy AS (A Shares)........ 5,380 131,812
Kamigumi Co. Ltd................. 6,000 39,375
Mayne Nickless Ltd. ............. 6,000 41,014
Nippon Express Co. Ltd........... 10,000 68,561
Toyo Kanetsu..................... 7,000 24,297
Unitor ASA*...................... 940 12,106
--------------
375,945
--------------
TOTAL BUSINESS SERVICES (1.9%) . 5,434,582
--------------
CAPITAL GOODS
AEROSPACE (0.5%)
Boeing Co........................ 5,600 595,700
British Aerospace................ 6,200 135,952
Coltec Industries, Inc.*......... 11,000 207,625
General Electric Co. PLC......... 18,400 120,410
Swire Pacific Ltd. (Class A) .... 6,000 57,211
United Technologies Corp......... 4,800 316,800
--------------
1,433,698
--------------
BUILDING & CONSTRUCTION (0.3%)
American Standard
Companies, Inc.*................ 6,700 256,275
Bouygues......................... 1,203 124,740
Daito Trust Construction Co. .... 8,112 90,359
GTM Entrepose.................... 1,116 51,622
Maeda Road Construction Co. ..... 2,000 23,141
Matsushita Electric Works Ltd. .. 7,000 60,263
National House Industrial Co. ... 7,000 93,084
Shimizu Corp..................... 7,000 52,284
Wimpey (George) PLC.............. 46,100 99,902
--------------
851,670
--------------
BUILDING MATERIALS & FOREST
PRODUCTS (0.2%)
BPB PLC.......................... 8,200 53,872
Hepworth PLC..................... 8,600 37,347
Louisiana Pacific Corp........... 5,200 109,850
Martin Marietta Materials, Inc. . 4,200 97,650
Rugby Group PLC.................. 38,400 62,494
Stora Kopparbergs (Series B) .... 7,950 108,422
--------------
469,635
--------------
ELECTRICAL EQUIPMENT (0.5%)
Alcatel Alsthom.................. 320 25,706
General Electric Co.............. 13,700 1,354,588
Sumitomo Electric Industries .... 7,000 97,919
--------------
1,478,213
--------------
82
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
MACHINERY (0.3%)
Amano Corp....................... 8,000 $ 85,657
Daifuku Co....................... 7,000 88,247
Furukawa Co. Ltd. ............... 11,000 37,042
Ishikawajima Harima Heavy
Industries Co. Ltd. ............ 9,000 40,022
KSB AG........................... 590 92,020
Legris Industries................ 1,990 83,804
Mitsubishi Heavy Industries
Ltd............................. 11,000 87,385
Schindler Holding AG*............ 52 56,526
Siebe PLC........................ 7,150 132,531
TI Group PLC..................... 15,500 154,539
--------------
857,773
--------------
TOTAL CAPITAL GOODS (1.8%) 5,090,989
--------------
CONSUMER CYCLICALS
AIRLINES (0.3%)
Delta Air Lines, Inc............. 1,100 77,963
Lufthansa AG..................... 7,000 94,528
Northwest Airlines Corp.
(Class A)*...................... 11,800 461,675
Qantas Airways Ltd............... 7,000 11,684
Singapore Airlines Ltd........... 1,000 9,076
Swissair*........................ 60 48,547
--------------
703,473
--------------
APPAREL, TEXTILE (0.5%)
Cone Mills Corp.*................ 12,000 94,500
Kuraray Co. Ltd.................. 10,000 92,393
Reebok International Ltd......... 31,250 1,312,500
--------------
1,499,393
--------------
AUTO RELATED (0.1%)
Asahi Glass Co. Ltd.............. 17,000 160,003
Magneti Marelli Spa*............. 26,250 32,621
Sumitomo Rubber
Industries, Inc................. 6,000 44,711
--------------
237,335
--------------
AUTOS & TRUCKS (0.2%)
Bajaj Auto Ltd. (GDR)............ 4,000 105,500
Honda Motor Corp................. 3,000 85,744
Toyota Motor Corp................ 13,000 373,802
Volkswagen AG*................... 150 62,143
--------------
627,189
--------------
FOOD SERVICES, LODGING (0.5%)
Brinker International, Inc.* .... 30,500 488,000
Compass Group PLC*............... 9,500 100,495
Host Marriott Corp.*............. 16,200 259,200
John Q Hammons Hotels, Inc.
(Class A)*...................... 15,000 127,500
La Quinta Motor Inns, Inc. ...... 27,900 533,588
--------------
1,508,783
--------------
HOUSEHOLD FURNITURE,
APPLIANCES (0.6%)
Electrolux B..................... 920 53,426
First Brands Corp................ 12,500 354,688
Matsushita Electric
Industrial Co................... 12,000 195,838
Sunbeam Corp. ................... 46,900 1,207,675
--------------
1,811,627
--------------
LEISURE RELATED (0.7%)
Carnival Corp. .................. 1,600 $ 52,800
Disney (Walt) Co................. 15,166 1,055,933
ITT Corp.*....................... 7,300 316,638
Ladbroke Group PLC............... 33,300 131,777
Learning Company, Inc.*.......... 4,800 69,000
Rank Group PLC................... 22,300 166,370
Resorts World BHD................ 20,000 91,071
Salomon SA....................... 830 71,186
Shimano, Inc..................... 3,000 51,032
--------------
2,005,807
--------------
PHOTO & OPTICAL (0.0%)
Fuji Photo Film Co............... 1,000 32,985
--------------
RETAIL--GENERAL (1.4%)
AutoZone, Inc.*.................. 46,500 1,278,750
British Airport Author PLC ...... 17,700 147,516
CompUSA, Inc.*................... 42,600 878,625
Dayton Hudson Corp............... 17,300 679,025
Fingerhut Companies, Inc......... 12,000 147,000
Kingfisher PLC................... 5,200 56,255
Kokuyo Co. ...................... 3,000 74,087
Sainsbury (J) PLC................ 22,800 151,547
Sears PLC........................ 64,700 105,295
Vendex International N.V. ...... 2,850 121,838
Woolworths Ltd................... 55,026 132,524
--------------
3,772,462
--------------
TOTAL CONSUMER CYCLICALS (4.3%) 12,199,054
--------------
CONSUMER NONCYCLICALS
BEVERAGES (0.5%)
Bass Breweries................... 7,980 112,235
Cadbury Schweppes PLC............ 14,900 125,712
Coca-Cola Amatil Ltd............. 7,048 75,348
Coca-Cola Co..................... 18,000 947,250
Grand Metropolitan............... 16,900 132,887
Kirin Brewery Co................. 11,000 108,281
Lion Nathan Ltd.................. 17,000 40,742
--------------
1,542,455
--------------
CONTAINERS (0.3%)
Crown Cork & Seal Co., Inc. ..... 12,000 652,500
Schmalbach Lubeca AG*............ 540 132,649
--------------
785,149
--------------
DRUGS (2.5%)
Amgen, Inc.*..................... 9,200 500,250
Apothekers Cooperatie Opg-CV .... 940 27,026
Astra AB (A Shares).............. 3,040 150,235
Biogen, Inc.*.................... 20,000 775,000
Centocor, Inc.*.................. 23,800 850,850
Eisai Co. Ltd.................... 4,000 78,750
Geltex Pharmaceuticals, Inc.* ... 3,200 77,600
Glaxo Wellcome PLC .............. 8,940 145,187
Merck & Co., Inc................. 17,200 1,363,100
Novartis AG*..................... 330 377,953
Orion-Yhtymae Oy (B Shares) ..... 3,030 116,661
Pfizer, Inc. .................... 18,600 1,541,475
Revco D.S., Inc.*................ 3,000 111,000
Sankyo Co........................ 1,000 28,322
Santen Pharmaceutical Co......... 2,000 41,447
83
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Smithkline Beecham PLC........... 8,900 $ 123,421
Taisho Pharmaceutical Co......... 4,000 94,292
Takeda Chemical Industries ...... 3,000 62,948
Warner-Lambert Co................ 6,500 487,500
Yamanouchi Pharmaceutical........ 7,000 143,856
--------------
7,096,873
--------------
FOODS (0.7%)
Campbell Soup Co................. 9,170 735,893
CSM N.V.*........................ 450 24,991
House Foods Industry............. 2,000 32,294
Nabisco Holdings Corp.
(Class A)....................... 19,770 768,559
Nestle AG........................ 186 199,688
Orkla A/S 'A'.................... 930 64,997
Suedzucker AG.................... 240 117,130
Viscofan Envoltura............... 1,950 28,560
Yakult Honsha Co. ............... 6,000 62,171
Yamakazi Baking Co. ............. 3,000 47,923
--------------
2,082,206
--------------
HOSPITAL SUPPLIES & SERVICES (1.1%)
Columbia/HCA Healthcare Corp. ... 27,000 1,100,250
Medtronic, Inc................... 9,600 652,800
Oxford Health Plans, Inc*........ 4,900 286,956
Pacificare Health Systems, Inc.
(Class B)*...................... 8,700 741,675
Steris Corp.*.................... 6,600 287,100
--------------
3,068,781
--------------
RETAIL--FOOD (0.2%)
Delhaize Freres.................. 930 55,298
Ito Yokado Co. Ltd. ............. 1,000 43,520
Kesko*........................... 1,750 24,705
Seven-Eleven Japan Ltd........... 5,000 292,721
Tesco PLC........................ 4,300 26,114
--------------
442,358
--------------
SOAPS & TOILETRIES (0.6%)
Colgate Palmolive Co............. 8,680 800,730
Gillette Corp.................... 10,275 798,881
KAO Corp. ....................... 11,000 128,227
Shiseido Co...................... 7,000 80,995
--------------
1,808,833
--------------
TOBACCO (1.0%)
BAT Industries................... 10,600 87,980
Hanjaya Mandala Sampoerna........ 24,000 128,027
Japan Tobacco, Inc............... 10 67,782
Loews Corp....................... 3,000 282,750
Philip Morris Cos., Inc. ........ 17,400 1,959,675
Tabacalera SA.................... 1,880 81,008
--------------
2,607,222
--------------
TOTAL CONSUMER NONCYCLICALS (6.9%) 19,433,877
--------------
CREDIT SENSITIVE
BANKS (1.1%)
AMMB Holdings BHD................ 8,000 67,155
Banco Santander SA............... 990 63,416
Bangkok Bank Public Co. ......... 2,000 19,340
Bank of Tokyo-Mitsubishi Bank ... 8,000 148,519
Barclays Bank ................... 14,050 240,811
Chase Manhattan Corp............. 2,500 223,125
Chiba Bank....................... 5,000 $ 34,108
Den Danske Bank.................. 2,000 161,371
First Union Corp................. 18,000 1,332,000
Kredietbank...................... 200 65,612
Malayan Banking Berhad........... 4,000 44,348
Mitsui Trust & Banking Co. ...... 22,000 171,920
National Westminster Bank* ...... 10,050 118,020
Overseas Chinese Bank............ 7,600 94,504
Overseas Union Bank Ltd.......... 10,000 77,181
Philippine Commercial
International Bank.............. 1,000 13,118
Sparbanken Sverige AB
(A Shares)...................... 2,300 39,462
Sparekassen Bikuben A/S*......... 870 40,788
State Bank of India (GDR)* ...... 4,000 58,000
Thai Farmers Bank Public Co. .... 13,000 81,104
Thai Farmers Bank Public Co.--
Warrants*....................... 375 102
Tokai Bank....................... 10,000 104,481
--------------
3,198,485
--------------
FINANCIAL SERVICES (1.9%)
American Express Co.............. 24,000 1,356,000
Beneficial Corp. ................ 3,500 221,813
Daiwa Securities Co. Ltd......... 3,000 26,682
Dean Witter Discover & Co. ..... 18,350 1,215,688
Incentive AB (B Shares)*......... 450 32,665
Industrial Credit & Investment
Corp. (GDR)*.................... 3,000 29,250
Industrial Credit & Investment
Corp. of India Ltd. (GDR)* ..... 1,000 9,500
ING Groep N.V.................... 6,260 225,246
Japan Securities Finance Co. ... 9,000 104,913
MBNA Corp........................ 28,300 1,174,450
Merrill Lynch & Co., Inc......... 9,900 806,850
Nikko Securities Co.............. 8,000 59,684
Nomura Securities Co............. 7,000 105,172
--------------
5,367,913
--------------
INSURANCE (1.4%)
AMEV N.V......................... 6,310 220,840
Assurances Generales de France 4,510 145,596
................................
Baloise Holdings................. 60 120,583
Istituto Naz Delle
Assicurazioni................... 83,800 109,165
ITT Hartford Group, Inc.......... 500 33,750
MGIC Investment Corp. ........... 4,500 342,000
Mitsui Marine & Fire
Insurance Co. .................. 11,000 59,175
PennCorp Financial Group, Inc. .. 16,200 583,200
Sumitomo Marine & Fire Insurance
Co. ............................ 9,000 55,954
TIG Holdings, Inc................ 17,500 592,813
Travelers Group, Inc............. 35,566 1,613,807
United Assurance Group PLC ...... 10,000 82,314
Zurich Versicherungs Reg......... 190 52,805
--------------
4,012,002
--------------
REAL ESTATE (0.2%)
Hysan Development Co. Ltd. ...... 7,000 27,875
Hysan Development Co.
Ltd.--Warrants*................. 300 272
New World Development Co......... 5,000 33,777
84
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Sefimeg.......................... 600 $ 43,481
Simco S.A........................ 550 48,020
Societe des Immeubles
de France SA.................... 628 37,037
Sumitomo Realty & Development
Co.............................. 11,000 69,338
Unibail S.A...................... 950 94,478
Union Immobiliere de France ..... 530 43,260
Wharf Holdings................... 8,000 39,925
--------------
437,463
--------------
UTILITY--ELECTRIC (0.5%)
Cinergy Corp..................... 6,900 230,288
FPL Group, Inc................... 11,600 533,600
Korea Electric Power (ADR) ...... 2,000 41,000
Malakoff BHD*.................... 9,000 44,189
Manila Electric Co............... 5,200 42,510
National Grid Group PLC.......... 44,100 147,696
Tokyo Electric Power Co., Inc. .. 3,000 65,797
Veba AG.......................... 3,800 218,547
--------------
1,323,627
--------------
UTILITY--GAS (0.1%)
Anglian Water PLC................ 11,900 120,277
Hong Kong & China Gas Co......... 13,200 25,514
Hong Kong & China Gas
Co.--Warrants*.................. 1,100 612
Osaka Gas Co..................... 21,000 57,482
Tokyo Gas Co..................... 41,000 111,165
--------------
315,050
--------------
UTILITY--TELEPHONE (0.3%)
British Telecommunications ...... 17,500 118,268
Frontier Corp.................... 5,500 124,438
Telecom Corp. of New Zealand .... 14,000 71,458
Telecom Italia Spa............... 55,900 145,196
Telephone & Data Systems, Inc. .. 7,500 271,875
WorldCom, Inc.*.................. 4,000 104,250
--------------
835,485
--------------
TOTAL CREDIT SENSITIVE (5.5%) . 15,490,025
--------------
ENERGY
COAL & GAS PIPELINES (0.2%)
Nabors Industries, Inc.*......... 29,000 558,250
--------------
OIL--DOMESTIC (0.5%)
Apache Corp...................... 14,100 498,788
Louisiana Land & Exploration
Corp. .......................... 9,800 525,525
Union Pacific Resources
Group, Inc...................... 9,824 287,352
--------------
1,311,665
--------------
OIL--INTERNATIONAL (0.8%)
British Petroleum Co. PLC........ 17,700 212,405
Elf Aquitaine.................... 2,110 192,070
ENI Spa.......................... 25,400 130,360
Exxon Corp....................... 12,900 1,264,200
Mitsubishi Oil Co................ 10,000 59,839
Repsol SA........................ 2,410 92,515
Shell Transport & Trading Co.* .. 5,500 95,304
Tatneft (ADR)*................... 500 24,000
Total Campagnie Francaise........ 2,881 234,322
--------------
2,305,015
--------------
OIL--SUPPLIES & CONSTRUCTION (1.4%)
Baker Hughes, Inc................ 23,850 $ 822,825
BJ Services Co.*................. 17,200 877,200
Halliburton Co................... 3,500 210,875
Noble Drilling Corp.*............ 12,500 248,438
Saipem Spa*...................... 11,950 54,989
Schlumberger, Ltd. .............. 8,500 848,938
Transocean Offshore, Inc......... 12,400 776,550
--------------
3,839,815
--------------
RAILROADS (0.6%)
Burlington Northern Santa Fe .... 6,600 570,074
Canadian Pacific Ltd............. 21,500 569,750
East Japan Railway Co............ 19 85,475
Guangshen Railway Co. Ltd.
(ADR)*.......................... 2,000 41,250
Union Pacific Corp............... 9,000 541,125
--------------
1,807,674
--------------
TOTAL ENERGY (3.5%) ............ 9,822,419
--------------
TECHNOLOGY
ELECTRONICS (2.7%)
Advanced Semiconductor
Engineering (GDR)*.............. 3,400 32,300
Altera Corp.*.................... 15,000 1,090,313
Cisco Systems, Inc.*............. 27,700 1,762,413
Hirose Electric Co. Ltd. ........ 2,000 115,879
Hoya Corp........................ 5,000 196,442
Intel Corp....................... 8,800 1,152,250
Intergraph Corp.*................ 10,500 107,625
Kandenko Co. Ltd................. 6,000 56,990
Kyocera Corp. ................... 1,000 62,343
National Semiconductor Corp.* ... 1,500 36,563
Rohm Co. Ltd..................... 6,000 393,748
Seagate Technology, Inc.*........ 6,500 256,750
SGS-Thomson Microelectronics
N.V.*........................... 760 53,757
TDK Corp......................... 4,000 260,772
Teradyne, Inc.*.................. 5,000 121,875
Texas Instruments, Inc. ......... 2,750 175,313
Ushio, Inc.*..................... 7,000 76,159
Yamatake-Honeywell Co............ 3,000 48,441
3Com Corp.*...................... 23,100 1,694,963
--------------
7,694,896
--------------
OFFICE EQUIPMENT (0.4%)
Canon, Inc....................... 9,000 198,947
Compaq Computer Corp.*........... 9,300 690,525
Sterling Software, Inc.*......... 4,000 126,500
Storage Technology Corp.*........ 1,500 71,438
--------------
1,087,410
--------------
OFFICE EQUIPMENT SERVICES (1.5%)
Electronic Data Systems Corp. ... 12,400 536,300
First Data Corp.................. 16,600 605,900
Informix Corp.*.................. 50,000 1,018,750
Microsoft Corp.*................. 7,800 644,475
Oracle Corp.*.................... 31,600 1,319,300
Sterling Commerce, Inc.*......... 6,370 224,543
--------------
4,349,268
--------------
TELECOMMUNICATIONS (1.0%)
Asia Satellite Telecommunications
Holdings Ltd.*.................. 2,000 4,642
DDI Corp. ....................... 65 429,928
85
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Deutsche Telekom AG*............. 2,140 $ 44,641
Deutsche Telekom AG (ADR)* ...... 2,000 40,750
DSC Communications Corp.*........ 5,100 91,163
Korea Mobile Telecommunications
Corp. (ADR)..................... 9,270 119,351
MFS Communications Co., Inc.* ... 5,250 286,125
Netscape Communications
Corp.*.......................... 9,600 546,000
Nokia Corp. (ADR)................ 3,000 172,875
PT Indosat....................... 41,000 121,506
PT Telekomunikasi Indonesia ..... 30,000 51,756
Scientific Atlanta, Inc.......... 19,000 285,000
Telecel Comunicacoes
Pessoai SA*..................... 280 17,883
Vanguard Cellular Systems, Inc.
(Class A)*...................... 25,000 393,750
Vodafone Group .................. 22,800 96,280
--------------
2,701,650
--------------
TOTAL TECHNOLOGY (5.6%) ........ 15,833,224
--------------
DIVERSIFIED MISCELLANEOUS (1.0%)
Allied Signal, Inc............... 18,700 1,252,900
BTR PLC.......................... 37,300 181,472
Cie Generale des Eaux............ 843 104,471
Citic Pacific Ltd................ 12,000 69,662
First Pacific Co................. 38,734 50,330
Hanson PLC....................... 52,000 72,601
Preussag AG...................... 210 47,492
Tomkins PLC...................... 23,600 108,552
U.S. Industries, Inc.*........... 25,500 876,564
--------------
TOTAL DIVERSIFIED (1.0%) ...... 2,764,044
--------------
TOTAL COMMON STOCKS
AND WARRANTS (31.3%)
(Cost $78,614,373) ............. 88,450,881
--------------
PREFERRED STOCKS:
BASIC MATERIALS (0.1%)
CHEMICALS
Henkel KGAA*..................... 3,144 157,117
--------------
CONSUMER CYCLICALS (0.0%)
RETAIL--GENERAL
Hornbach Holding AG.............. 1,490 106,512
--------------
TECHNOLOGY (0.0%)
TELECOMMUNICATIONS
Nokia Oy Cum..................... 1,580 91,697
--------------
TOTAL PREFERRED STOCKS (0.1%)
(Cost $285,154) ................ 355,326
--------------
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
LONG-TERM DEBT SECURITIES:
BUSINESS SERVICES (2.5%)
PRINTING, PUBLISHING &
BROADCASTING
Time Warner Entertainment Co.
8.375%, 03/15/23............... $ 7,000,000 $ 7,097,090
--------------
CREDIT SENSITIVE
BANKS (5.7%)
Chase Manhattan Corp.
8.625% Sub. Deb., 05/01/02 .... 5,500,000 5,961,010
Deutsche Bank
6.7%, 12/13/06................. 5,000,000 4,906,800
Sumitomo Bank International
0.75% Conv., 05/31/01.......... 11,000,000 100,445
Yen
Zion's First National Bank
8.536%, 12/15/26+.............. $ 5,050,000 5,209,227
--------------
16,177,482
--------------
FINANCIAL SERVICES (2.0%)
Ford Motor Credit Co.
6.125%, 01/09/06............... 6,000,000 5,633,640
--------------
FOREIGN GOVERNMENT (0.9%)
Province of Quebec
7.5%, 07/15/23................. 2,500,000 2,487,625
--------------
INSURANCE (2.5%)
Prudential Insurance Co.
8.1%, 07/15/15+................ 6,800,000 6,935,523
--------------
MORTGAGE RELATED (15.2%)
Federal Home Loan
Mortgage Corp.
7.0%, 09/01/11................. 8,943,760 8,940,970
Federal National Mortgage
Association:
6.0%, 11/01/10................. 16,453,280 15,820,866
6.5%, 01/01/11................. 3,752,490 3,684,476
7.0%, 05/01/26................. 8,999,030 8,804,993
Premier Auto Trust
7.15%, 02/04/99................ 5,650,000 5,692,375
--------------
42,943,680
--------------
UTILITY--GAS (1.8%)
RAS Laffan Liquid Natural Gas
8.294%, 09/15/14+.............. 5,000,000 5,081,075
--------------
U.S. GOVERNMENT (27.1%)
U.S. Treasury:
6.375% Note, 05/15/99.......... 38,450,000 38,786,430
6.125% Note, 09/30/00.......... 10,385,000 10,378,508
6.25% Note, 10/31/01........... 11,590,000 11,597,244
5.75% Note, 08/15/03........... 8,850,000 8,584,500
6.5% Note, 08/15/05............ 4,250,000 4,279,218
6.5% Bond, 11/15/26............ 2,950,000 2,894,688
--------------
76,520,588
--------------
TOTAL CREDIT SENSITIVE
(55.2%)........................ 155,779,613
--------------
TOTAL LONG-TERM DEBT SECURITIES (57.7%)
(Amortized Cost $163,076,530) . 162,876,703
--------------
86
<PAGE>
THE HUDSON RIVER TRUST
CONSERVATIVE INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
SHORT-TERM DEBT SECURITIES:
COMMERCIAL PAPER
ASCC Commercial Paper
5.34%, due 02/27/97............ $ 5,000,000 $ 4,957,725
Associates Corp. of North
America
5.75%, due 01/02/97............ 400,000 399,936
Morgan Stanley Group, Inc.
6.79%, due 01/02/97............ 400,000 399,925
--------------
TOTAL COMMERCIAL PAPER (2.0%) 5,757,586
--------------
TIME DEPOSITS
Canadian Imperial Bank of
Commerce
6.0%, due 01/02/97............. 4,300,000 4,300,000
Harris Trust & Savings
6.5%, due 01/02/97............. 900,000 900,000
Toronto Dominion Bank
6.25%, due 01/02/97............ 13,000,000 13,000,000
--------------
TOTAL TIME DEPOSITS (6.5%) ... 18,200,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (8.5%)
(Amortized Cost $23,957,586) .. 23,957,586
--------------
TOTAL INVESTMENTS (97.6%)
(Cost/Amortized Cost $265,933,643) 275,640,496
OTHER ASSETS
LESS LIABILITIES (2.4%) ....... 6,761,905
--------------
NET ASSETS (100.0%) ............ $282,402,401
==============
- --------------------------------------------
DISTRIBUTION OF INVESTMENTS BY GLOBAL REGION
As a Percentage of Total Investments
Canada.................... 0.2%
Japan..................... 2.6
New Zealand & Australia .. 0.2
Scandinavia............... 0.5
Southeast Asia............ 0.7
United Kingdom............ 1.7
United States**........... 92.2
Other European Countries 1.9
-------
100.0%
=======
- ------------
* Non-income producing.
** Includes Short-Term Debt Securities of 8.7%.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $17,225,825
or 6.1% of net assets.
Glossary:
ADR--American Depository Receipt
GDR--Global Depository Receipt
See Notes to Financial Statements.
87
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS AND WARRANTS:
BASIC MATERIALS
CHEMICALS (0.6%)
Akzo Nobel N.V. ................... 13,380 $ 1,826,675
Bayer AG........................... 51,000 2,069,762
Freeport-McMoRan, Inc.............. 101,500 3,260,688
Holliday Chemical Holdings PLC .... 214,000 450,922
Monsanto Co........................ 55,000 2,138,125
Olin Corp. ........................ 9,900 372,488
Toagosei Co. Ltd. ................. 44,000 155,772
UBE Industries Ltd. ............... 70,000 198,256
-------------
10,472,688
-------------
CHEMICALS--SPECIALTY (0.1%)
Crompton & Knowles Corp............ 49,700 956,725
Cytec Industries, Inc.*............ 16,700 678,438
NGK Insulators..................... 36,000 341,939
-------------
1,977,102
-------------
METALS & MINING (0.6%)
Century Aluminum Co................ 40,700 702,075
Gibraltar Steel Corp.*............. 31,700 832,125
Kaiser Aluminum Corp.* ............ 40,500 470,813
Mitsubishi Materials Corp.......... 57,000 230,343
Nippon Light Metal Co.............. 93,000 382,247
Nord Resources Corp.*.............. 27,939 122,233
Pechiney SA (A Shares)............. 12,472 522,581
Reynolds Metals Co................. 81,200 4,577,650
Steel Dynamics, Inc.*.............. 39,200 749,700
Western Mining Corp. Ltd........... 107,481 677,470
-------------
9,267,237
-------------
PAPER (0.1%)
Fletcher Forestry Shares........... 122,000 204,408
UPM-Kymmene Oy..................... 31,120 653,246
-------------
857,654
-------------
STEEL (0.3%)
Nippon Steel Corp.................. 206,000 608,341
Nisshin Steel Co. Ltd. ............ 410,000 1,101,028
NKK Corp.*......................... 265,000 597,228
Pohang Iron & Steel Co. Ltd.
(ADR)............................. 13,000 263,250
Tokyo Steel Manufacturing Co. Ltd. 99,000 1,410,500
Usinor Sacilor..................... 47,000 683,916
-------------
4,664,263
-------------
TOTAL BASIC MATERIALS (1.7%) ..... 27,238,944
-------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.9%)
Culligan Water Technologies,
Inc.*............................. 17,400 704,700
Philip Environmental, Inc.*........ 46,300 671,350
Republic Industries, Inc.*......... 39,100 1,219,431
Superior Services, Inc.*........... 7,800 158,925
United States Filter Corp.*........ 23,000 730,250
United Waste Systems, Inc.*........ 21,600 742,500
USA Waste Services, Inc.*.......... 180,200 5,743,875
WMX Technologies, Inc. ............ 143,000 4,665,375
-------------
14,636,406
-------------
PRINTING, PUBLISHING &
BROADCASTING (1.6%)
British Sky Broadcasting Group
PLC............................... 108,100 $ 966,671
Cablevision Systems Corp.
(Class A)*........................ 127,500 3,904,688
Dainippon Printing Co. Ltd......... 51,000 893,964
Evergreen Media Corp.
(Class A)*........................ 46,200 1,155,000
EZ Communications, Inc.*........... 12,600 461,475
Liberty Media Group
(Class A)*........................ 20,900 596,956
New York Times Co.................. 111,300 4,229,400
Pearson PLC........................ 66,200 849,987
Reed International................. 78,600 1,483,166
Reuters Holdings................... 124,400 1,601,519
Schibsted ASA...................... 15,800 291,570
Sinclair Broadcast Group, Inc.* ... 17,200 447,200
Singapore Press Holdings........... 49,000 966,483
Tele-Communications International,
Inc.*............................. 110,000 1,457,500
Television Broadcasts.............. 145,000 579,288
Time Warner, Inc................... 65,000 2,437,500
Universal Outdoor Holdings,
Inc.*............................. 15,900 373,650
Viacom, Inc. (Class B)*............ 110,311 3,847,096
-------------
26,543,113
-------------
PROFESSIONAL SERVICES (0.6%)
Adecco SA.......................... 1,670 419,216
Associated First Capital Corp. ... 39,500 1,742,938
Ceridian Corp.*.................... 73,800 2,988,900
Equity Corporation
International *................... 18,750 375,000
Ha-Lo Industries, Inc.*............ 48,062 1,321,705
Interim Services, Inc.*............ 11,700 415,350
ISS International Service
System A/S (Class B)*............. 23,850 627,945
Telespectrum Worldwide, Inc.* ..... 49,700 788,988
-------------
8,680,042
-------------
TRUCKING, SHIPPING (0.2%)
Autopistas Concesionaria Espanola . 37,850 522,256
Bergesen Dy AS (A Shares).......... 47,300 1,158,868
Kamigumi Co. Ltd................... 56,000 367,498
Mayne Nickless Ltd................. 55,005 375,998
Nippon Express Co. Ltd............. 81,000 555,341
Toyo Kanetsu....................... 61,000 211,743
Unitor ASA *....................... 8,560 110,239
-------------
3,301,943
-------------
TOTAL BUSINESS SERVICES (3.3%) 53,161,504
-------------
CAPITAL GOODS
AEROSPACE (0.6%)
Boeing Co.......................... 27,100 2,882,763
British Aerospace.................. 55,400 1,214,793
Coltec Industries, Inc.*........... 115,000 2,170,625
General Electric Co. PLC........... 163,900 1,072,568
Swire Pacific Ltd. (Class A) ...... 51,000 486,295
United Technologies Corp........... 39,400 2,600,400
-------------
10,427,444
-------------
88
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
BUILDING & CONSTRUCTION (0.4%)
American Standard Companies,
Inc.*............................. 24,700 $ 944,775
Bouygues........................... 10,708 1,110,322
Daito Trust Construction Co. ...... 70,570 786,075
GTM Entrepose...................... 9,953 460,387
Maeda Road Construction Co......... 19,000 219,843
Matsushita Electric Works Ltd. .... 65,000 559,580
National House Industrial Co. .... 53,000 704,775
Shimizu Corp....................... 64,000 478,024
Wimpey (George) PLC ............... 416,000 901,502
-------------
6,165,283
-------------
BUILDING MATERIALS & FOREST
PRODUCTS (0.4%)
BPB PLC............................ 72,700 477,620
Buckeye Cellulose Corp.*........... 15,400 410,025
Hepworth PLC....................... 76,500 332,217
Hughes Supply, Inc................. 16,200 698,625
Louisiana Pacific Corp............. 48,200 1,018,225
Martin Marietta Materials, Inc. ... 110,000 2,557,500
Rugby Group PLC.................... 347,000 564,723
Stora Kopparbergs (Series B) ...... 70,600 962,841
-------------
7,021,776
-------------
ELECTRICAL EQUIPMENT (0.7%)
Alcatel Alsthom.................... 2,640 212,075
General Electric Co................ 110,100 10,886,138
Sumitomo Electric Industries ...... 56,000 783,352
-------------
11,881,565
-------------
MACHINERY (0.5%)
Amano Corp......................... 73,000 781,625
Daifuku Co......................... 57,000 718,591
Furukawa Co. Ltd. ................. 105,000 353,596
Ishikawajima Harima Heavy
Industries Co. Ltd. .............. 83,000 369,096
KSB AG-Vorzug...................... 5,600 873,408
Legris Industries.................. 17,300 728,544
Mitsubishi Heavy Industries Ltd. .. 100,000 794,405
Schindler Holding AG*.............. 465 505,473
Siebe PLC.......................... 63,500 1,177,020
TI Group PLC....................... 138,200 1,377,887
-------------
7,679,645
-------------
TOTAL CAPITAL GOODS (2.6%)........ 43,175,713
-------------
CONSUMER CYCLICALS
AIRLINES (0.3%)
Lufthansa AG....................... 62,850 848,728
Mesa Airlines, Inc.*............... 47,200 318,600
Northwest Airlines Corp.
