SMITH BARNEY SERIES FUND SEMI-
ANNUAL REPORT FOR
SYMPHONY
A Tax-Deferred Variable Annuity
[Paste up Art]
EQUITY INDEX PORTFOLIO
MONEY MARKET PORTFOLIO
EQUITY INCOME PORTFOLIO
EMERGING GROWTH PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
DIVERSIFIED
STRATEGIC INCOME PORTFOLIO
JUNE 30, 1997
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SEMI-ANNUAL REPORT FOR SMITH BARNEY SERIES FUND
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Dear Investor:
We are pleased to provide the semi-annual report for the
Smith Barney Series
Fund -- Money Market, Diversified Strategic Income, Equity
Income, Equity Index,
Growth and Income, Emerging Growth and International
Equity Portfolios
("Portfolios") for the period ended June 30, 1997. This
letter will briefly
discuss general economic and market conditions. In
addition, detailed
comparisons showing the growth of a hypothetical $10,000
invested in each
Portfolio since inception can be found in this report
(except for the Money
Market Portfolio). A detailed summary of performance and
current holdings for
each Portfolio can be found in the appropriate sections
that follow.
MARKET AND ECONOMIC OVERVIEW
During the past six months, investors in both the U.S.
stock and bond markets
have benefitted from steady economic growth, robust
corporate earnings and
profits, a favorable interest-rate backdrop and little or
no signs of inflation.
All of these positive factors have produced an environment
that was virtually
ideal for financial assets during the reporting period.
The stock market began the year positively. Fueled by
strong fourth quarter
earnings and significant money flows into mutual funds,
the Standard & Poor's
500 Stock Index ("S&P 500"), a capitalization-weighted
index of 500 widely held
common stocks, gained more than 7% in January and February
and continued to move
to new highs in early March. However, as evidence of
unexpectedly strong
economic growth came to light, investors became
increasingly concerned about the
risks of higher inflation and rising interest rates.
A tightening labor market and rising production costs
prompted the Federal
Reserve Board ("Fed") to raise the federal-funds rate by
25 basis points (0.25%)
in late March of this year. (The federal-funds rate is the
interest rate banks
charge each other for overnight loans and a closely
watched indicator of the
direction of interest rates.) Higher interest rates
triggered a sharp sell-off
in the stock market during the last week of March, erasing
most of the market's
year-to-date gains.
The stock market correction that began in late March did
not last long. During
the second quarter of 1997, the S&P 500 generated a total
return of roughly
17.5%. This was the S&P 500's largest gain since the first
quarter of 1987 and
it has more than doubled since the end of 1994. The S&P
500 has posted positive
returns in all ten quarters during this time period.
Investors continue to favor
the quality, safety and liquidity of large multinational
corporations and the
stock market's historic climb has been driven primarily by
the strong
appreciation of large-capitalization stocks. In addition,
investors have
exhibited a growing confidence that inflation would remain
subdued and that
helped to push both the stock market's price/earnings
multiples and bond prices
higher. For most stock and bond investors, it does not get
any better than this.
The technology sector rebounded and led the market's broad
advance during the
six months under review. Considering the improving outlook
for sales and
earnings, networking, telecommunications equipment and
semiconductor equipment
stocks all went up sharply. A strong rally in the health
care sector was paced
by the pharmaceutical group. In addition, the financial
services sector
performed well as did consumer non-durable stocks. Because
of weaker commodity
prices and slowing relative earnings growth, the stocks
of energy and basic
materials lagged.
Although the U.S. unemployment rate is near a thirty-year
low and consumer
confidence is the highest it has been in over twenty
years, there has not been a
substantial increase in inflationary pressures. At their
May 20, 1997, meeting,
the Fed chose not to raise interest rates further,
indicating its view that the
U.S. economy could continue to grow at its present pace
without added
inflationary pressures. In addition, the Fed took no
action during its July
meeting.
Slower economic growth and a steady stream of reports
indicating no meaningful
rise in inflation caused all of the major segments of the
bond market to perform
well in the second quarter. Interest rates generally
declined and bond investors
enjoyed solid returns after a discouraging first quarter.
However, despite lower
interest rates, bond yields remained above the levels at
the end of 1996, a
reflection that some investors are still concerned that
the economy's strong
growth and tight labor market may result in an eventual
increase in inflation.
Why has the stock market continued its remarkable and
historic climb? We believe
one of the main reasons is the realization of the "peace
dividend." (The "peace
dividend" is a term used to describe the reallocation of
spending from military
purposes to peacetime priorities and the creation of huge
new markets throughout
the former Communist world.) As a result of the collapse
of communism and the
fall of the Berlin Wall, huge new markets have opened up
in China, Eastern
Europe
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and now even Russia. After the restructurings and
downsizings of the 1980s,
major dominant companies with predictable-earnings and
strong balance sheets in
the U.S. and elsewhere have been well positioned to
compete in the global
economy and consequently their stock prices have generally
outperformed the mid-
and small-cap ones globally. Moreover, these types of
largecap companies can
generate cash in a relatively slow growth environment.
The creation of a truly
global economy has begun to offer unprecedented
investment opportunities
throughout the world.
In our view, the strong growth in 401(k) plans has also
contributed to the stock
market's surge. According to Barron's magazine, assets
in 401(k) plans have
grown at a compound annual rate of 18% since 1986,
driving the value from $155
billion to $810 billion.
Looking ahead at the next six months, we think investors
should not become too
complacent and expect these outsized returns to continue
indefinitely. While we
cannot say with certainty a market correction is
imminent, investors need to
stay patient, remain committed to their disciplined
investment plans and
consider further diversifying their portfolios into
other asset classes to help
minimize the effects of any sustained market downturn.
MONEY MARKET PORTFOLIO
For the six months ended June 30, 1997, the Money Market
Portfolio generated a
total return of 2.18%.
Over the past six months, the U.S. economy has grown
vigorously. Gross Domestic
Product (GDP), the total output of goods and services,
rose at a 5.9% annual
rate in the first quarter of 1997. This comes on the
heels of a 3.8% annual rate
of growth in the fourth quarter of 1996. Much of the
growth in the first quarter
of 1997 came from higher personal consumption as
evidenced by strong motor
vehicle and durable goods sales. High consumer confidence
and a low unemployment
rate have also contributed to a healthy first half of the
year. Absent from the
picture has been any concrete signs of inflation. For the
first five months of
1997 consumer prices rose only 1.4%, down from the 3.8%
for the comparable
period of 1996. Nevertheless, the Federal Open Market
Committee (FOMC) raised
short-term interest rates by 25 basis points (0.25%) at
their meeting in March
1997.
Going forward, we expect to see economic growth slow down
from its current pace.
Part of the growth in the first quarter of 1997 resulted
from a buildup in
business inventories; a factor that will actually
subtract from future quarters.
Furthermore, reports from auto makers and department
stores suggest that retail
sales have slowed in the second quarter of 1997. This
slowdown could be the
result of temporary factors such as auto strikes and April
tax payments. The
overall trend indicates that both the labor market and
corporate America remain
strong. Nevertheless, recently released economic reports
gave the Fed the
necessary leeway to leave interest rates unchanged at
their May and July
meetings, while it continues to closely monitor for any
signs of excessive
growth and inflationary pressures.
It appears that Fed Chairman, Alan Greenspan, has adopted
a new policy based on
the possibility that we have entered a new economic era.
Greenspan seems willing
to allow faster economic growth because productivity gains
are helping to keep
inflation in check. In addition, successful deficit
reduction and high real
interest rates (based on our belief that the current rate
of inflation is
overstated) has enabled the Fed to pursue a less
restrictive monetary policy.
We believe the Fed will continue to take a fine tuning
approach to monetary
policy and there should be less dramatic changes in the
direction of interest
rates over the next several months. Given this scenario
and barring no inflation
(as reflected in recent bond market yield hovering below
7.0%), we will invest
across the yield curve if we identify any good values.
If inflation reports remain positive over the long term
and the annual rate of
economic growth slows down to a 2%-3% range in 1998, the
Fed could lower rates
to further prolong the economic expansion. We expect to
maintain an average
maturity of between 35 and 45 days and continue to focus
on highly rated
securities. Over the second quarter of 1997, we invested
50% in foreign
obligations and 50% in domestic obligations. We have
recently added several high
quality issuers to our portfolio such as Lucent
Technologies and Hertz
Corporation.
You should be aware that your investment in the Money
Market Portfolio is
neither insured nor guaranteed by the U.S. government.
Moreover, no assurance
can be given that the Money Market Portfolio will be able
to maintain a stable
net asset value (NAV) of $1.00 per share.
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DIVERSIFIED STRATEGIC INCOME PORTFOLIO
The Diversified Strategic Income Portfolio seeks to
provide investors with high
current income by investing in a combination of U.S.
government and
mortgage-related securities, high-yielding corporate bonds
and foreign
government securities. The Portfolio's management team
allocates assets based on
its analysis of current economic and market conditions,
taking into account the
relative risks and income opportunities within each of the
fixed-income sectors
of the Portfolio.
For the six months ended June 30, 1997, Diversified
Strategic Income Portfolio
had a total return of 2.73% which is slightly under the
Lehman Aggregate Bond
Index total return of 3.09% for the same period. (The
Lehman Aggregate Bond
Index is an unmanaged index composed of the Lehman
Intermediate
Government/Corporate Bond Index and the Mortgage-Backed
Securities Index and
includes U.S. Treasury issues, agency issues, corporate
bond issues and
mortgage-backed securities.)
After more than six years of uninterrupted growth, the
U.S. economy continued
its vigorous expansion over the past six months. The
annualized GDP rate of 5.6%
reported for the first quarter of 1997, coming on the
heels of an already brisk
3.8% annualized GDP growth for the fourth quarter of 1996,
raised the concerns
of many investors that the Fed would be forced to raise
short-term interest
rates. The Fed has stated that it considers an annual
growth rate of
approximately 2.0% to 2.5% to be the limit the U.S.
economy can absorb without
increasing inflationary pressures. As a result of the
unexpected strength in the
U.S. economy, the Fed raised the federal-funds rate by 25
basis points, or 0.25%
at its March 1997 meeting.
We remain bullish on the bond market in the coming months.
We expect that
interest rates should continue to go down for the
remainder of the year with the
benchmark 30-year U.S. Treasury bond yield falling to
around 6%. Moreover, we
believe that fixed-income investments should benefit from
the continued steady
growth of the U.S. economy with little or no threat of
higher inflationary
pressures.
Throughout the past three months, the U.S. high yield bond
market has generally
outperformed the more interest-rate sensitive, longer
maturity Treasury and
investment grade bond markets. The high yield bond market
has continued to rally
on strong demand from both new investors and mutual
funds. Given the market's
strong condition, we have seen a record amount of new
high yield bond issuance
(more than $60 billion) during the first six months of
this year. We expect this
trend to continue over the next six months.
Because of this record demand for high yield bonds, many
issues have appreciated
to fully valued levels with yield premiums over U.S.
Treasuries approximately
100 basis points tighter than their historical averages.
In addition to the
technical factors we have noted, there are a number of
positive fundamental
factors driving the valuations of high yield bonds.
Besides the huge inflow of
new capital into the high yield market, economic
conditions remain supportive
such as low inflation and low unemployment.