(Class A)*........................ 94,800 3,709,050
Qantas Airways Ltd................. 62,000 103,489
Singapore Airlines Ltd. ........... 11,000 99,836
Swissair *......................... 560 453,104
-------------
5,532,807
-------------
APPAREL, TEXTILE (1.0%)
Designer Holdings Ltd.*............ 33,600 541,800
Kuraray Co. Ltd.................... 96,000 886,970
Mohawk Industries, Inc.*........... 32,500 715,000
Nine West Group, Inc.*............. 27,200 1,261,400
Polymer Group, Inc.*............... 32,100 445,388
Reebok International Ltd. ......... 244,500 10,269,000
Stage Stores, Inc.*................ 28,300 516,475
Tommy Hilfiger Corp.*.............. 16,900 $ 811,200
Warnaco Group, Inc. (Class A) ..... 22,300 660,638
-------------
16,107,871
-------------
AUTO RELATED (0.2%)
Asahi Glass Co. Ltd................ 140,000 1,317,676
Magneti Marelli Spa *.............. 256,100 318,253
Miller Industries, Inc.*........... 22,950 459,000
Sumitomo Rubber Industries, Inc. .. 49,000 365,141
Team Rental Group, Inc.*........... 50,900 820,763
-------------
3,280,833
-------------
AUTOS & TRUCKS (0.3%)
Bajaj Auto Ltd. (GDR).............. 30,400 801,800
Honda Motor Corp................... 27,000 771,695
Toyota Motor Corp.................. 112,000 3,220,447
Volkswagen AG*..................... 1,310 542,712
-------------
5,336,654
-------------
FOOD SERVICES, LODGING (1.0%)
Brinker International, Inc.* ...... 234,700 3,755,200
Compass Group PLC*................. 84,700 895,990
Doubletree Corp.*.................. 25,341 1,140,345
Host Marriott Corp.*............... 138,200 2,211,200
Innkeepers USA Trust............... 43,300 600,788
Interstate Hotels Co.*............. 29,100 822,075
John Q Hammons Hotels, Inc. (Class
A)*............................... 200,000 1,700,000
La Quinta Motor Inns, Inc.......... 225,750 4,317,469
Suburban Lodges of America, Inc.* . 31,700 507,200
-------------
15,950,267
-------------
HOUSEHOLD FURNITURE,
APPLIANCES (1.0%)
Electrolux B....................... 8,210 476,766
First Brands Corp.................. 95,200 2,701,300
Industrie Natuzzi (ADR)............ 19,000 437,000
Matsushita Electric Industrial Co. 109,000 1,778,862
Sunbeam Corp. ..................... 394,500 10,158,375
-------------
15,552,303
-------------
LEISURE RELATED (1.1%)
Carnival Corp...................... 12,400 409,200
Cyrk, Inc.*........................ 220,600 2,867,800
Disney (Walt) Co. ................. 118,200 8,229,675
Harman International Industries,
Inc............................... 18,100 1,006,813
Ladbroke Group PLC................. 296,000 1,171,349
Learning Company, Inc.*............ 62,700 901,313
Rank Group PLC..................... 198,700 1,482,411
Resorts World BHD.................. 187,000 851,515
Salomon SA ........................ 7,450 638,961
Shimano, Inc. ..................... 34,000 578,361
-------------
18,137,398
-------------
PHOTO & OPTICAL (0.0%)
Fuji Photo Film Co. ............... 14,000 461,791
-------------
RETAIL--GENERAL (2.1%)
AutoZone, Inc.*.................... 380,000 10,450,000
British Airport Author PLC......... 157,500 1,312,641
CompUSA, Inc.*..................... 333,600 6,880,500
Consolidated Stores Corp.*......... 18,750 602,344
Dayton Hudson Corp................. 128,500 5,043,625
89
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Fingerhut Companies, Inc........... 260,500 $ 3,191,125
Kingfisher PLC..................... 46,500 503,048
Kokuyo Co. ........................ 29,000 716,173
Petco Animal Supplies, Inc.* ...... 31,400 651,550
Sainsbury (J) PLC.................. 202,600 1,346,647
Sears PLC ......................... 584,900 951,893
Vendex International N.V. ......... 25,300 1,081,579
Woolworths Ltd..................... 509,991 1,228,260
-------------
33,959,385
-------------
TOTAL CONSUMER CYCLICALS (7.0%) 114,319,309
-------------
CONSUMER NONCYCLICALS
BEVERAGES (0.6%)
Bass Breweries..................... 71,000 998,583
Cadbury Schweppes PLC.............. 132,700 1,119,592
Coca-Cola Amatil Ltd............... 64,000 684,207
Coca-Cola Co....................... 97,000 5,104,625
Grand Metropolitan................. 150,000 1,179,469
Kirin Brewery Co................... 42,000 413,436
Lion Nathan Ltd. .................. 157,000 376,260
-------------
9,876,172
-------------
CONTAINERS (0.5%)
Crown Cork & Seal Co., Inc......... 105,000 5,709,375
Hub Group, Inc. (Class A)*......... 24,400 652,700
Schmalbach Lubeca AG *............. 4,760 1,169,275
-------------
7,531,350
-------------
DRUGS (3.3%)
Amgen, Inc.*....................... 90,700 4,931,813
Apothekers Cooperatie Opg-CV ...... 9,445 271,551
Astra AB (A Shares)................ 27,030 1,335,805
Biogen, Inc.*...................... 161,655 6,264,131
Centocor, Inc.*.................... 198,000 7,078,500
Eisai Co. Ltd...................... 37,000 728,435
Geltex Pharmaceuticals, Inc.* ..... 33,100 802,675
Glaxo Wellcome PLC ................ 79,700 1,294,343
Medicis Pharmaceutical Corp.
(Class A)*........................ 11,300 497,200
MedImmune, Inc.*................... 28,500 484,500
Merck & Co., Inc................... 116,000 9,193,000
Novartis AG*....................... 3,105 3,556,194
Orion-Yhtymae Oy (B Shares)........ 26,700 1,028,003
Pfizer, Inc. ...................... 107,600 8,917,350
Sankyo Co.......................... 8,000 226,578
Santen Pharmaceutical Co........... 11,000 227,960
Smithkline Beecham PLC............. 80,100 1,110,790
Taisho Pharmaceutical Co........... 37,000 872,204
Takeda Chemical Industries......... 30,000 629,479
United Natural Foods, Inc.*........ 32,600 554,200
Warner-Lambert Co.................. 41,200 3,090,000
Yamanouchi Pharmaceutical.......... 58,000 1,191,952
-------------
54,286,663
-------------
FOODS (1.0%)
Campbell Soup Co................... 69,500 5,577,375
CSM N.V.*.......................... 4,100 227,692
House Foods Industry............... 22,000 355,237
Nabisco Holdings Corp.
(Class A)......................... 141,900 5,516,363
Nestle AG.......................... 1,650 1,771,423
Orkla A/S 'A'...................... 8,300 580,078
Suedzucker AG...................... 2,115 1,032,210
Viscofan Envoltura................. 16,700 244,588
Yakult Honsha Co. ................. 46,000 476,643
Yamakazi Baking Co. ............... 32,000 $ 511,182
-------------
16,292,791
-------------
HOSPITAL SUPPLIES & SERVICES (1.5%)
Columbia/HCA Healthcare Corp. ..... 225,000 9,168,750
Compdent Corp.*.................... 15,700 553,425
Coventry Corp.*.................... 46,600 431,778
Enterprises Systems, Inc.*......... 33,000 775,500
Medtronic, Inc..................... 81,700 5,555,600
National Surgery Centers, Inc.* ... 18,000 684,000
Oxford Health Plans, Inc.*......... 31,500 1,844,719
Pacificare Health Systems, Inc.
(Class B)*........................ 24,000 2,046,000
Rotech Medical Corp.*.............. 29,200 613,200
Steris Corp.*...................... 84,762 3,687,147
-------------
25,360,119
-------------
RETAIL--FOOD (0.3%)
Delhaize Freres.................... 8,300 493,524
Ito Yokado Co. Ltd. ............... 13,000 565,754
Kesko*............................. 14,530 205,126
Seven-Eleven Japan Ltd............. 48,000 2,810,120
Tesco PLC.......................... 38,000 230,772
-------------
4,305,296
-------------
SOAPS & TOILETRIES (0.9%)
Colgate Palmolive Co............... 71,210 6,569,123
Gillette Corp...................... 80,810 6,282,978
KAO Corp. ......................... 100,000 1,165,702
Shiseido Co........................ 60,000 694,241
-------------
14,712,044
-------------
TOBACCO (1.0%)
BAT Industries..................... 94,300 782,687
Hanjaya Mandala Sampoerna.......... 221,000 1,178,916
Japan Tobacco, Inc................. 95 643,943
Philip Morris Cos., Inc. .......... 118,100 13,301,013
Tabacalera SA...................... 16,960 730,806
-------------
16,637,365
-------------
TOTAL CONSUMER NONCYCLICALS (9.1%) 149,001,800
-------------
CREDIT SENSITIVE
BANKS (1.5%)
AMMB Holdings BHD.................. 70,000 587,606
Banco Santander SA................. 8,800 563,700
Bangkok Bank Public Co. ........... 18,000 174,062
Bank of Tokyo-Mitsubishi Bank ..... 72,000 1,336,672
Barclays Bank ..................... 125,400 2,149,302
Chase Manhattan Corp............... 3,000 267,750
Chiba Bank......................... 53,000 361,540
Den Danske Bank.................... 17,570 1,417,642
First Union Corp................... 140,600 10,404,400
Kredietbank........................ 1,940 636,435
Long-Term Credit Bank of Japan .... 1,000 5,414
Malayan Banking Berhad............. 41,000 454,563
Mitsui Trust & Banking Co.......... 198,000 1,547,276
National Westminster Bank*......... 89,500 1,051,025
Overseas Chinese Bank.............. 68,100 846,809
Overseas Union Bank Ltd............ 91,000 702,351
Philippine Commercial
International Bank................ 5,000 65,589
Sparbanken Sverige AB
(A Shares)........................ 19,600 336,286
90
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Sparekassen Bikuben A/S *.......... 7,770 $ 364,277
State Bank of India (GDR)*......... 32,000 464,000
Thai Farmers Bank Public Co. ...... 116,000 723,700
Thai Farmers Bank Public
Co.--Warrants*.................... 2,875 785
Tokai Bank......................... 85,000 888,093
-------------
25,349,277
-------------
FINANCIAL SERVICES (2.7%)
Aames Financial Corp............... 16,800 602,700
American Express Co................ 152,000 8,588,000
Beneficial Corp. .................. 35,000 2,218,125
Daiwa Securities Co. Ltd........... 32,000 284,604
Dean Witter Discover & Co.......... 142,000 9,407,500
Hambrecht & Quist Group*........... 28,000 605,500
Incentive AB (B Shares)*........... 3,820 277,291
Industrial Credit & Investment
Corp.(GDR)*....................... 32,000 312,000
Industrial Credit & Investment
Corp. of India Ltd.(GDR)*......... 8,000 76,000
ING Groep N.V...................... 55,800 2,007,788
Japan Securities Finance Co. ...... 78,000 909,248
MBNA Corp.......................... 223,700 9,283,550
Merrill Lynch & Co., Inc........... 77,200 6,291,800
Nikko Securities Co................ 67,000 499,853
Nomura Securities Co............... 71,000 1,066,747
Oxford Resources Corp.
(Class A)*........................ 29,900 923,163
RAC Financial Group, Inc.*......... 20,900 441,513
Union Acceptance Corp.
(Class A)*........................ 41,900 743,725
-------------
44,539,107
-------------
INSURANCE (2.6%)
AMEV N.V........................... 56,100 1,963,412
Assurances Generales de France .... 40,100 1,294,546
Baloise Holdings................... 540 1,085,245
Istituto Naz Delle Assicurazioni .. 745,000 970,497
ITT Hartford Group, Inc............ 3,600 243,000
Life Re Corp....................... 140,500 5,426,813
MGIC Investment Corp. ............. 51,000 3,876,000
Mitsui Marine & Fire Insurance
Co................................ 105,000 564,848
NAC Re Corp........................ 88,800 3,008,100
PennCorp Financial Group, Inc. .... 133,800 4,816,800
PMI Group, Inc..................... 12,400 686,650
Sumitomo Marine & Fire Insurance
Co. .............................. 82,000 509,801
TIG Holdings, Inc. ................ 120,000 4,065,000
Travelers Group, Inc............... 278,166 12,621,782
United Assurance Group PLC......... 89,200 734,245
Zurich Versicherungs Reg. ......... 1,700 472,469
-------------
42,339,208
-------------
REAL ESTATE (0.3%)
Hysan Development Co. Ltd.......... 67,000 266,805
Hysan Development Co.
Ltd.--Warrants *.................. 3,350 3,032
JP Realty, Inc..................... 20,000 517,500
Macerich Co. ...................... 19,600 512,050
New World Development Co. ......... 43,000 290,484
Sefimeg ........................... 5,800 420,314
Simco Ord SA....................... 5,275 460,552
Societe des Immeubles
de France SA...................... 6,240 $ 368,014
Sumitomo Realty & Development Co. . 103,000 649,253
Unibail SA......................... 7,880 783,672
Union Immobiliere de France........ 4,600 375,465
Wharf Holdings..................... 74,000 369,306
-------------
5,016,447
-------------
UTILITY--ELECTRIC (0.6%)
Cinergy Corp....................... 53,900 1,798,913
FPL Group, Inc..................... 65,000 2,990,000
Korea Electric Power (ADR)......... 18,000 369,000
Malakoff BHD *..................... 81,000 397,703
Manila Electric Co................. 49,400 403,840
National Grid Group PLC............ 392,000 1,312,851
Tokyo Electric Power Co., Inc. .... 35,000 767,637
Veba AG............................ 33,800 1,943,917
-------------
9,983,861
-------------
UTILITY--GAS (0.2%)
Anglian Water PLC.................. 106,100 1,072,383
Hong Kong & China Gas Co........... 130,800 252,823
Hong Kong & China Gas
Co.--Warrants *................... 10,900 6,060
Osaka Gas Co....................... 178,000 487,229
Tokyo Gas Co....................... 372,000 1,008,618
-------------
2,827,113
-------------
UTILITY--TELEPHONE (0.5%)
British Telecommunications......... 155,300 1,049,545
Frontier Corp...................... 50,000 1,131,250
LCI International, Inc.*........... 38,000 817,000
Telecom Corp. of New Zealand ...... 128,000 653,335
Telecom Italia Spa................. 530,800 1,378,727
Telephone & Data Systems, Inc. .... 34,700 1,257,875
WorldCom, Inc.*.................... 43,900 1,144,144
-------------
7,431,876
-------------
TOTAL CREDIT SENSITIVE (8.4%) .... 137,486,889
-------------
ENERGY
COAL & GAS PIPELINES (0.2%)
NABORS INDUSTRIES, INC.* 200,000 3,850,000
-------------
OIL--DOMESTIC (1.3%)
Apache Corp........................ 131,000 4,634,125
Costilla Energy, Inc.*............. 63,400 863,825
KCS Energy, Inc. .................. 18,900 675,675
Louis Dreyfus Natural Gas Corp.* .. 245,400 4,202,475
Louisiana Land & Exploration Corp. 76,700 4,113,038
Tom Brown, Inc.*................... 121,000 2,525,875
Ultramar Diamond Shamrock Corp. .. 16,258 514,159
Union Pacific Resources Group,
Inc............................... 123,176 3,602,898
-------------
21,132,070
-------------
OIL--INTERNATIONAL (1.2%)
British Petroleum Co. PLC.......... 157,700 1,892,442
Elf Aquitaine...................... 18,800 1,711,331
ENI Spa............................ 225,800 1,158,867
Exxon Corp......................... 98,200 9,623,600
91
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Mitsubishi Oil Co.................. 86,000 $ 514,619
Repsol SA.......................... 20,950 804,226
Shell Transport & Trading Co.* .... 49,000 849,072
Tatneft (ADR)*..................... 4,700 225,600
Total Campagnie Francaise.......... 26,234 2,133,709
-------------
18,913,466
-------------
OIL--SUPPLIES & CONSTRUCTION (2.1%)
Baker Hughes, Inc.................. 212,000 7,314,000
BJ Services Co.*................... 152,000 7,752,000
Halliburton Co..................... 35,000 2,108,750
Noble Drilling Corp.*.............. 133,000 2,643,375
Parker Drilling Co.*............... 132,100 1,271,463
Rowan Cos., Inc.*.................. 49,700 1,124,463
Saipem Spa*........................ 106,400 489,608
Schlumberger, Ltd. ................ 46,500 4,644,188
Transocean Offshore, Inc. ......... 110,500 6,920,063
-------------
34,267,910
-------------
RAILROADS (1.0%)
Burlington Northern Santa Fe ...... 56,600 4,888,825
Canadian Pacific Ltd............... 182,000 4,823,000
East Japan Railway Co.............. 185 832,268
Genesee & Wyoming, Inc.
(Class A)*........................ 24,500 851,375
Guangshen Railway Co. Ltd. (ADR)* . 16,000 330,000
Union Pacific Corp................. 86,400 5,194,800
-------------
16,920,268
-------------
TOTAL ENERGY (5.8%)............... 95,083,714
-------------
TECHNOLOGY
ELECTRONICS (4.4%)
Advanced Semiconductor Engineering
(GDR)*............................ 32,060 304,570
Altera Corp.*...................... 114,600 8,329,988
BMC Industries, Inc................ 36,400 1,146,600
Cisco Systems, Inc.*............... 239,400 15,231,825
Exabyte Corp.*..................... 37,700 504,238
Hirose Electric Co. Ltd............ 25,000 1,448,493
HMT Technology Corp.*.............. 28,000 420,438
Hoya Corp. ........................ 45,000 1,767,982
IDT Corp.*......................... 35,700 392,700
Insight Enterprises, Inc.*......... 14,900 417,200
Intel Corp......................... 73,800 9,663,187
Intergraph Corp.*.................. 90,000 922,500
Kandenko Co. Ltd................... 51,000 484,414
Kent Electronics Corp.*............ 24,700 636,025
Kyocera Corp. ..................... 11,000 685,778
National Semiconductor Corp.* ..... 30,000 731,250
Network General Corp.*............. 21,100 638,275
Rohm Co. Ltd....................... 53,000 3,478,111
Seagate Technology, Inc.*.......... 68,600 2,709,700
SGS-Thomson Microelectronics
N.V.*............................. 6,750 477,450
Systemsoft Corp.*.................. 31,800 473,025
TDK Corp........................... 38,000 2,477,334
Teradyne, Inc.*.................... 30,000 731,250
Texas Instruments, Inc. ........... 21,000 1,338,750
Uniphase Corp.*.................... 9,900 519,750
Ushio, Inc.*....................... 64,000 696,313
Westell Technologies, Inc.*........ 18,800 430,050
Yamatake-Honeywell Co.............. 37,000 597,444
3Com Corp.*........................ 181,300 13,302,880
3D Labs, Inc. Ltd.*................ 15,100 $ 347,300
-------------
71,304,820
-------------
OFFICE EQUIPMENT (0.7%)
Applix, Inc.*...................... 24,500 535,938
Canon, Inc......................... 75,000 1,657,888
Compaq Computer Corp.*............. 75,600 5,613,300
Read-Rite Corp.*................... 33,100 835,775
Sterling Software, Inc.*........... 47,100 1,489,538
Storage Technology Corp.*.......... 19,100 909,638
-------------
11,042,077
-------------
OFFICE EQUIPMENT SERVICES (2.3%)
Adobe Systems, Inc. ............... 39,300 1,468,838
Comverse Technology, Inc.*......... 44,900 1,697,781
Electronic Data Systems Corp. ..... 79,000 3,416,750
First Data Corp.................... 125,000 4,562,500
Informix Corp.*.................... 430,000 8,761,250
Microsoft Corp.*................... 61,600 5,089,700
Oracle Corp.*...................... 259,450 10,832,038
Premisys Communications, Inc.* .... 11,300 381,375
Sterling Commerce, Inc.*........... 54,685 1,927,646
Structural Dynamics Research Corp.
(Class A)*........................ 23,100 462,000
-------------
38,599,878
-------------
TELECOMMUNICATIONS (1.5%)
Act Networks, Inc.*................ 14,800 540,200
Asia Satellite Telecommunications
Holdings Ltd.*.................... 18,000 41,774
Cable Design Technologies *........ 17,400 541,575
Comnet Cellular, Inc.*............. 98,800 2,754,050
DDI Corp. ......................... 618 4,087,620
Deutsche Telekom AG*............... 19,250 401,563
DSC Communications Corp.*.......... 44,000 786,500
ICG Communications, Inc.*.......... 28,800 507,600
Korea Mobile Telecommunications
Corp. (ADR)....................... 74,160 954,810
MFS Communications Co., Inc.* ..... 45,013 2,453,209
Millicom International
Cellular SA *..................... 11,500 369,438
Netscape Communications Corp.* .... 79,200 4,504,500
Nokia Corp. (ADR).................. 35,000 2,016,875
PT Indosat 375,000 1,111,346
PT Telekomunikasi Indonesia........ 277,000 477,890
Scientific Atlanta, Inc............ 107,300 1,609,500
Telecel-Comunicacoes
Pessoai SA *...................... 2,490 159,035
Vodafone Group..................... 202,500 855,115
Winstar Communications, Inc.* ..... 28,300 594,300
Xircom *........................... 26,700 580,725
-------------
25,347,625
-------------
TOTAL TECHNOLOGY (8.9%)........... 146,294,400
-------------
DIVERSIFIED
MISCELLANEOUS (1.1%)
Allied Signal, Inc................. 147,900 9,909,300
BTR PLC............................ 331,800 1,614,275
Cie Generale des Eaux.............. 7,259 899,593
Citic Pacific Ltd.................. 111,000 644,373
First Pacific Co................... 355,685 462,167
Hanson PLC......................... 463,000 646,430
Preussag AG........................ 1,860 420,639
92
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
Tomkins PLC........................ 210,000 $ 965,931
U.S. Industries, Inc.*............. 88,000 3,025,000
-------------
TOTAL DIVERSIFIED (1.1%).......... 18,587,708
-------------
TOTAL COMMON STOCKS AND WARRANTS
(47.9%)
(Cost $682,993,577)............... 784,349,981
-------------
PREFERRED STOCKS:
BASIC MATERIALS (0.1%)
CHEMICALS
Henkel KGAA*....................... 27,980 1,398,272
-------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.0%)
Designer Finance Trust
6.0% Conv. ....................... 12,300 568,875
-------------
RETAIL--GENERAL (0.1%)
Hornbach Holding AG................ 12,420 887,835
-------------
TOTAL CONSUMER CYCLICALS (0.1%) 1,456,710
-------------
CONSUMER NONCYCLICALS (0.0%)
CONTAINERS
Crown Cork & Seal Co., Inc.
4.5% Conv ........................ 10,500 546,000
-------------
CREDIT SENSITIVE
BANKS (0.1%)
First Chicago NBD Corp.
5.75% Conv. Series B.............. 23,000 2,075,750
-------------
FINANCIAL SERVICES (0.0%)
Money Store
6.5% Conv......................... 22,500 615,938
-------------
INSURANCE (0.1%)
PennCorp Financial Group, Inc.
7.0% Conv. +...................... 19,950 1,187,025
-------------
TOTAL CREDIT SENSITIVE (0.2%) .... 3,878,713
-------------
TECHNOLOGY
TELECOMMUNICATIONS (0.2%)
MFS Communications Co., Inc.
8.0% Conv......................... 34,900 3,184,625
Nokia Oy Cum....................... 14,100 818,304
-------------
TOTAL TECHNOLOGY (0.2%)........... 4,002,929
-------------
TOTAL PREFERRED STOCKS (0.6%)
(Cost $8,111,854)................. 11,282,624
-------------
PRINCIPAL
AMOUNT
------
LONG-TERM DEBT SECURITIES:
BUSINESS SERVICES (0.1%)
ENVIRONMENTAL CONTROL
United Waste Systems, Inc.
4.5% Conv., 06/01/01+........ $ 1,135,000 1,373,350
------------
PRINTING, PUBLISHING &
BROADCASTING (1.3%)
Time Warner Entertainment Co.
8.375%, 03/15/23............. 20,950,000 21,240,577
------------
PROFESSIONAL SERVICES (0.2%)
Career Horizons, Inc.
7.0% Conv., 11/01/02......... 415,000 813,919
Danka Business Systems PLC
6.75% Conv., 04/01/02........ 905,000 1,221,750
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
First Financial Management Corp.
5.0% Conv., 12/15/99............ $ 1,320,000 $ 2,219,250
--------------
4,254,919
--------------
TOTAL BUSINESS SERVICES (1.6%) 26,868,846
--------------
CAPITAL GOODS (0.1%)
MACHINERY
DII Group, Inc.
6.0% Conv., 10/15/02+........... 1,100,000 1,045,000
--------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.1%)
Nine West Group, Inc.
5.5% Conv., 07/15/03+........... 1,675,000 1,666,625
--------------
FOOD SERVICES, LODGING (0.1%)
HFS, Inc.
4.5% Conv., 10/01/99............ 612,000 2,025,720
--------------
RETAIL--GENERAL (0.2%)
Saks Holdings, Inc.
5.5% Conv., 09/15/06............ 875,000 805,000
U.S. Office Products Co.
5.5% Conv., 02/01/01............ 1,035,000 1,345,500
--------------
2,150,500
--------------
TOTAL CONSUMER CYCLICALS (0.4%) 5,842,845
--------------
CONSUMER NONCYCLICALS
DRUGS (0.1%)
MedImmune, Inc.
7.0% Conv. Sub., 07/01/03+ ..... 1,025,000 1,104,438
Quintiles Transnational Corp.
4.25% Conv., 05/31/00+.......... 790,000 829,500
--------------
1,933,938
--------------
HOSPITAL SUPPLIES & SERVICES (0.3%)
American Medical Response, Inc.
5.25% Conv., 02/01/01+.......... 940,000 1,012,850
Healthsouth Corp.
5.0% Conv., 04/01/01............ 540,000 1,117,125
Phycor, Inc.
4.5% Conv., 02/01/03............ 800,000 779,000
Tenet Healthcare Corp.
6.0% Conv., 12/01/05............ 980,000 1,029,000
--------------
3,937,975
--------------
TOTAL CONSUMER NONCYCLICALS (0.4%) 5,871,913
--------------
CREDIT SENSITIVE
BANKS (1.3%)
Deutsche Bank
6.7%, 12/14/06.................. 21,450,000 21,050,172
Sumitomo Bank International
0.75% Conv., 05/31/01 ... Yen 101,000,000 922,265
--------------
21,972,437
--------------
FINANCIAL SERVICES (3.1%)
Aames Financial Corp.
5.5% Conv., 03/15/06+ .......... $ 720,000 972,900
Bankamerica Capital II
8.0%, 12/15/26.................. 20,000,000 20,381,000
Commercial Credit Co.
6.125%, 12/01/05................ 10,000,000 9,412,700
93
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
Leasing Solutions, Inc.
6.875% Conv., 10/01/03.......... $ 1,430,000 $ 1,430,000
RAC Financial Group, Inc.
7.25% Conv. Sub., 08/15/03+ .... 625,000 835,156
Santander Financial Issuances
7.0%, 04/01/06.................. 18,300,000 18,172,266
--------------
51,204,022
--------------
FOREIGN GOVERNMENT (1.3%)
Republic of Poland
4.0% PDI, 10/27/14 (a).......... 25,000,000 21,125,000
--------------
INSURANCE (2.5%)
John Hancock Mutual Life
Insurance Co.
7.375%, 02/15/24+............... 23,750,000 22,891,913
Penn Treaty American Corp.
6.25% Conv., 12/01/03+.......... 450,000 488,250
Travelers Capital III
7.625%, 12/01/36................ 18,000,000 17,515,260
--------------
40,895,423
--------------
MORTGAGE RELATED (9.3%)
Federal Home Loan
Mortgage Corp.
7.0%, 09/01/11.................. 28,523,343 28,514,444
Federal National Mortgage
Association:
6.5%, 05/01/11.................. 45,305,228 44,484,072
6.5%, 08/01/11.................. 18,430,548 18,096,494
7.0%, 05/01/26.................. 28,699,610 28,080,790
Government National Mortgage
Association
7.5%, 5/15/26................... 33,329,990 33,350,822
--------------
152,526,622
--------------
UTILITY--ELECTRIC (0.6%)
Empresa Electrica del Norte
7.75%, 03/15/06+................ 9,400,000 9,476,798
--------------
UTILITY--GAS (1.0%)
RAS Laffan Liquid Natural Gas
8.294%, 09/15/14+............... 16,730,000 17,001,277
--------------
U.S. GOVERNMENT (17.7%)
U.S. Treasury:
6.375% Note, 05/15/99........... 104,500,000 105,414,371
7.75% Note, 01/31/00............ 56,000,000 58,607,528
6.75% Note, 04/30/00............ 25,600,000 26,088,013
6.5% Note, 08/31/01............. 60,000,000 60,656,280
6.25% Note, 10/31/01............ 18,035,000 18,046,272
5.75% Note, 08/15/03............ 19,925,000 19,327,250
6.5% Note, 08/15/05............. 1,225,000 1,233,422
--------------
289,373,136
--------------
TOTAL CREDIT SENSITIVE (36.8%) . 603,574,715
--------------
ENERGY
COAL & GAS PIPELINES (0.0%)
Swift Energy Co.
6.25% Conv., 11/15/06........... $ 710,000 $ 779,225
--------------
OIL--SUPPLIES & CONSTRUCTION (0.1%)
Seacor Holdings
5.375% Conv. Sub. Notes,
11/15/06+....................... 675,000 783,000
--------------
TOTAL ENERGY (0.1%)............. 1,562,225
--------------
TECHNOLOGY
ELECTRONICS (1.1%)
Altera Corp.
5.75% Conv. Sub. Note,
06/15/02+....................... 1,630,000 2,522,425
Applied Magnetics Corp.:
7.0% Conv. Sub., 03/15/06 ...... 2,120,000 3,752,400
7.0% Conv. Sub. Euro, 03/15/06 . 140,000 247,800
C-Cube Microsystems, Inc.
5.875% Conv., 11/01/05.......... 930,000 1,204,350
Checkpoint Systems, Inc.
5.25% Conv., 11/01/05+.......... 455,000 664,869
LSI Logic Corp.
5.5% Conv., 03/15/01+........... 780,000 1,712,100
Plasma & Materials Technologies,
Inc.
7.125% Conv., 10/15/01+......... 1,100,000 1,078,000
Sanmina Corporation
5.5% Conv., 08/15/02+........... 1,410,000 2,948,663
SCI Systems, Inc.
5.0% Conv., 05/01/06............ 1,385,000 1,582,363
S3 Incorporated
5.75% Conv. Sub. Note,
10/01/03+....................... 605,000 662,475
3Com Corp.
10.25% Conv., 11/01/01+......... 1,035,000 2,284,763
--------------
18,660,208
--------------
TELECOMMUNICATIONS (0.3%)
BBN Corp.
6.0% Conv., 04/01/12............ 1,660,000 1,610,200
Comverse Technology, Inc.
5.75% Conv. Sub., 10/01/06+ .... 2,185,000 2,264,206
--------------
3,874,406
--------------
TOTAL TECHNOLOGY (1.4%)......... 22,534,614
--------------
DIVERSIFIED (0.1%)
MISCELLANEOUS
THERMO ELECTRON CORP.
5.0% CONV. EURO., 04/15/01 1,055,000 2,091,538
--------------
TOTAL LONG-TERM DEBT SECURITIES (40.9%)
(Amortized Cost $656,543,317) . 669,391,696
--------------
94
<PAGE>
THE HUDSON RIVER TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
SHORT-TERM DEBT SECURITIES:
BANKERS' ACCEPTANCES (0.6%)
Industrial Bank of Japan-L.A.
5.73%, due 01/16/97............. $10,000,000 $ 9,976,125
--------------
CERTIFICATES OF DEPOSIT (1.5%)
Canadian Imperial Bank of
Commerce
5.44%, due 03/31/97............. 25,000,000 25,009,103
--------------
COMMERCIAL PAPER
ASCC Commercial Paper:
5.34%, due 02/27/97............. 10,000,000 9,915,450
5.37%, due 03/27/97............. 19,300,000 19,059,849
Associates Corp. of North
America
5.75%, due 01/02/97............. 2,400,000 2,399,617
BHF Delaware, Inc.
5.64%, due 03/10/97............. 5,000,000 4,950,228
Dresdner U.S. Finance, Inc.
5.31%, due 04/10/97............. 5,000,000 4,927,263
International Securitization
5.45%, due 03/18/97............. 13,000,000 12,855,367
Koch Industries
6.9%, due 01/02/97.............. 500,000 499,904
Morgan (J.P.) & Co.
5.62%, due 03/05/97............. 5,000,000 4,953,538
Morgan Stanley Group, Inc.
6.79%, due 01/02/97............. 19,700,000 19,696,284
Sigma Finance Corp.
5.4%, due 03/17/97.............. $15,000,000 $ 14,835,312
Suntrust Banks, Inc.:
5.3%, due 03/10/97.............. 5,000,000 4,950,039
5.35%, due 03/31/97............. 10,000,000 9,869,219
--------------
TOTAL COMMERCIAL PAPER (6.7%) 108,912,070
--------------
TIME DEPOSITS
Canadian Imperial Bank of
Commerce
6.0%, due 01/02/97.............. 5,300,000 5,300,000
Harris Trust & Savings
6.5%, due 01/02/97.............. 4,800,000 4,800,000
Toronto Dominion Bank
6.25%, due 01/20/97............. 8,100,000 8,100,000
--------------
TOTAL TIME DEPOSITS (1.1%) ..... 18,200,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (9.9%)
(Amortized Cost $162,066,577) .. 162,097,298
--------------
TOTAL INVESTMENTS (99.3%)
(Cost/Amortized Cost $1,509,715,325) 1,627,121,599
OTHER ASSETS
LESS LIABILITIES (0.7%)......... 10,733,905
--------------
NET ASSETS (100.0%).............. $1,637,855,504
==============
- --------------------------------------------
DISTRIBUTION OF INVESTMENTS BY GLOBAL REGION
As a Percentage of Total Investments
Canada................... 0.3%
Japan.................... 4.0
New Zealand & Australia . 0.3
Scandinavia.............. 0.7
Southeast Asia........... 1.1
United Kingdom........... 2.5
United States**.......... 86.7
Other European Countries. 4.4
-------
100.0%
=======
- ------------
* Non-income producing.
** Includes Short-Term Debt Securities of 10.0%.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $74,805,583
or 4.6% of net assets.
(a) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at December 31, 1996.
Glossary:
ADR--American Depository Receipt
GDR--Global Depository Receipt
PDI--Past Due Interest Bond
See Notes to Financial Statements.
95
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS AND OTHER
INVESTMENTS:
BASIC MATERIALS
CHEMICALS (1.1%)
AGA AB (A Shares)................. 3,400 $ 51,355
Akzo Nobel N.V.................... 875 119,457
Asahi Chemical Industry Co. ..... 27,000 152,940
Bayer AG.......................... 15,850 643,250
BOC Group Co. PLC ................ 6,825 102,129
Dainippon Ink & Chemical, Inc. ... 51,000 188,922
Freeport-McMoRan, Inc............. 103,000 3,308,875
GP Batteries International Ltd. .. 143,000 474,760
GP Batteries International Ltd.+ . 37,000 122,840
GP Batteries International
Ltd.--Rights* ................... 5,750 2,875
Imperial Chemical Industries .... 18,212 239,764
Indo Gulf Fertilisers (GDR) ...... 50,000 35,000
Ishihara Sangyo Ltd.*............. 161,000 389,258
L'Air Liquide SA.................. 2,035 317,693
Linde AG.......................... 150 91,142
Millennium Chemicals, Inc.* ...... 1,904 33,796
Mitsubishi Chemical Corp.......... 52,000 168,379
Mitsui Toatsu Chemicals, Inc. .... 15,000 45,721
Monsanto Co....................... 125,000 4,859,375
Olin Corp. ....................... 26,000 978,250
Royal Plactics Group Ltd.*+ ...... 10,000 185,138
Sanyo Chemicals................... 20,000 153,700
Sekisui Chemical Co. Ltd. ........ 41,000 414,213
Shin-Etsu Chemical Ltd. .......... 10,000 182,195
Solvay Et Cie Societe Anonyme .... 120 73,529
Sumitomo Chemical Co. Ltd......... 31,000 122,865
Toray Industries, Inc............. 33,000 203,739
UBE Industries Ltd. .............. 14,000 39,651
-------------
13,700,811
-------------
CHEMICALS--SPECIALTY (0.5%)
Crompton & Knowles Corp........... 59,900 1,153,075
Cytec Industries, Inc.*........... 65,200 2,648,750
Kyowa Hakko Kogyo Co. ............ 8,000 61,066
NGK Insulators.................... 6,000 56,990
SGL Carbon AG+.................... 15,000 1,892,059
UCAR International, Inc.*......... 5,000 188,125
-------------
6,000,065
-------------
METALS & MINING (0.7%)
Alusuisse Lonza Holding AG........ 90 71,744
Broken Hill Proprietary Co. Ltd. 24,800 353,244
Century Aluminum Co............... 48,200 831,450
CRA Ltd........................... 5,800 91,050
Degussa AG........................ 250 113,725
Gibraltar Steel Corp.*............ 38,300 1,005,375
Great Central Mines Ltd.*......... 120,000 341,468
Gwalia Consolidated Ltd........... 95,800 224,633
Kaiser Aluminum Corp.*............ 48,800 567,300
Mitsubishi Materials Corp......... 24,000 96,986
Plutonic Resources Ltd............ 30,000 139,496
Reynolds Metals Co................ 67,000 3,777,125
RTZ Corp.......................... 19,347 310,387
Steel Dynamics, Inc.*............. 46,700 893,138
Sumitomo Metal Mining Co. ........ 10,000 67,438
Western Mining Corp. Ltd.......... 40,700 $ 256,539
-------------
9,141,098
-------------
PAPER (0.1%)
Amcor Ltd......................... 8,900 57,230
Asia Pacific Resources
International Holdings Ltd.