With its high valuations, the stock market has enabled
many companies that issue
high yield bonds to issue equity securities to further
bolster their balance
sheets. In addition, the highly liquid banking industry
has been able to meet
the needs of many high yield borrowers. As a consequence,
high yield default
rates remain at the low end of their historical range and
average about 1.5% per
year for the last two years. As long as economic and
market conditions remain
relatively benign, high yield bond spreads should stay at
the tighter end of
their historical range. Because of these positive
fundamental factors, we do not
believe that investor speculation has increased in the
high yield bond market.
However, we are sensitive that individual issues may
ultimately disappoint some
investors and underperform.
We believe the high yield market is fully valued at this
time. Since we still
expect the U.S. economy to grow moderately over the
foreseeable future with
little serious threat of either an acceleration of
inflation or an economic
recession, we do not anticipate any material deterioration
in high yield bond
performance.
We still firmly believe that the better quality high-yield
issues offer superior
risk-adjusted returns and lower default risk relative to
lower-quality issues
over a full economic cycle. In light of the trend toward
greater industry
competition and the fact that most companies in the U.S.
economy have little
pricing power, we believe our prudent approach to
investing
in high yield bonds
should generate consistent positive returns for the
remainder of the year.
In the global government bond market, the drive toward a
single European
currency under the agreement of European Monetary Union
(EMU) continued to exert
a positive influence on most European economies.
Investor skepticism regarding
the likelihood of the EMU dissipated in the face of
strong determination by the
monetary and fiscal authorities of Spain and Italy to
meet the strict criteria
for entry into EMU.
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The core European bond markets, particularly Germany,
France and the
Netherlands, lagged behind the smaller markets. These
three bond markets
significantly underperformed the higher-yielding
peripheral bond markets and
underperformed the J.P. Morgan Global Government Bond
Market Index as well. (The
J.P. Morgan Global Government Bond Market Index is a
common benchmark that
measures performance and quantifies risk across diverse
international
fixed-income markets.) Optimism about further interest
rate cuts in Germany
evaporated in the fall of 1996, which contributed to the
sluggish performance by
the core bond markets as a whole. Furthermore, many
veteran market observers
have voiced concerns over Germany's possible inability to
meet EMU membership
criteria. Failure to meet EMU deadlines by one of Europe's
most powerful
economies could derail efforts to build a single European
currency.
Despite the economic hurdles facing some European
economies, we remain positive
on European bonds, particularly in the smaller bond
markets. In our view,
economic recovery is well under way in many key European
countries and continued
efforts toward an EMU should further aid in the region's
recovery.
EQUITY INCOME PORTFOLIO
The Equity Income Portfolio seeks to provide current
income and, as a secondary
goal, long-term capital appreciation. The Portfolio will
seek to achieve its
goals principally through investment in dividend-paying
common stocks of
companies whose prospects for dividend growth and capital
appreciation are
considered favorable. The Portfolio will normally invest
at least 65% of its
assets in equity securities. Under normal circumstances,
the Portfolio will
concentrate at least 25% of its assets in equity and debt
securities of
companies in the utility industry.
As of June 30, 1997, the Portfolio invests approximately
73.2% of assets in
common stocks (51.1% in electric utilities, 13.3% in
natural gas companies and
8.8% in telecommunications companies), 20.5% in long-term
bonds and 6.3% in
cash. For the six months ended June 30, 1997, the
Portfolio had a total return
of 4.0% versus the S&P 500 total return of 20.6% for the
same period.
So far in 1997, favorable economic news, better-than
expected GDP, continued low
inflation and strong corporate earnings growth fueled the
U.S. economy and
financial markets. However, this positive economic
environment continued to
challenge utility stocks as a whole because of the
uncertainty surrounding
industry restructuring.
The strong equity market, as measured by the S&P 500 and
the Dow Jones
Industrial Average led by technology and cyclical issues,
provided investors
with investment returns substantially above historical
averages. Despite this
strong performance, the volatility of the markets
increased during the past six
months. In our opinion, this increase in market volatility
has not deterred
investors who continue to avoid more defensive stocks such
as utilities. As a
group, the utilities industry continued to underperform
relative to the
broad-based equity market.
Despite the market's lack of enthusiasm in the utility
industry and the cloud of
uncertainty caused by deregulation, we remain positive
on the utility industry
as a whole and anticipate several positive regulatory
decisions both at the
state and federal level in the months ahead. Although
the level of long-term
interest rates continues to be an important influence on
a utility company's
relative performance, we think that improving a
company's competitive position
is a more significant factor in achieving attractive
investment returns. Given
the wide disparity in the performance of different
utility stocks, we believe
that careful stock selection remains key to achieving
superior total return
performance.
With respect to the long-term outlook for utilities, many
states have recently
enacted competitive restructuring proposals. Under these
proposals, power
providers would compete for customers in an open market.
In our view, these
proposals are not only positive compared to many of the
early more punitive
proposals, but essentially provide the local utility the
opportunity to recover
its "stranded costs." (Stranded costs are expenses that
utilities are at risk of
not recovering in a competitive environment.) Stranded
costs, often associated
with expensive nuclear plants, includes any assets or
expenses that, when
recovered through traditional power rates, can cause
utility rates to exceed the
market price of power. Certain states have passed
legislation to permit the
recovery of stranded costs through the issuance of asset
backed bonds.
As full retail competition is established, clearly not all
utilities, whether in
the electric, gas or telecommunications industries, will
be impacted by
competition to the same extent. Deregulation, while
increasing the business risk
for companies with higher expenses, should provide
opportunities for lower-cost,
well-managed companies. We expect volatility in the
utility
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industry to persist as the reduction in regulatory
protection proceeds and the
financial markets differentiate between those companies
that are "competitively
blessed," (with lower cost structures, strong service
territory growth and
competitive management skills), and those companies that
are perceived to be
"fundamentally challenged," (due to the burden of high
cost structures, limited
customer growth and lack of a clear corporate strategy).
As noted, the
increasing disparity of performance within the utility
industry has resulted
from a combination of fundamental factors and competitive
uncertainty.
In our opinion, merger and acquisition activity within the
electric utility,
natural gas and telecommunication industry have generally
generated superior
total returns. We anticipate the pace of merger activity
within the utility
industry to increase as state and federal regulatory
proposals are finalized.
Consolidation such as mergers that integrate two
industries, (e.g.,
electric/natural gas) are primarily driven by competitive
concerns. A successful
merger often allows two companies to leverage their
production costs over a
larger customer base.
In an effort to take advantage of better relative market
performance and total
return, we have strategically increased the Portfolio's
emphasis in natural gas
stocks. The natural gas holdings in the Portfolio are
companies that we believe
should deliver solid core earnings growth while at the
same time rapidly growing
their non-regulated businesses. Supporting our confidence
in the natural gas
sector through the end of the 1997 is a positive commodity
price forecast and
solid earning performance for many natural gas companies.
In addition, we continue to increase the Portfolio's
emphasis in the
telecommunications industry. Although not immune to
regulatory concerns, select
companies within the telecommunications industry offer the
Portfolio additional
diversification and compelling investment opportunities.
Many telecommunications
companies stand to benefit from the integration of long
distance, local, cable
and internet services, as well as the rapid expansion of
global
telecommunications networks.
Our portfolio strategy continues to focus on current
income and long-term
capital appreciation. Looking ahead to the rest of 1997
and 1998, deregulation
and competition will continue to evolve implying both
increased volatility and
greater opportunity. We anticipate that as the competitive
regulatory framework
takes shape, issues of market share and customer
satisfaction will replace
concerns regarding transition plans and rate decreases.
The Portfolio maintains
its emphasis in quality, low-cost companies with a
predictable earnings base.
For the remaining six months of 1997, we expect to
continue the moderate,
sustainable growth in the U.S. economy. We believe
inflation should remain under
control as the Fed appears resolved to take the necessary
pre-emptive steps if
any signs of inflationary pressures emerge.
EQUITY INDEX PORTFOLIO
The Equity Index Portfolio is managed to provide
investment results that, before
the deduction of operating expenses, match the price and
yield performance of
the S&P 500. For the six months ended June 30, 1997, the
preexpense performance
of the Equity Index Fund closely approximated the S&P 500
total return of 20.6%
(with dividends). Net of all fund expenses, over this same
period, the Fund
provided a total return of 19.99%.
The stock market began 1997 on a positive note. Fueled by
strong fourth quarter
earnings and robust money flows into mutual funds, the S&P
500 gained over 7% in
January and February, and continued to move to new highs in
early March.
However, as evidence of unexpectedly robust economic growth
came to light,
investors became increasingly concerned about the risks of
higher inflation and
rising interest rates. The Fed raised short-term rates on
March 25, 1997, and
long-term Treasury bond yields moved back over the
psychologically important 7%
level. The upward spike in interest rates triggered a sharp
sell-off in the
stock market during the last week of March, erasing most of
the market's
year-to-date gains. For the entire first quarter, the S&P
500 posted only a 2.7%
gain (with dividends). Small capitalization issues
generally fared worse. During
the first three months of 1997, the Russell 2000 stock
index declined 5.5% in
value. (The Russell 2000 Index is made up of 2,000 smaller
capitalized
U.S.-based companies whose common stocks trade on either
the New York, American
or Nasdaq stock exchanges.)
The market correction that began in late March was short
lived. Stocks began to
rebound in late April, helped by strong first quarter
earnings and reassuring
signs that the economy was slowing to a rate of growth
consistent with continued
low inflation. Well over half of all companies reported
first quarter operating
earnings that exceeded analyst expectations, reflecting
continued profit margin
expansion from improving labor productivity and lower
interest-related expenses.
During
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May, the financial markets began to trade on evidence of a
steady deceleration
of inflation at all levels of the economy. Long-term
Treasury bond yields dipped
back below 6.75% and stock prices rose sharply. In May and
June, the S&P 500
advanced to new highs on almost a daily basis, and on June
20th closed above the
900 level for the first time.
With inflation dormant, corporate earnings growing at a
double-digit pace and
the Fed "on hold" with interest rates, investors could
apparently rationalize
bidding up equity prices to valuation levels that
reflected a "best of all
worlds" environment. After months of lagging performance,
small-cap stocks
finally staged a "catch-up" rally in May, in response to
improving relative
earnings and the announcement of a Federal balanced budget
accord that would
include a cut in the capital gains tax. At the end June,
the price-to-earnings
(P/E) ratio of the S&P 500 based on 12-month forward
earnings estimates was 18.5
times, the highest in over fifty years. (The
price/earnings ratio is the price
of a stock divided by its earnings per share.) During the
second quarter, the
S&P 500 advanced 17.5% (with dividends), the index's
fourth highest quarterly
gain since 1950 and its best since the first quarter of
1987.
At the industry level, a rebound in the technology stocks
led the market's broad
advance during the first half of 1997. Networking,
telecommunications equipment
and semiconductor equipment stocks all rose sharply on an
improving outlook for
sales and earnings. A strong rally in the health care area
was paced by drug
stocks, whose overseas exposure and strong relative
earnings growth proved
extremely attractive to investors seeking stable growth
stocks. Stocks in the
financial services industry continued to outperform,
helped by solid earnings
and the higher valuations resulting from consolidation in
the banking, insurance
and securities brokerage industries. Also strong were
consumer non-durable
stocks in the household products, retail drug and beverage
groups. Energy and
basic materials stocks lagged as the result of weaker
commodity prices and
slowing relative earnings growth. The utility industry
also underperformed due
to lackluster profit growth and a deteriorating
competitive environment in the
regional telephone and electric utility markets.
GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio seeks long-term capital
growth and income. The
Portfolio invests in income producing equity securities
including companies with
consistent dividend-paying histories, the capacity to
raise dividends in the
future and the potential for capital appreciation. For the
six months ended June
30, 1997, the Growth and Income Portfolio had a return of
14.49% versus the S&P
500 total return of 20.60% for the same period.
The Growth and Income Portfolio focuses on quality
companies with rising
dividends. In the last quarter, stock prices have risen so
sharply that even the
modest amounts of cash and intermediate bonds in the
Portfolio have penalized
performance. The result was third quartile performance for
the quarter. Over
time, however, we believe that how we select stocks should
prove beneficial to
shareholders. Investors should not extrapolate the market
strength of the last
quarter, or for that matter, the last year.
We have recently purchased two new stocks within the
Growth and Income
Portfolio: Rite Aid and Colgate-Palmolive. Although both
are consumer-oriented
companies, we did not purchase them based on an industry
outlook. Instead, we
bought them due to positive fundamental changes underway
at both companies.
Rite Aid (RAD), a major drug store chain, is revamping
operations at its
recently purchased Thrifty PayLess operations. The Thrifty
PayLess chain is
installing standardized point-of-sale (POS) and pharmacy
systems, the first step
towards increasing margins. Furthermore, sales have beaten
projections this
year. And RAD sells at a meaningful valuation discount to
competitors Walgreen
and CVS.
Colgate (CL) is a leading personal care products company.
Although it has been
aggressive in new product development, only now is Colgate
doing the cost
restructuring that many of its rivals have already
undertaken. And so, it's only
now that CL is beginning to reap the benefits of rising
margins and increasing
cash flow. In addition, its acquisition of Brazilian-based
Kolynos has just this
year added to its earnings.
EMERGING GROWTH PORTFOLIO
The Emerging Growth Portfolio seeks capital appreciation
by investing at least
65% of its total assets in the common stocks of small- and
medium-sized foreign
and domestic companies. The Portfolio focuses on companies
that are in the early
stages of their life cycle and have the potential to
become major enterprises.
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The Emerging Growth Portfolio generated a total return of
8.02% for the six
months ended June 30, 1997. However, the Portfolio trailed
its benchmark, the
Nasdaq Composite Index which gained 11.70% as the market
continued its
preference for larger-sized, consistent growth companies
rather than the small-
and middle-capitalization, high-growth companies emphasized
in the Portfolio.
(The Nasdaq Composite Index is a market capitalization
priceonly index that
tracks the performance of domestic common stocks.)
We employ a "bottom-up" approach that focuses on stock
selection rather than
"market timing" or "sector rotation." Our approach remains
the same regardless
of the market or economic conditions. We select stocks
based on the company's
potential to deliver upside earnings surprises. To find
such companies, we look
for two key criteria: rising earning estimates and
improving valuations. We
generally make investments in companies that we believe
have the highest growth
potential.
Though certain risks exist when investing in emerging
growth companies, we
attempt to avoid risk by maintaining a broadly diversified
portfolio and usually
remain fully invested. Our goal is to outperform the market
by selecting the
best stocks within each industry. In our view, this
investment style should
deliver consistent results over the long term.
During the first half of 1997, the Portfolio's biggest
gainers were: Dell
Computer Corp. (computers), Applied Materials
(electronics), Compuware Corp.
(software), Evergreen Media Corp. (media), and Medicis
Pharmaceutical Corp.
(pharmaceuticals). These companies greatly exceeded
earnings expectations, and
saw the market reward that performance with a higher
valuation. The Portfolio's
disappointments for the first half of 1997 were: Inacom
Corp. (consumer
distribution), Dynatech Corp. (technology), MiniMed, Inc.
(health care), U.S.
Filter Corp. (basic industries/raw materials) and Tommy
Hilfiger Corp. (consumer
nondurables). Although these companies generally beat
earnings expectations,
investor perceptions of deteriorating fundamentals within
their respective
industry niches caused their stock prices to decline.
Currently, the stock market is basking in the best of all
possible environments:
low inflation, moderate economic growth and solid
corporate earnings. While we
do not believe increased inflationary pressures are a
serious concern, some
warning signs are present, including strong job growth,
high consumer confidence
and a mild upturn in wages. In our view, the recent rally
in stock prices
suggests that investors believe the Fed will successfully
engineer a slowdown in
growth.
On a relative basis, small-capitalization stocks generally
trade at a premium to
the larger stocks of the S&P 500. However, the spread in
relative valuation
between small-capitalization and large-capitalization
stocks has narrowed over
the past year, and it appears to be close to bottoming
out. Historically, such
an event has been followed by a rebound in small-company
stock prices. As such,
we anticipate a gradual -- and probably volatile -- small
capitalization rally
that could last several years. We believe stock selection
will be very important
in such an environment, and we will continue to implement
our disciplined
investment approach.
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio seeks total return from
growth of capital and
income. The Portfolio seeks to achieve its objective by
investing at least 65%
of its assets in a diversified blend of equity securities
of established
non-U.S. issuers. For the six months ended June 30, 1997,
the International
Equity Portfolio posted a total return of 5.63% versus the
S&P 500 total return
of 20.6% for the same period.
During the first six months of 1997, the International
Equity Portfolio
performed solidly against a backdrop of impressive U.S.
equity markets. This
upward movement happened despite potentially worrisome
international events such
as the July 1 China/Hong Kong reunification, election of
the U.K. Labor Party
and ongoing debates surrounding the EMU that occurred in
the first half of 1997.
In our view, low inflation, favorable interest rates and
corporate restructuring
are positive long-term trends that should continue to help
support the
international equity markets.
For the six months ended June 30, 1997, the NAV of the
International Equity
Portfolio rose 5.63%. This NAV appreciation occurred
despite the strength of the
U.S. dollar versus the currencies of our international
trading partners, which
reduced the return to dollar-based investors.
Our equity allocations are driven by our "bottom-up"
approach to selecting
stocks and we continue to be heavily weighted in Europe,
at about 68% of assets.
(A "bottom-up" approach to investing focuses on the
potential outstanding
performance of individual companies rather than
considering the impact of major
economic trends.) Our primary country exposures include
the U.K. (12%), the
Netherlands (10%), Sweden (10%), Ireland (8%), Italy (5%),
and Germany (4%).
7
<PAGE>
SEMI-ANNUAL REPORT FOR SMITH BARNEY SERIES FUND ----------
- ----------------------------------------------------------
- -----------
In our view, the major issue for Europe right now is
whether EMU will continue.
In our opinion, the debate over the future of EMU
overlooks the austerity of
governments and the forced re-engineering of companies
that together are having
a beneficial effect on many stock prices. The Portfolio
places strong emphasis
on companies changing the way business is being done, such
as leveraging
productivity through United Kingdom's Misys (computer
systems) and Holland's
Getronics (computer services); outsourcing through United
Kingdom's Serco
(research and development services); new technologies
through Sweden's Ericsson
and Finland's Nokia (telecommunications); and holding down
health care costs
through Sweden's Novartis and Astra (pharmaceuticals).
The Pacific Rim markets, which represent roughly 27% of
the Portfolio's assets,
have generally been disappointing. The slowdown of the
region's economies,
coupled with a tightening of monetary policy, has brought
select markets such as
Thailand and the Philippines sharply lower. The single
exception has been Hong
Kong, where higher liquidity combined with relatively
inexpensive asset values
have contributed to a very strong market, particularly
among Chinese "red chip"
companies. ("Red chip" companies are Chinese firms listed
on Hong Kong's stock
exchanges.)
Interestingly, during the second quarter the Japanese
market was one of the
world's strongest, rising close to 20% in dollar terms,
half from local market
appreciation and half from a firming of the yen against
the dollar. The
Portfolio now has 8% of its assets in Japan, where
resurgent exports (in which
we are represented by global traders such as Japanese-
based Rohm Co.) have
provided a platform for steady domestic growth.
Latin American and other emerging markets have been the
favorites of 1997. We
currently have about 3% of the Portfolio in Latin America,
a region that is
clearly recovering. We continue to search for high-quality
franchise companies
such as Panama's Panamerican Beverage.
During the reporting period, we sold several securities.
The French
do-it-yourself home improvement retailer, Castorama, was
liquidated after the
company posted disappointing 1996 results. We think
Castorama has only limited
prospects for major improvements in 1997. We realized
gains
in Sun Hung Kai
Properties of Hong Kong following a surge in local
property prices prior to
reunification with China. In addition, we also sold the
Italian-based holdings
Fila (an athletic footwear and apparel retailer), due to
sluggish sales growth,
and Industrie Natuzzi (a consumer products company), when
this stock met our
sell price target.
In closing, we thank you for your investment in the Smith
Barney Series
Fund -- Money Market, Diversified Strategic Income, Equity
Income, Equity Index,
Growth and Income, Emerging Growth and International
Equity Portfolios. We look
forward to serving your financial needs in the years
ahead.
Sincerely,
/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman
August 8, 1997
8
<PAGE> ---------------------------------------------------
- ----------------------------
PERFORMANCE COMPARISON -- DIVERSIFIED STRATEGIC INCOME
PORTFOLIO AS OF 6/30/97
(UNAUDITED)
<TABLE>
<CAPTION> ------------------------------------------------
- -
AVERAGE ANNUAL TOTAL RETURN --------------------
----------------------
<S> <C>
Six Months Ended 6/30/97 2.73%
Year Ended 6/30/97 10.77%
Five Years Ended 6/30/97 7.77%
10/16/91* through 6/30/97 7.27%
CUMULATIVE TOTAL RETURN ------------
-----------
10/16/91* through 6/30/97 49.27%
* Commencement of operations ----------------
- --------------------------------</TABLE>
The chart to the right compares the growth in
value of a hypothetical $10,000 investment in
Diversified Strategic Income Portfolio on
October
16, 1991 (commencement of operations) through
June 30, 1997 with that of a similar investment
in the Lehman Brothers Aggregate Bond Index.
Index information is available at month- end
only; therefore, the closest month-end to
inception date of the Portfolio has been used.
Figures for the Lehman Brothers Aggregate Bond
Index, an unmanaged index, are composed of the
Lehman Intermediate Government/Corporate Bond
Index and the MortgageBacked Securities Index
and includes treasury issues, agency issues,
corporate bond issues and mortgage- backed
securities.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
SYMPHONY DIVERSIFIED LEHMAN BROTHERS
(FISCAL YEAR COVERED)
STRATEGIC PORTFOLIO AGGREGATE BOND INDEX
<S> <C>
<C>
10/16/91
10,000 10,000
DEC-91
10,140 10,507
DEC-92
10,284 11,285
DEC-93
11,576 12,386
DEC-94
11,251 12,024
DEC-95
13,071 14,246
DEC-96
14,530 14,944
6/30/97
14,927 15,405
</TABLE>
- ----------------------------------------------------------
- ---------------------
The performance shown represents past performance and is
not a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses
associated with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
- ----------------------------------------------------------
- ---------------------
PERFORMANCE COMPARISON -- EQUITY INCOME PORTFOLIO AS OF
6/30/97 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN --------------------
----------------------
<S> <C>
Six Months Ended 6/30/97 4.00%
Year Ended 6/30/97 9.08%
Five Years Ended 6/30/97 9.43%
10/16/91* through 6/30/97 9.18%
CUMULATIVE TOTAL RETURN ---------------------
--------------------10/16/91* through 6/30/97
65.11%
* Commencement of operations
</TABLE>
The chart to the right compares the growth in
value of a hypothetical $10,000 investment in
Equity Income Portfolio on October 16, 1991
(commencement of operations) through June 30,
1997 with that of a similar investment in the
Variable Annuity Lipper Equity Income Funds Peer
Group Average and Standard & Poor's 500 Index.
Index information is available at month-end
only; therefore, the closest month-end to
inception date of the Portfolio has been used.
The Standard & Poor's 500 Index is an unmanaged
index composed of 500 widely held common stocks
listed on the New York Stock Exchange, American
Stock Exchange and over-the-counter market.
The Variable Annuity Lipper Equity Income Funds
Peer Group Average is composed of 191 equity
income funds as of June 30, 1997 which underlie
variable annuities.
<TABLE>
<CAPTION>
VARIABLE ANNUITY
LIPPER EQUITY
MEASUREMENT PERIOD SYMPHONY
EQUITY INCOME FUNDS PEER
(FISCAL YEAR COVERED) INCOME
PORTFOLIO GROUP S&P 500 INDEX
<S> <C>
<C> <C>
10/16/91 10,000
10,000 10,000
DEC-91 10,200
10,559 10,838
DEC-92 11,397
11,782 11,668
DEC-93 12,583
13,758 12,844
DEC-94 11,308
14,094 13,012
DEC-95 14,979
16,510 17,898
DEC-96 15,876
18,034 19,988
6/30/97 16,511
20,914 24,106
</TABLE>
- ----------------------------------------------------------
- ---------------------
The performance shown represents past performance and is
not a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses
associated with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
9
<PAGE>
- ----------------------------------------------------------
- ---------------------
PERFORMANCE COMPARISON -- EQUITY INDEX PORTFOLIO AS OF
6/30/97 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN -------------------
------------------------
<S> <C>
Six Months Ended 6/30/97 19.99%
Year Ended 6/30/97 33.26%
Five Years Ended 6/30/97 18.46%
10/16/91* through 6/30/97 17.10%
CUMULATIVE TOTAL RETURN ------------
-----------
10/16/91* through 6/30/97 146.29%
* Commencement of operations ----------------
---------------------------
</TABLE>
The chart to the right compares the growth in
value of a hypothetical $10,000 investment in
Equity Index Portfolio on October 16, 1991
(commencement of operations) through June 30,
1997 with that of a similar investment in the
Standard & Poor's 500 Index. Index information
is available at month-end only; therefore, the
closest monthend to inception date of the
Portfolio has been used. The Standard & Poor's
500 Index is an
unmanaged index composed of 500 widely held
common stocks listed on the New York Stock
Exchange, American Stock Exchange and over-the-
counter market.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) EQUITY
INDEX PORTFOLIO S&P 500 INDEX
<S> <C>
<C>
10/16/91
10,000 10,000
DEC-91
10,620 10,838
DEC-92
11,335 11,668
DEC-93
12,316 12,844
DEC-94
12,421 13,012
DEC-95
16,870 17,898
DEC-96
20,526 22,005
6/30/97
24,630 26,538
</TABLE>
- ----------------------------------------------------------
- ---------------------
The performance shown represents past performance and is
not a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses
associated with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
- ----------------------------------------------------------
- ---------------------
PERFORMANCE COMPARISON -- GROWTH & INCOME PORTFOLIO AS OF
6/30/97 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN -------------------
------------------------
<S> <C>
Six Months Ended 6/30/97 14.49%
Year Ended 6/30/97
24.99%
Five Years Ended 6/30/97
15.16% 10/16/91* through 6/30/97
13.67%
CUMULATIVE TOTAL RETURN
-------------------------------------------
10/16/91* through 6/30/97 107.87%
* Commencement of operations
</TABLE>
The chart to the right compares the growth in
value of a hypothetical $10,000 investment in
Growth & Income Portfolio on October 16, 1991
(commencement of operations) through June 30,
1997 with that of a similar investment in the
Variable Annuity Lipper Growth & Income Funds
Peer Group Average and Standard & Poor's 500
Index. Index information is available at month-
end only; therefore, the closest month-end to
inception date of the Portfolio has been used.
The Standard & Poor's 500 Index is an unmanaged
index composed of 500 widely held common stocks
listed on the New York Stock Exchange, American
Stock Exchange and over-the-counter market.
The Variable Annuity Lipper Growth & Income
Funds Peer Group Average is composed of 429
growth and income funds as of June 30, 1997
which underlie variable annuities.
<TABLE>
<CAPTION>
VARIABLE ANNUITY
LIPPER GROWTH &
MEASUREMENT PERIOD SYMPHONY GROWTH
& INCOME FUNDS PEER
(FISCAL YEAR COVERED) INCOME PORTFOLIO
GROUP S&P 500 INDEX
<S> <C>
<C> <C>
10/16/91 10,000
10,000 10,000
DEC-91 10,140
10,746 10,838
DEC-92 10,996
11,551 11,668
DEC-93 11,995
12,802 12,844
DEC-94 11,611
12,646 13,012
DEC-95 15,152
16,514 17,898
DEC-96 18,157
18,211 19,988
6/30/97 20,787
21,012 24,106
</TABLE>
- ----------------------------------------------------------
- ---------------------
The performance shown represents past performance and is
not a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses
associated with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
<PAGE>
- ----------------------------------------------------------
- ---------------------
PERFORMANCE COMPARISON -- EMERGING GROWTH PORTFOLIO AS OF
6/30/97 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN -------------------
- ------------------------------
<S> <C>
Six Months Ended 6/30/97 8.02%
Year Ended 6/30/97 8.05%
12/3/93* through 6/30/97
16.97% CUMULATIVE TOTAL RETURN ---
--------------------
12/3/93* through 6/30/97 75.16%
* Commencement of operations ---------------
- ---------------------------------</TABLE>
The chart to the right compares the growth in
value of a hypothetical $10,000 investment in
Emerging Growth Portfolio on December 3, 1993
(commencement of operations) through June 30,
1997 with that of a similar investment in the
NASDAQ Composite Index. Index information is
available at month-end only; therefore, the
closest month-end to inception date of the
Portfolio has been used. The NASDAQ Composite
Index is a market capitalization price-only
index that tracks the performance of domestic
common stocks traded on the regular NASDAQ
market as well as foreign common stocks and ADRs
traded on the National Market System.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
SYMPHONY EMERGING GROWTH
(FISCAL YEAR COVERED)
PORTFOLIO NASDAQ COMPOSITE INDEX
<S>
<C>
<C>
12/3/93
10,000 10,000
DEC-93
10,410 10,297
DEC-94
9,631 9,968
DEC-95
13,762 13,947
DEC-96
16,215 17,115
6/30/97
17,516 19,117
</TABLE>
- ----------------------------------------------------------
- ---------------------
The performance shown represents past performance and is
not a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses
associated with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
- ----------------------------------------------------------
- ---------------------
PERFORMANCE COMPARISON -- INTERNATIONAL EQUITY PORTFOLIO
AS
OF 6/30/97
(UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN -------------------
- ------------------------------
<S> <C>
Six Months Ended 6/30/97 5.63%
Year Ended 6/30/97 11.66%
12/3/93* through 6/30/97
7.26% CUMULATIVE TOTAL RETURN ----
-------------------
12/3/93* through 6/30/97 28.48%
* Commencement of operations ---------------
- ---------------------------------</TABLE>
The chart to the right compares the growth in
value of a hypothetical $10,000 investment in
International Equity Portfolio on December 3,
1993 (commencement of operations through June
30, 1997 with that of a similar investment in
the Morgan Stanley EAFE Index. Index
information is available at month-end only;
therefore, the closest month-end to inception
date of the Portfolio has been used. The Morgan
Stanley EAFE Index is a composite index
consisting of equity total returns for the
coutries of Europe, Australia, New Zealand and
countries in the Far East, weighted based on
each country's gross domestic product.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
SYMPHONY INTERNATIONAL MORGAN STANLEY EAFE
(FISCAL YEAR COVERED)
EQUITY PORTFOLIO INDEX
<S> <C>
<C>
12/3/93
10,000 10,000
DEC-93
10,050 10,724
DEC-94
9,210 10,850
DEC-95
10,020 12,103
DEC-96
12,163 12,873
6/30/97
12,848 14,335
</TABLE>
- ----------------------------------------------------------
- ---------------------
The performance shown represents past performance and is
not a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses
associated with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
ANNUALIZED
AMOUNT SECURITY
YIELD VALUE -------------------------------------
- ----------------------------------------------------------
- -------------
<C> <S>
<C> <C>
U.S. GOVERNMENT AGENCIES AND INSTRUMENTALITIES -- 3.4%
$200,000 Federal National Mortgage Association
matures
7/3/97 (Cost --
$199,938).................................................
.. .... 5.65% $ 199,938 --------------------
- ----------------------------------------------------------
- ------------------------------
BANK NOTES -- 5.1%
200,000 Bank of America matures
8/19/97................................. 5.66
200,000
100,000 FCC National matures
8/4/97..................................... 5.71
100,000 --------------------------------------------------
- ----------------------------------------------------------
TOTAL BANK NOTES (Cost -
$300,000).............................
300,000 --------------------------------------------------
- ---------------------------------------------------------
COMMERCIAL PAPER -- 78.7%
200,000 Abbey National North America matures
8/1/97..................... 5.59 199,043
200,000 AIG Funding matures
7/2/97...................................... 5.53
199,969
200,000 Banca Commericale Italiana matures
8/25/97...................... 5.62
198,298 200,000 Bank Brussels Lambert mature
7/17/97 to
8/4/97.................. 5.55 to 5.71 199,222
200,000 Bank of New York matures
7/28/97................................ 5.58
199,168
200,000 Cades matures
10/3/97...........................................
5.80 197,034
200,000 Canadian Wheat Board matures
9/15/97............................ 5.62
197,657
200,000 Ciesco matures
8/14/97..........................................
5.70 198,626
200,000 CIT Group Holdings Inc. matures
7/21/97......................... 5.70
199,373
200,000 Cregum North America matures
7/11/97............................ 5.53
199,693
200,000 Dresdner US Finance Inc. matures
7/8/97......................... 5.53
199,786
200,000 General Electric Capital Corp. matures
11/10/97................. 5.71 195,908
200,000 Halifax Building Society matures
7/24/97........................ 5.56
199,293
185,000 J.P. Morgan & Co. matures
7/25/97............................... 5.55
184,319
200,000 Lucent Technologies matures
7/7/97.............................. 5.59
199,814
140,000 Merrill Lynch matures
8/8/97.................................... 5.66
139,173
200,000 Morgan Stanley matures
7/21/97.................................. 5.62
199,381
200,000 Norwest Corp. matures
7/7/97.................................... 5.54
199,816
200,000 Providence of British Columbia matures
7/18/97.................. 5.54 199,479
200,000 Rabobank Nederlands matures
7/3/97.............................. 5.61
199,938
150,000 Royal Bank of Canada matures
7/31/97............................ 5.52
149,329
200,000 San Paolo US Finance Inc. matures
9/10/97....................... 5.66
197,799
150,000 Shell Oil matures
7/1/97........................................ 6.00
150,000
200,000 Union Bank of Switzerland matures
7/1/97........................ 6.15
200,000
- ----------------------------------------------------------
- --------------------------------------------------
TOTAL COMMERCIAL PAPER (Cost --
$4,602,118).....................