(Class A)*....................... 5,000 28,125
Enso Oy (Series R) ............... 30,000 241,453
Fletcher Forestry Shares.......... 4,256 7,131
Grupo Industrial Durango (ADR)* .. 12,000 127,500
Mayr-Melnhof Karton Aktien AG*+ .. 1,500 73,424
Nippon Paper Industries Co. ...... 37,000 172,524
Oji Paper Co. Ltd. ............... 27,000 170,892
Svenska Cellulosa (Series B) ..... 3,200 64,993
UPM-Kymmene Oy.................... 3,292 69,103
-------------
1,012,375
-------------
STEEL (0.2%)
British Steel..................... 69,074 189,921
Hitachi Metals Ltd................ 54,000 429,445
Kawasaki Steel.................... 61,000 175,399
Nippon Steel Corp................. 147,000 434,108
NKK Corp.*........................ 85,000 191,564
Sumitomo Metal Industries......... 320,000 787,497
Thyssen AG........................ 450 79,806
Usinor Sacilor.................... 3,500 50,930
-------------
2,338,670
-------------
TOTAL BASIC MATERIALS (2.6%) .... 32,193,019
-------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (1.7%)
B.U.S. Berzelius Umwelt-Service
AG............................... 16,550 204,348
Culligan WaterTechnologies,Inc.*. 21,000 850,500
Daiseki Co. Ltd................... 10,000 238,321
Matsuda Sangyo Co. Ltd............ 12,000 309,818
Philip Environmental, Inc.* ...... 50,800 736,600
Powerscreen International......... 75,000 725,926
Rentokil Group PLC................ 30,000 225,615
Republic Industries, Inc.*........ 51,100 1,593,681
Superior Services, Inc.*.......... 9,400 191,525
Tomra Systems ASA................. 110,000 1,718,953
United States Filter Corp.* ...... 27,800 882,650
United Waste Systems, Inc.* ...... 26,000 893,750
USA Waste Services, Inc.*......... 174,200 5,552,625
WMX Technologies, Inc. ........... 260,000 8,482,500
-------------
22,606,812
-------------
PRINTING, PUBLISHING &
BROADCASTING (2.0%)
British Sky Broadcasting Group
PLC.............................. 33,749 301,796
Cablevision Systems Corp.
(Class A)*....................... 98,500 3,016,563
Carlton Communications PLC........ 25,000 220,347
Dainippon Printing Co. Ltd. ...... 12,000 210,345
96
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Elsevier N.V...................... 60,000 $ 1,013,508
Evergreen Media Corp.
(Class A)* ...................... 55,800 1,395,000
EZ Communications, Inc.*.......... 15,300 560,363
Havas............................. 200 14,031
Lagardere S.C.A................... 2,100 57,635
Liberty Media Group (Class A)* ... 28,500 814,031
Mediaset Spa*..................... 200,000 922,952
Mirror Group Newspapers PLC ..... 70,000 258,421
New York Times Co................. 109,200 4,149,600
News Corp. Ltd.................... 34,500 182,084
Nippon Television Network Corp. . 3,930 1,187,721
Pegasus Media & Communications
(Class B)*....................... 50 15,000
Reed International................ 22,000 415,136
Reuters Holdings.................. 36,570 470,800
Sinclair Broadcast Group, Inc.* .. 20,800 540,800
Singapore Press Holdings.......... 3,000 59,172
Star Publications BHD............. 20,000 78,796
Takara Printing Co................ 14,000 113,634
TCI Group (Class A)*.............. 41,500 542,094
Time Warner, Inc.................. 120,050 4,501,875
Tokyo Broadcasting System......... 56,000 855,885
Toppan Printing Co. .............. 7,000 87,644
Universal Outdoor
Holdings, Inc.*.................. 19,100 448,850
Ver Ned Uitgeversbedr
Ver Bezit N.V.................... 25,000 522,084
Viacom, Inc. (Class B)*........... 97,540 3,401,708
-------------
26,357,875
-------------
PROFESSIONAL SERVICES (1.4%)
Adecco SA......................... 275 69,033
ADT Ltd.*......................... 1,664 38,064
Apcoa Parking AG.................. 3,000 321,679
Asatsu, Inc. ..................... 21,000 667,300
Associated First Capital Corp. .. 71,600 3,159,350
Ceridian Corp.*................... 141,400 5,726,700
Content Beheer N.V.*+............. 53,000 2,023,546
Cordiant PLC*..................... 200,000 352,899
Equity Corporation
International*................... 22,700 454,000
Ha-Lo Industries, Inc.*........... 57,937 1,593,268
Interim Services, Inc.*........... 13,800 489,900
Meitec Corp....................... 55,800 1,064,830
Nackebro Fastighets AB*........... 310 5,319
Secom Co. ........................ 2,000 121,060
SGS Holdings...................... 25 61,449
Telespectrum Worldwide, Inc.* .... 60,000 952,500
WPP Group PLC..................... 100,000 435,127
-------------
17,536,024
-------------
TRUCKING, SHIPPING (0.2%)
Brambles Industries Ltd. ......... 30,000 585,407
Comfort Group Ltd. ............... 160,000 141,785
Irish Continental Group........... 30,000 211,063
Kawasaki Kisen*................... 55,000 125,378
Mitsui O.S.K. Lines Ltd.*......... 19,000 45,445
Nippon Express Co. Ltd............ 25,000 171,401
Nippon Yusen K.K.................. 17,000 $ 76,919
Peninsular & Oriental Steam
Navigation Co.................... 10,466 105,783
Western Bulk Shipping+............ 31,500 150,889
Yamato Transport ................. 110,000 1,139,798
-------------
2,753,868
-------------
TOTAL BUSINESS SERVICES (5.3%) .. 69,254,579
-------------
CAPITAL GOODS
AEROSPACE (0.9%)
Boeing Co......................... 65,350 6,951,606
British Aerospace................. 5,576 122,269
Coltec Industries, Inc.*.......... 128,000 2,416,000
General Electric Co. PLC.......... 36,076 236,083
Rolls-Royce....................... 22,528 99,376
United Technologies Corp.......... 32,600 2,151,600
-------------
11,976,934
-------------
BUILDING & CONSTRUCTION (0.7%)
ABB AG ........................... 550 684,161
American Standard Companies,
Inc.*............................ 59,900 2,291,175
CSR Ltd........................... 16,900 59,105
Cubiertas Y Mzov SA............... 3,824 294,769
Daiwa House Industry Co........... 9,000 115,793
Hitachi Plant Engineering &
Construction Co.................. 40,000 236,940
Hochtief AG....................... 1,500 58,975
Japan Industrial Land
Development...................... 15,000 284,949
Kajima Corp. ..................... 33,000 235,938
Kaneshita Construction Co. ...... 28,000 265,953
Kumagai Gumi Co................... 13,000 32,217
MacMahon Holdings Ltd............. 700,000 623,162
Mancon BHD*....................... 47,999 146,344
Mitsui Home Co. Ltd............... 42,000 518,608
Nanno Construction Co. Ltd. ...... 26,000 154,909
Nawarat Patanakarn Public Co. ... 80,000 93,582
Nishimatsu Construction Co. ..... 5,000 43,606
Obayashi Corp..................... 12,000 81,029
Ohmoto Gumi Co. Ltd............... 15,000 215,007
Oriental Construction Co. ........ 17,000 218,720
Paul Y.-ITC Construction
Holdings......................... 400,000 95,675
Paul Y.-ITC Construction
Holdings--Warrants* ............. 80,000 1,432
Penta Ocean Construction.......... 10,000 44,556
PS Corp........................... 31,200 522,649
Sanyo Engineering & Construction,
Inc.............................. 23,000 204,559
Sekisui House Ltd................. 13,000 132,458
Shimizu Corp...................... 15,000 112,037
Sho Bond Construction............. 39,900 1,074,933
Suido Kiko Kaisha................. 3,000 21,242
Taisei Corp. ..................... 20,000 103,618
Toda Construction................. 32,000 243,157
United Engineers Malaysia BHD .... 11,000 99,307
Wesco, Inc........................ 9,050 113,311
YTL Corp. BHD..................... 11,000 59,236
-------------
9,483,112
-------------
97
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
BUILDING MATERIALS & FOREST
PRODUCTS (0.6%)
Blue Circle Industries............ 13,338 $ 81,115
Boral Ltd. ....................... 40,000 113,823
BPB PLC........................... 90,000 591,276
Buckeye Cellulose Corp.*.......... 18,600 495,225
Chichibu Onoda Cement Co.......... 11,000 46,827
Cie de St. Gobain................. 2,100 297,080
Dahl International AB*+........... 50,000 1,052,177
Fujikura Ltd. .................... 68,000 544,893
Furukawa Electric Co.............. 13,000 61,627
Heidelberg Zement AG.............. 1,000 80,712
Holderbank Financiere Glarus AG . 80 57,139
Hughes Supply, Inc................ 19,500 840,938
Lafarge Corp...................... 4,750 284,991
Martin Marietta Materials, Inc. .. 59,200 1,376,400
Nichiha Corp...................... 52,700 932,864
Portland Valderrivas SA*.......... 5,000 336,857
Redland PLC....................... 9,480 59,520
Rexan PLC......................... 13,121 81,032
RMC Group PLC..................... 4,518 77,204
Sumitomo Forestry Co. ............ 8,000 97,401
Wolseley PLC...................... 10,088 79,842
-------------
7,588,943
-------------
ELECTRICAL EQUIPMENT (0.9%)
Alcatel Alsthom................... 5,000 401,658
Daikin Industries Ltd............. 5,000 44,469
General Electric Co............... 93,900 9,284,363
Kinden Corp....................... 5,000 63,466
Omron Corp. ...................... 62,000 1,167,084
Schneider SA...................... 2,250 104,033
Siemens AG........................ 10,400 482,693
Sumitomo Electric Industries ..... 17,000 237,803
Yaskawa Electric Corp.*........... 72,000 249,927
-------------
12,035,496
-------------
MACHINERY (0.8%)
Amada Co. Ltd. ................... 5,000 38,857
Asahi DiamondIndustryCo.Ltd. .... 35,000 317,330
Construcciones Auxiliar Ferro .... 3,000 113,776
Ebara Corp........................ 5,000 65,193
Enshu*............................ 60,000 180,295
Fag Kugelfischer Georg Schaefer .. 3,200 43,774
Fanuc Co.......................... 5,900 189,008
IHC Caland N.V.................... 10,000 570,966
Ishikawajima Harima Heavy
Industries....................... 80,000 355,755
Kalmar Industries AB+............. 12,000 184,773
Kawasaki Heavy Industries......... 126,000 521,147
Keyence Corp. .................... 6,000 740,869
Komatsu Ltd....................... 29,000 237,890
Kubota Corp....................... 33,000 159,287
Makino Milling Machine Co. ...... 50,000 319,057
Mitsubishi Heavy Industries Ltd. . 180,000 1,429,928
Namura Shipbuilding Co............ 39,000 127,968
Nireco............................ 12,000 136,776
Nitta Corp........................ 39,000 488,300
Nitto Kohki Co. Ltd............... 20,200 723,858
Rofin-Sinar Technologies, Inc.* .. 20,000 $ 235,000
SMC Corp.......................... 17,400 1,170,417
Sodick Co.*....................... 126,000 1,044,469
Thai Engine Manufacturing Public
Co.*............................. 100,000 775,949
Toyoda Automatic Loom Works ...... 5,000 93,688
-------------
10,264,330
-------------
TOTAL CAPITAL GOODS (3.9%) ...... 51,348,815
-------------
CONSUMER CYCLICALS
AIRLINES (0.4%)
British Airways................... 45,000 466,777
Cathay Pacific Airways............ 41,000 64,671
Delta Air Lines, Inc.............. 1,100 77,963
Japan Air Lines Co.*.............. 24,000 127,450
KLM............................... 14,000 393,602
Lufthansa AG...................... 5,500 74,272
Mesa Airlines, Inc.*.............. 57,000 384,750
Northwest Airlines Corp.
(Class A)* ...................... 78,300 3,063,488
Qantas Airways Ltd................ 100,000 166,919
Singapore Airlines Ltd. .......... 73,000 662,546
-------------
5,482,438
-------------
APPAREL, TEXTILE (1.3%)
Adidas AG+........................ 5,500 475,370
Carli Gry International A/S* ..... 20,000 958,033
Designer Holdings Ltd.*........... 40,500 653,063
First Sign International
Holdings Ltd..................... 1,300,000 415,993
King Co.*......................... 67,000 301,416
Kuraray Co. Ltd................... 6,000 55,436
Mohawk Industries, Inc.*.......... 39,200 862,400
Nine West Group, Inc.*............ 32,800 1,521,100
Polymer Group, Inc.*.............. 38,600 535,575
Reebok International Ltd.......... 193,000 8,106,000
Renown, Inc.*..................... 120,000 320,180
Stage Stores, Inc.*............... 34,100 622,325
Teijin Ltd........................ 18,000 78,646
Tommy Hilfiger Corp.*............. 18,500 888,000
Warnaco Group, Inc. (Class A) .... 26,900 796,913
-------------
16,590,450
-------------
AUTO RELATED (0.4%)
Asahi Glass Co. Ltd............... 35,000 329,419
Autoliv AB........................ 6,000 263,081
Autoliv AB (ADS)*+................ 6,000 259,500
Bridgestone Corp.................. 14,000 265,953
Bridgestone Metalpha.............. 15,000 128,227
FCC Co. Ltd....................... 10,000 271,997
LucasVarity PLC................... 17,320 66,018
Mabuchi Motor Co.................. 14,200 714,843
Michelin (CGDE), (Class B)........ 2,400 129,563
Miller Industries, Inc.*.......... 27,750 555,000
Minebea Co........................ 75,000 626,889
NGK Spark Plug Co................. 14,000 153,527
Nippondenso Co. Ltd............... 21,000 505,915
Team Rental Group, Inc.*.......... 59,300 956,213
Toyoda Gosei*..................... 30,000 208,013
-------------
5,434,158
-------------
98
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
AUTOS & TRUCKS (0.3%)
Fiat Spa.......................... 67,500 $ 204,253
Daimler-Benz AG*.................. 18,250 1,251,218
Honda Motor Corp.................. 34,000 971,764
Isuzu Motors Ltd.................. 30,000 133,408
Perusahaan Otomobl Nasional BHD .. 9,000 57,018
Peugeot SA........................ 700 78,790
Toyota Motor Corp................. 15,000 431,310
-------------
3,127,761
-------------
FOOD SERVICES, LODGING (1.2%)
AAPC Limited...................... 400,000 241,634
Accor SA.......................... 550 69,644
Brinker International, Inc.* ..... 198,700 3,179,200
Doubletree Corp.*................. 30,627 1,378,215
Fujita Kanko, Inc................. 3,000 55,695
Host Marriott Corp.*.............. 200,300 3,204,800
Innkeepers USA Trust.............. 52,300 725,663
Interstate Hotels Co.*............ 35,100 991,575
Jurys Hotel Group PLC............. 100,000 466,203
La Quinta Motor Inns, Inc......... 191,600 3,664,350
QPQ Corp.*........................ 16,400 38,950
QPQ Corp.--Warrants*.............. 16,400 2,050
Sanyo Pax Co. Ltd................. 35,000 607,461
Suburban Lodges of America* ...... 38,300 612,800
Thistle Hotels PLC*............... 131,600 409,181
-------------
15,647,421
-------------
HOUSEHOLD FURNITURE,
APPLIANCES (1.2%)
Elamex S.A. de C.V.*.............. 76,700 738,238
Electrolux B...................... 1,100 63,879
First Brands Corp................. 115,000 3,263,125
Industrie Natuzzi (ADR)........... 36,200 832,600
MatsushitaElectricIndustrialCo. . 20,000 326,397
Nippon Electric Glass............. 26,000 399,620
Philips Electronics............... 3,000 121,482
Sanyo Electric Co. Ltd............ 108,000 447,630
Sharp Corp. ...................... 17,000 242,207
Sunbeam Corp. .................... 360,500 9,282,875
Tostem Corp....................... 3,000 82,894
Toto.............................. 5,000 56,990
-------------
15,857,937
-------------
LEISURE RELATED (1.7%)
Aristocrat Leisure Ltd............ 60,000 155,950
Canal Plus........................ 350 77,306
Carnival Corp. ................... 11,300 372,900
Cinar Films, Inc. (Class B)* ..... 15,000 390,000
Cyrk, Inc.*....................... 195,000 2,535,000
Disney (Walt) Co.................. 95,791 6,669,448
Enix Corp.* ...................... 12,900 291,840
Granada Group PLC................. 17,347 256,013
Harman International
Industries, Inc.................. 21,800 1,212,625
ITT Corp.*........................ 85,600 3,712,900
Japan Airport Terminal Co......... 44,000 539,504
KTM Motorradholding AG*........... 3,420 191,097
Learning Company, Inc.*........... 101,300 1,456,188
Mars Engineering Corp.*........... 9,000 229,255
Namco Ltd......................... 28,000 858,302
Nelvana Limited*+................. 18,000 $ 299,069
Nintendo Co. ..................... 14,000 1,002,159
Rank Group PLC.................... 32,498 242,453
Resorts World BHD................. 24,000 109,285
Sega Enterprises Ltd.............. 2,000 67,352
SMH AG............................ 100 61,636
Tag Heuer International SA
(ADR)*........................... 50,200 809,475
Thorn EMI......................... 4,927 116,478
Toei Co........................... 33,000 212,572
Toho Co. ......................... 400 58,026
Tokyo Dome Corp................... 3,000 52,327
Tourism Holdings Ltd.............. 70,000 133,614
-------------
22,112,774
-------------
PHOTO & OPTICAL (0.1%)
Fuji Photo Film Co................ 12,000 395,821
Noritsu Koki Co. Ltd.............. 21,000 988,257
-------------
1,384,078
-------------
RETAIL--GENERAL (2.9%)
Ahold N.V......................... 1,789 111,771
AutoZone, Inc.*................... 317,900 8,742,250
Boots Co. PLC..................... 26,111 269,503
British Airport Author PLC........ 120,000 1,000,108
Carrefour......................... 825 536,803
Centros Comerciales Pryca SA ..... 7,000 148,387
CompUSA, Inc.*.................... 285,000 5,878,125
Consolidated Stores Corp.*........ 22,500 722,813
Daiei, Inc........................ 14,000 106,986
Dai-Ichi Corp..................... 9,000 181,850
Dayton Hudson Corp................ 102,600 4,027,050
Dixons Group PLC*................. 160,000 1,486,971
Doshisha Co. ..................... 7,000 114,843
Eiden Sakakiya Co. Ltd. .......... 28,000 282,877
Federated Department Stores,
Inc.*............................ 99,800 3,405,675
Fingerhut Companies, Inc.......... 160,000 1,960,000
Fu Hui Jewellery*................. 250,000 23,272
Great Universal Stores............ 28,714 301,043
Harvey Nichols Group PLC*+........ 30,600 179,804
Hennes & Mauritz AB
(B Shares)....................... 500 69,216
Homac Corp. ...................... 11,400 206,718
Home Wide Corp, Inc............... 16,000 143,684
Isetan Co......................... 64,000 828,944
Karstadt AG....................... 150 49,909
Kokuyo Co. ....................... 2,000 49,391
Marks & Spencer................... 60,611 509,819
Marui Co. Ltd..................... 7,000 126,328
Metro AG* ........................ 950 74,392
Nissen Corp. Ltd. ................ 5,700 39,867
Paris Miki, Inc................... 20,000 721,872
Petco Animal Supplies, Inc.* ..... 37,900 786,425
Pinault Printemps................. 350 138,826
Promodes.......................... 300 84,707
Rinascente........................ 13,000 75,418
Rinascente--Warrants*............. 650 287
Sainsbury (J) PLC................. 7,365 48,954
Sato Corp. ....................... 35,700 696,676
Shaddy Co. Ltd. .................. 3,000 47,923
Sriwani Holdings BHD.............. 400,000 1,077,014
99
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Swank International
Manufacturing.................... 300,000 $ 45,381
St. Dupont*+...................... 29,100 987,106
Takihyo Co. Ltd................... 27,000 326,397
Warehouse Group Ltd. ............. 200,900 482,889
Xebio Co.......................... 9,800 291,944
-------------
37,390,218
-------------
TOTAL CONSUMER CYCLICALS (9.5%) 123,027,235
-------------
CONSUMER NONCYCLICALS
BEVERAGES (0.9%)
Asahi Breweries Ltd............... 8,000 82,894
Bass Breweries.................... 13,487 189,689
Cadbury Schweppes PLC............. 18,792 158,548
Carlsberg 'A'..................... 900 60,845
Coca-Cola Amatil Ltd. ............ 7,600 81,250
Coca-Cola Co...................... 122,000 6,420,250
Fraser & Neave.................... 30,000 308,726
Grand Metropolitan................ 85,339 671,032
Guinness PLC...................... 164,568 1,289,791
Heineken N.V. .................... 801 141,698
Kirin Brewery Co.................. 16,000 157,499
Lion Nathan Ltd. ................. 60,000 143,794
Louis Dreyfus Citrus*+............ 43,500 1,425,267
Louis Vuitton Moet Hennessy ...... 1,500 418,907
Panamerican Beverages............. 9,000 421,875
Quilmes Industrial Quins (ADR) ... 33,300 303,863
-------------
12,275,928
-------------
CONTAINERS (0.4%)
Crown Cork & Seal Co., Inc. ...... 75,000 4,078,125
Hub Group, Inc. (Class A)*........ 28,900 773,075
Toyo Seikan Kaisha................ 3,000 72,274
-------------
4,923,474
-------------
DRUGS (4.7%)
Amgen, Inc.*...................... 61,800 3,360,375
Astra AB (A Shares)............... 13,000 642,451
Biogen, Inc.*..................... 150,000 5,812,500
Centocor, Inc.*................... 152,200 5,441,150
Daiichi Pharmaceutical Co......... 5,000 80,304
Eisai Co. Ltd..................... 5,000 98,437
Geltex Pharmaceuticals, Inc.* .... 58,200 1,411,350
Glaxo Wellcome PLC ............... 32,082 521,018
Hafslund Nycomed ASA
(B Shares) ...................... 11,700 80,300
Medicis Pharmaceutical Corp.
(Class A)*....................... 13,500 594,000
MedImmune, Inc.*.................. 32,800 557,600
Merck & Co., Inc.................. 103,000 8,162,750
Novartis AG*...................... 1,571 1,799,285
Novo-Nordisk AS (ADR)
(B Shares) ...................... 3,000 565,647
Nycomed ASA (B Shares)*........... 11,700 180,078
Pfizer, Inc. ..................... 136,200 11,287,575
Revco D.S., Inc.*................. 88,000 3,256,000
Roche Holdings AG Genusscheine ... 201 1,564,001
Rohto Pharmaceutical Co........... 7,000 67,697
Santen Pharmaceutical Co.......... 50,000 1,036,180
Schering AG....................... 1,250 105,521
Smithkline Beecham PLC............ 130,169 1,805,124
Smithkline Beecham PLC (ADR) ..... 46,000 $ 3,128,000
Taisho Pharmaceutical Co.......... 31,000 730,766
Takeda Chemical Industries........ 11,000 230,809
United Natural Foods, Inc.* ...... 39,200 666,400
Warner-Lambert Co................. 81,500 6,112,500
Yamanouchi Pharmaceutical......... 54,000 1,109,749
Zeneca Group PLC.................. 30,000 846,700
-------------
61,254,267
-------------
FOODS (1.1%)
Ajinomoto Co., Inc................ 12,000 122,269
BSN Gervais Danone................ 1,250 174,183
Campbell Soup Co.................. 62,635 5,026,459
Fyffes PLC........................ 900,000 1,678,329
Nabisco Holdings Corp.
(Class A)........................ 125,040 4,860,930
Nestle AG......................... 630 676,362
Nippon Meat Packers, Inc.......... 4,000 51,809
Nissin Food Products Co........... 3,000 63,984
Nutrica Verenigde Bedrijven
N.V.+............................ 2,600 394,817
Oie Sangyo Co. Ltd. .............. 6,000 77,714
PT Sekar Bumi..................... 182,500 115,898
Shriram Industrial Enterprises
Ltd. (GDR)*+..................... 24,000 3,600
Tingyi Holdings Corp.*............ 500,000 130,907
Viscofan Envoltura................ 9,000 131,814
Warabeya Nichiyo Co. Ltd.*........ 18,000 153,873
Yamakazi Baking Co. .............. 4,000 63,898
-------------
13,726,846
-------------
HOSPITAL SUPPLIES & SERVICES (2.0%)
Cochlear Ltd...................... 130,000 369,923
Columbia/HCAHealthcareCorp....... 211,500 8,618,625
Compdent Corp.*................... 18,900 666,225
Coventry Corp.*................... 56,100 519,802
Enterprises Systems, Inc.*........ 39,700 932,950
National Surgery Centers, Inc.* .. 21,800 828,400
Oxford Health Plans, Inc.*........ 64,000 3,748,000
Pacificare Health Systems, Inc.
(Class B)*....................... 50,300 4,288,075
Rotech Medical Corp.*............. 35,700 749,700
Scandinavian Mobility
International, Inc.+............. 27,600 454,760
Steris Corp.*..................... 97,500 4,241,250
Tamro Group ...................... 17,500 116,866
-------------
25,534,576
-------------
RETAIL--FOOD (0.2%)
Daimon Co. Ltd.................... 14,000 224,851
Ito Yokado Co. Ltd. .............. 10,000 435,196
Jusco Co.......................... 9,000 305,414
McBride PLC....................... 60,000 139,789
Ministop Co. Ltd.................. 5,500 134,401
Santa Isabel S.A. (ADR)........... 27,400 619,925
Seven-Eleven Japan Ltd............ 12,000 702,530
Tesco PLC......................... 48,646 295,424
-------------
2,857,530
-------------
100
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
SOAPS & TOILETRIES (1.0%)
BIC............................... 600 $ 89,968
Colgate Palmolive Co.............. 61,660 5,688,135
Gillette Corp..................... 74,850 5,819,588
KAO Corp. ........................ 10,000 116,570
L'Oreal........................... 1,605 604,446
Shiseido Co....................... 42,000 485,968
Unilever.......................... 16,865 409,247
Unilever N.V. CVA................. 2,553 451,333
-------------
13,665,255
-------------
TOBACCO (1.6%)
BAT Industries.................... 100,000 829,997
Imperial Tobacco PLC*............. 39,999 258,329
Loews Corp........................ 45,000 4,241,250
Philip Morris Cos., Inc. ......... 120,500 13,571,313
RJ Reynolds BHD................... 200,000 542,467
Rothmans of Pall Mall BHD......... 6,000 62,958
Swedish Match Co. AB*............. 360,000 1,267,012
-------------
20,773,326
-------------
TOTAL CONSUMER NONCYCLICALS (11.9%) 155,011,202
-------------
CREDIT SENSITIVE
BANKS (1.9%)
ABN Amro Holdings................. 3,879 252,220
Akita Bank........................ 18,000 111,907
Asahi Bank Ltd.................... 58,000 515,845
Banca Commerciale Italiana........ 35,000 63,684
Banco Bilbao Vizcaya SA........... 4,050 218,845
Banco Latinoamericano de
Exportaciones S.A. (E Shares) ... 9,500 482,125
Banco Popular..................... 1,000 196,564
Banco Santander Chile (ADR) ...... 16,000 240,000
Banco Santander SA................ 2,691 172,377
Bancomer B Local*................. 50,000 19,944
Bank Austria AG................... 920 67,975
Bank of Tokyo-Mitsubishi Bank .... 72,000 1,336,672
Banque Nationale de Paris......... 2,250 87,077
Barclays Bank .................... 48,309 827,995
Chase Manhattan Corp.............. 15,000 1,338,750
Cie Fin Paribas Series A ......... 1,400 94,682
CS Holdings....................... 4,550 467,408
Dai-Ichi Kangyo Bank.............. 10,000 144,202
Den Danske Bank................... 1,300 104,891
Deutsche Bank AG.................. 13,300 620,574
Dresdner Bank AG.................. 2,900 86,691
First Union Corp.................. 128,500 9,509,000
Fokus Bank........................ 8,000 55,157
Fuji Bank Ltd. ................... 63,000 919,351
Generale de Banque................ 200 71,763
Grupo Financiero Bantorte (Class
B)*.............................. 22,500 22,637
Hang Seng Bank.................... 39,000 473,980
HSBC Holdings PLC (H.K.$)......... 20,000 427,953
HSBC Holdings PLC................. 20,000 435,813
International Bank of Asia........ 270,000 179,779
Istituto Bancario San Paolo di
Torino........................... 15,000 91,966
Istituto Mobilare Italiano........ 10,000 85,703
Kredietbank....................... 170 55,770
Lloyds TSB Group PLC.............. 115,481 $ 851,660
Malayan Banking Berhad............ 18,000 199,564
Mediobanca Spa.................... 10,000 53,960
Mitsubishi Trust&BankingCorp. ... 23,000 307,832
National Australia Bank Ltd. ..... 37,700 443,495
Overseas Union Bank Ltd........... 40,000 308,726
Sakura Bank Ltd. ................. 82,000 586,271
Schweizerische Bankgesellschaft .. 610 534,576
Shizuoka Bank..................... 44,000 467,317
Skandinaviska Enskilda Banken
(Series A)....................... 8,000 82,121
Societe Generale.................. 1,400 151,373
Sparbanken Sverige AB
(A Shares)....................... 16,000 274,519
Sumitomo Bank Ltd. ............... 68,000 980,572
Svenska Handelsbanken
(Series A) ...................... 3,100 89,101
Toho Bank ........................ 20,000 121,233
Union Bank of Hong Kong*.......... 20,000 25,212
-------------
25,256,832
-------------
FINANCIAL SERVICES (3.6%)
Aames Financial Corp.............. 20,300 728,263
American Express Co............... 177,300 10,017,450
Beneficial Corp................... 51,750 3,279,656
CMIC Finance & Securities Co.
Ltd. ............................ 200,000 288,544
Credit Local de France............ 3,500 304,905
Credit Saison Co. ................ 64,000 1,431,310
Daiwa Securities Co. Ltd. ........ 19,000 168,984
Dean Witter Discover & Co. ...... 119,600 7,923,500
Groupe Bruxelles Lambert SA ...... 450 57,986
Hambrecht & Quist Group*.......... 33,200 717,950
Hong Leong Finance Ltd. .......... 50,000 116,487
ING Groep N.V..................... 12,194 438,763
Invesco........................... 60,000 266,730
JCG Holdings...................... 60,000 58,569
MBNA Corp......................... 189,500 7,864,250
Merrill Lynch & Co., Inc.......... 85,000 6,927,500
Nichiei Co. Ltd. ................. 20,000 1,469,649
Nomura Securities Co.............. 41,000 616,009
Oxford Resources Corp.
(Class A)*....................... 35,000 1,080,625
Promise Co. Ltd................... 12,500 615,232
RAC Financial Group, Inc.*........ 25,300 534,463
Sanyo Shinpan Finance Co. Ltd. ... 9,000 563,423
Schroders PLC..................... 3,875 100,570
Takefuji Corp.*................... 6,500 468,656
Union Acceptance Corp.
(Class A)*....................... 50,600 898,150
Yamaichi Securities............... 70,000 311,286
-------------
47,248,910
-------------
INSURANCE (3.1%)
Aegon N.V......................... 15,000 955,370
Allianz AG Holding................ 600 1,080,062
AMEV N.V.......................... 17,000 594,973
Assicurazioni Generali............ 14,300 271,035
Commercial Union PLC.............. 10,726 125,591
Corporacion Mapfre Cia
Inter SA......................... 12,000 731,682
101
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Fortis AG......................... 740 $ 118,814
General Accident.................. 8,971 117,797
Gio Australia Holdings Ltd.* ..... 100,000 255,942
Istituto Naz Delle Assicurazioni . 60,000 78,161
ITT Hartford Group, Inc........... 23,600 1,593,000
Koa Fire & Marine................. 35,000 169,847
Legal & General Group............. 23,090 147,146
Life Re Corp...................... 150,000 5,793,750
MGIC Investment Corp. ............ 66,400 5,046,400
Mitsui Marine &
Fire Insurance Co................ 13,000 69,934
Pacific & Orient BHD.............. 150,000 362,304
PennCorp Financial Group, Inc. ... 126,100 4,539,600
PMI Group, Inc.................... 10,900 603,588
Prudential Corp................... 42,249 355,732
Royal & Sun Alliance Insurance
Group PLC........................ 33,539 255,390
Schweizerische Ruckversicherungs
Gesellschaft .................... 420 448,397
Skanska AB (Series B)............. 1,800 79,584
Sumitomo Marine & Fire Insurance
Co. ............................. 10,000 62,171
TIG Holdings, Inc. ............... 141,000 4,776,375
Tokio Marine & Fire
Insurance Co. ................... 34,000 320,007
Travelers Group, Inc.............. 248,534 11,277,230
-------------
40,229,882
-------------
REAL ESTATE (0.4%)
British Land Co................... 8,416 74,538
Cheung Kong Holdings.............. 35,000 311,106
City Developments Ltd............. 95,000 855,428
Daibiru Corp...................... 28,000 258,700
DBS Land.......................... 17,000 62,567
Diligentia AB*.................... 800 12,611
IOI Corp. BHD..................... 100,000 153,633
JP Realty, Inc. .................. 22,100 571,838
Land Securities PLC............... 9,978 127,174
Lend Lease Corp. Ltd.............. 4,100 79,517
Macerich Co. ..................... 20,900 546,013
MEPC PLC.......................... 8,200 60,825
Mitsubishi Estate Co.............. 71,000 729,557
Mitsui Fudosan.................... 20,000 200,328
New World Development Co.......... 29,000 195,908
Sap Holdings*..................... 40,000 191,645
Sun Hung Kai Properties........... 23,000 281,757
Wharf Holdings.................... 17,000 84,841
-------------
4,797,986
-------------
UTILITY--ELECTRIC (1.1%)
British Energy PLC*............... 418,000 1,052,631
China Light & Power Co. Ltd. ..... 11,000 48,924
Cinergy Corp...................... 46,600 1,555,275
Edison Spa........................ 15,000 94,932
Electrabel........................ 870 206,100
Endesa............................ 5,741 408,906
Enersis S.A. (ADR)................ 6,000 166,500
FPL Group, Inc.................... 75,700 3,482,200
Gas Y Electridad SA (Series 2) ... 5,000 319,899
Hidroelectrica del Cantabrico .... 15,000 572,927
Iberdrola II...................... 30,000 425,504
Iberdrola SA...................... 55,303 $ 784,388
Kansai Electric Power Co., Inc. .. 22,400 464,209
National Grid Group PLC........... 150,027 502,457
National Power PLC................ 120,560 1,009,938
Powergen PLC (ADR)................ 1,250 49,375
RWE AG............................ 4,800 200,884
Tenaga Nasional BHD............... 49,000 234,765
Tohoku Electric Power Co., Inc. .. 11,500 228,391
Tokyo Electric Power Co., Inc. ... 28,000 614,109
Tractebel Investment
International Capital............ 220 102,534
Tractebel Investment
International Capital--
Warrants*........................ 220 0
United Utilities PLC.............. 8,965 95,373
Veba AG........................... 19,550 1,124,366
Viag AG........................... 500 195,769
-------------
13,940,356
-------------
UTILITY--GAS (0.0%)
Scottish Power PLC................ 13,327 80,363
Thames Water...................... 7,439 78,055
-------------
158,418
-------------
UTILITY--TELEPHONE (0.9%)
British Telecommunications........ 121,891 823,761
Empresas Telex-Chile S.A. (ADR) .. 40,000 185,000
Frontier Corp..................... 106,000 2,398,250
Hellenic Telecommunication
Organization SA.................. 17,000 292,773
Kon. PTT Nederland+............... 40,000 1,524,890
LCI International, Inc.*.......... 55,594 1,195,271
PT Indonesian Satellite (ADR) .... 6,000 164,250
Singapore Telecommunications Ltd. 20,000 47,166
Tele Danmark AS (B Shares)........ 2,000 110,412
Telecom Corp. of New Zealand ..... 23,300 118,927
Telecom Italia Spa................ 37,500 97,404
Telefonica de Espana SA........... 23,566 547,694
Telefonica del Peru S.A. (ADR) ... 32,000 604,000
Telekom Malaysia BHD.............. 28,000 249,456
Telephone & Data Systems, Inc. ... 42,100 1,526,125
WorldCom, Inc.*................... 80,115 2,087,997
-------------
11,973,376
-------------
TOTAL CREDIT SENSITIVE (11.0%) .. 143,605,760
-------------
ENERGY
COAL & GAS PIPELINES (0.3%)
British Gas....................... 100,557 386,733
Nabors Industries, Inc.*.......... 170,000 3,272,500
OMV AG............................ 5,000 563,844
-------------
4,223,077
-------------
OIL--DOMESTIC (1.4%)
Apache Corp....................... 138,100 4,885,288
Costilla Energy, Inc.*............ 69,500 946,938
KCS Energy, Inc. ................. 22,400 800,800
Louis Dreyfus Natural Gas Corp.* 139,100 2,382,088
Louisiana Land & Exploration
Corp. ........................... 92,200 4,944,225
Ultramar Diamond Shamrock Corp. . 19,482 616,118
102
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
Union Pacific Resources Group,
Inc.............................. 108,439 $ 3,171,841
XCL Corp.*........................ 200,000 37,500
-------------
17,784,798
-------------
OIL--INTERNATIONAL (1.2%)
British Petroleum Co. PLC......... 100,804 1,209,675
Canadian Occidental............... 6,000 96,000
Cosmo Oil Co. Ltd................. 11,000 52,906
Elf Aquitaine..................... 8,250 750,983
ENI Spa........................... 108,500 556,852
ENI Spa (ADR)..................... 5,000 258,125
Exxon Corp........................ 92,800 9,094,400
Japan Energy Corp................. 19,000 51,679
Mitsubishi Oil Co................. 8,000 47,872
Nippon Oil Co. Ltd. .............. 22,000 113,030
Norsk Hydro AS.................... 2,100 113,785
Oil Search Ltd.................... 340,000 662,110
Petrofina SA...................... 290 92,393
Repsol SA......................... 12,748 489,368
Royal Dutch Petroleum Co.......... 8,553 1,498,687
Tatneft (ADR)*.................... 7,000 336,000
Total Campagnie Francaise......... 900 73,200
-------------
15,497,065
-------------
OIL--SUPPLIES & CONSTRUCTION (3.1%)
Baker Hughes, Inc................. 221,250 7,633,125
BJ Services Co.*.................. 148,600 7,578,600
Bouygues Offshore SA (ADR)* ...... 80,000 1,030,000
Coflexip (ADR)*................... 11,000 288,750
Halliburton Co.................... 50,000 3,012,500
Noble Drilling Corp.*............. 180,700 3,591,413
Parker Drilling Co.*.............. 235,100 2,262,838
Rowan Cos., Inc................... 59,800 1,352,975
Schlumberger, Ltd. ............... 76,800 7,670,400
Transocean Offshore, Inc.......... 105,000 6,575,625
-------------
40,996,226
-------------
RAILROADS (1.2%)
Burlington Northern Santa Fe ..... 46,900 4,050,988
Canadian Pacific Ltd.............. 216,000 5,724,000
East Japan Railway Co............. 55 247,431
Genesee & Wyoming, Inc.