4,602,118 ------------------------------------------------
- ----------------------------------------------------------
- --
FOREIGN CERTIFICATES OF DEPOSIT -- 6.8%
100,000 Banque National De Paris matures
8/4/97......................... 5.50
100,001
200,000 Bayerische Vereinsbank matures
9/15/97.......................... 5.65
200,000
100,000 Societe Generale matures
8/22/97................................ 5.67
100,004 --------------------------------------------------
- ----------------------------------------------------------
TOTAL FOREIGN CERTIFICATES OF DEPOSIT (Cost
- - $400,005)........ 400,005
- ----------------------------------------------------------
- --------------------------------------------------
TIME DEPOSITS -- 3.4%
200,000 Republic National Bank of New York matures
7/1/97 (Cost --
$200,000).................................................
.. .... 6.25 200,000
- ----------------------------------------------------------
- -------------------------------------------------
REPURCHASE AGREEMENT -- 2.6%
149,000 Chase Securities Corp., 5.745% due 7/1/97;
Proceeds at maturity
-- $149,024;
(Fully collateralized by U.S. Treasury
Note, 6.250% due 6/30/02;
Market value -- $151,980) (Cost -
$149,000)....................
149,000
- ----------------------------------------------------------
- --------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -
$5,851,061*).................
$5,851,061
- ----------------------------------------------------------
- --------------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
DIVERSIFIED STRATEGIC INCOME
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT
SECURITY
VALUE ----------------------------------------------------
- -----------------------------------------------------
<C> <S>
<C>
U.S. GOVERNMENT SECTOR -- 39.4% --------------------------
- ----------------------------------------------------------
- ---------------------
U.S. GOVERNMENT AGENCY AND OBLIGATIONS -- 39.4%
$ 4,000,000 U.S. Treasury Notes, 5.875% due
11/30/01.................................. $ 3,923,080
653,433 FHLMC, 9.000% due 1/1/20 through
5/1/21................................... 690,391
1,137,800 GNMA, 8.000% due 5/15/17 through
12/15/21................................. 1,164,459
378,557 GNMA, 7.500% due
2/15/24..................................................
379,977
1,897,482 GNMA, 7.000% due 9/15/23 through
5/15/24.................................. 1,864,865
13,502,273 GNMA, 9.000% due 11/15/16 through
9/15/24................................. 14,387,389 ---
- ----------------------------------------------------------
- --------------------------------------------
TOTAL U.S. GOVERNMENT SECTOR (Cost -
$22,337,015)........................ 22,410,161 -------
- ----------------------------------------------------------
- ----------------------------------------
HIGH YIELD SECTOR -- 27.9% -------------------------------
- ----------------------------------------------------------
- ----------------
CORPORATE BONDS AND NOTES -- 25.7% -----------------------
- ----------------------------------------------------------
- ------------------------
AEROSPACE AND DEFENSE -- 0.8%
250,000 Airplanes Pass Through Trust, 10.875%
due
3/15/19......................... 287,605
150,000 UNC Inc., 11.000% due
6/1/06..............................................
175,875 --------------------------------------------------
- -------------------------------------------------------
463,480 --------------------------------------------------
- ------------------------------------------------------
BROADCASTING - TV, CABLE AND RADIO -- 5.0%
300,000 Comcast UK Cable, step bond to yield
11.200% due 11/15/07................. 225,750
250,000 Le Groupe Videotron Ltee., 10.625% due
2/15/05............................ 276,250
100,000 Multicanal S.A., 10.500% due 2/1/07
(b)................................... 107,125
Rogers Cablesystems Ltd.:
325,000 10.000% due
12/1/07...................................................
.. .. 350,187
275,000 11.000% due
12/1/15...................................................
.. .. 300,438
250,000 Rogers Communications Inc., 10.875% due
4/15/04........................... 262,812
150,000 RSL Communications Ltd., 12.250% due
11/15/06............................. 163,125
200,000 SFX Broadcasting Inc., 10.750% due
5/15/06................................ 219,000
450,000 UIH Australia/Pacific Communications
Inc.,
step bond to yield 14.000% due
5/15/06...................................................
.. .............. 278,438
200,000 United International Holdings Inc., zero
coupon bond to yield 14.000% due
11/15/99..................................................
.. .............. 156,000
400,000 Videotron Holdings PLC, step bond to
yield
11.000% due 8/15/05............ 334,000
250,000 Wireless One Inc., 13.000% due
10/15/03................................... 155,000
- ----------------------------------------------------------
- -----------------------------------------------
2,828,125 ------------------------------------------------
- ---------------------------------------------------------
BUILDING - CONSTRUCTION -- 0.2%
100,000 American Builders & Contractors Supply
Co., 10.625% due 5/15/07 (b)....... 103,000
- ----------------------------------------------------------
- -----------------------------------------------
CHEMICALS, PLASTICS AND RUBBER -- 1.0%
100,000 Polytama International, 11.250% due
6/15/07............................... 103,500
175,000 PT. Polysindo Eka Perkasa, 13.000% due
6/15/01............................ 198,844
250,000 Terra Industries, Inc., 10.500% due
6/15/05............................... 272,812 -----
- ----------------------------------------------------------
- ------------------------------------------
575,156 --------------------------------------------------
- -------------------------------------------------------
CONSUMER DURABLE GOODS - HOME FURNISHINGS -- 0.2%
130,000 TAG-Heuer International S.A., 12.000%
due
12/15/05........................ 148,200 -----------
- ----------------------------------------------------------
- ------------------------------------
DIVERSIFIED - CONGLOMERATE MANUFACTURING -- 0.5%
260,000 American Pad & Paper Co., 13.000% due
11/15/05............................ 303,550 -------
- ----------------------------------------------------------
- ----------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
DIVERSIFIED STRATEGIC INCOME
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT
SECURITY
VALUE ----------------------------------------------------
- -----------------------------------------------------
<C> <S>
<C>
ELECTRIC UTILITIES -- 0.5%
$ 200,000 Calpine Corp., 10.500% due
5/15/06........................................ $
216,000
55,205 Midland Funding Corp. I, 10.330% due
7/23/02.............................. 59,622 ------
- ----------------------------------------------------------
- -----------------------------------------
275,622 --------------------------------------------------
- -------------------------------------------------------
ELECTRONICS - COMPUTERS -- 1.2%
250,000 Graphic Controls Corp., 12.000% due
9/15/05............................... 275,625
300,000 Unisys Corp., 12.000% due
4/15/03.........................................
328,500
100,000 Viasystems Inc., 9.750% due 6/1/07
(b).................................... 102,500 ----
- ----------------------------------------------------------
- -------------------------------------------
706,625 --------------------------------------------------
- -------------------------------------------------------
FINANCE COMPANIES - CONSUMER CREDIT -- 0.2%
100,000 Imperial Credit Industries Inc., 9.875%
due 1/15/07....................... 99,750
- ----------------------------------------------------------
- -----------------------------------------------
FOOD -- 1.4%
300,000 TLC Beatrice International Holdings,
11.500% due 10/1/05.................. 337,875
400,000 Van De Kamps Inc., 12.000% due
9/15/05.................................... 445,500
- ----------------------------------------------------------
- -----------------------------------------------
783,375 --------------------------------------------------
- -------------------------------------------------------
GROCERY AND CONVENIENCE STORES -- 0.1%
100,000 Pathmark Stores Inc., 12.625% due
6/15/02................................. 69,750 ---
- ---------------------------------------------------------
- ----------------------------------------------
HEALTH CARE, DRUGS AND HOSPITAL SUPPLIES -- 0.9%
200,000 Magellan Health Services, Inc., 11.250%
due 4/15/04....................... 223,000
Tenet Healthcare Corp.:
150,000 8.000% due
1/15/05...................................................
.. ... 151,125
150,000 8.625% due
1/15/07...................................................
.. ... 154,125
- ----------------------------------------------------------
- -----------------------------------------------
528,250 --------------------------------------------------
- -------------------------------------------------------
HOTEL AND GAMING -- 1.4%
300,000 Courtyard by Marriott, 10.750% due
2/1/08................................. 327,000
125,000 Grand Casinos, Inc., 10.125% due
12/1/03.................................. 130,313
100,000 Horseshoe Gaming, L.L.C., 9.375% due
6/15/07 (b).......................... 100,625
200,000 Mohegan Tribal Gaming Authority, 13.500%
due 11/15/02..................... 262,750
- ----------------------------------------------------------
- -----------------------------------------------
820,688 --------------------------------------------------
- -------------------------------------------------------
LEISURE, AMUSEMENT AND MOTION PICTURES -- 0.2%
150,000 Coleman Escrow Corp., zero coupon bond
to
yield 12.020% due 5/15/01 (b)... 94,875
- ----------------------------------------------------------
- -----------------------------------------------
MACHINERY -- 0.4%
200,000 Terex Corp., 13.250% due
5/15/02..........................................
224,500 --------------------------------------------------
- -------------------------------------------------------
OIL -- 0.5%
150,000 DeepTech International, Inc., 12.000%
due
12/15/00........................ 159,375
100,000 Ico, Inc., 10.375% due 6/1/07
(b)......................................... 103,000
- ----------------------------------------------------------
- -----------------------------------------------
262,375 --------------------------------------------------
- -------------------------------------------------------
OIL AND NATURAL GAS -- 1.8%
100,000 Clark Oil & Refining Corp., 10.500% due
12/1/01........................... 103,750
200,000 Global Marine Inc., 12.750% due
12/15/99.................................. 210,000
150,000 Parker Drilling Corp., 9.750% due
11/15/06................................ 156,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
DIVERSIFIED STRATEGIC INCOME
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT
SECURITY
VALUE ----------------------------------------------------
- -----------------------------------------------------
<C> <S>
<C>
OIL AND NATURAL GAS -- 1.8% (CONTINUED)
$ 300,000 Santa Fe Energy Resources Inc., 11.000%
due 5/15/04....................... $ 325,500
225,000 United Meridian Corp., 10.375% due
10/15/05............................... 244,125 ----
- ----------------------------------------------------------
- -------------------------------------------
1,040,125 ------------------------------------------------
- ---------------------------------------------------------
PACKAGING AND CONTAINERS -- 1.2%
100,000 Gaylord Container Corp., step bond to
yield 12.750% due 5/15/05........... 110,250
600,000 Ivex Holdings Corp., step bond to yield
13.250% due 3/15/05............... 470,250
100,000 Vicap S.A., 11.375% due 5/15/07
(b)....................................... 105,125 -
- ----------------------------------------------------------
- ----------------------------------------------
685,625 --------------------------------------------------
- -------------------------------------------------------
PAPER AND PRINTING -- 1.4%
250,000 Indah Kiat International Finance Co.,
11.875% due 6/15/02................. 275,000
275,000 SD Warren Co., 12.000% due
12/15/04.......................................