(Class A)*....................... 29,600 1,028,600
Hankyu Corp....................... 40,000 198,601
Kinki Nippon Railroad Co. ........ 28,650 178,862
Odakyu Electric Railway Co. ...... 4,000 24,005
Tobu Railway Co. Ltd.............. 14,000 68,543
Tokyu Corp........................ 20,000 113,634
Union Pacific Corp................ 69,000 4,148,625
-------------
15,783,289
-------------
TOTAL ENERGY (7.2%).............. 94,284,455
-------------
TECHNOLOGY
ELECTRONICS (4.9%)
Altera Corp.*..................... 92,000 6,687,250
Austria Mikro Systeme
International+................... 1,430 110,412
BMC Industries, Inc............... 43,900 1,382,850
Cable & Wireless ................. 32,650 271,553
Cisco Systems, Inc.*.............. 224,800 14,302,890
Electrocomponents PLC............. 8,375 66,284
Exabyte Corp.*.................... 45,400 $ 607,225
Fujimi, Inc....................... 6,100 328,676
Hirose Electric Co. Ltd. ......... 15,000 869,096
Hitachi Ltd. ..................... 58,000 540,886
HMT Technology Corp.*............. 33,800 507,528
Hoya Corp......................... 29,000 1,139,366
IDT Corp.* ....................... 43,000 473,000
Insight Enterprises, Inc.*........ 18,000 504,000
Intel Corp........................ 50,000 6,546,875
Intergraph Corp.*................. 100,000 1,025,000
Kent Electronics Corp.*........... 29,500 759,625
Kyocera Corp...................... 1,000 62,343
Murata Manufacturing Co. Ltd. ... 5,000 166,221
National Semiconductor Corp.* .... 30,000 731,250
NEC Corp.......................... 11,000 132,976
Network General Corp.*............ 25,500 771,375
Rohm Co. Ltd...................... 11,000 721,872
Seagate Technology, Inc.*......... 132,577 5,236,792
Sony Corp......................... 8,000 524,307
Systemsoft Corp.*................. 38,500 572,688
TDK Corp.......................... 11,000 717,123
Teradyne, Inc.*................... 50,000 1,218,750
Texas Instruments, Inc. .......... 28,000 1,785,000
Tokyo Electron.................... 14,000 429,151
Uniphase Corp.*................... 11,800 619,500
Westell Technologies Inc.*........ 22,700 519,263
Yokogawa Electric Corp............ 160,000 1,381,573
3Com Corp.*....................... 155,000 11,373,120
3D Labs, Inc. Ltd.*............... 18,300 420,900
-------------
63,506,720
-------------
OFFICE EQUIPMENT (0.8%)
Applix, Inc.*..................... 29,500 645,313
Canon, Inc........................ 14,000 309,472
Compaq Computer Corp.*............ 62,770 4,660,673
Oce-Van De Grinten N.V. .......... 460 49,921
Read-Rite Corp.*.................. 39,800 1,004,950
Ricoh Elemex Corp. ............... 7,000 97,919
Sterling Software, Inc.*.......... 67,800 2,144,175
Storage Technology Corp.*......... 30,200 1,438,275
Sun Microsystems, Inc.*........... 20,000 513,750
-------------
10,864,448
-------------
OFFICE EQUIPMENT SERVICES (2.8%)
Accugraph Corp. (Class A)*........ 30,000 23,882
Comverse Technology, Inc.*........ 54,100 2,045,656
Electronic Data Systems Corp. .... 83,700 3,620,025
First Data Corp................... 100,600 3,671,900
Fuji Soft Corp.................... 12,000 366,808
Informix Corp.*................... 410,000 8,353,750
Istar Internet, Inc.*+............ 38,000 127,661
Merkantildata A/S................. 2,000 36,751
Microsoft Corp.*.................. 50,800 4,197,350
Misys PLC......................... 25,000 478,169
Oracle Corp.*..................... 214,550 8,957,463
Premisys Communications, Inc.* ... 13,400 452,250
SAP AG............................ 1,600 218,872
Sterling Commerce, Inc.*.......... 101,448 3,576,042
Structural Dynamics Research
Corp. (Class A)*................. 27,800 556,000
-------------
36,682,579
-------------
103
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
NUMBER VALUE
OF SHARES (NOTE 1)
- ---------------------------------------------------------------
TELECOMMUNICATIONS (3.1%)
Act Networks, Inc.*............... 17,800 $ 649,700
Architel Systems Corp.*........... 30,300 186,989
BCE Mobile Communications, Inc.* . 4,000 118,605
Cable Design Technologies*........ 21,000 653,625
Cellular Communications Puerto
Rico, Inc.*...................... 3,600 71,100
Comnet Cellular, Inc.*............ 21,600 602,100
DDI Corp. ........................ 129 853,242
Deutsche Telekom AG (ADR)*........ 272,000 5,542,000
DSC Communications Corp.*......... 71,650 1,280,744
Ericsson (L.M.) Telephone Co.
(Series B)....................... 14,700 454,849
Filtronic Comtek PLC.............. 300,000 1,896,402
Forval Corp....................... 3,000 116,829
ICG Communications, Inc.*......... 83,686 1,474,966
KoreaMobileTelecommunications
Corp. (ADR)...................... 127,720 1,644,395
MFS Communications Co., Inc.* .... 72,639 3,958,825
Millicom International Cellular
SA*.............................. 13,300 427,263
NetCom Systems AB (B Shares)* .... 44,000 712,988
NetscapeCommunicationsCorp.*..... 63,700 3,622,938
Nokia Corp. (ADR)................. 95,500 5,503,188
Rogers Cantel Mobile
Communications (Class B)*........ 6,000 118,970
Scientific Atlanta, Inc........... 310,500 4,657,500
Spectrum Network Systems*+........ 440,000 153,883
Tadiran Telecommunications Ltd. .. 66,600 1,490,175
Telecom Italia Mobile Spa......... 125,000 316,029
Vanguard Cellular Systems, Inc.
(Class A)*....................... 100,000 1,575,000
Vodafone Group.................... 215,846 911,473
Winstar Communications, Inc.* .... 33,600 705,600
Xircom*........................... 32,500 706,875
-------------
40,406,253
-------------
TOTAL TECHNOLOGY (11.6%)......... 151,460,000
-------------
DIVERSIFIED
MISCELLANEOUS (1.2%)
Allied Signal, Inc................ 116,500 7,805,500
Austral Enterprises BHD........... 23,999 44,853
BTR PLC........................... 78,068 379,817
Cie Generale des Eaux............. 9,450 1,171,119
Crean (James) PLC-Units........... 40,000 125,451
Damskibs AS (Class B)............. 5 128,672
GKN PLC........................... 5,325 91,314
Hanson PLC........................ 133,335 186,159
Hutchison Whampoa................. 78,000 612,645
Indonesia Fund, Inc.*............. 4,000 39,000
International UNP Holdings* ...... 143,000 29,242
International UNP
Holdings-Warrants* .............. 125,000 0
Invesco Funding LLC*.............. 12,000 53,346
Lyonnais des Eaux Dumez........... 1,000 93,071
Mitsubishi Corp................... 71,000 735,688
Mitsui & Co. ..................... 39,000 316,553
Montedison Spa*................... 74,000 50,443
Pilkington PLC.................... 17,397 46,641
Sime Darby BHD.................... 180,000 709,167
Smiths Industries................. 5,559 $ 76,280
Sophus Berendsen A/S 'B'.......... 385 49,571
Sumitomo Corp..................... 22,000 173,439
Taiwan Fund....................... 5,000 111,250
Tomkins PLC....................... 70,000 321,977
U.S. Industries, Inc.*............ 76,000 2,612,500
Williams Holdings PLC............. 10,569 62,193
-------------
TOTAL DIVERSIFIED (1.2%)......... 16,025,891
-------------
TOTAL COMMON STOCKS AND OTHER
INVESTMENTS (64.2%)
(Cost $748,000,811).............. 836,210,956
-------------
PREFERRED STOCKS:
CONSUMER CYCLICALS
AIRLINES (0.1%)
Continental Airlines Finance
Trust
8.5% Conv. ...................... 7,500 502,500
-------------
APPAREL, TEXTILE (0.0%)
Designer Finance Trust
6.0% Conv. ...................... 9,600 444,000
-------------
RETAIL--GENERAL (0.0%)
Fielmann AG....................... 4,200 132,375
-------------
TOTAL CONSUMER CYCLICALS (0.1%) 1,078,875
-------------
CONSUMER NONCYCLICALS (0.0%)
CONTAINERS
Crown Cork & Seal Co., Inc.
4.5% Conv. ...................... 9,500 494,000
-------------
CREDIT SENSITIVE
FINANCIAL SERVICES (0.0%)
Money Store
6.5% Conv. ...................... 16,500 451,688
-------------
INSURANCE (0.1%)
PennCorp Financial Group, Inc.
7.0% Conv.+...................... 15,500 922,250
-------------
TOTAL CREDIT SENSITIVE (0.1%) ... 1,373,938
-------------
TECHNOLOGY
TELECOMMUNICATIONS (0.3%)
MFS Communications Co., Inc.
8.0% Conv. ...................... 25,800 2,354,250
Nokia Oy Cum...................... 16,775 973,550
-------------
TOTAL TECHNOLOGY (0.3%).......... 3,327,800
-------------
TOTAL PREFERRED STOCKS (0.5%)
(Cost 4,659,785)................. 6,274,613
-------------
LONG-TERM DEBT SECURITIES
PRINCIPAL
AMOUNT
------
BASIC MATERIALS (0.7%)
CHEMICALS
Reliance Industries Ltd.
10.5%, 08/06/46+............ $7,950,000 8,562,548
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.1%)
United Waste Systems, Inc.
4.5% Conv., 06/01/01+....... 710,000 859,100
--------------
LONG-TERM DEBT SECURITIES
104
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
PRINTING, PUBLISHING &
BROADCASTING (0.7%)
Time WarnerCommunicationsCo. ...
9.15%, 02/01/23................. $ 8,035,000 $ 8,707,353
--------------
PROFESSIONAL SERVICES (0.1%)
Career Horizons, Inc.
7.0% Conv., 11/01/02............ 305,000 598,181
First Financial Management Corp.
5.0% Conv., 12/15/99............ 985,000 1,656,031
--------------
2,254,212
--------------
TOTAL BUSINESS SERVICES (0.9%) . 11,820,665
--------------
CAPITAL GOODS (0.1%)
MACHINERY
DII Group, Inc.
6.0% Conv., 10/15/02+........... 740,000 703,000
--------------
CONSUMER CYCLICALS
APPAREL, TEXTILE (0.1%)
Nine West Group, Inc.
5.5% Conv., 07/15/03+........... 1,165,000 1,159,175
--------------
FOOD SERVICES, LODGING (0.1%)
HFS, Inc.
4.5% Conv., 10/01/99............ 450,000 1,489,500
--------------
RETAIL--GENERAL (0.2%)
Saks Holdings, Inc.
5.5% Conv., 09/15/06............ 705,000 648,600
U.S. Office Products Co.:
5.5% Conv., 02/01/01............ 965,000 1,254,500
5.5% Conv. Sub. Note,
05/15/03+....................... 35,000 32,550
--------------
1,935,650
--------------
TOTAL CONSUMER CYCLICALS (0.4%) 4,584,325
--------------
CONSUMER NONCYCLICALS
DRUGS (0.1%)
MedImmune, Inc.
7.0% Conv. Sub., 07/01/03+ ..... 780,000 840,450
Quintiles Transnational Corp.
4.25% Conv., 05/31/00+.......... 690,000 724,500
--------------
1,564,950
--------------
HOSPITAL SUPPLIES & SERVICES (0.3%)
American Medical Response, Inc.
5.25% Conv., 02/01/01+.......... 755,000 813,513
Healthsouth Corp.
5.0% Conv., 04/01/01............ 405,000 837,844
Phycor, Inc.
4.5% Conv., 02/01/03............ 695,000 676,756
Tenet Healthcare Corp.
6.0% Conv., 12/01/05............ 665,000 698,250
--------------
3,026,363
--------------
TOTAL CONSUMER NONCYCLICALS (0.4%) 4,591,313
--------------
CREDIT SENSITIVE
BANKS (1.3%)
Deutsche Bank
6.7%, 12/13/06.................. $ 8,000,000 $ 7,850,880
St. George Bank Ltd.
7.15%, 10/15/05+................ 9,525,000 9,509,951
--------------
17,360,831
--------------
FINANCIAL SERVICES (0.2%)
Aames Financial Corp.
5.5% Conv., 03/15/06+........... 530,000 716,163
Leasing Solutions, Inc.
6.875% Conv., 10/01/03.......... 1,045,000 1,045,000
RAC Financial Group, Inc.
7.25% Conv. Sub., 08/15/03+ .... 505,000 674,806
Safeguard Scientifics
6.0% Conv., 02/01/06+........... 475,000 517,750
--------------
2,953,719
--------------
FOREIGN GOVERNMENT (1.1%)
Province of Quebec
7.5%, 07/15/23.................. 5,500,000 5,472,775
Republic of Poland
4.0% PDI, 10/27/14 (a).......... 11,000,000 9,295,000
--------------
14,767,775
--------------
INSURANCE (0.8%)
Conseco Finance Trust II
8.7%, 11/15/26.................. 5,000,000 5,025,850
Corporacion Mapfre
8.5% Conv., 02/27/99 ........ Peseta 4,700,000 36,230
John Hancock Mutual Life
Insurance Co.
7.375%, 02/15/24+............... $ 5,000,000 4,819,350
Penn Treaty American Corp.
6.25% Conv., 12/01/03+.......... 700,000 759,500
--------------
10,640,930
--------------
MORTGAGE RELATED (3.4%)
Federal Home Loan
Mortgage Corp.
7.0%, 09/01/11.................. 10,152,376 10,149,209
Federal National Mortgage
Association:
6.5%, 01/01/11.................. 934,876 917,932
6.0%, 04/01/11.................. 12,327,153 11,853,334
6.5%, 08/01/11.................. 8,894,098 8,732,893
7.0%, 05/01/26.................. 10,215,115 9,994,857
7.0%, 08/01/26.................. 2,456,571 2,403,603
--------------
44,051,828
--------------
UTILITY--ELECTRIC (0.4%)
California Energy Co., Inc.
9.5%, 09/15/06.................. 4,760,000 4,926,600
--------------
UTILITY--GAS (0.7%)
RAS Laffan Liquid Natural Gas
8.294%, 09/15/14+............... 8,500,000 8,637,828
--------------
105
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
U.S. GOVERNMENT (10.4%)
U.S. Treasury:
7.25% Note, 02/15/98............ $24,450,000 $ 24,778,556
6.375% Note, 05/15/99........... 53,490,000 53,958,035
6.75%, Note 04/30/00............ 4,000,000 4,076,252
6.5% Note, 08/31/01............. 7,000,000 7,076,566
6.25% Note, 10/31/01............ 10,230,000 10,236,394
5.75% Note, 08/15/03............ 32,825,000 31,840,250
6.5% Note, 08/15/05............. 4,015,000 4,042,603
--------------
136,008,656
--------------
TOTAL CREDIT SENSITIVE (18.3%) . 239,348,167
--------------
ENERGY
COAL & GAS PIPELINES (0.1%)
Nabors Industries, Inc.
5.0% Conv., 05/15/06............ 545,000 675,800
Swift Energy Co.
6.25% Conv., 11/15/06........... 515,000 565,213
--------------
1,241,013
--------------
OIL--SUPPLIES & CONSTRUCTION (0.0%)
Seacor Holdings
5.375% Conv. Sub. Notes,
11/15/06+....................... 495,000 574,200
--------------
TOTAL ENERGY (0.1%) ............ 1,815,213
--------------
TECHNOLOGY
ELECTRONICS (1.1%)
Altera Corp.
5.75% Conv. Sub. Note,
06/15/02+....................... 1,330,000 2,058,175
Applied Magnetics Corp.:
7.0% Conv. Sub., 03/15/06 ...... 1,530,000 2,708,100
7.0% Conv. Sub. Euro, 03/15/06 . 100,000 177,000
C-Cube Microsystems, Inc.
5.875% Conv., 11/01/05.......... 705,000 912,975
Checkpoint Systems, Inc.
5.25% Conv., 11/01/05+.......... 310,000 452,988
LSI Logic Corp.
5.5% Conv., 03/15/01+........... 570,000 1,251,150
Plasma & Materials
Technologies, Inc.
7.125% Conv., 10/15/01+......... 920,000 901,600
Sanmina Corporation
5.5% Conv., 08/15/02+........... 1,030,000 2,153,988
SCI Systems, Inc.
5.0%, Conv., 05/01/06........... 1,085,000 1,239,613
S3 Incorporated
5.75% Conv. Sub. Note,
10/01/03+....................... 505,000 552,975
3Com Corp.
10.25% Conv., 11/01/01+......... 865,000 1,909,488
--------------
14,318,052
--------------
TELECOMMUNICATIONS (0.2%)
Bay Networks, Inc.
5.25%, 05/15/03+................ $ 375,000 $ 338,438
BBN Corp.
6.0% Conv., 04/01/12............ 1,235,000 1,197,950
Comverse Technology, Inc.
5.75% Conv. Sub., 10/01/06+ .... 1,175,000 1,217,594
--------------
2,753,982
--------------
TOTAL TECHNOLOGY (1.3%) ........ 17,072,034
--------------
DIVERSIFIED
MISCELLANEOUS (0.1%)
Brierley Investment Ltd.
9.0% Conv. Sub. Note, 06/30/98 . 14,000 12,075
Thermo Electron Corp.
5.0% Conv. Euro, 04/15/01 ...... 845,000 1,675,213
--------------
TOTAL DIVERSIFIED (0.1%) ...... 1,687,288
--------------
TOTAL LONG-TERM DEBT SECURITIES (22.3%)
(Amortized Cost $282,739,720) .. 290,184,553
--------------
SHORT-TERM DEBT SECURITIES:
CERTIFICATES OF DEPOSIT
Canadian Imperial Bank of
Commerce
5.44%, due 03/31/97............. 25,000,000 25,009,103
Sanwa Bank Ltd.
5.495%, due 01/22/97............ 2,000,000 1,999,802
--------------
TOTAL CERTIFICATES OF DEPOSIT (2.1%) 27,008,905
--------------
COMMERCIAL PAPER
ASCC Commercial Paper:
5.34%, due 02/27/97............. 31,000,000 30,737,895
5.37%, due 03/27/97............. 700,000 691,290
Associates Corp. of North
America
5.75%, due 01/02/97............. 400,000 399,936
Dresdner U.S. Finance, Inc.
5.31%, due 04/10/97............. 5,000,000 4,927,263
Enterprise Funding Corp.
5.45%, due 03/03/97............. 5,034,000 4,989,048
Koch Industries
6.9%, due 01/02/97.............. 18,300,000 18,296,493
Morgan Stanley Group, Inc.
6.79%, due 01/02/97............. 2,900,000 2,899,453
Old Line Funding Corp.
5.5%, due 02/27/97.............. 15,200,000 15,067,632
Suntrust Banks, Inc.:
5.3%, due 03/03/97.............. 13,000,000 12,883,473
5.35%, due 03/31/97............. 10,000,000 9,869,219
--------------
TOTAL COMMERCIAL PAPER (7.7%) 100,761,702
--------------
TIME DEPOSITS
Canadian Imperial Bank of
Commerce
6.0%, due 01/02/97.............. 6,100,000 6,100,000
106
<PAGE>
THE HUDSON RIVER TRUST
GROWTH INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
December 31, 1996
- ---------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------
Harris Trust & Savings
6.5%, due 01/02/97.............. $ 4,400,000 $ 4,400,000
Sumitomo Bank Ltd.
6.5%, due 01/02/97.............. 1,500,000 1,500,000
Toronto Dominion Bank
6.25%, due 01/02/97............. 18,400,000 18,400,000
--------------
TOTAL TIME DEPOSITS (2.3%) ..... 30,400,000
--------------
TOTAL SHORT-TERM DEBT SECURITIES (12.1%)
(Amortized Cost $158,157,826) .. 158,170,607
--------------
TOTAL INVESTMENTS (99.1%)
(Cost/Amortized Cost $1,193,558,142) 1,290,840,729
OTHER ASSETS
LESS LIABILITIES (0.9%)......... 11,274,254
--------------
NET ASSETS (100.0%).............. $1,302,114,983
==============
- --------------------------------------------
DISTRIBUTION OF INVESTMENTS BY GLOBAL REGION
As a Percentage of Total Investments
Canada................... 0.6%
Japan.................... 5.9
Latin America............ 0.3
New Zealand & Australia . 1.3
Scandinavia.............. 1.3
Southeast Asia........... 1.0
United Kingdom........... 2.8
United States**.......... 81.3
Other European
Countries............... 5.5
-------
100.0%
=======
- ------------
* Non-income producing.
** Includes Short-Term Debt Securities of 12.3%.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold to qualified institutional
buyers. At December 31, 1996, these securities amounted to $63,744,015
or 4.9% of net assets.
(a) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at December 31, 1996.
Glossary:
ADR--American Depository Receipt
GDR--Global Depository Receipt
PDI--Past Due Interest Bond
See Notes to Financial Statements.
107
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Organization and Significant Accounting Policies
The Hudson River Trust (the "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 (the "1940 Act"), as amended, as an open-end management
investment company. The Trust issues shares of beneficial interest currently
divided among thirteen Portfolios (the "Portfolios"): Money Market,
Intermediate Government Securities, Quality Bond, High Yield, Growth and
Income, Equity Index, Common Stock, Global, International, Aggressive Stock,
Conservative Investors, Balanced and Growth Investors. Effective October 2,
1996, the Trust made available a second class of shares, Class IB, for each
of the Trust's Portfolios. In connection with the Class IB shares offering,
the existing class of shares has been redesignated Class IA. The Class IB
shares are subject to distribution fees imposed under a distribution plan
(the "Distribution Plan") adopted pursuant to Rule 12b-1 under the 1940 Act.
Under the Trust's multiple class distribution system, both classes of shares
have identical voting, dividend, liquidation, and other rights, other than
the payment of distribution fees under the Distribution Plan.
Class IA shares 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 January 1, 1997, Equitable
Variable was merged into Equitable. Class IB shares are offered to an
insurance company separate account of Equitable.
The investment objectives of each Portfolio are as follows:
Money Market Portfolio -- High level of current income, preserve its
assets and maintain liquidity. The Portfolio pursues this objective by
investing in primarily high quality U.S. dollar denominated money market
instruments.
Intermediate Government Securities Portfolio -- 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.
Quality Bond Portfolio -- High current income consistent with preservation
of capital by investing primarily in investment grade fixed income
securities. The Portfolio reserves the right to invest in convertible debt
securities, preferred stocks and dividend-paying common stocks.
High Yield Portfolio -- High return by maximizing current income and, to
the extent consistent with that objective, capital appreciation. The
Portfolio pursues 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."
Growth and Income Portfolio -- 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.
Equity Index Portfolio -- Total return before expenses that approximates
the total return performance of the Standard & Poor's Corporation 500 Index,
including reinvestment of dividends, at a risk level consistent with that of
the Index.
Common Stock Portfolio -- Long-term growth of its capital and increase
income. The Portfolio pursues this objective by investing primarily in common
stock and other equity-type instruments.
Global Portfolio -- Long-term growth of capital. The Portfolio pursues
this objective by investing primarily in equity securities of non-United
States companies as well as United States issuers.
108
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
International Portfolio -- 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.
Aggressive Stock Portfolio -- Long-term growth of capital. The Portfolio
pursues 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.
Conservative Investors Portfolio -- High total return without, in the
investment adviser's opinion, undue risk to principal. The Portfolio pursues
this objective by investing in a diversified mix of publicly traded equity
and debt securities.
Balanced Portfolio -- High return through both appreciation of capital and
current income. The Portfolio pursues this objective by investing in a
diversified portfolio of publicly traded equity and debt securities and
short-term money market instruments.
Growth Investors Portfolio -- Highest total return consistent with the
investment adviser's determination of reasonable risk. The Portfolio pursues
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 preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
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.
109
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
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.
Expenses attributable to a single Portfolio are charged to that Portfolio.
Expenses of the Trust are charged to each Portfolio in proportion to net
assets.
The Board of Trustees has approved the lending of portfolio securities,
through its custodian bank Chase Manhattan Bank, N.A. ("Chase") acting as
lending agent, to certain broker-dealers in exchange for negotiated lenders'
fees. Any such loan of portfolio securities will be continuously secured by
collateral at least equal to the value of the security loaned. All loans will
be collateralized in the form of cash or U.S. Government securities. Chase
will indemnify the Portfolios from any loss resulting from a borrower's
failure to return a loaned security when due. At December 31, 1996, the value
of securities loaned and collateral received were as follows:
<TABLE>
<CAPTION>
VALUE OF VALUE OF
SECURITIES COLLATERAL
PORTFOLIO LOANED RECEIVED*
- ---------------------------------- ------------- -------------
<S> <C> <C>
Intermediate Government
Securities........................ $ 17,601,878 $ 18,301,550
Quality Bond ...................... 27,315,488 28,167,188
Growth and Income ................. 1,943,750 2,000,000
Equity Index ...................... 1,288,680 1,356,953
Common Stock ...................... 102,898,955 105,377,860
Global ............................ 69,205,867 72,320,750
International ..................... 12,267,188 12,820,136
Aggressive Stock .................. 195,608,196 200,344,604
Conservative Investors ............ 23,376,066 24,170,813
Balanced .......................... 133,571,671 138,838,707
Growth Investors .................. 88,709,978 90,833,147
</TABLE>
- ------------
* Including U.S. Government securities valued at $919,250, $743,460 and
$1,827,086 for the Global, International and Growth Investors
Portfolios, respectively.
Chase invests the cash collateral and retains a portion of the interest
earned. During the year ended December 31, 1996, the Intermediate Government
Securities, Quality Bond, High Yield, Growth and Income, Equity Index, Common
Stock, Global, International, Aggressive Stock, Conservative Investors,
Balanced and Growth Investors Portfolios received $37,318, $27,425, $8,919,
$3,183, $1,082, $78,441, $210,691, $33,846, $405,162, $97,871, $306,462 and
$274,815, respectively, of security loan fees, net of rebates paid. Such net
fees are included in interest income in the accompanying Statements of
Operations.
110
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
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.
The Portfolios do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
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 at least 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.
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.
111
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
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:
For the year ended December 31, 1996, in conformity with Statement of
Position 93-2 Determination, Disclosure and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies, the reclassification arising from current book/tax differences
resulted in increases (decreases) to the components of net assets as follows:
<TABLE>
<CAPTION>
QUALITY EQUITY
BOND HIGH YIELD INDEX COMMON STOCK GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Paid-in capital...................... $ -- $ -- $ (7,525) $ (988,124) $ (220,445)
Undistributed (overdistributed) net
investment income................... 42,229 449,873 (284,528) (8,723,430) 1,186,161
Accumulated net realized gain
(loss).............................. (42,229) (449,873) 292,053 9,711,554 (965,716)
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------ -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Paid-in capital...................... $ -- $ -- $ -- $ -- $ --
Undistributed (overdistributed) net
investment income .................. 352,064 3,794 (8,654) (35,347) 842,896
Accumulated net realized gain
(loss).............................. (352,064) (3,794) 8,654 35,347 (842,896)
</TABLE>
2. Management of the Trust
Alliance Capital Management L.P. (Alliance), a publicly traded limited
partnership, indirectly majority-owned by Equitable, is the investment
adviser. The investment advisory fees are as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY 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%
FIRST NEXT OVER
$500 MILLION $1 BILLION $1.5 BILLION
---------------- ---------------- ----------------
International Portfolio.................................... .90% .85% .80%
</TABLE>
112
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
3. Distribution Plan
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act for the Class IB shares of the Trust.
Under the Plan, the Trust pays a distribution fee to Equitable Distributors,
Inc. ("Distributor"), an indirect, wholly-owned subsidiary of the Equitable,
at an annual rate of up to 0.50% of each Portfolio's average daily net assets
attributable to Class IB shares. The Trustees currently limit payments at an
annual rate equal to 0.25% of average daily net assets attributable to its
Class IB shares. In accordance with the Plan, payments are made for services
rendered to the Trust with respect to Class IB shares regardless of the level
of expenditures incurred by the Distributor. The Plan provides that the
Distributor will use such payments for services rendered and expenses borne
in connection with activities primarily intended to result in the sale of the
Trust's Class IB shares.
4. Investment Transactions
Investment security transactions, excluding short-term debt securities,
for the Intermediate Government Securities, Quality Bond, High Yield, Growth
and Income, Equity Index, Common Stock, Global, International, Aggressive
Stock, Conservative Investors, Balanced and Growth Investors Portfolios for
the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
INTER-
MEDIATE GROWTH
GOVERNMENT QUALITY AND
SECURITIES BOND HIGH YIELD INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
COST OF PURCHASES:
Stocks and long-term corporate debt
securities ........................... $ -- $253,934,635 $781,128,281 $248,681,019
U.S. Government securities ............ 250,043,480 417,690,775 -- --
NET PROCEEDS OF SALES AND REDEMPTIONS:
Stocks and long-term corporate debt
securities ........................... -- 274,718,651 720,651,732 129,315,154
U.S. Government securities............. 227,916,328 400,265,960 -- --
</TABLE>
<TABLE>
<CAPTION>
EQUITY COMMON
INDEX STOCK GLOBAL INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
COST OF PURCHASES:
Stocks and long-term corporate debt
securities............................ $206,816,773 $3,642,874,019 $657,898,998 $145,560,889
U.S. Government securities............. -- -- -- --
NET PROCEEDS OF SALES AND REDEMPTIONS:
Stocks and long-term corporate debt
securities ........................... 43,594,778 3,133,001,586 441,217,164 38,206,577
U.S. Government securities............. -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
STOCK INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
COST OF PURCHASES:
Stocks and long-term corporate debt
securities............................ $3,743,831,253 $185,088,283 $1,502,532,357 $1,459,573,841
U.S. Government securities............. -- 288,281,378 1,071,280,407 608,182,035
NET PROCEEDS OF SALES AND REDEMPTIONS:
Stocks and long-term corporate debt
securities ........................... 3,319,337,126 135,333,021 1,618,684,625 1,138,232,981
U.S. Government securities............. -- 313,973,715 1,026,954,569 711,943,608
</TABLE>
No activity is shown for the Money Market Portfolio since it trades
exclusively in short-term debt securities.