306,969
200,000 Tjiwi Kimia International Finance Co.,
13.250% due 8/1/01................. 228,000 --------
- ----------------------------------------------------------
- ---------------------------------------
809,969 --------------------------------------------------
- -------------------------------------------------------
POLLUTION CONTROL AND WASTE REMOVAL -- 0.2%
125,000 Envirosource Inc., 9.750% due
6/15/03..................................... 123,594
- ----------------------------------------------------------
- -----------------------------------------------
REAL ESTATE -- 0.4%
201,000 Trizec Finance, Ltd., 10.875% due
10/15/05................................ 223,613 ---
- ---------------------------------------------------------
- ----------------------------------------------
RETAIL -- 0.5%
250,000 Barnes & Noble Inc., 11.875% due
1/15/03.................................. 271,250 --
- ----------------------------------------------------------
- ---------------------------------------------
TELEPHONE AND COMMUNICATIONS -- 4.7%
150,000 Alvey Systems Inc., 11.375% due
1/13/03................................... 155,250
500,000 Clearnet Communications Inc., step bond
to
yield 14.750% due 12/15/05..... 345,000
400,000 Colt Telecom Group PLC., step bond to
yield 12.000% due 12/15/06 (a)...... 261,000
100,000 Fonorola Inc., 12.500% due
8/15/02........................................
108,000
150,000 Intelcom Group Inc., step bond to yield
12.500% due 5/1/06................ 100,125
100,000 Intercel, Inc., 11.125% due 6/1/07
(b).................................... 100,750
375,000 Intermedia Communications of Florida,
step
bond to yield 12.500% due
5/15/06...................................................
.. .............. 262,500
350,000 ITC Deltacom Inc., 11.000% due 6/1/07
(b)................................. 359,625
375,000 Millicom International Cellular, step
bond
to yield 13.500% due 6/1/06.... 276,563
450,000 Nextel Communications, Inc., step bond
to
yield 9.750% due 8/15/04........ 347,625
150,000 Qwest Communications International,
10.875% due 4/1/07 (b)................ 163,875
300,000 Telesystem International Wireless, step
bond to yield 13.250% due 6/30/07
(b).......................................................
.. .............. 162,000
- ----------------------------------------------------------
- -----------------------------------------------
2,642,313 ------------------------------------------------
- ---------------------------------------------------------
TOBACCO -- 0.3%
150,000 Consolidated Cigar Corp., 10.500% due
3/1/03.............................. 157,875
- ----------------------------------------------------------
- -----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
DIVERSIFIED STRATEGIC INCOME
PORTFOLIO <TABLE>
<CAPTION>
FACE
AMOUNT
SECURITY
VALUE ----------------------------------------------------
- -----------------------------------------------------
<C> <S>
<C>
TRANSPORTATION -- 0.7%
$ 100,000 Central Transport Rental Group PLC,
9.500%
due 4/30/03.................... $ 97,250
270,000 Sea Containers Ltd., Series A, 12.500%
due
12/1/04........................ 303,750 ------------
- ----------------------------------------------------------
- -----------------------------------
401,000 --------------------------------------------------
- -------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -
$13,785,450)..................... 14,642,685 ----------
- ----------------------------------------------------------
- -------------------------------------
<CAPTION>
SHARES
SECURITY
VALUE ----------------------------------------------------
- -----------------------------------------------------
<C> <S>
<C>
PREFERRED STOCKS -- 2.2% ---------------------------------
- ----------------------------------------------------------
- --------------
AUTOMOBILE, AUTO PARTS AND TRUCK MANUFACTURING -- 0.4%
3,750 Navistar International Corp., Series G,
Convertible until 12/31/49........ 229,219 ---------
- ----------------------------------------------------------
- --------------------------------------
BANKING -- 0.1%
2,400 California Federal Preferred Capital
Corp., Series A, Exchangeable........ 62,100 ------
- ----------------------------------------------------------
- ----------------------------------------BROADCASTING - TV,
CABLE AND RADIO -- 1.2%
630 Time Warner Inc., Series
M................................................
700,875 --------------------------------------------------
- -------------------------------------------------------
TELEPHONE AND COMMUNICATIONS -- 0.5%
213 Panamsat Corp.,
Exchangeable..............................................
266,250 --------------------------------------------------
- -------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost -
$1,184,476)............................... 1,258,444 -
- ----------------------------------------------------------
- ----------------------------------------------
WARRANTS -- 0.0% -----------------------------------------
- ----------------------------------------------------------
- -----BROADCASTING - TV, CABLE AND RADIO -- 0.0%
750 Wireless One Inc., Expire 10/19/00
(c).................................... 569 ----
- ----------------------------------------------------------
- -------------------------------------------
TELEPHONE AND COMMUNICATIONS -- 0.0%
1,650 Clearnet Communications Inc., Expire
9/15/05 (c).......................... 9,075
600 Nextel Communications Inc., Expire
5/23/99
(c)............................ 6
- ----------------------------------------------------------
- -----------------------------------------------
9,081 ----------------------------------------------------
- -----------------------------------------------------
TOTAL WARRANTS (Cost --
$20,934)..........................................
9,650 ----------------------------------------------------
- -----------------------------------------------------
TOTAL HIGH YIELD SECTOR (Cost -
$14,990,860)............................. 15,910,779 --
- ----------------------------------------------------------
- ---------------------------------------------
<CAPTION>
FACE
AMOUNT+
SECURITY
VALUE ----------------------------------------------------
- -----------------------------------------------------
<C> <S>
<C>
INTERNATIONAL SECTOR -- 28.3% ----------------------------
- ----------------------------------------------------------
- -------------------
BONDS -- 28.3% -------------------------------------------
- ----------------------------------------------------------
- ----
ARGENTINA -- 0.5%
300,000 Argentina Discount, Series L, 6.875% due
3/31/23 (d)...................... 259,689
- ----------------------------------------------------------
- -----------------------------------------------
AUSTRALIA -- 1.6%
400,000 New South Wales Treasury Corp., 12.000%
due 12/1/01....................... 363,832
700,000 Queensland Treasury Corp., 8.000% due
5/14/03............................. 556,634
- ----------------------------------------------------------
- -----------------------------------------------
920,466 --------------------------------------------------
- -------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
DIVERSIFIED STRATEGIC INCOME
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT+
SECURITY
VALUE ----------------------------------------------------
- -----------------------------------------------------
<C> <S>
<C>
CANADA -- 2.1%
Government of Canada:
150,000 7.500% due
7/1/97....................................................
.. ... $ 108,738
650,000 11.750% due
2/1/03....................................................
.. .. 601,363
100,000 International Finance Corp., 7.750% due
8/18/98........................... 75,248
300,000 KFW International Finance, 9.500% due
5/13/02............................. 250,072
250,000 Rogers Cablesystems Ltd., 9.650% due
1/15/14.............................. 183,930 ------
- ----------------------------------------------------------
- -----------------------------------------
1,219,351 ------------------------------------------------
- ---------------------------------------------------------
DENMARK -- 2.9%
Kingdom of Denmark:
7,000,000 6.000% due
12/10/99..................................................
.. ... 1,099,190
3,250,000 8.000% due
5/15/03...................................................
.. ... 554,010
- ----------------------------------------------------------
- -----------------------------------------------
1,653,200 ------------------------------------------------
- ---------------------------------------------------------
FINLAND -- 1.9%
2,000,000 Finnish Export Credit Corp., 6.000% due
1/15/99........................... 397,077
3,000,000 Government of Finland, 9.500% due
3/15/04................................. 701,340 ---
- ----------------------------------------------------------
- --------------------------------------------
1,098,417 ------------------------------------------------
- ---------------------------------------------------------
GERMANY -- 3.1%
3,000,000 Bundesrepublic, 5.250% due
2/21/01........................................
1,782,681 ------------------------------------------------
- ---------------------------------------------------------
IRELAND -- 1.7%
600,000 Irish Government, 8.000% due
10/18/00.....................................
966,054 --------------------------------------------------
- -------------------------------------------------------
ITALY -- 4.1%
3,300,000,000 Buoni Poliennali Del Tesoro, 8.500% due
8/1/99............................ 2,017,625
600,000,000 Italian Certificati di Credito Del
Tesoro,
7.600% due 8/1/99 (d).......... 355,134 ------------
- ----------------------------------------------------------
- -----------------------------------
2,372,759 ------------------------------------------------
- ---------------------------------------------------------
MEXICO -- 0.7%
500,000 Mexican States Value Recovery Rights,
Expire 6/30/03 (c).................. 0
500,000 United Mexican States, Series B, 6.250%
due 12/31/19...................... 386,565
- ----------------------------------------------------------
- -----------------------------------------------
386,565 --------------------------------------------------
- -------------------------------------------------------
NEW ZEALAND -- 1.6%
New Zealand Government:
750,000 6.500% due
2/15/00...................................................
.. ... 506,368
500,000 10.000% due
3/15/02...................................................
.. .. 381,653
- ----------------------------------------------------------
- -----------------------------------------------
888,021 --------------------------------------------------
- -------------------------------------------------------
SPAIN -- 2.8%
200,000,000 Government of Spain, 10.100% due
2/28/01.................................. 1,572,720 --
- ----------------------------------------------------------
- ---------------------------------------------
SWEDEN -- 2.3%
10,000,000 Swedish Government, 10.250% due
5/5/03.................................... 1,279,292 -
- ----------------------------------------------------------
- ----------------------------------------------
UNITED KINGDOM -- 3.0%
1,000,000 United Kingdom Treasury Bill, 7.750% due
9/8/06........................... 1,683,032 ----------
- ----------------------------------------------------------
- -------------------------------------
TOTAL INTERNATIONAL SECTOR (Cost -
$16,327,878).......................... 16,082,247 -----
- ----------------------------------------------------------
- ------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
DIVERSIFIED STRATEGIC INCOME
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT+
SECURITY
VALUE ----------------------------------------------------
- -----------------------------------------------------
<C> <S>
<C>
REPURCHASE AGREEMENT -- 4.4%
$ 2,451,000 CS First Boston Corp., 5.750% due
7/1/97;
Proceeds at
maturity -- $2,451,391;
(Fully collateralized by U.S. Treasury
Notes, 6.750% due 4/30/00;
Market value -- $2,504,100) (Cost -
$2,451,000).......................... $ 2,451,000 ------
- ----------------------------------------------------------
- -----------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -
$56,106,753*).......................... $56,854,187 ----
- ----------------------------------------------------------
- -------------------------------------------
</TABLE>
(a) Security issued with attached warrants.
(b) Security is exempt from registration under Rule 144A
of the Securities Act
of 1933. This security may be resold in transactions
that are exempt from
registration, normally to qualified institutional
buyers.
(c) Non-income producing security.
(d) Represents current rate on floating rate security.
+ Represents local currency.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
COMMON STOCKS -- 73.2% -----------------------------------
- ----------------------------------------------------------
- -----------
GAS -- 13.3%
14,000 Coastal Corp.
..........................................................
.. ... $ 744,625
20,888 Duke Energy Corp.
..........................................................
. 1,001,319
15,000 El Paso Natural Gas Co.
.....................................................
825,000
15,000 Enron Corp.
..........................................................
.. ..... 612,188
15,000 Equitable Resources Inc.
....................................................
425,625
15,000 MCN Corp.
..........................................................
.. ....... 459,374
35,000 Southwest Gas Corp.
.........................................................
695,625
20,000 Williams Cos. Inc.
..........................................................
875,000 --------------------------------------------------
- ------------------------------------------------------
5,638,756 ------------------------------------------------
- -------------------------------------------------------
TELECOMMUNICATIONS -- 8.8%
5,000 Bell Atlantic Corp.
.........................................................
379,375
20,000 MCI Communications Corp.
....................................................
765,625
7,000 SBC Communications Inc.
.....................................................
433,125
25,000 Teleport Communications Group, Inc.
(a)...................................... 853,125
25,000 U.S. West Media Group
(a)....................................................
506,250
25,000 Worldcom Inc.
(a).......................................................
.. ... 800,000 -------------------------------------
- ----------------------------------------------------------
- ---------
3,737,500 ------------------------------------------------
- --------------------------------------------------------
UTILITIES -- 51.1%
22,200 Allegheny Power System, Inc.
................................................
592,463
25,000 American Electric Power Inc.
................................................
1,050,000
15,000 Baltimore Gas & Electric Co.
................................................
400,313
30,000 CINergy Corp.
..........................................................
.. ... 1,044,375
20,000 CISPO, Inc.
..........................................................
.. ..... 731,250
25,000 CMS Energy Corp.
..........................................................
.. 881,250
29,000 Consolidated Edison Co. of New York, Inc.
................................... 853,687
30,000 DPL Inc.
..........................................................
.. ........ 738,750
40,000 DQE Inc.
..........................................................
.. ........ 1,130,000
35,000 Edison
International.............................................
.. .......... 870,625
8,000 Energen Corp.
..........................................................
.. ... 269,500
25,000 Enova Corp.
..........................................................
.. ..... 601,563
35,000 Entergy Corp.
..........................................................
.. ... 958,125
15,000 Florida Progress Corp.
......................................................
469,687
27,000 FPL Group Inc.
..........................................................
.. .. 1,243,688
28,500 GPU Inc.
..........................................................
.. ........ 1,022,437
25,000 Illinova Corp.
..........................................................
.. .. 550,000
25,000 Long Island Lighting Co.
....................................................
575,000
8,400 New England Electric
System..................................................
310,800
20,000 New York State Electric & Gas Corp.
......................................... 417,500
35,000 NIPSCO Industries, Inc.
.....................................................
1,445,937
20,000
Pacificorp................................................
.. ................. 440,000
10,000 Pinnacle West Capital Co.
...................................................
300,625
20,000 Potomac Electric Power Co.
..................................................
462,500
20,000 Public Service Co. of
Colorado...............................................
830,000
15,000 Public Service Co. of New
Mexico.............................................
268,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
UTILITIES -- 51.1% (CONTINUED)
25,000 SCANA Corp.
..........................................................
.. ..... $ 620,313
30,600 Sierra Pacific
Resources.................................................
.. .. 979,200
35,000 Southern Co.
..........................................................
.. .... 765,625
25,000 Texas Utilities Co.
.........................................................
860,937 --------------------------------------------------
- ------------------------------------------------------
21,684,275 -----------------------------------------------
- ---------------------------------------------------------
TOTAL COMMON STOCKS (Cost --
$25,429,183)....................................
31,060,531 -----------------------------------------------
- ---------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
CORPORATE BONDS AND NOTES -- 20.5% -----------------------
- ----------------------------------------------------------
- -----------------------
UTILITIES -- 20.5%
Arizona Public Service Co., First Mortgage:
$ 250,000 7.250% due
8/1/23....................................................
.. .... 235,313
250,000 8.750% due
1/15/24...................................................
..
.... 273,438
200,000 8.000% due
2/1/25....................................................
.. .... 203,000
255,000 Central Illinois Public Service Co., 8.500%
due 5/15/22...................... 271,256
200,000 Cincinnati Gas & Electric Co., 8.500% due
9/1/22............................. 207,000
250,000 Commonwealth Edison Co., 8.375% due
9/15/22.................................. 250,625
250,000 Dayton Power & Light Co., First Mortgage,
8.150% due 1/15/26................. 258,125
Duquesne Light Co., First Collateral Trust:
200,000 8.375% due
5/15/24...................................................
.. .... 210,000
250,000 7.550% due
6/15/25...................................................
.. .... 241,250
200,000 Idaho Power Co., First Mortgage, 8.750% due
3/15/27.......................... 217,750
500,000 Illinois Power Co., 8.000% due
2/15/23.......................................
492,500 300,000 Kentucky Utilities Co., First
Mortgage, 8.550%
due 5/15/27................... 316,125
Madison Gas & Electric Co., First Mortgage:
200,000 8.500% due
4/15/22...................................................
.. .... 212,500
500,000 7.700% due
2/15/28...................................................
.. .... 500,000
250,000 Midwest Power Systems Inc., 8.125% due
2/1/23................................ 263,438
200,000 New England Power Co., General & Reference,
8.000% due 8/1/22................ 201,250
New York State Electric & Gas Corp., First
Mortgage:
250,000 8.300% due
12/15/22..................................................
.. .... 254,375
250,000 7.450% due
7/15/23...................................................
.. .... 239,375
250,000 Niagara Mohawk Power Co., First Mortgage,
8.500% due 7/1/23.................. 245,312
250,000 Pacific Gas & Electric Co., 6.750% due
10/1/23............................... 227,187
500,000 Pennsylvania Power & Light Co., First
Mortgage, 8.500% due 5/1/22............ 520,000
300,000 Public Service Co., Oklahoma, First
Mortgage,
7.375% due 4/1/23.............. 291,375
200,000 San Diego Gas & Electric Co., 8.500% due
4/1/22.............................. 211,750
550,000 Tampa Electric, Co., First Mortgage, 7.750%
due 11/1/22...................... 550,000
500,000 Texas Utilities, Co., First Mortgage, 7.625%
due 7/1/25...................... 485,000
250,000 Virginia Electric & Power Co., First
Mortgage,
7.500% due 6/1/23............. 245,000
400,000 Wisconsin Electric & Power Co., First
Mortgage, 7.050% due 8/1/24............ 373,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
UTILITIES -- 20.5% (CONTINUED)
$ 300,000 Wisconsin Power & Light Co., Notes, 8.600%
due
3/15/27....................... $ 321,000
425,000 Wisconsin Public Service Corp., First
Mortgage, 7.125% due 7/1/23............ 397,906 ----
- ----------------------------------------------------------
- ------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -
$8,664,905)......................... 8,714,850
- ----------------------------------------------------------
- ----------------------------------------------
REPURCHASE AGREEMENT -- 6.3%
2,683,000 Chase Securities Corp., 5.745% due 7/1/97;
Proceeds at
maturity -- $2,683,428; (Fully
collateralized by U.S. Treasury Notes, 6.250%
due 6/30/02; Market value -- $2,736,663)
(Cost -- $2,683,000)................ 2,683,000 -------
- ----------------------------------------------------------
- ---------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$36,777,088*)............................. $42,458,381 -
- ----------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
COMMON STOCKS -- 99.5% -----------------------------------
- ----------------------------------------------------------
- -----------
BASIC INDUSTRIES -- 6.7%
90 Aeroquip-Vickers, Inc.
.......................................................
$ 4,253
361 Air Products & Chemicals, Inc.
...............................................
29,331
732 Alcan Aluminum Ltd.
..........................................................
25,391
564 Allegheny Teledyne, Inc.
.....................................................
15,228
915 Allied Signal, Inc.
..........................................................
76,860
561 Aluminum Co. of
America...................................................
.. .. 42,285
585 Applied Materials, Inc.
(a)...................................................
41,425
345 Armco, Inc.
(a).......................................................
.. ...... 1,337
138 ASARCO,
Inc.......................................................
.. .......... 4,226
337 Avery Dennison Corp.
.........................................................
13,522
1,156 Barrick Gold Corp.
..........................................................
. 25,432
727 Battle Mountain Gold Corp.
...................................................
4,135
169 Bemis, Inc.
..........................................................
.. ...... 7,309
361 Bethlehem Steel Corp.
(a).....................................................
3,768
174 B.F. Goodrich Co.
..........................................................
.. 7,536
157 Boise Cascade Corp.
..........................................................
5,544
309 Champion International Corp.
.................................................
17,072
302 Cyprus Amax Minerals Corp.
...................................................
7,399
786 Dow Chemical Co.
..........................................................
.. . 68,480
451 Echo Bay Mines Ltd.
(a).......................................................
2,593
3,644 E.I. du Pont De Nemours & Co.
................................................
229,117
466 Engelhard Corp.
..........................................................
.. .. 9,757
120 FMC Corp.
(a).......................................................
.. ........ 9,533
625 Freeport-McMoRan Copper & Gold Corp., Class B
Shares.......................... 19,453
161 General Signal Corp.
.........................................................
7,024
296 Georgia Pacific Corp.
........................................................
25,271
195 Great Lakes Chemical Corp.
...................................................
10,213
159 Harnischfeger Industries, Inc.
...............................................
6,599
331 Hercules, Inc.
..........................................................
.. ... 15,847
475 Homestake Mining Co.
.........................................................
6,205
436 Ikon Office Solutions, Inc.
..................................................
10,873
545 Inco Ltd.
..........................................................
.. ........ 16,384
158 Inland Steel Industries, Inc.
................................................
4,128
971 International Paper Co.
......................................................
47,154
382 ITT Industries Inc.
..........................................................
9,837
279 James River Corp. of
Virginia.................................................
10,323
1,829 Kimberly-Clark Corp.
.........................................................
90,993
352 Louisiana Pacific Corp.
......................................................
7,436
169 Mead Corp.
..........................................................
.. ....... 10,520
1,903 Monsanto Co.
..........................................................
.. ..... 81,948
460 Morton International Industries, Inc.
........................................ 13,886
26 Nacco Industries, Inc.
.......................................................
1,467
218 Nalco Chemical Co.
..........................................................
. 8,420
505 Newmont Mining Corp.
.........................................................
19,695
284 Nucor Corp.
..........................................................
.. ...... 16,046
210 Phelps Dodge Corp.
..........................................................
. 17,889
775 Placer Dome, Inc.
..........................................................
.. 12,691
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
BASIC INDUSTRIES -- 6.7% (CONTINUED)
93 Potlatch Corp.
..........................................................
.. ... $ 4,208
593 PPG Industries, Inc.
.........................................................
34,468
506 Praxair, Inc.
..........................................................
.. .... 28,336
235 Reynolds Metals Co.
..........................................................
16,744
207 Rohm & Haas Co.
..........................................................
.. .. 18,642
324 Sigma-Aldrich Corp.
..........................................................
11,360
321 Stone Container Corp.
........................................................
4,594
179 Temple Inland, Inc.
..........................................................
9,666
225 Union Camp Corp.
..........................................................
..
. 11,250
412 Union Carbide Corp.
..........................................................
19,390
768 United Technologies Corp.
....................................................
63,744
274 USX-U.S. Steel
Group.....................................................
.. ... 9,607
1,466 Waste Management, Inc.
.......................................................
47,095
330 Westvaco Corp.
..........................................................
.. ... 10,374
642 Weyerhaeuser Co.
..........................................................
.. . 33,384
179 Willamette Industries, Inc.
..................................................
12,530
312 Worthington Industries, Inc.
.................................................
5,714
235 W.R. Grace & Co.
..........................................................