113
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
Transactions in options written for the year ended December 31, 1996 are
summarized as follows:
<TABLE>
<CAPTION>
COMMON STOCK
PORTFOLIO
----------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------- ---------------
<S> <C> <C>
Options outstanding--January 1, 1996................ 72,400 $ 31,689,532
Options written..................................... 745,200 310,976,384
Options terminated in closing purchase
transactions....................................... (350,625) (151,830,550)
Options expired..................................... (31,650) (12,066,500)
Options exercised .................................. (274,125) (110,161,066)
----------- ---------------
Options outstanding--December 31, 1996 ............. 161,200 $ 68,607,800
=========== ===============
</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,
1996, the Quality Bond, Global, International, Conservative Investors,
Balanced 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/
QUALITY BOND PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- ------------------------------------- ---------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
Swedish Krona, expiring 01/22/97 ..... 59,511 $ 8,802,011 $ 8,764,492 $(37,519)
FOREIGN CURRENCY SALE CONTRACTS
Australian Dollars, expiring
01/28/97............................. 17,266 13,541,486 13,632,563 (91,077)
Swedish Krona, expiring 01/22/97 ..... 9,003 9,279,351 9,003,162 276,189
---------------
$147,593
===============
</TABLE>
<TABLE>
<CAPTION>
CONTRACT COST ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
GLOBAL PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- ------------------------------------------------ ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
Deutsche Marks, expiring 01/02/97-01/03/97 ..... 171 $ 109,716 $ 110,421 $ 705
FOREIGN CURRENCY SALE CONTRACTS
Deutsche Marks, expiring 01/21/97................ 20,000 13,740,113 13,368,627 371,486
Japanese Yen, expiring 03/12/97.................. 2,055,000 19,731,483 18,738,032 993,451
Netherland Guilders, expiring 01/21/97-04/28/97 55,662 33,596,109 32,897,910 698,199
---------------
$2,063,841
===============
</TABLE>
<TABLE>
<CAPTION>
CONTRACT COST ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
INTERNATIONAL PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- ----------------------------------------------- ---------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY SALE CONTRACTS
Deutsche Marks, expiring 01/21/97-04/30/97 ..... 2,600 $1,739,380 $1,714,504 $ 24,876
Japanese Yen, expiring 03/12/97................. 404,800 3,886,767 3,691,074 195,693
Netherland Guilders, expiring
01/21/97-04/28/97.............................. 7,970 4,675,150 4,642,843 32,307
---------------
$252,876
===============
</TABLE>
114
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
<TABLE>
<CAPTION>
CONTRACT COST ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
CONSERVATIVE INVESTORS PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- ------------------------------------------ ---------- ------------- --------- ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
British Pounds, expiring
01/03/97-01/07/97......................... 36 $35,639 $35,740 $101
FOREIGN CURRENCY SALE CONTRACTS
Hong Kong Dollars, expiring 01/03/97 ...... 174 22,522 22,529 (7)
Malaysian Ringgit, expiring 01/02/97 ...... 13 4,946 4,951 (5)
---------------
$ 89
===============
</TABLE>
<TABLE>
<CAPTION>
CONTRACT COST ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
BALANCED PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- --------------------------------------------- ---------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
British Pounds, expiring 01/07/97............. 146 $250,112 $250,127 $ 15
FOREIGN CURRENCY SALE CONTRACTS
Hong Kong Dollars, expiring 01/30/97 ......... 1,420 183,435 183,485 (50)
Malaysian Ringgit, expiring
01/02/97-01/06/97............................ 71 28,001 28,024 (23)
---------------
$(58)
===============
</TABLE>
<TABLE>
<CAPTION>
CONTRACT COST ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
GROWTH INVESTORS PORTFOLIO: (000'S) DATE VALUE (DEPRECIATION)
- ----------------------------------------------- ---------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
Japanese Yen, expiring 01/06/97................. 20,600 $ 177,939 $ 177,908 $ (31)
FOREIGN CURRENCY SALE CONTRACTS
Deutsche Marks, expiring 01/21/97-04/30/97 ..... 7,600 5,049,513 4,994,213 55,300
French Francs, expiring 01/03/97................ 600 115,196 115,418 (222)
Japanese Yen, expiring 03/12/97................. 716,700 6,881,535 6,535,060 346,475
Netherland Guilders, expiring
01/21/97-04/28/97.............................. 12,488 7,444,730 7,334,434 110,296
---------------
$511,818
===============
</TABLE>
As of December 31, 1996, 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 GROWTH
MONEY GOVERNMENT QUALITY AND
MARKET SECURITIES BOND HIGH YIELD INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Aggregate gross unrealized appreciation $ 161,362 $ 901,616 $ 2,230,258 $ 8,181,913 $ 29,363,104
Aggregate gross unrealized depreciation (3,841) (280,447) (69,964) (3,017,609) (1,811,069)
-------------- ------------- -------------- -------------- -------------
Net unrealized appreciation.............. $ 157,521 $ 621,169 $ 2,160,294 $ 5,164,304 $ 27,552,035
============== ============= ============== ============== =============
Federal income tax cost of investments .. $450,833,231 $92,000,197 $151,122,493 $192,384,980 $204,211,023
============== ============= ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
EQUITY COMMON
INDEX STOCK GLOBAL INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation . $ 66,168,971 $1,832,534,355 $187,742,897 $ 13,964,200
Aggregate gross unrealized depreciation (3,933,846) (210,788,064) (56,564,269) (9,944,597)
-------------- -------------- -------------- ---------------
Net unrealized appreciation ............. $ 62,235,125 $1,621,746,291 $131,178,628 $ 4,019,603
============== ============== ============== ===============
Federal income tax cost of investments .. $320,809,131 $5,047,205,980 $860,653,361 $145,299,176
============== ============== ============== ===============
</TABLE>
115
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
<TABLE>
<CAPTION>
AGGRESSIVE CONSERVATIVE GROWTH
STOCK INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation . $ 586,112,647 $ 14,217,803 $ 148,244,711 $ 136,653,070
Aggregate gross unrealized depreciation (97,924,279) (4,914,681) (34,205,650) (42,072,029)
-------------- -------------- -------------- ---------------
Net unrealized appreciation ............. $ 488,188,368 $ 9,303,122 $ 114,039,061 $ 94,581,041
============== ============== ============== ===============
Federal income tax cost of investments .. $3,402,294,383 $266,337,374 $1,513,082,539 $1,196,259,689
============== ============== ============== ===============
</TABLE>
During the year ended December 31, 1996, the Quality Bond, High Yield and
Growth and Income Portfolios utilized available capital loss carryforwards of
$395,138, $1,100,531 and $474,588, respectively.
The Intermediate Government Securities Portfolio had net capital loss
carryforwards of $9,831,366 (of which $9,349,227 expires in the year 2002 and
$482,139 expires in the year 2004) and the Quality Bond Portfolio had net
capital loss carryforwards of $4,993,809 which expires 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.
5. Capital Share Transactions
At December 31, 1996, 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 two classes, designated Class
IA and Class IB for each Portfolio.
Transactions in Shares were as follows:
<TABLE>
<CAPTION>
INTERMEDIATE
MONEY MARKET GOVERNMENT SECURITIES
PORTFOLIO PORTFOLIO
------------------------------ ----------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Class IA
Shares sold......... 49,765,857 38,608,910 3,938,806 3,178,905
Shares issued in
reinvestment of
dividends and
distributions ..... 1,878,824 1,793,866 496,768 391,277
-------------- -------------- ------------- -------------
Total shares
issued............. 51,644,681 40,402,776 4,435,574 3,570,182
Shares redeemed..... (44,125,860) (34,441,594) (2,495,957) (1,464,671)
-------------- -------------- ------------- -------------
Net increase
(decrease)......... 7,518,821 5,961,182 1,939,617 2,105,511
============== ============== ============= =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Class IA
Shares sold......... 2,872,392 2,039,780 7,067,122 4,920,577
Shares issued in
reinvestment of
dividends and
distributions ..... 1,135,383 941,017 2,737,878 1,087,864
------------- ------------- ------------- -------------
Total shares
issued............. 4,007,775 2,980,797 9,805,000 6,008,441
Shares redeemed..... (4,048,559) (1,231,693) (2,158,843) (2,047,031)
------------- ------------- ------------- -------------
Net increase
(decrease)......... (40,784) 1,749,104 7,646,157 3,961,410
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND
INCOME EQUITY INDEX COMMON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------- ---------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------ ----------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Class IA
Shares sold................... 9,026,248 5,330,789 16,152,780 12,811,615 43,446,898 32,314,046
Shares issued in reinvestment
of dividends and
distributions ............... 1,157,520 173,344 1,372,168 243,074 39,581,929 20,247,043
------------ ----------- ------------- ------------- -------------- --------------
Total shares issued........... 10,183,768 5,504,133 17,524,948 13,054,689 83,028,827 52,561,089
Shares redeemed .............. (730,115) (375,025) (4,670,841) (4,148,263) (15,634,826) (15,886,663)
------------ ----------- ------------- ------------- -------------- --------------
Net increase ................. 9,453,653 5,129,108 12,854,107 8,906,426 67,394,001 36,674,426
============ =========== ============= ============= ============== ==============
</TABLE>
116
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL AGGRESSIVE STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------------------- ---------------------------
APRIL 3,
YEAR ENDED YEAR ENDED 1995* YEAR ENDED
DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Class IA
Shares sold................... 15,536,853 15,621,046 12,450,977 2,781,575 28,813,436 24,290,758
Shares issued in reinvestment
of dividends and
distributions ............... 3,493,773 1,875,847 409,789 46,457 18,391,950 8,689,767
------------- ------------- ------------- ------------- ------------- -------------
Total shares issued........... 19,030,626 17,496,893 12,860,766 2,828,032 47,205,386 32,980,525
Shares redeemed............... (3,682,913) (4,317,611) (2,284,561) (190,166) (15,090,379) (17,101,621)
------------- ------------- ------------- ------------- ------------- -------------
Net increase ................. 15,347,713 13,179,282 10,576,205 2,637,866 32,115,007 15,878,904
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH
INVESTORS BALANCED INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------- ---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Class IA
Shares sold................... 4,420,391 4,574,632 3,826,284 3,451,513 17,024,570 16,117,087
Shares issued in reinvestment
of dividends and
distributions ............... 1,758,154 1,178,017 11,161,085 5,393,327 9,635,249 2,104,190
------------- ----------- ------------- ------------- ------------- -------------
Total shares issued........... 6,178,545 5,752,649 14,987,369 8,844,840 26,659,819 18,221,277
Shares redeemed............... (3,042,720) (983,364) (7,431,615) (7,393,399) (1,643,924) (1,144,340)
------------- ----------- ------------- ------------- ------------- -------------
Net increase.................. 3,135,825 4,769,285 7,555,754 1,451,441 25,015,895 17,076,937
============= =========== ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET HIGH YIELD COMMON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------- -----------------
OCTOBER 2, 1996* OCTOBER 2, 1996* OCTOBER 2, 1996*
TO TO TO
DECEMBER 31, 1996 DECEMBER 31, 1996 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Class IB
Shares sold ................................................. 353,450 64,659 64,063
Shares issued in reinvestment of dividends and distributions 3,389 3,757 4,203
----------------- ----------------- -----------------
Total shares issued ......................................... 356,839 68,416 68,266
Shares redeemed.............................................. (43,566) -- --
----------------- ----------------- -----------------
Net increase ................................................ 313,273 68,416 68,266
================= ================= =================
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE STOCK GROWTH INVESTORS
PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------- -----------------
OCTOBER 2, 1996* OCTOBER 2, 1996* OCTOBER 2, 1996*
TO TO TO
DECEMBER 31, 1996 DECEMBER 31, 1996 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Class IB
Shares sold ................................................. 16,657 16,059 26,902
Shares issued in reinvestment of dividends and distributions 486 1,035 571
----------------- ----------------- -----------------
Total shares issued ......................................... 17,143 17,094 27,473
Shares redeemed ............................................. -- -- (5)
----------------- ----------------- -----------------
Net increase ................................................ 17,143 17,094 27,468
================= ================= =================
- ------------
* Commencement of operations.
117
<PAGE>
THE HUDSON RIVER TRUST
NOTES TO FINANCIAL STATEMENTS--(Concluded)
December 31, 1996
6. 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 were
affiliates during the year ended December 31, 1996 are summarized as follows:
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE MARKET VALUE REALIZED
DECEMBER 31, PURCHASES SALES AT DECEMBER 31, DIVIDEND GAIN
1995 AT COST COST 1996 INCOME (LOSS)
-------------- ------------- ------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK PORTFOLIO:
CBL & Associates Properties,
Inc. ......................... $ 23,864,100 $ -- $ 389,999 $ 27,872,550 $1,826,496 $ 71,285
Ceridian Corp. ................ -- 147,330,475 -- 148,432,500 -- --
Chris Craft Industries, Inc.
(Class B) .................... 52,926,452 -- 699,730 49,849,843 -- 2,150,539
Essex Property Trust, Inc. (a) 7,026,250 -- 1,419,599 8,583,375 439,632 230,986
Regency Realty Corp. .......... 13,260,075 -- 2,791,249 16,372,125 1,194,671 344,155
-------------- ------------- ------------- -------------- ------------ --------------
$ 97,076,877 $251,110,393 $3,460,799 $ 2,796,965
============== ============= ============= ============== ============ ==============
AGGRESSIVE STOCK PORTFOLIO:
Aames Financial Corp. ......... $ -- $ 42,877,524 $ -- $ 39,907,350 $ -- $ --
AK Steel Holding Corp. ........ -- 51,253,111 -- 52,554,637 143,860 --
Diamond Shamrock, Inc. (b) .... 10,981,350 113,128,651 123,878,953 -- 1,074,864 791,010
DT Industries, Inc. ........... -- 20,039,150 -- 20,366,500 -- --
Evergreen Media Corp. (Class A) -- 70,859,044 -- 62,782,500 -- --
Harman International
Industries, Inc. ............. -- 76,411,622 -- 83,281,750 62,520 --
Healthwise of America, Inc. (c) 36,899,265 -- 21,053,272 -- -- --
Nine West Group, Inc. ......... 87,810,000 60,430,963 16,605,324 144,356,100 -- 9,981,987
Office Max, Inc. .............. 62,813,337 33,646,805 99,154,141 -- -- (11,304,560)
Playboy Enterprises, Inc.
(Class B)..................... 7,798,800 -- 7,372,638 -- -- 2,788,044
Polymer Group, Inc. ........... -- 46,201,327 -- 35,167,575 -- --
Riscorp, Inc. (Class A) ....... -- 30,178,057 30,178,058 -- -- (20,701,356)
Rowan Cos., Inc. (a) .......... 40,817,325 8,147,199 7,648,972 85,646,937 -- 14,436,064
Suburban Lodges of America .... -- 17,834,953 -- 15,078,400 -- --
Sun Healthcare Group, Inc. .... 34,501,950 -- 60,385,693 -- -- (29,805,407)
Telephone & Data Systems, Inc. 117,753,450 2,325,847 5,708,538 104,508,750 1,153,200 598,524
Ultramar Diamond Shamrock Corp.
(b) .......................... -- 126,586,516 -- 132,338,671 -- --
United Healthcare (c) ......... -- 21,053,272 21,053,272 -- -- 13,682,853
USA Waste Services, Inc. (a) .. 47,349,825 61,436,395 25,853,037 109,073,062 977,490 10,711,824
Xtra Corp. .................... 50,417,750 8,070,269 -- 59,701,350 -- --
-------------- ------------- ------------- -------------- ------------ --------------
$497,143,052 $944,763,582 $3,411,934 $ (8,821,017)
============== ============= ============= ============== ============ ==============
GLOBAL PORTFOLIO:
Nelvana Ltd. (a) .............. $ 1,889,495 $ -- $ 59,767 $ 2,159,942 $ -- $ 60,876
============== ============= ============= ============== ============ ==============
</TABLE>
- ------------
(a) Holdings represented less than 5% of outstanding shares at December 31,
1996, although ownership was above 5% for a period of time during the
year.
(b) Exchanged for Ultramar Diamond Shamrock Corp.
(c) Exchanged for United Healthcare.
118
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS
December 31, 1996
SELECTED DATA FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD(C)
MONEY MARKET PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
---------------------------------------------------------- --------------
YEAR ENDED DECEMBER 31, OCTOBER 2,
1996 TO
---------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993* 1992 1996
---------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) ... $ 10.16 $ 10.14 $ 10.12 $ 10.11 $ 10.13 $10.16
---------- ---------- ---------- ---------- ---------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.54 0.57 0.41 0.30 0.37 0.11
Net realized and unrealized gain (loss) on
investments............................... (0.01) -- -- -- (0.01) 0.01
---------- ---------- ---------- ---------- ---------- --------------
Total from investment operations........... 0.53 0.57 0.41 0.30 0.36 0.12
---------- ---------- ---------- ---------- ---------- --------------
LESS DIVIDENDS:
Dividends from net investment income ...... (0.52) (0.55) (0.39) (0.29) (0.38) (0.02)
Dividends in excess of net investment
income.................................... -- -- -- -- -- (0.10)
---------- ---------- ---------- ---------- ---------- --------------
Total dividends............................ (0.52) (0.55) (0.39) (0.29) (0.38) (0.12)
---------- ---------- ---------- ---------- ---------- --------------
Net asset value, end of period ............. $ 10.17 $ 10.16 $ 10.14 $ 10.12 $ 10.11 $10.16
========== ========== ========== ========== ========== ==============
Total return (d)............................ 5.33% 5.74% 4.02% 3.00% 3.57% 1.29%
========== ========== ========== ========== ========== ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........... $463,422 $386,691 $325,391 $248,460 $268,584 $3,184
Ratio of expenses to average net assets .... 0.43% 0.44% 0.42% 0.42% 0.43% 0.67%(b)
Ratio of net investment income to average
net assets................................. 5.17% 5.53% 4.01% 2.91% 3.63% 4.94%(b)
</TABLE>
INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO(E):
<TABLE>
<CAPTION>
CLASS IA
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993* 1992
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) ... $ 9.47 $ 8.87 $ 10.08 $ 10.53 $ 10.73
--------- --------- --------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.54 0.58 0.65 0.59 0.60
Net realized and unrealized gain (loss) on
investments............................... (0.19) 0.57 (1.08) 0.51 (0.02)
--------- --------- --------- ---------- ----------
Total from investment operations .......... 0.35 1.15 (0.43) 1.10 0.58
--------- --------- --------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ...... (0.53) (0.55) (0.78) (0.68) (0.60)
Distributions from realized gains.......... -- -- -- (0.87) (0.18)
--------- --------- --------- ---------- ----------
Total dividends and distributions ........ (0.53) (0.55) (0.78) (1.55) (0.78)
--------- --------- --------- ---------- ----------
Net asset value, end of period.............. $ 9.29 $ 9.47 $ 8.87 $ 10.08 $ 10.53
========= ========= ========= ========== ==========
Total return (d)............................ 3.78% 13.33% (4.37)% 10.58% 5.53%
========= ========= ========= ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........... $88,384 $71,780 $48,518 $158,511 $293,587
Ratio of expenses to average net assets .... 0.56% 0.57% 0.56% 0.53% 0.52%
Ratio of net investment income to average
net assets................................. 5.73% 6.15% 6.75% 5.43% 5.63%
Portfolio turnover rate..................... 318% 255% 133% 254% 316%
</TABLE>
119
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
QUALITY BOND PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------------------
YEAR ENDED DECEMBER 31, OCTOBER 1, 1993
---------------------------------- TO DECEMBER 31,
1996 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (a)............. $9.61 $ 8.72 $ 9.82 $ 10.00
---------- ---------- ---------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................... 0.57 0.57 0.66 0.11
Net realized and unrealized gain (loss) on
investments and foreign currency transactions...... (0.07) 0.88 (1.16) (0.16)
---------- ---------- ---------- -----------------
Total from investment operations.................... 0.50 1.45 (0.50) (0.05)
---------- ---------- ---------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income................ (0.60) (0.56) (0.55) (0.12)
Dividends in excess of net investment income........ (0.02) -- -- --
Distributions in excess of realized gains........... -- -- -- (0.01)
Tax return of capital distributions................. -- -- (0.05) --
---------- ---------- ---------- -----------------
Total dividends and distributions................... (0.62) (0.56) (0.60) (0.13)
---------- ---------- ---------- -----------------
Net asset value, end of period ...................... $9.49 $ 9.61 $ 8.72 $ 9.82
========== ========== ========== =================
Total return (d)..................................... 5.36% 17.02% (5.10)% (0.51)%
========== ========== ========== =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).................... $155,023 $157,443 $127,575 $104,832
Ratio of expenses to average net assets.............. 0.59% 0.59% 0.59% 0.69%(b)
Ratio of net investment income to average net assets. 6.06% 6.13% 7.17% 4.62%(b)
Portfolio turnover rate.............................. 431% 411% 222% 77%
</TABLE>
HIGH YIELD PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
------------------------------------------------------- --------------
OCTOBER 2,
YEAR ENDED DECEMBER 31,
1996 TO
------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993* 1992 1996
---------- ---------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) ... $ 9.64 $ 8.91 $10.08 $ 9.15 $ 8.96 $10.25
---------- ---------- --------- --------- --------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 1.02 0.98 0.89 0.94 0.89 0.19
Net realized and unrealized gain (loss) on
investments............................... 1.07 0.73 (1.17) 1.10 0.19 0.15
---------- ---------- --------- --------- --------- --------------
Total from investment operations........... 2.09 1.71 (0.28) 2.04 1.08 0.34
---------- ---------- --------- --------- --------- --------------
LESS DISTRIBUTIONS:
Dividends from net investment income ...... (0.98) (0.94) (0.88) (0.92) (0.89) (0.03)
Dividends in excess of net investment
income.................................... (0.03) (0.04) (0.01) -- -- (0.25)
Distributions from realized gains.......... (0.70) -- -- (0.19) -- (0.01)
Distributions in excess of realized gains . -- -- -- -- -- (0.29)
---------- ---------- --------- --------- --------- --------------
Total dividends and distributions.......... (1.71) (0.98) (0.89) (1.11) (0.89) (0.58)
---------- ---------- --------- --------- --------- --------------
Net asset value, end of period ............. $ 10.02 $ 9.64 $8.91 $ 10.08 $ 9.15 $10.01
========== ========== ========= ========= ========= ==============
Total return (d)............................ 22.89% 19.92% (2.79)% 23.15% 12.31% 3.32%
========== ========== ========= ========= ========= ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........... $199,360 $118,129 $73,895 $67,169 $47,687 $ 685
Ratio of expenses to average net assets .... 0.59% 0.60% 0.61% 0.63% 0.60% 0.82%(b)
Ratio of net investment income to average
net assets................................. 9.93% 10.34% 9.23% 9.52% 9.58% 8.71%(b)
Portfolio turnover rate..................... 485% 350% 248% 280% 177% 485%
</TABLE>
120
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
GROWTH AND INCOME PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
---------------------------------------------------
OCTOBER 1, 1993
YEAR ENDED DECEMBER 31, TO
-------------------------------- DECMBER 31, 1993
1996 1995 1994
---------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (a) ............... $ 11.70 $ 9.70 $ 9.95 $10.00
---------- --------- --------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.24 0.33 0.31 0.03
Net realized and unrealized gain (loss) on investments 2.05 1.97 (0.36) (0.06)
---------- --------- --------- -----------------
Total from investment operations ...................... 2.29 2.30 (0.05) (0.03)
---------- --------- --------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.23) (0.30) (0.20) (0.02)
Dividends in excess of net investment income ......... -- -- -- (0.00)
Distributions from realized gains...................... (0.75) -- -- --
Tax return of capital distributions ................... -- -- -- (0.00)
---------- --------- --------- -----------------
Total dividends and distributions ..................... (0.98) (0.30) (0.20) (0.02)
---------- --------- --------- -----------------
Net asset value, end of period ......................... $ 13.01 $ 11.70 $ 9.70 $ 9.95
========== ========= ========= =================
Total return (d) ....................................... 20.09% 24.07% (0.58)% (0.25)%
========== ========= ========= =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...................... $232,080 $98,053 $31,522 $1,456
Ratio of expenses to average net assets................. 0.58% 0.60% 0.78% 2.70%(b)
Ratio of net investment income to average net asset ... 1.94% 3.11% 3.13% 1.12%(b)
Portfolio turnover rate ................................ 88% 65% 52% 48%
Average commission rate paid (f)........................ $0.0604 -- -- --
</TABLE>
EQUITY INDEX PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
-----------------------------------------
YEAR ENDED DECEMBER
31,
---------------------- MARCH 1, 1994 TO
1996 1995 DECEMBER 31, 1994
---------- ---------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period (a) ............... $13.13 $ 9.87 $10.00
---------- ---------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.27 0.26 0.20
Net realized and unrealized gain (loss) on investments 2.65 3.32 (0.09)
---------- ---------- -----------------
Total from investment operations...................... 2.92 3.58 0.11
---------- ---------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income ................. (0.25) (0.22) (0.20)
Distributions from realized gains .................... (0.64) (0.09) (0.03)
Distributions in excess of realized gains ............ -- (0.01) (0.01)
---------- ---------- -----------------
Total dividends and distributions .................... (0.89) (0.32) (0.24)
---------- ---------- -----------------
Net asset value, end of period ......................... $15.16 $13.13 $ 9.87
========== ========== =================
Total return (d) ....................................... 22.39% 36.48% 1.08%
========== ========== =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...................... $386,249 $165,785 $36,748
Ratio of expenses to average net assets ................ 0.39% 0.48% 0.49%(b)
Ratio of net investment income to average net assets .. 1.91% 2.16% 2.42%(b)
Portfolio turnover rate ................................ 15% 9% 7%
Average commission rate paid (f)........................ $0.0306 -- --
</TABLE>
121
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
COMMON STOCK PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
------------------------------------------------------------------- --------------
OCTOBER 2,
YEAR ENDED DECEMBER 31,
1996 TO
------------------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993* 1992 1996
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (a)...................... $16.48 $ 13.36 $ 14.65 $ 13.49 $ 14.18 $17.90
------------ ------------ ------------ ------------ ------------ --------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ......... 0.15 0.20 0.20 0.23 0.24 0.02
Net realized and unrealized
gain (loss) on
investments and foreign
currency
transactions.................. 3.73 4.12 (0.51) 3.10 0.20 1.52
------------ ------------ ------------ ------------ ------------ --------------
Total from investment
operations.................... 3.88 4.32 (0.31) 3.33 0.44 1.54
------------ ------------ ------------ ------------ ------------ --------------
LESS DISTRIBUTIONS:
Dividends from net investment
income........................ (0.15) (0.20) (0.19) (0.23) (0.24) (0.00 )
Dividends in excess of net
investment
income........................ -- (0.02) (0.01) (0.00) -- (0.03 )
Distributions from realized
gains......................... (1.76) (0.95) (0.77) (1.94) (0.89) (0.16 )
Distributions in excess of
realized gains ............... (0.22) (0.03) -- -- -- (1.03 )
Tax return of capital
distributions ................ -- -- (0.01) -- -- --
------------ ------------ ------------ ------------ ------------ --------------
Total dividends and
distributions................. (2.13) (1.20) (0.98) (2.17) (1.13) (1.22 )
------------ ------------ ------------ ------------ ------------ --------------
Net asset value, end of period .. $18.23 $ 16.48 $ 13.36 $ 14.65 $ 13.49 $18.22
============ ============ ============ ============ ============ ==============
Total return (d)................. 24.28% 32.45% (2.14)% 24.84% 3.22% 8.49 %
============ ============ ============ ============ ============ ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) ........................ $6,625,390 $4,879,677 $3,466,245 $3,125,128 $2,307,292 $1,244
Ratio of expenses to average net
assets ......................... 0.38% 0.38% 0.38% 0.38% 0.38% 0.63 %(b)
Ratio of net investment income to
average net assets ............. 0.85% 1.27% 1.40% 1.55% 1.73% 0.61 %(b)
Portfolio turnover rate ......... 55% 61% 52% 82% 71% 55 %
Average commission rate paid (f) $0.0565 -- -- -- -- $0.0565
</TABLE>
122
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
GLOBAL PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
----------------------------------------------------------- --------------
OCTOBER 2,
YEAR ENDED DECEMBER 31,
1996 TO
----------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993* 1992 1996
------------ ---------- ---------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) .. $15.74 $ 13.87 $ 13.62 $ 11.41 $ 11.64 $ 16.57
------------ ---------- ---------- ---------- --------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.21 0.26 0.20 0.08 0.14 0.02
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions............................. 2.05 2.32 0.52 3.58 (0.20) 0.81
------------ ---------- ---------- ---------- --------- --------------
Total from investment operations.......... 2.26 2.58 0.72 3.66 (0.06) 0.83
------------ ---------- ---------- ---------- --------- --------------
LESS DISTRIBUTIONS:
Dividends from net investment income ..... (0.21) (0.25) (0.17) (0.15) (0.11) --
Dividends in excess of net investment
income................................... (0.08) -- -- -- -- (0.11)
Distributions from realized gains ....... (0.79) (0.42) (0.28) (1.30) (0.06) (0.10)
Distributions in excess of realized
gains..................................... -- (0.03) (0.00) (0.00) -- (0.28)
Tax return of capital distributions ..... (0.00) (0.01) (0.02) -- -- (0.00)
------------ ---------- ---------- ---------- --------- --------------
Total dividends and distributions ....... (1.08) (0.71) (0.47) (1.45) (0.17) (0.49)
------------ ---------- ---------- ---------- --------- --------------
Net asset value, end of period............. $16.92 $ 15.74 $ 13.87 $ 13.62 $ 11.41 $ 16.91
============ ========== ========== ========== ========= ==============
Total return (d) .......................... 14.60% 18.81% 5.23% 32.09% (0.50)% 4.98%
============ ========== ========== ========== ========= ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ........ $997,041 $686,140 $421,698 $141,257 $49,171 $ 290
Ratio of expenses to average net assets .. 0.60% 0.61% 0.69% 0.84% 0.70% 0.86%(b)
Ratio of net investment income to average
net assets ............................... 1.28% 1.76% 1.41% 0.62% 1.20% 0.48%(b)
Portfolio turnover rate ................... 59% 67% 71% 150% 216% 59%
Average commission rate paid (f)........... $0.0418 -- -- -- -- $0.0418
</TABLE>
INTERNATIONAL PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
------------------------------------
APRIL 3, 1995
YEAR ENDED TO
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period (a) ............. $10.87 $10.00
----------------- -----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .............................. 0.13 0.14
Net realized and unrealized gain on investments .... 0.94 0.98
----------------- -----------------
Total from investment operations.................... 1.07 1.12
----------------- -----------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............... (0.10) (0.07)
Dividends in excess of net investment income ....... (0.09) (0.13)
Distributions from realized gains .................. (0.25) (0.05)
----------------- -----------------
Total dividends and distributions .................. (0.44) (0.25)
----------------- -----------------
Net asset value, end of period ....................... $11.50 $10.87
================= =================
Total return (d) ..................................... 9.82% 11.29%
================= =================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .................... $151,907 $28,684
Ratio of expenses to average net assets .............. 1.06% 1.03%(b)
Ratio of net investment income to average net assets 1.10% 1.71%(b)
Portfolio turnover rate .............................. 48% 56%
Average commission rate paid (f) ..................... $0.0251 --
</TABLE>
123
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
AGGRESSIVE STOCK PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
------------------------------------------------------------------- --------------
YEAR ENDED DECEMBER 31, OCTOBER 2,
1996 TO
------------------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993* 1992 1996
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (a)...................... $35.68 $ 30.63 $31.89 $ 29.81 $ 33.82 $ 37.28
------------ ------------ ------------ ------------ ------------ --------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .......... 0.09 0.10 0.04 0.09 0.17 (0.01)
Net realized and unrealized gain
(loss) on investments ......... 7.52 9.54 (1.26) 4.91 (1.25) 0.85
------------ ------------ ------------ ------------ ------------ --------------
Total from investment operations 7.61 9.64 (1.22) 5.00 (1.08) 0.84
------------ ------------ ------------ ------------ ------------ --------------
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.09) (0.10) (0.04) (0.09) (0.18) --
Dividends in excess of net
investment income.............. (0.00) -- -- -- -- (0.02)
Distributions from realized
gains .......................... (7.33) (4.49) -- (2.75) (2.75) (0.23)
Distributions in excess of
realized gains ................ (0.02) -- -- (0.07) -- (2.04)
Tax return of capital
distributions................... -- -- (0.00) (0.01) -- --
------------ ------------ ------------ ------------ ------------ --------------
Total dividends and
distributions................... (7.44) (4.59) (0.04) (2.92) (2.93) (2.29)
------------ ------------ ------------ ------------ ------------ --------------
Net asset value, end of period .. $35.85 $ 35.68 $ 30.63 $ 31.89 $ 29.81 $ 35.83
============ ============ ============ ============ ============ ==============
Total return (d)................. 22.20% 31.63% (3.81)% 16.77% (3.16)% 2.32%
============ ============ ============ ============ ============ ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)......................... $3,865,256 $2,700,515 $1,832,164 $1,557,332 $1,210,576 $ 613
Ratio of expenses to average net
assets ......................... 0.48% 0.49% 0.49% 0.49% 0.50% 0.73%(b)
Ratio of net investment income
(loss) to average net assets ... 0.24% 0.28% 0.12% 0.28% 0.57% (0.10)%(b)
Portfolio turnover rate ......... 108% 127% 92% 89% 68% 108%
Average commission rate paid (f) $0.0263 -- -- -- -- $0.0263
</TABLE>
CONSERVATIVE INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993* 1992
----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) .... $11.52 $ 10.15 $ 11.12 $ 10.94 $ 11.29
----------- ---------- ---------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.50 0.60 0.55 0.52 0.64
Net realized and unrealized gain (loss) on
investments................................. 0.07 1.43 (1.00) 0.65 (0.01)
----------- ---------- ---------- ---------- ---------
Total from investment operations............. 0.57 2.03 (0.45) 1.17 0.63
----------- ---------- ---------- ---------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income ....... (0.51) (0.59) (0.52) (0.50) (0.62)
Dividends in excess of net investment
income...................................... -- -- -- (0.00) --
Distributions from realized gains ........... (0.27) (0.07) -- (0.49) (0.36)
Distributions in excess of realized gains ... (0.02) -- -- -- --
----------- ---------- ---------- ---------- ---------
Total dividends and distributions............ (0.80) (0.66) (0.52) (0.99) (0.98)
----------- ---------- ---------- ---------- ---------
Net asset value, end of period................ $11.29 $ 11.52 $ 10.15 $ 11.12 $ 10.94
=========== ========== ========== ========== =========
Total return (d) ............................. 5.21% 20.40% (4.10)% 10.76% 5.64 %
=========== ========== ========== ========== =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............. $282,402 $252,101 $173,691 $114,418 $70,675
Ratio of expenses to average net assets ..... 0.61% 0.59% 0.59% 0.60% 0.61%
Ratio of net investment income to average net
assets ...................................... 4.48% 5.48% 5.22% 4.49% 5.77%
Portfolio turnover rate ...................... 181% 287% 228% 178% 136%
Average commission rate paid (f) ............. $0.0488 -- -- -- --
</TABLE>
124
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Continued)
December 31, 1996
BALANCED PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993* 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period (a) ..... $16.76 $14.87 $16.67 $16.19 $18.48
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................ 0.53 0.54 0.45 0.50 0.56
Net realized and unrealized gain (loss) on
investments................................. 1.31 2.36 (1.78) 1.46 (1.11 )
------------ ------------ ------------ ------------ ------------
Total from investment operations............. 1.84 2.90 (1.33) 1.96 (0.55 )
------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.53) (0.54) (0.44) (0.50 ) (0.55 )
Dividends in excess of net investment
income...................................... -- -- (0.03) -- --
Distributions from realized gains............ (1.40) (0.47) -- (0.95 ) (1.19 )
Distributions in excess of realized gains ... (0.03) -- -- (0.03 ) --
Tax return of capital distributions ......... -- -- (0.00) -- --
------------ ------------ ------------ ------------ ------------
Total dividends and distributions............ (1.96) (1.01) (0.47) (1.48 ) (1.74 )
------------ ------------ ------------ ------------ ------------
Net asset value, end of period ............... $16.64 $16.76 $14.87 $16.67 $16.19
============ ============ ============ ============ ============
Total return (d).............................. 11.68% 19.75% (8.02)% 12.28 % (2.85 )%
============ ============ ============ ============ ============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............. $1,637,856 $1,523,142 $1,329,820 $1,364,640 $1,076,670
Ratio of expenses to average net assets ...... 0.41% 0.40% 0.39% 0.39 % 0.40 %
Ratio of net investment income to average net
assets....................................... 3.15% 3.33% 2.87% 2.99 % 3.30 %
Portfolio turnover rate....................... 177% 186% 115% 99 % 91 %
Average commission rate paid (f) ............. $0.0516 -- -- -- --
</TABLE>
GROWTH INVESTORS PORTFOLIO:
<TABLE>
<CAPTION>
CLASS IA CLASS IB
------------------------------------------------------------ --------------
YEAR ENDED DECEMBER 31, OCTOBER 2,
1996 TO
------------------------------------------------------------ DECEMBER 31,
1996 1995 1994 1993* 1992 1996
------------ ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period
(a).................................... $17.68 $ 14.66 $ 15.61 $ 14.69 $ 15.17 $ 16.78
------------ ---------- ---------- ---------- ---------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................ 0.40 0.57 0.50 0.43 0.44 0.07
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions .............. 1.66 3.24 (0.98) 1.79 0.28 0.71
------------ ---------- ---------- ---------- ---------- --------------
Total from investment operations ..... 2.06 3.81 (0.48) 2.22 0.72 0.78
------------ ---------- ---------- ---------- ---------- --------------
LESS DISTRIBUTIONS:
Dividends from net investment income . (0.40 ) (0.54) (0.46) (0.42) (0.41) (0.02 )
Dividends in excess of net investment
income ............................. (0.03 ) (0.01) (0.01) -- -- (0.09 )
Distributions from realized gains .... (2.10 ) (0.24) -- (0.88) (0.79) (0.02 )
Distributions in excess of realized
gains ............................... (0.01 ) -- -- -- -- (0.24 )
------------ ---------- ---------- ---------- ---------- --------------
Total dividends and distributions .... (2.54 ) (0.79) (0.47) (1.30) (1.20) (0.37 )
------------ ---------- ---------- ---------- ---------- --------------
Net asset value, end of period ......... $17.20 $ 17.68 $ 14.66 $ 15.61 $ 14.69 $ 17.19
============ ========== ========== ========== ========== ==============
Total return (d)........................ 12.61 % 26.37% (3.15)% 15.26% 4.85% 4.64 %
============ ========== ========== ========== ========== ==============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...... $1,301,643 $896,134 $492,478 $278,467 $148,650 $ 472
Ratio of expenses to average net
assets................................ 0.57 % 0.56% 0.59% 0.62% 0.60% 0.84 %(b)
Ratio of net investment income to
average net assets.................... 2.31 % 3.43% 3.32% 2.71% 3.00% 1.69 %(b)
Portfolio turnover rate ................ 190 % 107% 131% 118% 129% 190 %
Average commission rate paid (f) ...... $0.0495 -- -- -- -- $0.0495
</TABLE>
125
<PAGE>
THE HUDSON RIVER TRUST
FINANCIAL HIGHLIGHTS--(Concluded)
December 31, 1996
* 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.
(a) Date as of which funds were first allocated to the Portfolios are as
follows:
Class IA:
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
International Portfolio--April 3, 1995
Class IB:
Money Market, High Yield, Common Stock, Global, Aggressive Stock
and Growth Investors Portfolios--October 2, 1996.
(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.
(f) For fiscal years beginning on or after September 1, 1995, a portfolio
is required to disclose its average commission rate paid per share for
security trades on which commissions are charged.
126
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders 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, Growth and Income Portfolio, Equity Index
Portfolio, Common Stock Portfolio, Global Portfolio, International Portfolio,
Aggressive Stock Portfolio, Conservative Investors Portfolio, Balanced
Portfolio and Growth Investors Portfolio (constituting The Hudson River
Trust, hereafter referred to as the "Trust") at December 31, 1996, the
results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended
and the financial highlights for each of the periods presented, 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, 1996 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 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 10036
February 10, 1997
127
<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
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
(a) Financial Statements:
The following financial statements are filed as part of this amended Registration Statement.
Included in Part A--Prospectus of the Registration Statement: Financial Highlights.
Included in Part B--Statement of Additional Information of the Registration Statement:
Audited Statements of Assets and Liabilities as of December 31, 1996.
Audited Statements of Operations for the year ended December 31, 1996.
Audited Statements of Changes in Net Assets of the Alliance Common Stock, Alliance Money Market,
Alliance Balanced, Alliance Aggressive Stock, Alliance High Yield, Alliance Global, Alliance Conservative
Investors, Alliance Growth Investors, Alliance Quality Bond, Alliance Growth and Income, Alliance
Equity Index and Alliance Intermediate Government Securities Portfolios for the years ended December
31, 1996 and 1995 and of the Alliance International Portfolio for the year ended December 31, 1996
and for the period from April 3, 1995 (date of commencement of operations) through December 31, 1995.
Alliance Money Market Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance Intermediate Government Securities Portfolio Audited Portfolio of Investments as of December
31, 1996.
Alliance Quality Bond Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance High Yield Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance Balanced Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance Growth and Income Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance Equity Index Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance Common Stock Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance Global Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance Aggressive Stock Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance Conservative Investors Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance Growth Investors Portfolio Audited Portfolio of Investments as of December 31, 1996.
Alliance International Portfolio Audited Portfolio of Investments as of December 31, 1996.
Notes to Financial Statements.
Financial Highlights.
Report of Independent Accountants.
</TABLE>
- ------------
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(b) Exhibits:
The following exhibits are filed herewith or incorporated by reference to the filing indicated:
(1) Amended and Restated Agreement and Declaration of Trust of the Trust.
(2) By-Laws of the Trust.
(3) Not applicable.
(4)(a) Portions of Amended and Restated Agreement and Declaration of Trust relating to shareholders' rights
(previously filed with Post-Effective Amendment No. 28 on February 14, 1997).
(4)(b) Portions of By-Laws of the Trust relating to shareholders' rights (previously filed with Post-Effective
Amendment No. 28 on February 14, 1997).
(5) Investment Advisory Agreement between the Trust and Alliance dated May 1, 1997.
(6)(a) Class IA Distribution Agreement between the Trust and EQ Financial Consultants, Inc. (previously filed
with Post-Effective Amendment No. 27 on May 9, 1996).
(6)(b) Class IB Distribution Agreement between the Trust and Equitable Distributors, Inc. (previously filed
with Post-Effective Amendment No. 27 on May 9, 1996).
(7) Not applicable.
(8) Custodian Agreement between the Trust and Chase, dated August 25, 1988.
(10) Not applicable.
(11)(a) Consent of Price Waterhouse LLP.
(11)(b) Powers of Attorney.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Rule 12b-1 Plan (previously filed with Post-Effective Amendment No. 27 on May 9, 1996).
(16) Schedule for computation of Portfolio yield quotations and total return (previously filed with Post-Effective
Amendment No. 26 on May 1, 1996).
(17) Financial Data Schedules.
(18) Rule 18f-3 Plan (previously filed with Post-Effective Amendment No. 27 on May 9, 1996).
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Equitable controls the Trust by virtue of their ownership of 99.7% of the
Trust's shares as of March 31, 1997. All Trust shareholders are required to
solicit instructions from their policyowners as to certain matters. The Trust
also offers its shares to insurance companies unaffiliated with Equitable.
On July 22, 1992, Equitable converted from a New York mutual life
insurance company to a publicly-owned New York stock life insurance company.
At that time Equitable became a wholly-owned subsidiary of The Equitable
Companies Incorporated ("Holding Company" or "EQ") and currently Equitable
constitutes the Holding Company's only operating business.
2
<PAGE>
The largest stockholder of the Holding Company is AXA, a French insurance
holding company. AXA currently owns approximately 60% of the outstanding
shares of common stock of the Holding Company plus convertible preferred
stock. AXA, a public company with shares traded on the Paris Bourse (the
French stock exchange), 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 response to Item 26 included in Post-Effective Amendment No. 5 to the
Registration Statement on Form N-4 for Separate Account A of Equitable (File
Nos. 33-47949 and 811-1705) is incorporated herein by reference.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS AS OF MARCH 31, 1997
- -------------------------------- ----------------------------------------------
<S> <C>
Class IA shares of beneficial
interest 17
Class IB 1
</TABLE>
ITEM 27. INDEMNIFICATION
DECLARATION OF TRUST
The Declaration of Trust provides in substance that no Trustee or officer
and no investment adviser or other third party shall be liable to the Trust,
its shareholders, or to any shareholder, Trustee, officer, employee or agent
for any action or failure to act, except upon a showing of bad faith, willful
misfeasance, gross negligence or reckless disregard of duties. The
Declaration of Trust further provides in substance that, with the exceptions
stated above, a Trustee or officer of the Trust is entitled to be indemnified
against all liability incurred in connection with the affairs of the Trust.
In addition, the Declaration of Trust authorizes the Trust to purchase and
pay for liability insurance to indemnify the Trustees and officers against
certain claims and liabilities.
MASSACHUSETTS LAW
Under Massachusetts law, shareholders of a Massachusetts business trust
such as the Trust may, under certain circumstances, be held personally liable
as partners for the obligations of the Trust. The Trust's Declaration of
Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Trust or the Trustees.
INSURANCE
To the extent permitted by New York law and subject to all applicable
requirements thereof, Equitable has undertaken to indemnify each Trustee and
officer of the Trust, so long as Equitable indirectly controls the Trust, who
is made or threatened to be made a party to any action or proceeding, whether
civil or criminal, by reason of the fact that he or she, his or her testator
or intestate, is or was a Trustee or officer of the Trust.
The Trustees and officers are insured under a policy issued by Lloyd's of
London to Equitable and certain affiliates:
Annual Limit: $25,000,000
Deductible: $5,000,000 each loss and aggregate for company
retention, nil per trustee and officer individually.
The Trustees and officers are also insured under a policy issued by X.L.
Insurance Company of $25,000,000 coverage and a policy issued by A.C.E.
Insurance Company of $50,000,000 coverage excess of the Lloyd's policy.
UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing
3
<PAGE>
provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The descriptions of Alliance Capital Management L.P. under the caption
"Management of the Trust" in the Prospectus and under the caption "Investment
Advisory and Other Services" in the Statement of Additional Information
constituting Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein.
The information as to the directors and executive officers of Alliance
Capital Management Corporation, the general partner of Alliance Capital
Management L.P., set forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on April 21, 1988 (File No.
801-32361) and amended through the date hereof, is incorporated by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) EQ Financial Consultants, Inc. is the principal underwriter of the
Trust's Class IA shares, and Equitable Distributors, Inc. is the principal
underwriter of the Trust's Class IB shares.
(b) Set forth below is certain information regarding the directors and
officers of EQ Financial Consultants, Inc., the principal underwriter of the
Trust's Class IA shares, and of Equitable Distributors, Inc., the principal
underwriter of the Trust's Class IB shares. The business address of the
persons whose names are preceded by a single asterisk is 1290 Avenue of the
Americas, New York, New York 10104. The business address of the persons whose
names are preceded by a double asterisk is 1755 Broadway, 3rd Floor, New
York, New York 10019. Mr. Higgins' business address is 6301 Morrison
Boulevard, Charlotte, North Carolina 28211. Mr. Witte's business address is
135 West Fiftieth Street, 4th Floor, New York, New York 10020. Mr.
Kornweiss's business address is 4251 Crums Mill Road, Harrisburg, PA 17112.
Mr. Bullen's and Ms. Russo's business address is 200 Plaza Drive, Secaucus,
New Jersey 07096. The business address for Messrs. Brakovich, Shepherdson and
Meserve is 660 Newport Center Drive, Suite 1200, Newport Beach, California
92660.
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS EQ FINANCIAL CONSULTANTS, INC. REGISTRANT
- -------------------------- ----------------------------------------------------- ------------------
<S> <C> <C>
DIRECTORS
*Derry E. Bishop Director None
*Harvey Blitz Director None
*Michael S. Martin Director Vice President
**Michael F. McNelis Director None
*Richard V. Silver Director None
*Mark R. Wutt Director None
OFFICERS
*Michael S. Martin Chairman of the Board and Chief Executive Officer Vice President
**Michael F. McNelis President and Chief Operating Officer None
*Derry E. Bishop Executive Vice President None
*Gordon G. Dinsmore Executive Vice President None
4
<PAGE>
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS EQ FINANCIAL CONSULTANTS, INC. REGISTRANT
- -------------------------- ----------------------------------------------------- ------------------
**Martin J. Telles Executive Vice President and Chief Marketing Officer None
*Fred A. Folco Executive Vice President None
*Thomas J. Duddy, Jr. Executive Vice President None
*William J. Green Executive Vice President None
*A. Frank Beaz Executive Vice President None
Dennis D. Witte Executive Vice President None
**Robert McKenna Senior Vice President and Chief Financial Officer None
**Theresa A. Nurge-Alws Senior Vice President None
Mary P. Breen Vice President and Counsel None
**Ronald Boswell First Vice President None
**Donna M. Dazzo First Vice President None
*Michael Brzozowski Vice President and Compliance Director None
**Amy Franceschini Vice President None
**Linda Funigiello Vice President None
**James Furlong Vice President None
**Richard Koll Vice President None
Peter R. Kornweiss Vice President None
**Frank Lupo Vice President None
**T.S. Narayanan Vice President None
*Janet E. Hannon Secretary None
*Linda J. Galasso Assistant Secretary None
*Harvey Blitz Executive Vice President None
*Peter D. Noris Executive Vice President Trustee
**James R. Anderson Vice President None
*Raymond T. Barry Vice President None
**Rosemary Magee Vice President None
**Laura A. Pellegrini Vice President None
Edna Russo First Vice President None
*Rose A. Osorio Vice President None
**T.S. Narayanan Vice President None
</TABLE>
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS EQUITABLE DISTRIBUTORS, INC. REGISTRANT
- ------------------------------ ------------------------------------------------ -----------------
<S> <C> <C>
DIRECTORS
*Greg Brakovich Director None
*Jerome S. Golden Director None
*William T. McCaffrey Director None
*James A. Shepherdson, III Director None
OFFICERS
*Jerome S. Golden Chairman of the Board None
Greg Brakovich Co-President, Co-Chief Executive Officer and None
Managing Director
James A. Shepherdson, III Co-President, Co-Chief Executive Officer and None
Managing Director
5
<PAGE>
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS EQUITABLE DISTRIBUTORS, INC. REGISTRANT
- ------------------------------ ------------------------------------------------ -----------------
Dennis D. Witte Senior Vice President None
Phillipe D. Meserve Managing Director None
Thomas D. Bullen Chief Financial Officer None
*Michael Brzozowski Chief Compliance Officer None
Mary P. Breen Vice President None
*Ronald R. Quist Treasurer None
*Janet Hannon Secretary None
*Linda J. Galasso Assistant Secretary None
</TABLE>
(c) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The Trust's accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules thereunder are in
the physical possession of the following:
The Trust
Rule 31a-1(b)(4)
Rule 31a-2(a)(1)
Alliance Capital Management Corporation
135 West 50th Street
New York, New York 10019
Rule 31a-1(b)(1)-(3),(5)-(12)
Rule 31a-2(a)(1)-(2)
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081
Rule 31a-1(b)(2)-(3)
Rule 31a-2(a)(2)
ITEM 31. MANAGEMENT SERVICES
Inapplicable.
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
***************
NOTICE
A copy of the Declaration of Trust of The Hudson River Trust (the "Trust")
is on file with the Secretary of State of The Commonwealth of Massachusetts
and notice is hereby given that this Registration Statement has been executed
on behalf of the Trust by an officer of the Trust as an officer and by its
Trustees as trustees and not individually and the obligations of or arising
out of this Registration Statement are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon the assets
and property of the Trust.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and the State
of New York on the 30th day of April 1997.
THE HUDSON RIVER TRUST
By: /s/ Kathleen A. Corbet
-------------------------------
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
PRINCIPAL EXECUTIVE OFFICER:
John D. Carifa,
President and Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER:
Mark D. Gersten,
Treasurer and Chief Financial Officer
PRINCIPAL ACCOUNTING OFFICER:
Thomas R. Manley,
Controller and Chief Accounting Officer
TRUSTEES:
John D. Carifa
Richard W. Couper
Brenton W. Harries
Howard E. Hassler
William L. Mannion
Alton G. Marshall
Clifford L. Michel
Peter D. Noris
Donald J. Robinson
By: /s/ Edmund P. Bergan, Jr.
-------------------------------
Edmund P. Bergan, Jr.
As Attorney-in-Fact
April 30, 1997
7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
(1) Amended and Restated Agreement and Declaration of Trust of the Trust.
(5) Investment Advisory Agreement between the Trust and Alliance.
(6)(a) Class IA Distribution Agreement between the Trust and EQ Financial Consultants, Inc.
(6)(b) Class IB Distribution Agreement between the Trust and Equitable Distributors, Inc.
(8) Custodian Agreement between the Trust and Chase.
(11)(a) Consent of Price Waterhouse LLP.
(11)(b) Powers of Attorney.
(27) Financial Data Schedules.
</TABLE>
<PAGE>
THE HUDSON RIVER TRUST
-----------------
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
-----------------
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
made in this 11th day of April, 1997 (as so amended and restated, the
"Declaration of Trust"), by the Trustees hereunder, and by the holders of
shares of beneficial interest to be issued hereunder as hereinafter provided.
WHEREAS, pursuant to Section 10.3 of Article X of the Declaration of
Trust the Trustees of the Trust have determined that the Declaration of Trust
should be amended and restated; and
WHEREAS, the shareholders have duly approved this Declaration of
Trust;
NOW, THEREFORE, the Trustees of this Trust direct that this
Declaration of Trust be filed with the Secretary of State of The Commonwealth
of Massachusetts and that this Declaration of Trust shall take effect as of
the date of filing.
WITNESSETH that
WHEREAS, this Trust was established on July 10, 1987 by an Agreement
and Declaration and Trust of the same date executed and delivered in Boston,
Massachusetts; and
WHEREAS, this Trust was formed to establish a trust fund for the
purpose of investing and reinvesting the assets of insurance company separate
accounts and such other assets as may be held by it; and
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts voluntary association with
transferable shares in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets, which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same
upon the following terms and conditions for the pro rata benefit of the
holders from time to time of Shares in this Trust as hereinafter set forth.
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
1.1 Name. This Trust shall be known as "The Hudson River Trust,"
and the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.
1.2 Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust
established by Agreement and Declaration of Trust dated July 10, 1987, as
amended from time to time, and as amended and restated herein;
(b) "Trustees" refers to the Trustees of the Trust named herein
or elected in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be divided from
time to time or, if more than one series or class of Shares is authorized by
the Trustees, the equal proportionate transferable units into which each
series or class of Shares shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Principal Underwriter" and "Majority Shareholder Vote"
(the 67% or 50% requirement of the third sentence of Section 2(a)(42) of the
1940 Act, whichever may be applicable) shall have the meanings given them in
the 1940 Act;
(g) "Declaration of Trust" shall mean this Amended and
Restated Agreement and Declaration of Trust as amended or restated from time
to time; and
(h) "Bylaws" shall mean the Bylaws of the Trust as amended from
time to time.
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ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to provide investors a managed investment
primarily in securities, commodities and other investment media and to carry
on such other business as the Trustees may from time to time determine
pursuant to their authority under this Declaration of Trust.
ARTICLE III
SHARES
3.1 Division of Beneficial Interest. The Shares of the Trust
shall be issued with or without par value and shall be issued in one or
more series as the Trustees may, without shareholder approval, authorize. Each
series shall be preferred over all other series in respect of the assets
allocated to that series. The Shares of any series may be issued in two or
more classes, as the Trustees may, without Shareholder approval, authorize.
Unless the Trustees have authorized the issuance of Shares of a series in two
or more classes, each Share of a series shall represent an equal proportionate
interest in the assets and liabilities of the series with each other Share of
the same series, none having priority or preference over another. If the
Trustees have authorized the issuance of Shares of a series in two or more
classes, then the classes may have such variations as to dividend, redemption,
and voting rights, net asset values, expenses borne by the classes, and other
matters as the Trustees have authorized. The number of Shares authorized shall
be unlimited. The Trustees may from time to time divide or combine the Shares
of any series or of any class of a series into a greater or lesser number
without thereby changing the proportionate beneficial interests in the series
or class.
3.2 Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent. No
certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of Share certificates, the
transfer of Shares and similar matters. The record books of the Trust as kept
by the Trust or any transfer or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders of each series or class and as to
the number of Shares of each series or class held from time to time by each
Shareholder.
3.3 Investment in the Trust. The Trustees shall accept
investments in the Trust from such persons and on such terms and for such
consideration, which may consist of cash or tangible or intangible property or
a combination thereof, as they from time to time authorize.
All consideration received by the Trust for the issue or sale of
Shares of each series, together with all income, earnings, profits, and
proceeds thereof, including any proceeds
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derived from the sale, exchange or liquidation thereof, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be shall irrevocably belong to the series of Shares with respect to
which the same were received by the Trust for all purposes, subject only to
the rights of creditors, and shall be so handled upon the books of account of
the Trust and are herein referred to as "assets of" such series.
3.4 No Preemptive Rights. Shareholders shall have no preemptive
or other right to subscribe to any additional Shares or other securities
issued by the Trust.
3.5 Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in
this instrument. Every shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the continuance
of the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to
the rights of said decedent under this Trust. Ownership of Shares shall not
entitle the Shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of the same or for
an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or
agent of the Trust shall have any power to bind personally any Shareholder,
nor except as specifically provided herein to call upon any Shareholder for
the payment of any sum of money or assessment whatsoever other than such as
the Shareholder may at any time personally agree to pay.
ARTICLE IV
THE TRUSTEES
4.1 Election. The number of Trustees shall be as provided in the
Bylaws or as fixed from time to time by the Trustees. The Shareholders may
elect Trustees at any meeting of Shareholders called by the Trustees for that
purpose. Each Trustee shall serve during the continued lifetime of the Trust
until he dies, resigns or is removed, or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees and the election and
qualification of his successor. Any Trustee may resign at any time by written
instrument signed by him and delivered to any officer of the Trust, to each
other Trustee or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time.
Except to the extent expressly provided in a written agreement with the Trust,
no Trustee resigning and no Trustee removed shall have any right to any
compensation for any period following his resignation or removal, or any right
to damages on account of such removal.
4.2 Effect of Death, Resignation, etc. of a Trustee. The death,
declination, resignation, retirement, removal or incapacity of the Trustees,
or any one of them, shall not
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operate to annul the Trust or to revoke any existing agency created pursuant
to the terms of this Declaration of Trust.
4.3 Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and
they shall have all powers necessary or convenient to carry out that
responsibility. Without limiting the foregoing, the Trustees may adopt Bylaws
not inconsistent with this Declaration of Trust providing for the conduct of
the business of the Trust and may amend and repeal them to the extent that
such Bylaws do not reserve that right to the Shareholders; they may enlarge or
reduce their number, may fill vacancies in their number, including vacancies
caused by enlargement of their number, and may remove Trustees with or without
cause; they may elect and remove, with or without cause, such officers and
appoint and terminate such agents as they consider appropriate; they may
appoint from their own number, and terminate, any one or more committees,
consisting of two or more Trustees, including an executive committee which
may, when the Trustees are not in session, exercise some or all of the power
and authority of the Trustees as the Trustees may determine; they may employ
one or more custodians of the assets of the Trust and may authorize such
custodians to employ subcustodians and to deposit all or any part of such
assets in a system or systems for the central handling of securities, retain a
transfer agent or a Shareholder servicing agent, or both, provide for the
distribution of Shares by the Trust, through one or more principal
underwriters or otherwise, set record dates for the determination of
Shareholders with respect to various matters, and in general delegate such
authority as they consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the Trust or to any
such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate,
write options on and lease any or all of the assets of the Trust;
(c) To act as a distributor of shares and as underwriter of, or
broker or dealer in, securities or other property;
(d) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power and
discretion with relation to securities or property as the Trustees shall deem
proper;
(e) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
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(f) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in the
name of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or otherwise;
(g) To allocate assets, liabilities and expenses of the Trust to
a particular series or class of Shares or to apportion the same among two
or more series of classes of Shares, provided that any liabilities or expenses
incurred by a particular series or class of Shares shall be payable solely out
of the assets of that series or class;
(h) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer, any
security of which is or was held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation or issuer;
and to pay calls or subscriptions with respect to any security held in the
Trust;
(i) To join with other security holders in acting through a
committee depositary, voting trustee or otherwise, and in that connection
to deposit any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of
the expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(j) To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy, including but
not limited to claims for taxes;
(k) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(l) To borrow funds;
(m) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust property or any part thereof to secure any of or all such obligations;
(n) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust individually against all
claims and liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action alleged to
have been taken or omitted by any such person
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as Shareholder, Trustee, officer, employee, agent, investment adviser or
manager, principal underwriter, or independent contractor, including any
action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person against
such liability;
(o) To pay pensions for faithful service, as deemed appropriate
by the Trustees, and to adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement, incentive
and benefit plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers, employees and agents
of the Trust; and
(p) To engage in any other lawful act or activity in which
corporations organized under the Massachusetts Business Corporation Law may
engage.
The Trustees shall not in any way be bound or limited by present or
future law or custom in regard to investments by trustees. Except as otherwise
provided herein or from time to time in the Bylaws, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting
of Trustees (a quorum being present), within or without Massachusetts,
including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting, or by written consents of a
majority of the Trustees then in office.
4.4 Payment of Expenses by Trust. The Trustees are authorized to
pay or to cause to be paid out of the principal or income of the Trust,
or partly out of principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, in connection with the management thereof, or in
connection with the financing of the sale of Shares, including, but not
limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, any investment adviser, manager,
or sub-adviser, principal underwriter, auditor, counsel, custodian, transfer
agent, shareholder servicing agent, and such other agents or independent
contractors and such other expenses and charges as the Trustees may deem
necessary or proper to incur; provided, however, that all expenses, fees,
charges, taxes and liabilities incurred or arising in connection with a
particular series or class of Shares as determined by the Trustees, shall be
payable solely out of the assets of that series or class.
4.5 Ownership of Assets of the Trust. Title to all of the assets
of each series of Shares and of the Trust shall at all times be considered as
vested in the Trustees.
4.6 Advisory, Management and Distribution. The Trustees may, at
any time and from time to time, contract for exclusive or nonexclusive
advisory and/or management services with any corporation, trust, association
or other organization (the "Manager"), including, without limitation, Alliance
Capital Management, L.P., every such contract to comply with such
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requirements and restrictions as may be set forth in the Bylaws; and any such
contract may provide for one or more Sub-advisers who shall perform all or
part of the obligations of the Manager under such contract and may contain
such other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without limitation,
authority to determine from time to time what investments shall be purchased,
held, sold or exchanged and what portion, if any, of the assets of the Trust
shall be held uninvested and to make changes in the Trust's investments. The
Trustees may also, at any time and from time to time, contract with the
Manager or any other corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or principal underwriter
for the Shares, every such contract to comply with such requirements and
restrictions as may be set forth in the Bylaws; and any such contract may
contain such other terms interpretive of or in addition to said requirements
and restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or for any
corporation, trust, association, or other organization, or of or for any
parent or affiliate of any organization, with which an advisory or management
contract, or principal underwriter's or distributor's contract, or transfer,
shareholder servicing or other agency contract may have been or may hereafter
be made, or that any such organization, or any parent or affiliate thereof, is
a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory or management contract or principal
underwriter's or distributor's contract, or transfer, shareholder servicing or
other agency contract may have been or may hereafter be made also has an
advisory or management contract, or principal underwriter's or distributors
contract, or transfer, Shareholder servicing or other agency contract with one
or more other corporations, trusts, associations, or other organizations, or
has other business or interests shall not affect the validity of any such
contract or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust on its Shareholders.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Shareholders shall have such power to vote as is provided for in, and
may hold meetings and take actions pursuant to, the provisions of the Bylaws.
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ARTICLE VI
DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES
6.1 Distributions. The Trustees may each year, or more frequently
if they so determine, distribute to the Shareholders of each series or
class of Shares such income and capital gains, accrued or realized, as the
Trustees may determine, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with good accounting practices. The Trustees shall have full
discretion to determine which items shall be treated as income and which items
as capital and their determination shall be binding upon the Shareholders.
Distributions of each year's income of each series or class of Shares shall be
distributed pro rata to Shareholders in proportion to the number of Shares of
each series or class held by each of them. Such distributions shall be made in
cash or Shares or a combination thereof as determined by the Trustees. Any
such distribution paid in Shares will be paid at the net asset value thereof
as determined in accordance with the Bylaws.
6.2 Redemptions and Repurchases. The Trust shall purchase such
Shares as are offered by any Shareholder for redemption, upon the
presentation of any certificate for the Shares to be purchased, a proper
instrument of transfer and a request directed to the Trust or a person
designated by the Trust that the Trust purchase such Shares, or in accordance
with such other procedures for redemption as the Trustees may from time to
time authorize, and the Trust will pay therefor the net asset value thereof,
as next determined in accordance with the Bylaws, less such redemption charge
or fee as the Trustees may determine from time to time. Except as otherwise
determined by the Trustees, payment for said Shares shall be made by the Trust
to the Shareholder within seven days after the date on which the request is
made. The obligation set forth in this Section 2 is subject to the provision
that in the event that any time the New York Stock Exchange is closed for
other than customary weekends or holidays, or, if permitted by rules of the
Commission. During periods when trading on the Exchange is restricted or
during any emergency which makes it impractical for the Trust to dispose of
its investments or to determine fairly the value of its net assets, or during
any other period permitted by order of the Commission for the protection of
investors, such obligation may be suspended or postponed by the Trustees. The
Trust may also purchase or repurchase Shares at a price not exceeding the net
asset value of such Shares in effect when the purchase or repurchase or any
contract to purchase or repurchase is made.
6.3 Redemptions at the Option of the Trust. The Trust shall
have the right at its option and at any time to redeem Shares of any
Shareholder at the net asset value thereof as determined in accordance with
the Bylaws: (i) if at such time such Shareholder owns fewer Shares than, or
Shares having an aggregate net asset value of less than, an amount determined
from time to time by the Trustees; or (ii) to the extent that such Shareholder
owns Shares of a particular series or class of Shares equal to or in excess of
a percentage of the outstanding Shares of that series or class determined from
time to time by the Trustees; or (iii) to the
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extent that such Shareholder owns Shares of the Trust representing a
percentage equal to or in excess of such percentage of the aggregate number of
outstanding Shares of the Trust or the aggregate net asset value of the Trust
determined from time to time by the Trustees.
6.4 Dividends, Distributions, Redemptions and Repurchases. No
dividend or distribution (including, without limitation, any distribution paid
upon termination of the Trust or of any series) with respect to, nor any
redemption or repurchase of, the Shares of any series shall be effected by the
Trust other than from the assets of such series.
ARTICLE VII
COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES
7.1 Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount of their
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking,
underwriting, brokerage, or investment dealer or other services and payment
for the same by the Trust.
7.2 Limitation of Liability. The Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any
officer, agent, employee, manager or principal underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee,
but nothing herein contained shall protect any Trustees against any liability
to which he or she would otherwise be subject by reason of wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his or her office.
Every note, bond, contract, instrument, certificate, Share or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the
Trust shall be conclusively deemed to have been executed or done only in or
with respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
ARTICLE VIII
INDEMNIFICATION
8.1 Trustees, Officers, etc. The Trust shall indemnify each of
its Trustees and officers (including persons who serve at the Trust's
request as directors, officers or trustees of another organization in which
the Trust has any interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person") against all liabilities and
expenses, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees
reasonably incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
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criminal, before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party or otherwise
or with which such Covered Person may be or may have been threatened, while in
office or thereafter, by reason of being or having been such a Covered Person
except with respect to any matter as to which such Covered Person shall have
been finally adjudicated in any such action, suit or other proceeding (a) not
to have acted in good faith in the reasonable belief that such Covered
Person's action was in or not opposed to the best interests of the Trust or
(b) to be liable to the Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office. Expenses, including
counsel fees so incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines or penalties),
shall be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust shall be insured against losses arising from any such advance
payments or (c) either a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees then in office
act on the matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to
a full trial type inquiry) that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Article.
8.2 Compromise Payment. As to any matter disposed of (whether
by a compromise payment, pursuant to a consent decree or otherwise)
without an adjudication in a decision on the merits by a court, or by any
other body before which the proceeding was brought, that such Covered Person
either (a) did not act in good faith in the reasonable belief that his action
was in or not opposed to the best interests of the Trust or (b) is liable to
the Trust or its Shareholders by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his or her office, indemnification shall be provided if (a) approved as in
the best interests of the Trust, after notice that it involves such
indemnification, by at least a majority of the disinterested Trustees acting
on the matter (provided that a majority of the disinterested Trustees then in
office act on the matter) upon a determination, based upon a review of readily
available facts (as opposed to a full trial type inquiry) that such Covered
Person acted in good faith in the reasonable belief that his action was in or
not opposed to the best interests of the Trust and is not liable to the Trust
or its Shareholders by reasons of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office, or (b) there has been obtained an opinion in writing of
independent legal counsel, based upon a review of readily available facts (as
opposed to a full trial type inquiry) to the effect that such Covered Person
appears to have acted in good faith in the reasonable belief that his action
was in or not opposed to the best interests of the Trust and that such
indemnification would not protect such Person against any liability to the
Trust to which he would otherwise be subject by reason of
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wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. Any approval pursuant to this
Section shall not prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with this Section as indemnification
if such Covered Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief that
such Covered Person's action was in or not opposed to the best interests of
the Trust or to have been liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
8.3 Indemnification Not Exclusive. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
such Covered Person may be entitled. As used in this Article VIII, the term
"Covered Person" shall include such person's heirs, executors and
administrators and a "disinterested Trustee" is a Trustee who is not an
"interested person" of the Trust as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, (or who has been exempted from
being an "interested person" by any rule, regulation or order of the
Commission) and against whom none of such actions, suits or other proceedings
or another action, suit or other proceeding on the same or similar grounds is
then or has been pending. Nothing contained in this Article shall affect any
rights to indemnification to which personnel of the Trust, other than Trustees
or officers, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability insurance
on behalf of any such person.
8.4 Shareholders. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his or her being or
having been a Shareholder and not because of his or her acts or omissions
or for some other reason, the Shareholder or former Shareholder (or his or her
heirs, executors, administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other general successor)
shall be entitled to be held harmless from and indemnified against all loss
and expense arising from such liability, but only out of the assets of the
particular series of Shares of which he or she is or was a Shareholder.
ARTICLE IX
MISCELLANEOUS
9.1 Trustees, Shareholders, etc. Not Personally Liable, Notice.
All persons extending credit to, contracting with or having any claim
against the Trust or a particular series of Shares shall look only to the
assets of the Trust or the assets of that particular series of Shares for
payment under such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any liability to which
such Trustees would otherwise be subject by reason of
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wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officer or officers shall give notice
that this Declaration of Trust is on file with the Secretary of The
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustee or Trustees or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually
but are binding only upon the assets and property of the Trust, and may
contain such further recitals as he or she or they may deem appropriate, but
the omission thereof shall not operate to bind any Trustee or Trustees or
officer of officers or Shareholder or Shareholders individually.
9.2 Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretion
hereunder shall be binding upon everyone interested. A Trustee shall be liable
for his or her own wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment or mistakes
of fact or law. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and shall
be under no liability for any act or omission in accordance with such advice
or for failing to follow such advice. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is required.
9.3 Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred to the Trust or
upon its order.
9.4 Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The
Trust may be terminated at any time by the vote of Shareholders holding at
least a majority of the Shares of each series entitled to vote or by the
Trustees by written notice to the Shareholders. Any series of Shares may be
terminated at any time by vote of Shareholders holding at least a majority of
the Shares of such series entitled to vote or by the Trustees by written
notice to the Shareholders of such series.
Upon termination of the Trust or of any one or more series of Shares,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated, of the Trust or of the
particular series as may be determined by the Trustees, the Trust shall, in
accordance with such procedures as the Trustees consider appropriate, reduce
the remaining assets to distributable form in cash or shares or other
securities, or any combination thereof, and distribute the proceeds to the
Shareholders of the series involved, ratably according to the aggregate net
asset value of Shares of such series or class of Shares held by the several
Shareholders of such series or class of Shares on the date of termination.
-13-
<PAGE>
9.5 Filing of Copies, References, Headings. The original or a
copy of this instrument and of each amendment hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of
this instrument and of each amendment hereto shall be filed by the Trust with
the Secretary of The Commonwealth of Massachusetts and with the Boston City
Clerk, as well as any other governmental office where such filing may from
time to time be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
amendments have been made and as to any matters in connection with the Trust
hereunder, and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or
of any such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein", "hereof" and
"hereunder" shall be deemed to refer to this instrument as amended or affected
by any such amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect
the meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
9.6 Applicable Law. The original Declaration of Trust was
executed and delivered in The Commonwealth of Massachusetts, and the Trust was
created under and is to be governed by and construed and administered
according to the laws of said Commonwealth. The Trust shall be of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
9.7 Amendments. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of the then Trustees
when authorized to do so by vote of Shareholders holding a majority of the
Shares of each series entitled to vote, except that an amendment which shall
affect the holders of one or more series of Shares but not the holders of
all outstanding series shall be authorized by vote of the Shareholders holding
a majority of the Shares entitled to vote of each series affected and no vote
of Shareholders of a series not affected shall be required. Any amendment
which shall affect the holders of Shares of one or more classes of a series
but not the holders of all Shares of a series shall be authorized by vote of
the Shareholders holding a majority of the Shares of such classes affected by
the amendment voting together as a single class, and no vote of Shareholders
of the classes not affected shall be required. Amendments having the purpose
of changing the name of the Trust, of establishing, changing, or eliminating
the par value of the shares or of supplying any omission, curing any ambiguity
or curing, correcting or supplementing any defective or inconsistent provision
contained herein shall not require authorization by Shareholder vote. In
addition to the foregoing, the provisions of this Declaration of Trust may be
amended for any other reason at any time without the vote or consent of
Shareholders, so long as such amendment does not materially adversely affect
the rights of any Shareholder with respect to which such amendment is or
purports to be applicable and so long as such amendment is not in
contravention of applicable law, including the 1940 Act, by an instrument
-14-
<PAGE>
signed in writing by a majority of the Trustees (or by an officer of the Trust
pursuant to a vote of a majority of Trustees).
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Declaration of Trust this 11th day of April, 1997.
JOHN D. CARIFA
-------------------------
John D. Carifa
PETER D. NORIS
-------------------------
Peter D. Noris
CLIFFORD L. MICHEL
-------------------------
Clifford L. Michel
DONALD J. ROBINSON
-------------------------
Donald J. Robinson
ALTON G. MARSHALL
-------------------------
Alton G. Marshall
BRENTON W. HARRIES
-------------------------
Brenton W. Harries
RICHARD D. COUPER
-------------------------
Richard D. Couper
WILLIAM L. MANNION
-------------------------
William L. Mannion
HOWARD E. HASSLER
-------------------------
Howard E. Hassler
-15-
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT executed as of May 1, 1997, between THE HUDSON
RIVER TRUST, a Massachusetts business trust (the "Trust"), on behalf of its
portfolio series listed on Schedule 1 hereto (each, a "Portfolio" and
collectively, the "Portfolios"), and ALLIANCE CAPITAL MANAGEMENT L.P. (the
"Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of the Trust, the
Adviser will, at its expense, furnish continuously an investment program for
each Portfolio, will make investment decisions on behalf of each Portfolio and
will, subject to the provisions of paragraph (c), place all orders for the
purchase and sale of each Portfolio's portfolio securities. Subject always to
the control of the Trustees of the Trust, the Adviser will also manage,
supervise and conduct the other affairs and business of the Trust and the
Portfolios and matters incidental thereto. In the performance of its duties,
the Adviser will comply with the provisions of the Agreement and Declaration
of Trust and By-laws of the Trust and each Portfolio's stated investment
objectives, policies and restrictions and will use its best efforts to
safeguard and promote the welfare of the Trust and the Portfolios and to
comply with other policies which the Trustees may from time to time determine.
(b) The Adviser, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (but not accounting
services) required for it to perform its duties hereunder and will pay all
salaries, fees and expenses of officers and Trustees of the Trust who are
affiliated with the Adviser.
(c) In the selection of brokers, dealers, or futures commissions
merchants (collectively, "brokers") and the placing of orders for the purchase
and sale of portfolio investments for each Portfolio, the Adviser shall seek
to obtain the most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions for brokerage
and research services as described below. In using its best efforts to obtain
for each Portfolio the most favorable price and execution available, the
Adviser, bearing in mind each Portfolio's best interest at all times, shall
consider all factors it deems relevant, including, by way of illustration,
price, the size of the transaction, the nature of the market for the security,
the amount of the commission, the timing of the transaction taking
<PAGE>
into account market prices and trends, the reputation, experience and
financial stability of the broker involved and the quality of service rendered
by the broker in other transactions. Subject to such policies as the Trustees
may determine, the Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused any Portfolio to pay a broker that provides brokerage and
research services to the Adviser an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker would have charged for effecting that transaction, if the Adviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker, viewed in terms of either that particular transaction or the Adviser's
overall responsibilities with respect to such Portfolio and to other clients
of the Adviser as to which the Adviser exercises investment discretion.
(d) Subject to the provisions of the Agreement and Declaration of
Trust of the Trust and the Investment Company Act of 1940, the Adviser, at its
expense, may select and Agreement with one or more investment advisers (the
"Sub-Adviser") for any Portfolio to perform some or all of the services for
which it is responsible pursuant to paragraph (a) of this Section 1 (and any
related facilities or services for which it is responsible under paragraph (b)
of this Section 1). The Adviser will compensate any Sub-Adviser of such
Portfolio for its services to such Portfolio. The Adviser may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub- Adviser unless and until a
successor Sub-Adviser is selected.
(e) The Adviser shall not be obligated to pay any expenses of or for
the Trust or any Portfolio not expressly assumed by the Adviser pursuant to
this Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Adviser, and in any person controlling,
controlled by or under common control with the Adviser, and that the Adviser
and any person controlling, controlled by or under common control with the
Adviser may have an interest in the Trust or in any Portfolio. It is also
understood that the Adviser and persons controlling, controlled by or under
common control with the Adviser have and may have advisory, management
service, distribution or other contracts with other organizations and persons,
and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE ADVISER
The Trust, on behalf of the Portfolios, will pay to the Adviser as
compensation for the Adviser's services rendered, for the facilities furnished
and for the expenses borne by the Adviser pursuant to Section 1, a fee
computed and paid monthly at the annual rates applicable
-2-
<PAGE>
to the average daily net asset value of each Portfolio set forth on Schedule 1
hereto. Such fee computed with respect to the net asset value of a Portfolio
shall be paid from the assets of such Portfolio. Such average daily net asset
value of each Portfolio shall be determined by taking an average of all of the
determinations of such net asset value during such month at the close of
business on each business day during such month while this Agreement is in
effect. Such fee shall be payable for each month within five (5) business days
after the end of such month.
In the event that expenses of any Portfolio for any fiscal year (not
including any distribution expenses paid by such Portfolio pursuant to any
distribution plan) should exceed the expense limitation on investment company
expenses enforced by any statute or regulatory authority of any jurisdiction
in which shares of such Portfolio are qualified for offer and sale, the
compensation due the Adviser for such fiscal year shall be reduced by the
amount of such excess by a reduction or refund thereof. In the event that the
expenses of any Portfolio exceed any expense limitation which the Adviser may,
by written notice to the Trust, voluntarily declare to be effective with
respect to such Portfolio, subject to such terms and conditions as the Adviser
may prescribe in such notice, the compensation due the Adviser shall be
reduced, and, if necessary, the Adviser shall bear the expenses of such
Portfolio to the extent required by such expense limitation.
If the Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS
AGREEMENT
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Agreement shall not be
amended as to any Portfolio unless such amendment is approved at a meeting by
the affirmative vote of a majority of the outstanding shares of such
Portfolio, and by the vote, cast in person at a meeting called for the purpose
of voting on such approval, of a majority of the Trustees of the Trust who are
not interested persons of the Trust or of the Adviser or of any Sub-Adviser of
the Trust. Shareholders of a Portfolio not affected by any such amendment
shall have no right to vote with respect to such amendment.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective upon its execution, and shall
remain in full force and effect as to a particular Portfolio continuously
thereafter (unless terminated automatically as set forth in Section 4) until
terminated as follows:
(a) Either party hereto may at any time terminate this Agreement as
to any Portfolio on not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
-3-
<PAGE>
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of such Portfolio,
and (ii) a majority of the Trustees of the Trust who are not interested
persons of the Trust or of the Adviser, by vote cast in person at a meeting
called for the purpose of voting on such approval, do not specifically approve
at least annually the continuance of this Agreement, then this Agreement shall
automatically terminate with respect to such Portfolio at the close of
business on the second anniversary of its execution, or upon the expiration of
one year from the effective date of the last such continuance, whichever is
later; provided, however, that if the continuance of this Agreement is
submitted to the shareholders of such Portfolio for their approval and such
shareholders fail to approve such continuance of this Agreement as provided
herein, the Adviser may continue to serve hereunder in a manner consistent
with the Investment Company Act of 1940 and the rules and regulations
thereunder.
Action by the Trust under (a) above may be taken either (i) by vote
of a majority of its Trustees or (ii) by the affirmative vote of a majority of
the outstanding shares of the relevant Portfolio affected.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION
The Adviser shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Adviser shall fail to be
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended from time to time, and under the laws of any jurisdiction in which
the Adviser is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Adviser shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the "control" (as defined in the Investment Company Act of 1940) of the
Adviser.
7. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding shares" of the Portfolio means the affirmative
vote, at a duly called and held meeting of shareholders of such Portfolio, (a)
of the holders of 67% or more of the shares of such Portfolio present (in
person or by proxy) and entitled to vote at such meeting, if the holders of
more than 50% of the outstanding securities of the Portfolio entitled to vote
at such meeting are present in person or by proxy, or (b) of the holders of
more than 50% of the outstanding shares of the Portfolio entitled to vote at
such meeting, whichever is less.
-4-
<PAGE>
For the purposes of this Agreement, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the rules and
regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the rules
and regulations thereunder.
8. NONLIABILITY OF ADVISER
In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and
duties hereunder, the Adviser shall not be subject to any liability to the
Trust, to any Portfolio, or to any shareholder of any Portfolio, for any act
or omission in the course of, or connected with, rendering services hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
each of the respective Portfolios.
-5-
<PAGE>
IN WITNESS WHEREOF, THE HUDSON RIVER TRUST and ALLIANCE CAPITAL
MANAGEMENT L.P. have each caused this instrument to be signed in duplicate on
its behalf by its duly authorized representative, all as of the day and year
first above written.
THE HUDSON RIVER TRUST
By: EDMUND P. BERGAN, JR.
_______________________________
Name: Edmund P. Bergan, Jr.
Title: Secretary
ALLIANCE CAPITAL MANAGEMENT L.P.
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, GENERAL PARTNER
By: JOHN D. CARIFA
-----------------------------
Name: John D. Carifa
Title: President
-6-
<PAGE>
SCHEDULE 1
TO
INVESTMENT ADVISORY AGREEMENT
THE HUDSON RIVER TRUST
FEE SCHEDULE
(AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
<TABLE>
<CAPTION>
FIRST NEXT NEXT NEXT
$750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
INTERNATIONAL PORTFOLIOS
International 0.900% 0.825% 0.800% 0.780% 0.770%
Global 0.675% 0.600% 0.550% 0.530% 0.520%
EQUITY PORTFOLIOS
Aggressive Stock 0.625% 0.575% 0.525% 0.500% 0.475%
Common Stock 0.475% 0.425% 0.375% 0.355% 0.345%*
Growth & Income 0.550% 0.525% 0.500% 0.480% 0.470%
Small Cap Growth 0.900% 0.850% 0.825% 0.800% 0.775%
ASSET ALLOCATION PORTFOLIOS
Growth Investors 0.550% 0.500% 0.450% 0.425% 0.400%
Balanced 0.450% 0.400% 0.350% 0.325% 0.300%
Conservative Investors 0.475% 0.425% 0.375% 0.350% 0.325%
FIXED INCOME PORTFOLIOS
High Yield 0.600% 0.575% 0.550% 0.530% 0.520%
Quality Bond 0.525% 0.500% 0.475% 0.455% 0.445%
Intermediate Government 0.500% 0.475% 0.450% 0.430% 0.420%
Securities
OTHER PORTFOLIOS
Equity Index 0.325% 0.300% 0.275% 0.255% 0.245%
Money Market 0.350% 0.325% 0.300% 0.280% 0.270%
</TABLE>
*On assets in excess of $10 billion, the management fee for the Common Stock
Portfolio is reduced to 0.335% of average daily net assets.
-7-
<PAGE>
CLASS IA
DISTRIBUTION AGREEMENT
AGREEMENT, dated as of June 30, 1996 by and between The Hudson River
Trust (the "Trust") and EQ Financial Consultants, Inc. (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is a Massachusetts business trust whose
shareholders are and will be separate accounts in unit investment trust form
("Eligible Separate Accounts") of insurance companies;
WHEREAS, variable insurance and annuity product ("Variable Products")
net premiums, contributions and considerations will be allocated to Eligible
Separate Accounts for investment in the Trust;
WHEREAS, the Trust's shares may not be sold separately from the
Variable Products;
WHEREAS, the Trust has previously entered into a Distribution
Agreement, dated as of January 1, 1995 (the "Prior Agreement"), by and between
The Hudson River Trust and Equico Securities, Inc. ("Equico") under which
Equico has undertaken marketing activities with respect to Trust shares;
WHEREAS, Equico has changed its name to EQ Financial Consultants,
Inc. and the Trust's existing shares are being redesignated as Class IA shares
in connection with the creation and designation of a new class of Class IB
shares;
WHEREAS, the parties wish to restate the Prior Agreement to reflect
such changes and to make other conforming changes;
WHEREAS, the Trust is registered as an open end investment company
under the Investment Company Act of 1940 ("Investment Company Act");
WHEREAS, the Investment Company Act prohibits any principal
underwriter for a registered open end investment company from offering for
sale, selling, or delivering after sale any security of which such company is
the issuer, except pursuant to a written contract with such company, and the
Distributor will be a principal underwriter for sale of securities issued by
the Trust;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934 ("Securities Exchange Act") and is a member of
the National Association of Securities Dealers, Inc.
("NASD");
NOW THEREFORE, the Trust and the Distributor agree as follows:
Section 1. The Trust has ratified a Policy on Conflicts (the
"Policy"), which was adopted by the Board of Directors of the Hudson River
Fund, Inc., predecessor of the Trust. This Agreement shall be subject to the
provisions of the Policy, the terms of which are incorporated herein by
reference, made a part hereof and controlling. The Policy may be amended or
superseded, without prior notice, and this Agreement shall be deemed amended
to the extent the Policy is amended or superseded. The Distributor represents
and warrants that it will act in a manner consistent with such Policy as so
set forth and as it may be amended or superseded, so long as it is a principal
underwriter of the Class IA shares of the Trust. This provision shall survive
the termination of this Agreement.
Section 2. The Distributor is hereby authorized, from time to time,
to enter into separate written agreements ("Sales Agreements" or,
individually, a "Sales Agreement"), on terms and conditions not inconsistent
with this Agreement, with insurance companies which have Eligible Separate
Accounts and which agree to participate in the distribution of the Trust's
Class IA shares, directly or through affiliated broker dealers (collectively,
with the insurance companies the "Participating Insurance Companies"), by
means of distribution of Variable Products and to use their best efforts to
solicit applications for Variable Products. The Distributor may not enter into
any Sales Agreement with any Participating Insurance Company that is more
favorable than that maintained with any other Participating Insurance Company
and Eligible Separate Account, except that not all portfolios of the Trust
need be made available for investment by all Participating Insurance
Companies, Eligible Separate Accounts or Variable Products. Each Sales
1
<PAGE>
Agreement shall be entered into jointly with the Participating Insurance
Company and the Eligible Separate Account.
Section 3. Such Participating Insurance Companies and their agents or
representatives soliciting applications for Variable Products shall be duly
and appropriately licensed, registered or otherwise qualified for the sale of
Variable Products under any applicable insurance laws and any applicable
securities laws of one or more states or other jurisdictions in which Variable
Products may be lawfully sold. Each such Participating Insurance Company
shall, when required by law, be both registered as a broker dealer under the
Securities Exchange Act and a member of the NASD. Each such Participating
Insurance Company shall agree to comply with all laws and regulations whether
federal or state, and whether relating to insurance, securities or other
general areas, including but not limited to the record-keeping and sales
supervision requirements of such laws and regulations.
Section 4. The Trust's shares are divided into series, each
representing a different portfolio of investments ("Portfolios") and each
series is further divided into Class IA and Class IB shares. The Trust
Portfolios and any restrictions on availability relating thereto are set forth
in Schedule A hereto, which may be amended from time to time.
Purchases and redemptions of the Trust shares of each Portfolio shall
be at the net asset value therefor, computed as set forth in the most recent
relevant Prospectus and Statement of Additional Information relating to the
Trust contained in its Registration Statement of Form N-1A, file No. 2-94996,
or any amendments thereto (respectively, "Trust Prospectus" and "SAI"), and
any supplements thereto. Trust shares may not be sold or transferred except to
an Eligible Separate Account with the prior approval of the Trust's Board of
Trustees.
Section 5. The Trust shall not pay any compensation to the
Distributor for services as principal underwriter herein, nor shall the Trust
reimburse the Distributor for any expenses related to such services. The
Distributor may, but need not, pay or charge Participating Insurance Companies
pursuant to agreements as described in Section 2.
Section 6. The Trust represents to the Distributor that the Trust
Prospectus and SAI, as of their respective effective dates, contain all
statements and information which are required to be stated therein by the
Securities Act of 1933 and in all respects conform to the requirements
thereof, and neither the Trust Prospectus nor the SAI include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the foregoing representations shall not apply to
information contained in or omitted from the Trust Prospectus and SAI in
reliance upon, and in conformity with, written information furnished by the
Distributor specifically for use in the preparation thereof.
In this connection, the Distributor acknowledges that the day-to-day
operations of the Trust, including without limitation, investment management,
securities brokerage allocation, cash control, accounting, record keeping and
other administrative, marketing and regulatory compliance functions, are
carried on and may in the future be carried on by the Equitable Life Assurance
Society of the United States ("Equitable"), affiliates of Equitable, and other
parties unaffiliated with Equitable on behalf of the Trust (collectively, the
"Preparing Parties"), under various agreements and arrangements, and that such
activities in large measure provide the basis upon which statements and
information are included or omitted from the Trust Prospectus and SAI. The
Distributor further acknowledges that because of the foregoing arrangements,
the preparation of the Trust Prospectus or SAI is substantially in the control
of the Preparing Parties, subject to the broad supervisory authority and
responsibility of the Trust's Board of Trustees, and that, essentially, the
only Trust Prospectus or SAI information not independently known to, or
prepared by, the Preparing Parties is personal information as to each
Trustee's full name, age, background, business experience and other personal
information that may require disclosures under securities laws and for which
the Preparing Parties necessarily must rely on each such Trustee to produce.
Section 7. The Trust will periodically prepare Prospectuses (and, if
applicable, SAIs) and any supplements thereto, proxy materials and annual and
semi-annual reports (collectively, the "Documents")
2
<PAGE>
and shall make camera ready copy available to the Distributor for reproduction
by the Distributor or the Participating Insurance Companies. Subject to the
prior approval of the Trust's officers, the Trust shall pay the cost of
printing and mailing Documents which are distributed to existing owners of
Variable Products, provided that the Distributor or the Participating
Insurance Companies shall be required to submit documentation in support of
such expenses which is satisfactory to the officers of the Trust. The Trust
shall not pay the cost of printing or mailing Documents except as specified in
this Section 7. The Trust will use its best efforts to provide notice to the
Distributor of anticipated filings or supplements. The Distributor or the
Participating Insurance Companies may alter the form of some or all of the
Documents, with the prior approval of the Trust's officers. Any preparation
costs associated with altering the form of the Documents will be borne by the
Distributor or the Participating Insurance Companies, not the Trust.
Section 8. The Distributor and officers of the Trust may from time to
time authorize descriptions of the Trust for use in sales literature or
advertising by the Participating Insurance Companies (including brochures,
letters, illustrations and other similar materials, whether transmitted
directly to potential applicants or published in print or audio-visual media),
which authorization will not be unreasonably withheld or delayed.
Section 9. The Distributor shall furnish to the Trust, at least
quarterly, reports as to the sales of Trust shares made pursuant to this
Agreement. These reports may be combined with any similar report prepared by
the Distributor or any of the Preparing Parties.
Section 10. The Distributor shall submit to all regulatory and
administrative bodies having jurisdiction over the operations of the
Distributor, the Trust or any Participating Insurance Company, present or
future, any information, reports or other material which any such body by
reason of this Agreement may request or require as authorized by applicable
laws or regulations.
Section 11. This Agreement shall be subject to the provisions of the
Investment Company Act, the Securities Exchange Act and the Securities Act of
1933 and the rules, regulations, and rulings thereunder and of the NASD, from
time to time in effect, including such exemptions from the Investment Company
Act and no-action positions as the Securities and Exchange Commission or its
staff may grant, and the terms hereof shall be interpreted and construed in
accordance therewith. Without limiting the generality of the foregoing, (a)
the term "assigned" shall not include any transaction exempted from section
15(b)(2) of the Investment Company Act and (b) the vote of the persons having
voting rights in respect of the Trust referred to in Section 12 shall be the
affirmative votes of the lesser of (i) the holders of more than 50% of all
votes in respect of Class IA shares entitled to be cast in respect of the
Trust or (ii) the holders of at least 67% of the votes in respect of Class IA
shares which are present at a meeting of such persons if the holders of more
than 50% of the votes in respect of Class IA shares entitled to be cast in
respect of the Trust are present or represented by proxy at such meeting, in
either case voted in accordance with the provisions of the Policy.
Section 12. This Agreement shall continue in effect only so long as
such continuance is specifically approved at least annually by a majority of
the Trustees of the Trust who are not interested persons of the Trust or the
Distributor and by (a) persons having voting rights in respect of the Trust,
by the vote stated in Section 11, voted in accordance with the provisions of
the Policy, or (b) the Board of Trustees of the Trust.
Section 13. This Agreement shall terminate automatically if it shall
be assigned.
Section 14. A copy of the Agreement and Declaration of Trust of the
Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is given hereby that this Agreement is executed on
behalf of the trustees of the Trust as trustees and not individually, and that
the obligations of or arising out of this Agreement are not binding upon any
of the trustees or shareholders individually but are binding only upon the
assets and property of each Portfolio.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
THE HUDSON RIVER TRUST
Attest:
ANDREW L. GANGOLF By: BARBARA J. KRUMSIEK
- --------------------------------- -------------------------------
Assistant Secretary Vice President
EQ FINANCIAL CONSULTANTS, INC.
(formerly EQUICO SECURITIES, INC.)
Attest:
LORAINE HERZOG By: MICHAEL F. MCNELIS
- --------------------------------- -------------------------------------
President and Chief Operating Officer
4
<PAGE>
SCHEDULE A
PORTFOLIOS OF THE HUDSON RIVER TRUST
International Portfolio
Global Portfolio
Aggressive Stock Portfolio
Small Cap Growth Portfolio
Common Stock Portfolio
Growth and Income Portfolio
Growth Investors Portfolio
Balanced Portfolio
Conservative Investors Portfolio
High Yield Portfolio
Quality Bond Portfolio
Intermediate Government Securities Portfolio
Equity Index Portfolio
Money Market Portfolio
RESTRICTIONS
None
<PAGE>
CLASS IB
DISTRIBUTION AGREEMENT
AGREEMENT, dated as of July 8, 1996 by and between The Hudson River
Trust (the "Trust") and Equitable Distributors, Inc. (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is a Massachusetts business trust whose
shareholders are and will be separate accounts in unit investment trust form
("Eligible Separate Accounts") of insurance companies;
WHEREAS, variable insurance and annuity product ("Variable Products")
net premiums, contributions and considerations will be allocated to Eligible
Separate Accounts for investment in the Trust;
WHEREAS, the Trust's shares may not be sold separately from the
Variable Products;
WHEREAS, the Trust has adopted a distribution plan in respect of its
Class IB shares pursuant to Rule 12b-1 under the Investment Company Act of
1940 ("Investment Company Act");
WHEREAS, the Trust desires the Distributor to undertake marketing
activities with respect to Class IB shares of the Trust's constituent
Portfolios and to compensate the Distributor for services rendered and
expenses borne (including payments made to third parties) in connection
therewith;
WHEREAS, the Trust is registered as an open end investment company
under the Investment Company Act;
WHEREAS, the Investment Company Act prohibits any principal
underwriter for a registered open end investment company from offering for
sale, selling, or delivering after sale any security of which such company is
the issuer, except pursuant to a written contract with such company, and the
Distributor will be a principal underwriter for sale of Class IB shares issued
by the Trust;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934 ("Securities Exchange Act") and is a member of
the National Association of Securities Dealers, Inc.
("NASD");
NOW THEREFORE, the Trust and the Distributor agree as follows:
Section 1. The Trust has ratified a Policy on Conflicts (the
"Policy"), which was adopted by the Board of Directors of the Hudson River
Fund, Inc., predecessor of the Trust. This Agreement shall be subject to the
provisions of the Policy, the terms of which are incorporated herein by
reference, made a part hereof and controlling. The Policy may be amended or
superseded, without prior notice, and this Agreement shall be deemed amended
to the extent the Policy is amended or superseded. The Distributor represents
and warrants that it will act in a manner consistent with such Policy as so
set forth and as it may be amended or superseded, so long as it is a principal
underwriter of the Class IB shares of the Trust. This provision shall survive
the termination of this Agreement.
Section 2. The Distributor is hereby authorized, from time to time,
to enter into separate written agreements ("Sales Agreements" or,
individually, a "Sales Agreement"), on terms and conditions not inconsistent
with this Agreement, with insurance companies which have Eligible Separate
Accounts and which agree to participate in the distribution of the Trust's
Class IB shares, directly or through affiliated broker dealers (collectively,
with the insurance companies the "Participating Insurance Companies"), by
means of distribution of Variable Products and to use their best efforts to
solicit applications for Variable Products. The Distributor may not enter into
any Sales Agreement with any Participating Insurance Company that is more
favorable than that maintained with any other Participating Insurance Company
and Eligible Separate Account, except that not all portfolios of the Trust
need be made available for investment
1
<PAGE>
by all Participating Insurance Companies, Eligible Separate Accounts or
Variable Products. Each Sales Agreement shall be entered into jointly with the
Participating Insurance Company and the Eligible Separate Accounts.
Section 3. Such Participating Insurance Companies and their agents or
representatives soliciting applications for Variable Products shall be duly
and appropriately licensed, registered or otherwise qualified for the sale of
Variable Products under any applicable insurance laws and any applicable
securities laws of one or more states or other jurisdictions in which Variable
Products may be lawfully sold. Each such Participating Insurance Company
shall, when required by law, be both registered as a broker dealer under the
Securities Exchange Act and a member of the NASD. Each such Participating
Insurance Company shall agree to comply with all laws and regulations whether
federal or state, and whether relating to insurance, securities or other
general areas, including but not limited to the record-keeping and sales
supervision requirements of such laws and regulations.
Section 4. The Trust's shares are divided into series, each
representing a different portfolio of investments ("Portfolios") and each
series is further divided into Class IA and Class IB shares. The Trust
Portfolios and any restrictions on availability relating thereto are set forth
in Schedule A hereto, which may be amended from time to time.
Purchases and redemptions of the Trust's Class IB shares of each
Portfolio shall be at the net asset value therefor, computed as set forth in
the most recent relevant Prospectus and Statement of Additional Information
relating to the Trust contained in its Registration Statement of Form N-1A,
file No. 2-94996, or any amendments thereto (respectively, "Trust Prospectus"
and "SAI"), and any supplements thereto. Trust shares may not be sold or
transferred except to an Eligible Separate Account with the prior approval of
the Trust's Board of Trustees.
Section 5. As compensation for services rendered and expenses borne
in connection with the distribution of Class IB shares, each Portfolio shall
pay the Distributor a monthly fee (payable on or before the fifth business day
of the following month) at a rate equal to .25% per annum of the average daily
net assets of the Portfolio attributable to Class IB shares. The Distributor
may, but need not, pay or charge Participating Insurance Companies pursuant to
agreements as described in Section 2.
Section 6. The Trust represents to the Distributor that the Trust
Prospectus and SAI, as of their respective effective dates, contain all
statements and information which are required to be stated therein by the
Securities Act of 1933 and in all respects conform to the requirements
thereof, and neither the Trust Prospectus nor the SAI include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the foregoing representations shall not apply to
information contained in or omitted from the Trust Prospectus and SAI in
reliance upon, and in conformity with, written information furnished by the
Distributor specifically for use in the preparation thereof.
In this connection, the Distributor acknowledges that the day-to-day
operations of the Trust, including without limitation, investment management,
securities brokerage allocation, cash control, accounting, record keeping and
other administrative, marketing and regulatory compliance functions, are
carried on and may in the future be carried on by the Equitable Life Assurance
Society of the United States ("Equitable"), affiliates of Equitable, and other
parties unaffiliated with Equitable on behalf of the Trust (collectively, the
"Preparing Parties"), under various agreements and arrangements, and that such
activities in large measure provide the basis upon which statements and
information are included or omitted from the Trust Prospectus and SAI. The
Distributor further acknowledges that because of the foregoing arrangements,
the preparation of the Trust Prospectus or SAI is substantially in the control
of the Preparing Parties, subject to the broad supervisory authority and
responsibility of the Trust's Board of Trustees, and
2
<PAGE>
that essentially, the only Trust Prospectus or SAI information not
independently known to, or prepared by, the Preparing Parties is personal
information as to each Trustee's full name, age, background, business
experience and other personal information that may require disclosures under
securities laws and for which the Preparing Parties necessarily must rely on
each such Trustee to produce.
Section 7. The Trust will periodically prepare Prospectuses (and, if
applicable, SAIs) and any supplements thereto, proxy materials and annual and
semi-annual reports (collectively, the "Documents") and shall make camera
ready copy available to the Distributor for reproduction by the Distributor or
the Participating Insurance Companies. Subject to the prior approval of the
Trust's officers, the Trust shall pay the cost of printing and mailing
Documents which are distributed to existing owners of Variable Products,
provided that the Distributor or the Participating Insurance Companies shall
be required to submit documentation in support of such expenses which is
satisfactory to the officers of the Trust. The Trust shall not pay the cost of
printing or mailing Documents except as specified in this Section 7. The Trust
will use its best efforts to provide notice to the Distributor of anticipated
filings or supplements. The Distributor or the Participating Insurance
Companies may alter the form of some or all of the Documents, with the prior
approval of the Trust's officers. Any preparation costs associated with
altering the form of the Documents will be borne by the Distributor or the
Participating Insurance Companies, not the Trust.
Section 8. The Distributor and officers of the Trust may from time to
time authorize descriptions of the Trust for use in sales literature or
advertising by the Participating Insurance Companies (including brochures,
letters, illustrations and other similar materials, whether transmitted
directly to potential applicants or published in print or audio-visual media),
which authorization will not be unreasonably withheld or delayed.
Section 9. The Distributor shall furnish to the Trust, at least
quarterly, reports as to the sales of Trust shares made pursuant to the
Agreement. These reports may be combined with any similar report prepared by
the Distributor or any of the Preparing Parties.
Section 10. The Distributor shall submit to all regulatory and
administrative bodies having jurisdiction over the operations of the
Distributor, the Trust or any Participating Insurance Company, present or
future, any information, reports or other material which any such body by
reason of this Agreement may request or require as authorized by applicable
laws or regulations.
Section 11. This Agreement shall be subject to the provisions of the
Investment Company Act, the Securities Exchange Act and the Securities Act of
1933 and the rules, regulations, and rulings thereunder and of the NASD, from
time to time in effect, including such exemptions from the Investment Company
Act and no-action positions as the Securities and Exchange Commission or its
staff may grant, and the terms thereof shall be interpreted and construed in
accordance therewith. Without limiting the generality of the foregoing, (a)
the term "assigned" shall not include any transaction exempted from section
15(b)(2) of the Investment Company Act and (b) the vote of the persons having
voting rights in respect of the Trust referred to in Section 12 shall be the
affirmative votes of the lesser of (i) the holders of more than 50% of all
votes in respect of Class IB shares entitled to be cast in respect of the
Trust or (ii) the holders of at least 67% of the votes in respect of Class IB
shares which are present at a meeting of such persons if the holders of more
than 50% of the votes in respect of Class IB shares entitled to be cast in
respect of the Trust are present or represented by proxy at such meeting, in
either case voted in accordance with the provisions of the Policy.
Section 12. This Agreement shall continue in effect only so long as
such continuance is specifically approved at least annually by a majority of
the Trustees of the Trust who are not interested persons of the Trust or the
Distributor and who have no direct or indirect financial interest in the
distribution plan pursuant to which this Agreement has been authorized (or any
agreement thereunder) (the "Independent Trustees") by (a) persons having
voting rights in respect of the Trust, by the vote stated in Section 11, voted
in accordance
3
<PAGE>
with the provisions of the Policy, or (b) the Board of Trustees of the Trust.
This Agreement may be terminated at any time without penalty by a majority of
the Independent Trustees or by persons having voting rights in respect of the
Trust by the vote stated in Section 11.
Section 13. This Agreement shall terminate automatically if it shall
be assigned.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts and
notice is given hereby that this Agreement is executed on behalf of the
trustees of the Trust as trustees and not individually, and that the
obligations of or arising out of this Agreement are not binding upon any of
the trustees or shareholders individually but are binding only upon the assets
and property of each portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
THE HUDSON RIVER TRUST
Attest:
ANDREW L. GANGOLF By: BARBARA J. KRUMSIEK
---------------------- ---------------------------
Assistant Secretary Vice President
EQUITABLE DISTRIBUTORS, INC.
Attest:
GREG BRAKOVICH By: JAMES A. SHEPHERDSON
- -------------------------- ----------------------------------
Co-President and Co-Chief Co-President and Co-Chief
Operating Officer Operating Officer
4
<PAGE>
SCHEDULE A
PORTFOLIOS OF THE HUDSON RIVER TRUST
International Portfolio
Global Portfolio
Aggressive Stock Portfolio
Small Cap Growth Portfolio
Common Stock Portfolio
Growth and Income Portfolio
Growth Investors Portfolio
Balanced Portfolio
Conservative Investors Portfolio
High Yield Portfolio
Quality Bond Portfolio
Intermediate Government Securities Portfolio
Equity Index Portfolio
Money Market Portfolio
RESTRICTIONS
None
<PAGE>
Exhibit 8
---------
CUSTODY AGREEMENT BETWEEN
THE HUDSON RIVER TRUST
AND
THE CHASE MANHATTAN BANK, N.A.
This Agreement is dated August 25, 1988 by and between THE HUDSON
RIVER TRUST, a business trust organized and existing under the laws of the
Commonwealth of Massachusetts (the "Trust"), and THE CHASE MANHATTAN BANK,
N.A., a national banking association organized under the laws of the United
States (the "Bank").
WITNESSETH:
-----------
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified, open-end management
investment company; and
WHEREAS, the Trust is a "series" type of mutual fund, and as such
issues separate classes of stock each of which represents a separate portfolio
(a "Portfolio") of investments; and
WHEREAS, the Trust desires that the securities and cash of each of its
Portfolios shall be hereafter held by the Bank pursuant to the terms of this
Agreement;
WHEREAS, the Trust, the Bank and Integrity Life Insurance Company
entered into a Custody Agreement, dated January 27, 1986, which will be
terminated upon the execution of this agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Bank hereby agree as follows:
Section 1. Definitions
A. The word "securities" as used herein includes short term money
market instruments and government obligations, and stocks, shares, bonds,
debentures, notes, bank certificates of deposit or other obligations and any
certificates of deposit or other obligations and any certificates, receipts,
options, warrants or other instruments representing rights to receive,
purchase, or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets, and all other
negotiable or non-negotiable paper.
B. The words "Authorized Instruction" shall mean (i) a request,
direction, notice or certification from any Authorized Person to the Bank in
writing or via telephone, TWX, facsimile transmission, bank wire, the Bank's
Securities InfoCash or Customer
<PAGE>
Data Entry System or other teleprocess or electronic instruction system
acceptable to the Bank which the Bank believes in good faith to have been given
by an Authorized Person or which is transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify or
(ii) a DTC Instruction (as defined in paragraph D of this Section 1). An
Authorized Instruction given by telephone shall be confirmed by an Authorized
Person within twenty four hours thereafter in writing or by facsimile
transmission. However, the Bank shall not be liable for the failure of an
Authorized Person to send such confirmation. Unless otherwise expressly
provided, an Authorized Instruction shall continue in full force and effect
until cancelled or superseded by a subsequent Authorized Instruction received
by the Bank. If the Bank requires test arrangements, authentication methods or
other security devices to be used with respect to an Authorized Instruction,
any Authorized Instruction given by the Trust thereafter shall be given and
processed in accordance with such terms and conditions for the use of such
arrangements, methods or devices as the Bank may put into effect and modify
from time to time. The Trust shall safeguard any testkeys, identification codes
or other security devices which the Bank shall make available to it and shall
hold the Bank harmless from any loss incurred by the Trust except to the extent
that such loss resulted from negligent action, negligent failure to act or
willful misconduct of the Bank or any of its nominees, agents or subcustodians
in allowing the use of such security device by an unauthorized person. The Bank
may electronically record any telephone discussions with respect to the
securities and cash held pursuant to this Agreement.
C. The words "Authorized Person" shall mean (a) the President, any
Vice President, the Secretary, the Treasurer, the Controller, any Assistant
Vice President, any Assistant Secretary, any Assistant Treasurer and any
Assistant Controller of the Trust whose names are specified in an incumbency
certificate substantially in the form annexed hereto as Appendix A, and (b) any
other person, whether or not any such person is an officer or employee of the
Trust, who is duly authorized by the Board of Trustees of the Trust (the
"Board") or the custody committee thereof (the "Custody Committee") to give, on
behalf of the Trust, Authorized Instructions, and whose name is specified in a
designation certificate substantially in the form annexed hereto as Appendix B.
D. The words "DTC Instruction" shall mean a deliver or receive
instruction received by the Bank on the Eligible Trade Report or the Ineligible
Trade Report through the Depository Trust Company's institutional delivery
system that contains a bank account number assigned by the Bank to a Portfolio
of the Trust in the defined "agent internal account number" field.
-2-
<PAGE>
Section 2. Names, Titles and Signatures
A. Annexed hereto as Appendix A is an incumbency certificate signed by
two of the present officers of the Trust setting forth the names, positions and
signatures of the present officers of the Trust. The Trust agrees to furnish to
the Bank a new such certificate in the event any such present officer ceases to
be an officer or the Trust, or in the event other or additional officers are
elected or appointed and the Trust desires that they be able to issue
Authorized Instructions.
B. Annexed hereto as Appendix B is a designation certificate signed by
two of the present officers of the Trust setting forth the names and the
signatures of the persons, other than officers of the Trust, who are presently
authorized to issue an Authorized Instruction. The Trust agrees to furnish to
the Bank a new such certificate in the event that any such present
Authorization Person ceases to be so authorized or in the event that other or
additional persons are so authorized.
Section 3. Receipt and Disbursement of Money
A. The Bank is hereby authorized to receive cash and to endorse and
collect all checks, drafts or other orders for the payment of money received by
the Bank for the Portfolios of the Trust.
B. The Bank may cause the account of a Portfolio of the Trust to be
credited on the payable date for interest, dividends or redemptions, and if the
Bank so elects and subsequently is unable to collect such amount or property in
the ordinary course of transactions, the Trust will return to the Bank such
amount or property credited promptly upon receipt of the Bank's oral or written
notification by the Trust. The Bank shall have no duty to institute legal
proceedings, file a claim or proof of claim in any insolvency proceeding or
take any action beyond its ordinary collection procedures to collect such
amounts or property, but this Agreement shall not limit or waive any rights
which the Trust may have against any other person.
C. Subject to the provisions of Section 10, the Bank shall make, or
cause its subcustodians to make, payments of cash held under this Agreement
only
(a) for the purchase of securities for a Portfolio of the Trust
and upon the delivery of such securities to, or the crediting of such
securities to the account of, the Bank or its subcustodian, each such
payment to be made at prices as specified by an Authorized
Instruction;
(b) for the purchase or redemption of shares of the capital stock
of the Trust and upon the delivery to the Bank or its subcustodian of
such shares to be so purchased or redeemed;
-3-
<PAGE>
(c) for the payment for the account of a Portfolio of the Trust
of dividends, interest, taxes, management or supervisory fees, capital
distributions, operating expenses or other expenses customarily
associated with securities trading or securities processing;
(d) for the payments to be made in connection with the
conversion, exchange or surrender of securities held under this
Agreement;
(e) in the case of a purchase effected through the Depository
Trust Company or under the Federal Reserve/Treasury book-entry systems
(collectively "Securities System"), on a "daily net" basis;
(f) in connection with repurchase agreements entered into by a
Portfolio, against delivery of the underlying securities;
(g) for the purchase of put options by a Portfolio of the Trust
on securities held under this Agreement for such Portfolio upon
receipt of notice of the transaction;
(h) for other proper corporate purposes of the Trust; or
(i) upon the termination of this Agreement as hereinafter set
forth.
All payments of cash for the purpose permitted by subsection (a) through (g) of
this paragraph C shall be made only upon receipt by the Bank of an Authorized
Instruction. In the case of any payment to be made for the purpose permitted by
subsection (h) of this paragraph C, the Trust shall first furnish to the Bank
and the Bank must first receive a certified copy of a resolution of the Custody
Committee or the Board describing such payment, declaring the purpose of such
to be a proper corporate purpose, and naming the person or persons to whom such
payment is to be made. Any payment pursuant to subsection (i) of this paragraph
C will be made in accordance with Section 18.
D. In the event that any payment for clearance of securities
transactions made under paragraph C of this Section 3 for a Portfolio of the
Trust exceed the available cash held for such Portfolio under this Agreement,
the Bank may, in its discretion, advance such Portfolio an amount equal to such
excess and such advance shall be deemed a loan, payable on demand, from the
Bank to the Trust, and, in the event of such a loan, the Bank may cause the
account of such Portfolio to be debited for interest in an amount calculated
using the rate of interest customarily charged by the Bank on similar loans.
E. Whenever the Trust shall sell or redeem any shares of any Portfolio
of the Trust, the Trust shall deliver to the Bank an Authorized Instruction
duly specifying (a) the name of the insurance
-4-
<PAGE>
company separate account (in unit investment trust form) to which the shares
are sold and from which money is to be received, or, in the case of a
redemption, to which payment is to be made, (b) the Portfolio to which the
shares relate and (c) the amount of money, in the case of a sale, to be
received by the Bank, or, in the case of a redemption, to be paid by the Bank
and the manner/mode in which such payment shall be made. Upon receipt of money
from the sale of shares of a Portfolio, the Bank shall credit such money to the
Trust account in the name of such Portfolio. Upon receipt of an Authorized
Instruction from the Trust the Bank shall make payment as provided in paragraph
C of Section 3 out of the cash held by the Bank for such Portfolio to which the
redeemed shares relate.
Section 4. Receipt and Disposition of Securities
All securities received by the Bank for a Portfolio of the Trust shall
be held by the Bank in a separate account or accounts physically segregated at
all times from securities of any other Portfolio of the Trust or of any other
person, firm, or corporation, unless deposited pursuant to Section 9 of this
Agreement. All such securities are to be held or disposed of by the Bank for
each Portfolio pursuant to the terms of this Agreement. The Bank shall have no
power or authority to assign, hypothecate, pledge or otherwise dispose of any
such securities, except pursuant to an Authorized Instruction, as provided in
Section 5 or as provided in paragraph A of Section 11.
Section 5. Custody Account Transaction
Subject to the provisions of Section 10, securities held under this
Agreement will be transferred, exchanged or delivered by the Bank or its
subcustodians only:
(a) upon sale of such securities for a Portfolio of the Trust and
receipt by the Bank or its subcustodian of payment therefor, each such
payment to be in the amount specified by an Authorized Instruction;
(b) when such securities are called, redeemed or retired, or
otherwise become payable;
(c) in exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment;
(d) upon conversion of such securities pursuant to their terms
into other securities;
(e) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(f) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
-5-
<PAGE>
(g) in the case of a sale effected through a Securities System,
on a "daily net" basis;
(h) against payment under any repurchase agreement entered into
by a Portfolio related to such securities;
(i) in connection with the writing of a covered call option, upon
receipt of an Authorized Instruction and payment of the premium due,
the Bank shall (i) where the underlying securities are physically held
by the Bank, cause an escrow receipt to be issued with respect to the
underlying securities and shall hold such securities in a segregated
account in accordance with the terms of the receipt or, (ii) where the
underlying securities are maintained at a Securities System, cause a
depository receipt to be issued requiring the Securities System to
pledge the underlying securities to the Option Clearing Corporation
(the "OCC"). At the expiration of a call option, the Bank shall (i)
where the underlying securities are physically held by the Bank, take
reasonable steps to obtain the return or release and cancellation of
any escrow receipt; provided, however, that the Bank shall thereafter
be under no liability for failure to obtain such return or release if
the Bank promptly notifies the Trust of such failure, and upon the
receipt of such release or upon the expiration or such escrow receipt
in accordance with its terms, shall release such securities from the
segregated account or (ii) where the underlying securities are
maintained at Securities System, issue a release of deposit and
deliver copies of such release to the subject OCC clearing member and
to the OCC.
(j) upon exercise of a call option written by a Portfolio of the
Trust on securities held under this Agreement for such Portfolio,
against the receipt of payment of the strike price therefor, and (i)
where the underlying securities are physically held by the Bank,
receipt by the Bank of documentation releasing and cancelling the
escrow receipt previously issued by the Bank in connection with the
transaction or, (ii) where the underlying securities are maintained at
a Securities System, upon the issuance by the Bank of a release of
deposit together with its representation that it will deliver such
securities upon payment of the strike price.
(k) upon exercise of a put option by a Portfolio of the Trust on
securities held under this Agreement for such Portfolio, against a
receipt of payment of the strike price therefor;
(1) for other proper corporate purposes of the Trust;
-6-
<PAGE>
(m) upon the termination of this Agreement as hereinafter set
forth.
All transfers, exchanges or deliveries of securities held under this Agreement
for a purpose permitted by subsections (a) through (k) of this Section 5, will
be made, only upon receipt by the Bank of an Authorized Instruction. In case of
any transfer, exchange, or delivery to be made for the purpose permitted by
subsection (1) of this Section 5, the Trust shall first furnish to the Bank and
the Bank must first receive a certified copy of a resolution of the Custody
Committee or the Board describing such transfer, exchange or delivery,
declaring the purpose of such to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be made. Any
transfer or delivery pursuant to subsection (m) of this Section 5 will be made
in accordance with Section 18.
Section 6. Maintenance of Securities Abroad
Securities held pursuant to this Agreement shall be held in the United
States or in any other country or other jurisdiction as shall be specified from
time to time in an Authorized Instruction. Cash held pursuant to this Agreement
shall be credited to an account in such amounts and in the country or other
jurisdiction as shall be specified from time to time in an Authorized
Instruction, provided that such country or other jurisdiction shall be one in
which such cash is legal currency for the payment of public or private debts.
Section 7. Eligible Foreign Custodians and Securities Depositories
The Bank is authorized to hold the securities and the cash held
pursuant to this Agreement in custody and deposit accounts, respectively, which
have been established by the Bank with one of its branches, a branch of a U.S.
bank, an eligible foreign custodian or an eligible foreign securities
depository; provided, however, that the Board has approved the use of, and the
Bank's contract with, such eligible foreign custodian or eligible foreign
securities depository by resolution, and a certified copy of such resolution
has been provided to the Bank. Furthermore, if one of its branches, a branch of
a qualified U.S. bank or an eligible foreign custodian is selected to act as
the Bank's subcustodian to hold any of the securities or cash held pursuant to
this Agreement, such entity may be authorized by resolution of the Board to
hold such securities or cash in its account with any eligible foreign
securities depository in which it participates. For purposes of this Agreement
(a) "qualified U.S. bank" shall mean a qualified U.S. bank as defined in Rule
17f-5 under Section 17(f) of the 1940 Act having aggregate capital, surplus,
and undivided profits of not less than one hundred million dollars
($100,000,000); (b) "eligible foreign custodian" shall mean (i) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States that is regulated as such by that
country's government or an agency thereof and that
-7-
<PAGE>
has shareholders' equity in excess of two hundred million dollars
($200,000,000) in U.S. currency (or a foreign currency equivalent thereof),
(ii) a majority owned direct or indirect subsidiary of a qualified U.S. bank
holding company that is incorporated or organized under the laws of a country
other than the United States and that has shareholder's equity in excess of one
hundred million dollars ($100,00,000) in U.S. currency (or a foreign currency
equivalent thereof) or (iii) a banking institution or trust company
incorporated or organized under the laws of a country other than the United
States or a majority owned direct or indirect subsidiary of a qualified U.S.
bank or bank holding company that is incorporated or organized under the laws
of a country other than the United States which has such other qualifications
as shall be specified in Authorized Instructions and approved by the Bank; and
(c) "eligible foreign securities depository" shall mean a securities depository
or clearing agency, incorporated or organized under the laws of a country other
than the United States, which operates (i) the central system for handling of
securities or equivalent book-entries in the country or (ii) a transnational
system for the central handling of securities or equivalent book-entries.
Herein the term "subcustodian" will refer to any branch of a qualified
U.S. bank, any eligible foreign custodian or any eligible foreign securities
depository with which the Bank has entered into an agreement of the type
contemplated hereunder regarding securities and cash held or to be held
pursuant to this Agreement.
Section 8. Use of Subcustodian
With respect to securities and cash which are maintained by the Bank
in the custody of a subcustodian pursuant to Section 7 (as used in this Section
8, the term "Securities" means such securities and cash):
(a) The Bank shall identify on its books as belonging to a
particular Portfolio of the Trust any Securities held by such
subcustodian.
(b) In the event that a subcustodian permits any of the
Securities placed in its care to be held in any eligible foreign
securities depository, such subcustodian shall be required by its
agreement with the Bank to identify on its books such Securities as
being held for the account of the Bank as a custodian for its
customers.
(c) Any Securities held by a subcustodian of the Bank shall be
subject only to the instructions of the Bank or its agents on behalf
of the Trust; and any Securities held in an eligible foreign
securities depository for the account of a subcustodian shall be
subject only to the instructions on behalf of the Trust of such
subcustodian or, if permitted by the terms of the agreement between
the Bank and such subcustodian, the Bank or its agents.
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<PAGE>
(d) The Bank shall deposit Securities only in an account with a
subcustodian which includes exclusively the assets held by the Bank
for its customers, and the Bank shall cause such account to be
designated by such subcustodian as a special custody account for the
exclusive benefit of customers of the Bank.
(e) Unless otherwise stated in an agreement approved by the
Board, any agreement the Bank shall enter into with a subcustodian
with respect to the holding of Securities shall require that (i) the
Securities are not subject to any right, charge, security interest,
lien or claim of any kind in favor of such subcustodian except for
their safe custody or administration and (ii) beneficial ownership of
such Securities is freely transferable without the payment of money or
value other than for safe custody or administration; provided,
however, that the foregoing shall not apply to the extent that any of
the above-mentioned rights, charges, etc. result from any arrangements
made by the Trust with any such subcustodian.
(f) Upon request of the Trust, the Bank shall identify the name,
address and principal place of business of any subcustodian of the
Trust's securities and, as furnished to the Bank by such subcustodian,
the name and address of the governmental agency or other regulatory
authority that supervises or regulates such subcustodian.
(g) The Bank hereby warrants to the Trust that it shall not enter
into an agreement with a subcustodian with respect to the holding of
Securities, unless, in its opinion, after due inquiry, the established
procedures to be followed by each subcustodian afford protection for
such Securities at least equal to that afforded by the Bank's
established procedures with respect to similar securities held by the
Bank (and its securities depositories) in New York.
Section 9. Deposits by the Bank
A. The Bank is authorized to deposit all or any part of the securities
held by it pursuant to this Agreement in a "Securities depository" as defined
in Rule 17f-4 under Section 17(f) of the 1940 Act including, without
limitation, in the Federal Reserve/Treasury book-entry system for United States
and Federal agency securities, the Depository Trust Company book-entry system
or their successors and nominees, provided that such deposit is made in
accordance with the provisions of such rule.
B. The Bank is authorized to deposit options held by it pursuant to
this Agreement with the OCC, provided:
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(a) The Bank shall deposit the options with the OCC clearing
member used to effect transactions relating to such options (the
"Clearing Member") in an account that includes only assets held by the
Bank for its customers.
(b) Where options are transferred to the account of a Portfolio
of the Trust, the Bank shall, by book-entry or otherwise, identify as
belonging to such Portfolio a quantity of options in a tangible bulk
of options (i) registered in the name of the Bank or its nominee or
(ii) shown on the Bank's account on the books of the Clearing Member.
(c) The Bank shall promptly send to the Trust any reports it
receives from OCC or any Clearing Member used on their respective
systems of internal accounting control.
(d) The Bank shall have received a certified copy of a resolution
of the Custody Committee or the Board approving the arrangements
regarding the use of OCC.
Section 10. Custody Account Procedures
A. With respect to all transactions for securities and cash held
pursuant to this Agreement, including, without limitation, dividend and
interest payments and sales and redemptions of securities, availability of
funds credited to an account of a Portfolio will be based on the type of funds
used in the trade settlement or payment, including, but not limited to, same
day availability for federal or same day funds and next business day
availability for clearing house or next day funds. Subject to the preceding
sentence, with respect to any transaction involving securities held or to be
held hereunder for a Portfolio of the Trust for which the Bank customarily
offers this service, the Bank may in its discretion cause the account of such
Portfolio to be credited on the contractual settlement date with the proceeds
of any sale of such securities and to be debited on contractual settlement date
for the cost of any of such securities purchased. The Trust agrees that the
Bank's providing of this service is conditional upon the Trust maintaining a
satisfactory business relationship with the Bank and a financial condition
acceptable to the Bank. The amount of available cash held hereunder shall be
calculated daily for each Portfolio of the Trust and shall be determined at the
end of a particular day by aggregating (i) the amount of the cash held
hereunder at the end of the prior day and (ii) the difference between the total
credits and total debits applied to the cash held hereunder for that day. These
debit and credit entries are provisional accounting entries which the Bank
shall reverse in accordance with an Authorized Instruction and which the Bank
may reverse if a transaction with respect to which any such credit or debit was
made fails to settle within a reasonable period, determined by the Bank in its
discretion, after the contractual settlement date, except that if any
securities delivered pursuant to this Section 10 are returned by the recipient
thereof, the Bank may reverse any such credits and debits at any time.
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The Bank has no obligation to use this crediting and debiting procedure with
respect to a delivery of securities if the Trust does not have actually in its
account sufficient securities to make the delivery. As with other transactions
processed hereunder, the Bank's responsibility with respect to transactions for
which it uses this crediting and debiting procedure shall be governed by the
provisions of this Agreement, including Section 15. The Trust agrees that the
Bank's using this procedure is not an assurance by it that the transaction will
actually settle on the contractual settlement date and does not impose
responsibility on the Bank with respect to the transaction. Without limiting
the Bank's right to reverse credits and debits described above, the account
statements which it furnishes to the Trust shall reflect transactions as to
which the Bank uses this procedure as if they had actually settled on the
contractual settlement date, unless, prior to the date to which the statement
relates, the Bank has reversed such credits and debits.
B. With respect to any transaction as to which the Bank does not
determine so to credit or debit the account of a Portfolio of the Trust, the
proceeds from the sale or exchange of securities will be credited and the cost
of such securities purchased or acquired will be debited to the account of such
Portfolio on an actual basis, together with any other transactions of such
Portfolio, on the date such proceeds or securities are received by the Bank.
C. Notwithstanding the preceding paragraphs A and B, settlement and
payment for securities received for, and delivery of securities out of, the
account of a Portfolio of the Trust may be effected in accordance with the
customary or established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities or depository or escrow
receipts to the purchaser thereof or to a dealer therefor (or to an agent for
such purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer (or agent
therefor). Provided that the Bank did not select the party to which securities
were delivered against a receipt in accordance with the preceding sentence, it
shall not bear the risk of collection of the funds or other property paid or
distributed in respect of such securities.
Section 11. Certain Duties of the Bank
A. Unless and until the Bank receives an Authorized Instruction to the
contrary, the Bank shall, or shall instruct or authorize the appropriate
subcustodian to, (a) present for payment all securities held under this
Agreement which are called, redeemed or retired or otherwise become payable and
all coupons and other income items held by it for the appropriate Portfolio of
the Trust which call for payment upon presentation and hold the cash received
by it upon such payment for such Portfolio in accordance with the terms of this
Agreement; (b) receive interest and cash dividends and credit the same to the
appropriate Portfolio of the Trust; (c) hold for the appropriate Portfolio of
the Trust all stock dividends,
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rights and similar securities issued with respect to any securities held by it;
and (d) exchange interim receipts or temporary securities held under this
Agreement for the definitive securities issued in exchange therefor.
B. Upon receipt of an Authorized Instruction, the Bank shall (a)
convert money of foreign issue into United States dollars or any other currency
necessary to effect any transaction involving securities held or to be held
pursuant to this Agreement whenever it is practicable to do so through
customary banking channels, using the method or agency, designated in the
Authorized Instruction, if any, and if no method is designated, using any
method or agency available, including, but not limited to, the facilities of
the Bank, its subsidiaries, affiliates or subcustodians; and (b) execute as
agent on behalf of the Trust all ownership certificates in such form and manner
as such Authorized Instruction shall direct.
Section 12. Registration of Securities
A. Except as otherwise directed by an Authorized Instruction, the Bank
shall register all securities, except such as are in bearer form, (i) in the
name of a nominee or nominees which are either a "dba" of the Bank or, if a
separate legal entity, subject to the legal and operational control of the
Bank, (ii) as to any securities maintained at a securities depository, in the
name of a nominee or nominees appointed by such a securities depository or
(iii) as to any securities held by a subcustodian, in the name of a nominee or
nominees appointed by such subcustodian. The specific securities held by the
Bank hereunder shall be at all times identifiable in its records. If any
securities registered in the name of such nominee or nominees are called for
partial redemption by the issuer of such securities, the Bank may allot the
called portion to the respective beneficial holders of such securities in a
manner customarily used by the Bank with respect to such allotments. In
consideration of the registration of any stocks, bonds, securities, and other
property, in the name of the Bank's nominees or the nominees of a depository or
subcustodian, the Trust agrees to pay on demand to the Bank or the nominees the
amount of any loss or liability for stockholder's assessments, or otherwise,
claimed or asserted against the Bank, the subcustodian or the nominees by
reason of such registration.
B. The Trust shall from time to time, as necessary, furnish to the
Bank appropriate instruments to enable the Bank to hold or deliver in proper
form for transfer, or to register in the name of a nominee as specified above,
any securities which it may hold for the Trust and which may from time to time
be registered in the name of the Trust.
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<PAGE>
Section 13. Voting and Other Action
A. Neither the Bank nor any nominee nor any securities depository nor
any subcustodian shall vote any of the securities held hereunder for the Trust,
except in accordance with the instructions contained in an Authorized
Instruction. The Bank shall promptly deliver, or cause to be executed and
delivered, to the Trust all notices, proxies and proxy soliciting materials
received by the Bank or any nominee with relation to such securities, such
proxies to be executed by the registered holder of such securities (if
registered otherwise than in the name of the Trust) but without indicating the
manner in which such proxies are to be voted.
B. The Bank shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and maturities of
securities and expiration of rights in connection therewith) received by the
Bank or any nominee from issuers of the securities being held for a Portfolio
of the Trust. With respect to tender or exchange offers, the Bank shall
transmit promptly to the Trust all written information received by the Bank or
any nominee from issuers of the securities whose tender or exchange is sought
and from the party (or the party's agents) making the tender or exchange offer.
Section 14. Transfer Taxes and Other Disbursements
A. The Bank is authorized and directed, unless otherwise advised in
particular transactions, to claim exemption from transfer taxes on all
transfers and deliveries of securities held under this Agreement. The Trust
shall pay or reimburse the Bank from time to time for any transfer taxes or
other charges paid by the Bank upon transfers of securities made hereunder, and
for all other necessary and proper out of pocket disbursements and expenses
made or incurred by the Bank in the performance of this Agreement.
B. Upon receipt of an Authorized Instruction, the Bank shall execute
and deliver such certificates as may reasonably be requested by an Authorized
Person in connection with securities delivered to it or by it under this
Agreement in such form and manner as such Authorized Instruction shall direct.
Section 15. Concerning the Banking
A. The Bank shall be paid by the Trust as compensation for its
services pursuant to this Agreement such compensation as may from time to time
be agreed upon in writing between the Trust and the Bank.
B. The Trust agrees to indemnify and hold harmless the Bank and any of
its nominees, agents and subcustodians from any and all losses, liabilities,
claims, demands, damages, and cost and expenses (including, without limitation,
counsel fees and expenses) (collectively, "Losses") incurred or assessed
against it or them in connection with the performance of this Agreement, except
such as may
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<PAGE>
arise from negligent action, negligent failure to act or willful misconduct of
the Bank or any of its nominees, agents or subcustodians.
C. The Bank agrees to indemnify and hold harmless the Trust from any
general damages arising out of any inability of the Trust to transfer
securities or cash held by subcustodian appointed by the Bank pursuant to
Section 7, where such inability results from any dispute between the Bank and
such subcustodian; provided, however, the Bank shall not be liable under this
paragraph C if it acts in good faith in connection with such dispute.
D. The Bank shall not be liable for any action taken in good faith
pursuant to an Authorized Instruction or a certified copy of any resolution of
the Custody Committee or the Board and may rely on the genuineness of any such
document which it may in good faith believe to have been validly executed. In
addition, the Bank shall not be liable for any losses to the extent that such
losses resulted from, or were caused by, nationalization, expropriation,
currency restrictions, acts of war or terrorism, insurrection, revolution,
hurricane, tornado, earthquake or nuclear fusion, fission or radiation
("Intervening Forces").
E. With respect to all securities and cash held under this Agreement,
the Bank shall maintain safeguards and controls in conformity with current and
established banking and depository practices and usages. The Bank shall use
reasonable care with respect to the safekeeping of property under this
Agreement.
F. Subject to paragraph G of this Section 15 and notwithstanding
paragraph E of this section 15, the Bank shall be strictly liable to the Trust
for any loss of securities or cash held pursuant to the Agreement resulting
from robbery, theft, burglary, fire or mysterious disappearance while such
securities and cash are in the Bank's custody or the custody of a nominee,
central depository or agent retained by the Bank. In addition, the Bank will be
liable to the Trust for losses of such securities or cash which result from the
Bank's negligence or willful misconduct or the negligence or willful misconduct
of its officers, employees and agents, including nominees or central
depositories retained by the Bank. The Bank shall have the burden of proving
lack of such negligence or willful misconduct. In the event of a loss of
securities or cash while in the custody of the Bank or the custody of a
nominee, depository or agent other than a loss resulting from Intervening
Forces, the Bank shall (i) remit the amount of such cash to the Trust and (ii)
replace any such securities with securities of like kind and quality, together
with any rights and privileges pertaining thereto, or if acceptable to the
Trust remit cash equal to the market value of such securities as of the date of
discovery of the loss; provided, however, that the Trust shall reimburse the
Bank for any such replacement of securities or remission of cash if the Bank is
not liable to the Trust in accordance with this section 15.
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<PAGE>
G. Notwithstanding the provisions of paragraph F, as to securities or
cash held by a subcustodian, or an eligible foreign securities depository
engaged by such subcustodian, the Bank shall only be liable to the Trust for
losses which shall occur as a result of the failure of such subcustodian or
eligible foreign securities depository to exercise reasonable care with respect
to the custody of securities and cash held pursuant to this Agreement;
provided, however, that the Bank shall not be liable for any loss of such
securities or cash to the extent that such loss resulted from, or was caused
by, the direction of the Trust to maintain custody of any securities or cash in
a foreign country including, without limitation, losses resulting from acts of
God or Intervening Forces. In the event that the Bank is liable to the Trust
for a loss of securities or cash held pursuant to this Agreement, the Bank
shall (i) remit the amount of such cash to the Trust and (ii) replace such
securities with securities of like kind and quality, together with any rights
and privileges pertaining thereto, or if acceptable to the Trust, remit cash
equal to the market value of such securities as of the date of discovery of
such loss.
H. Upon request by the Trust, any reasonable costs and expenses
incurred by the Trust in defending or preparing to defend any investigation,
suit or other proceeding initiated by a third party as a result of a loss of
securities or cash held under this Agreement for which the Bank is liable will
be paid by the Bank to the Trust in a current manner as such costs and expenses
are paid by the Trust.
I. Subject to its obligations set forth above, the Bank will be liable
to the Trust only to the extent of its general damages suffered or incurred for
which liability is imposed upon the Bank by a court of law or under the terms
of this Agreement. General damages shall mean only those damages as directly
and necessarily result from such act or omission without reference to any
special conditions or circumstances of the Trust or of any transaction.
J. The Bank shall be responsible only for those duties stated in this
Agreement or contained in an Authorized Instruction and, without limiting the
foregoing, the Bank shall have no duty or responsibility:
(a) to supervise the investment of, or make recommendations with
respect to the purchase, retention or sale of, securities or other
property relating to the account of any Portfolio of the Trust or to
maintain any insurance for the benefit of the Trust on property held
under this Agreement;
(b) with regard to any security held under this Agreement as to
which a default in the payment of principal or interest has occurred,
to give notice of default, make demand for payment or take any other
action with respect to such default;
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(c) for any act or omission, or for the solvency or notice to the
Trust of the solvency, of any broker or dealer which is selected by
the Trust or any other person other than the Bank, its officers,
employees it agents, to effect any transaction for any Portfolio of
the Trust;
(d) to evaluate, or report to the Trust regarding, the financial
condition of any party to which the Trust delivers securities or
payment pursuant to this Agreement, except if selected by the Bank,
its officers, employees or agents; or
(e) for any loss occasioned by delay in the actual receipt of
notice by the Bank of any payment, redemption or other transaction in
respect to which the Bank is authorized to take some action pursuant
to this Agreement.
K. The Bank represents and warrants that it currently maintains a
banker's blanket bond which provides standard fidelity and non-negligent loss
coverage in the amount of one hundred million dollars ($100,000,000) with
respect to the securities and cash which may be held pursuant to this
Agreement. The Bank agrees that if at any time it for any reason discontinues
or reduces such coverage, it shall provide prior written notice of such fact to
the Trust. The Bank need not maintain any insurance specifically for the
benefit of the Trust.
Section 16. Reports by the Bank and Access for Examination
A. The Bank shall furnish to the Trust at the close of each month
statements (which, if requested by the Trust, are to be certified by a duly
authorized officer of the Bank) showing (i) the number of shares or other units
or the principal amounts held, as the case may be, of the securities held by it
for each of the Portfolios of the Trust and by each subcustodian, including an
identification of the entity having custody of the securities hereunder, and
(ii) details of each of the debit and credit entries made for each of the
Portfolios of the Trust, which statement shall identify the entity which has or
had custody of the underlying securities. The Bank shall also furnish to the
Trust such daily or special reports as reasonably required by the Trust in
respect of any of the assets held hereunder by the Bank or by a subcustodian.
B. With respect to securities or cash held by a' subcustodian, in the
absence of the filing in writing with the Bank by the Trust of exceptions or
objections to any statement furnished pursuant to paragraph A of this Section
16 within twelve months of the receipt by the Trust of such statement, the
Trust shall be deemed to have approved any such statement; and in such case or
upon written approval of the Trust of any such statement the Bank shall, to the
extent permitted by law, be released, relieved and discharged with respect to
all matters and things set forth in such statement as though such statement has
been settled by the decree of a court of
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<PAGE>
competent jurisdiction in an action in which the Trust and all persons having
an equity interest in the Trust were parties.
C. The books and records of the Bank pertaining to its actions under
this Agreement shall be open at reasonable times for inspection and audit by
members of the Board, Authorized Persons, the independent auditors for the
Trust, and other persons designated by or pursuant to resolutions of the
Custody Committee or the Board. In addition, the Bank shall submit to all
regulatory and administrative bodies having jurisdiction over the operations of
the Trust, present or future, any information reports or other material which
any such body by reason of this Agreement may request or require pursuant to
applicable laws or regulations. The Bank shall, subject to restrictions under
applicable law, also obtain from any subcustodian with which the Bank maintains
the custody of any securities held pursuant to this Agreement an undertaking to
provide such access to its books and records and such information as the Bank
has agreed to provide in this paragraph C.
D. Upon a reasonable request from the Trust, the Bank shall furnish to
the Trust such reports (or portions thereof) of the Bank's external auditors as
relate directly to the Bank's system of internal accounting controls applicable
to the Bank's duties under this Agreement. The Bank shall use its best efforts
to obtain and furnish the Trust with such similar reports as the Trust may
reasonably request with respect to each eligible foreign custodian and eligible
foreign securities depository holding securities pursuant to this Agreement.
Section 17. Authority
The Trust warrants its authority to deposit pursuant to this Agreement
any securities and cash which the Bank or its agents receive for deposit and
give instructions relative thereto.
Section 18. Termination or Assignment
This Agreement may be terminated by the Trust or the Bank on sixty
(60) days' notice, given in writing and sent by registered mail to each of the
other parties. Upon any termination of the Agreement, pending appointment of a
successor to the Bank or a determination by the Board to function without a
bank custody arrangement for the securities of the Trust or to operate the
Trust in any other form permitted of the Trust or to operate the Trust in any
other form permitted by law not requiring a custodian of such securities, the
Bank may deliver the securities held by it pursuant to this Agreement to a bank
or trust company in the city of New York of its own selection having an
aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than one hundred million dollars ($100,000,000)
as a safekeeper for the Trust to be held under terms similar to those of this
Agreement. The obligations of the parties hereto regarding the exercise of care
with respect to any securities or cash of a Portfolio of the Trust
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<PAGE>
then held by the Bank, indemnities and payment of fees and expenses shall
survive the termination of this Agreement.
Section 19. Governing Law and Successors and Assigns
This Agreement shall be governed by the laws of the State of New York.
This Agreement may not be assigned by either the Trust or the Bank, but shall
bind the successors in interest of the Trust and the Bank.
Section 20. Notice to Parties
All written notices required under this Agreement shall be deemed duly
given to the parties if personally delivered or mailed to the parties at their
respective addresses set forth below (unless written notice of change of
address shall have been given):
To the Trust: The Hudson River Trust
1221 Avenue of the Americas
New York, New York 10020
Attention: J. Scott Fox
The Hudson River Trust
1755 Broadway, 3B
New York, New York 10019
Attention: Dennis Sheehan
To the Bank: The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10005
Attention: William J. Keenan
Section 21. Prior Proposals
This agreement contains the complete agreement of the parties hereto
with respect to the holding of the securities and cash of each of the
Portfolios of the Trust (except as may be expressly provided to the contrary
herein) and supercedes and replaces any previously made proposals,
representations, warranties or agreements with respect thereto by either or
both parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
as of the date first above written.
Executed in several counterparts, each of which is an original.
ATTEST: THE HUDSON RIVER TRUST
/s/ Kevin Keefe By: /s/ Kathleen W. Bratton
- ------------------------ -------------------------
Secretary Vice President
ATTEST: THE CHASE MANHATTAN BANK, N.A.
/s/ Ilian Alvarado By: /s/ Carl J. Ferrara
- ------------------------ -------------------------
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<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 29 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 10, 1997, relating to the financial statements and financial
highlights of the Hudson River Trust, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement.
We also consent to the reference to us under the heading "Financial Highlights"
in such Prospectus and to the reference to us under the heading "Other Services
- - Independent Accountants" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 28, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ Howard E. Hassler
-----------------------------------------
Howard E. Hassler
Dated: April 14, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ John D. Carifa
-----------------------------------------
John D. Carifa
Dated: April 14, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ Richard W. Couper
-----------------------------------------
Richard W. Couper
Dated: April 14, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ Brenton W. Harries
-----------------------------------------
Brenton W. Harries
Dated: April 14, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ William L. Mannion
-----------------------------------------
William L. Mannion
Dated: April 14, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ Alton G. Marshall
-----------------------------------------
Alton G. Marshall
Dated: April 14, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ Peter D. Noris
-----------------------------------------
Peter D. Noris
Dated: April 14, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ Donald J. Robinson
-----------------------------------------
Donald J. Robinson
Dated: April 14, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ Clifford L. Michel
-----------------------------------------
Clifford L. Michel
Dated: April 14, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ Thomas R. Manley
-----------------------------------------
Thomas R. Manley
Dated: April 14, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to
the extent inconsistent herewith and constitutes and appoints John D. Carifa,
Edmund P. Bergan, Jr. and Andrew L. Gangolf, and each of them, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities, solely for the
purpose of signing the Registration Statement, and any amendments thereto, on
Form N-1A of The Hudson River Trust and filing the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
/s/ Mark D. Gersten
-----------------------------------------
Mark D. Gersten
Dated: April 14, 1997
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<NAME> AGGRESSIVE STOCK PORTFOLIO - CLASS IB
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<NAME> GLOBAL PORTFOLIO - CLASS IA
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<NAME> GLOBAL PORTFOLIO - CLASS IB
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<NAME> CONSERVATIVE INVESTORS PORTFOLIO - CLASS IA
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<NAME> GROWTH INVESTORS PORTFOLIO - CLASS IA
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<NAME> GROWTH INVESTORS PORTFOLIO - CLASS IB
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<NAME> INTERMEDIATE GOVERNMENT PORTFOLIO - CLASS IA
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<NAME> QUALITY BOND PORTFOLIO - CLASS IA
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<NAME> EQUITY INDEX PORTFOLIO - CLASS IA
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