.. . 12,954
- ----------------------------------------------------------
- ----------------------------------------------
1,475,895 ------------------------------------------------
- --------------------------------------------------------
CAPITAL GOODS -- 7.8%
134 Armstrong World Industries, Inc.
.............................................
9,832 2,320 Boeing Co.
..........................................................
.. ....... 123,105
94 Briggs & Stratton Corp.
......................................................
4,700
689 Browning Ferris Industries, Inc.
.............................................
22,909 620 Caterpillar, Inc.
..........................................................
.. 66,573
93 Centex Corp.
..........................................................
.. ..... 3,778
129 Cincinnati Milacron, Inc.
....................................................
3,346
383 Cooper Industries, Inc.
......................................................
19,054
149 Crane Co.
..........................................................
.. ........ 6,230
128 Cummins Engine, Inc.
.........................................................
9,032
329 Dana Corp.
..........................................................
.. ....... 12,502
828 Deere & Co.
..........................................................
.. ...... 45,437
364 Dover Corp.
..........................................................
.. ...... 22,386
250 Eaton Corp.
..........................................................
.. ...... 21,828
202 Echlin, Inc.
..........................................................
.. ..... 7,272
1,447 Emerson Electric Co.
.........................................................
79,675
272 Fluor Corp.
..........................................................
.. ...... 15,011
132 Foster Wheeler Corp.
.........................................................
5,346
204 General Dynamics Corp.
.......................................................
15,300
10,656 General Electric Co.
(b)......................................................
696,636
107 Giddings & Lewis, Inc.
.......................................................
2,234
802 Illinois Tool Works, Inc.
....................................................
40,050
354 Ingersoll Rand Co.
..........................................................
. 21,860
269 Johnson Controls, Inc.
.......................................................
11,046
126 Kaufman & Broad Home Corp.
...................................................
2,213
624 Lockheed Martin Corp.
........................................................
64,623
687 McDonnell Douglas Corp.
......................................................
47,060
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
CAPITAL GOODS -- 7.8% (CONTINUED)
323 Moore Corp. Ltd.
..........................................................
.. . $ 6,359
238 Navistar International Corp.
(a)..............................................
4,105
187 Northrop Grumman Corp.
.......................................................
16,421
168 Owens-Corning Fiberglass Corp.
...............................................
7,245
252 Paccar, Inc.
..........................................................
.. ..... 11,702
241 Parker Hannifin Corp.
........................................................
14,626
145 Raychem Corp.
..........................................................
.. .... 10,784
764 Raytheon Corp.
..........................................................
.. ... 38,964
709 Rockwell International Corp.
.................................................
41,831
288 Stanley
Works.....................................................
.. .......... 11,520
536 Textron, Inc.
..........................................................
.. .... 35,577
483 Thermo Electron Corp.
(a).....................................................
16,422
172 Thomas & Betts Corp.
.........................................................
9,041
202 Timken Co.
..........................................................
.. ....... 7,184
411 TRW, Inc.
..........................................................
.. ........ 23,350
540 Tyco International Ltd.
......................................................
37,564
2,055 Westinghouse Electric Corp.
..................................................
47,522
172 W.W. Grainger, Inc.
..........................................................
13,448 ---------------------------------------------------
- -----------------------------------------------------
1,732,703 ------------------------------------------------
- --------------------------------------------------------
CONSUMER DURABLES -- 2.5%
305 Black & Decker Corp.
.........................................................
11,342
237 Case Corp.
..........................................................
.. ....... 16,323
2,274 Chrysler Corp.
..........................................................
.. ... 74,616
256 Cooper Tire & Rubber Co.
.....................................................
5,632
740 Corning, Inc.
..........................................................
.. .... 41,162
115 Fleetwood Enterprises, Inc.
..................................................
3,428
3,836 Ford Motor Co.
..........................................................
.. ... 144,809
2,446 General Motors Corp.
.........................................................
136,212
584 Genuine Parts Co.
..........................................................
.. 19,783
503 Goodyear Tire & Rubber Co.
...................................................
31,846
519 Masco Corp.
..........................................................
.. ...... 21,668
324 Maytag Corp.
..........................................................
.. ..... 8,464
514 Newell Co.
..........................................................
.. ....... 20,367
68 Pulte Corp.
..........................................................
.. ...... 2,350
197 Snap-On, Inc.
..........................................................
.. .... 7,757
241 Whirlpool Corp.
..........................................................
.. .. 13,150
- ----------------------------------------------------------
- ----------------------------------------------
558,909 --------------------------------------------------
- ------------------------------------------------------
CONSUMER NON-DURABLES -- 13.4%
1,616 Anheuser-Busch Cos., Inc.
....................................................
67,771
1,758 Archer-Daniels-Midland Co.
...................................................
41,313
487 Autozone, Inc.
(a).......................................................
.. ... 11,475
430 Avon Products, Inc.
..........................................................
30,342
99 Ball Corp.
..........................................................
.. ....... 2,976
223 Brown Forman Corp., Class B
Shares............................................
10,885
1,512 Campell Soup Co.
..........................................................
.. . 75,600
167 Clorox Co.
..........................................................
.. ....... 22,044
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
CONSUMER NON-DURABLES -- 13.4% (CONTINUED)
8,052 Coca Cola Co.
(b).......................................................
.. .... $ 543,510
950 Colgate Palmolive Co.
........................................................
61,988
777 Conagra, Inc.
..........................................................
.. .... 49,825
123 Coors Adolph Co., Class B
Shares..............................................
3,275
465 CPC International, Inc.
......................................................
42,925
415 Crown Cork & Seal, Inc.
......................................................
22,176
251 Eastman Chemical Co.
.........................................................
15,938
1,078 Eastman Kodak Co.
..........................................................
.. 82,736
551 Fortune Brands, Inc.
.........................................................
20,559
249 Fruit of the Loom, Inc.
(a)...................................................
7,719
523 General Mills, Inc.
..........................................................
34,060
1,796 Gillette Co.
..........................................................
.. ..... 170,171
419 Hasbro, Inc.
..........................................................
.. ..... 11,888
497 Hershey Foods Corp.
..........................................................
27,490
1,192 H.J. Heinz Co.
..........................................................
.. ... 54,981
357 International Flavors & Fragrances, Inc.
..................................... 18,028
682 Kellogg Co.
..........................................................
.. ...... 58,396
231 Liz Claiborne, Inc.
..........................................................
10,770
935 Mattel, Inc.
..........................................................
.. ..... 31,673
2,258 McDonald's Corp.
..........................................................
.. . 109,090
933 Nike Inc., Class B
Shares....................................................
. 54,464
5,028 PepsiCo, Inc.
..........................................................
.. .... 188,864
7,907 Philip Morris Cos., Inc.
(b)..................................................
350,873
267 Pioneer Hi Bred International, Inc.
.......................................... 21,360
147 Polaroid Corp.
..........................................................
.. ... 8,158
2,199 Procter & Gamble Co.
.........................................................
310,609
440 Quaker Oats Co.
..........................................................
.. .. 19,745
344 Ralston Purina
Group.....................................................
.. ... 28,271
180 Reebok International Ltd.
(a).................................................
8,415
485 Rubbermaid, Inc.
..........................................................
.. . 14,429
124 Russell Corp.
..........................................................
.. .... 3,673
1,557 Sara Lee Corp.
..........................................................
.. ... 64,810
1,200 Seagram Ltd.
..........................................................
.. ..... 48,300
556 Sherwin Williams Co.
.........................................................
17,166
161 Stride Rite Corp.
..........................................................
.. 2,073
201 Tupperware Corp.
..........................................................
.. . 7,336
518 Unilever N.V.
..........................................................
.. .... 112,924
603 UST, Inc.
..........................................................
.. ........ 16,733
206 VF Corp.
..........................................................
.. ......... 17,536
336 Whitman Corp.
..........................................................
.. .... 8,505
376 W.M. Wrigley Jr. Co.
.........................................................
25,192 ---------------------------------------------------
- -----------------------------------------------------
2,969,040 ------------------------------------------------
- --------------------------------------------------------
CONSUMER SERVICES -- 8.5%
181 Alberto Culver, Class B
Shares................................................
5,068
812 Albertsons, Inc.
..........................................................
.. . 29,638
242 American Greetings Corp., Class A
Shares...................................... 8,984
472 American Stores Co.
..........................................................
23,305
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
CONSUMER SERVICES -- 8.5% (CONTINUED)
319 Brunswick Corp.
..........................................................
.. .. $ 9,969
341 Charming Shoppes, Inc.
(a)....................................................
1,780
317 Circuit City Stores, Inc.
....................................................
11,273
551 Cognizant Corp.
..........................................................
.. .. 22,316
1,056 Comcast Corp., Class A Shares
(Special).......................................
22,572
679 Costco Companies, Inc.
(a)....................................................
22,322
1,284 CUC International, Inc.
(a)...................................................
33,143
542 CVS Corp.
..........................................................
.. ........ 27,778
517 Darden Restaurants, Inc.
.....................................................
4,685
702 Dayton Hudson Corp.
..........................................................
37,338
267 Deluxe Corp.
..........................................................
.. ..... 9,111
368 Dillard Department Stores, Inc., Class A
Shares............................... 12,742
313 Dow Jones & Co. Inc.
.........................................................
12,579
551 Dun & Bradstreet Corp.
.......................................................
14,464
209 Ecolab, Inc.
..........................................................
.. ..... 9,980
500 Equifax, Inc.
..........................................................
.. .... 18,594
673 Federated Department Stores
(a)...............................................
23,387
122 Fleming Co., Inc.
..........................................................
.. 2,196
456 Gannett, Inc.
..........................................................
.. .... 45,030
904 Gap, Inc.
..........................................................
.. ........ 35,143
194 Giant Food Inc., Class A
Shares...............................................
6,329
124 Great Atlantic & Pacific Tea Co., Inc.
....................................... 3,371
230 Harcourt General, Inc.
.......................................................
10,953
333 Harrah's Entertainment, Inc.
(a)..............................................
6,077
510 HFS, Inc.
(a).......................................................
.. ........ 29,580
800 Hilton Hotels Corp.
..........................................................
21,250
1,554 Home Depot, Inc.
..........................................................
.. . 107,129
262 Interpublic Group Co., Inc.
..................................................
16,064
799 J.C. Penney Co.
..........................................................
.. .. 41,697
100 John H. Harland Co.
..........................................................
2,281
125 Jostens, Inc.
..........................................................
.. .... 3,344
1,567 K mart Corp.
(a).......................................................
.. ..... 19,196
121 King World Productions, Inc.
.................................................
4,235
304 Knight Ridder, Inc.
..........................................................
14,915
816 Kroger Co.
(a).......................................................
.. ....... 23,664
1,016 Laidlaw, Inc., Class B
Shares.................................................
14,034
877 Limited, Inc.
..........................................................
.. .... 17,759
372 Loews Cos., Inc.
..........................................................
.. . 37,247
126 Longs Drug Stores Corp.
......................................................
3,300
414 Marriott International, Inc.
.................................................
25,409
793 May Department Stores Co.
....................................................
37,469
322 McGraw Hill Cos., Inc.
.......................................................
18,938
119 Mercantile Stores, Inc.
......................................................
7,490
173 Meredith Corp.
..........................................................
..
... 5,017
147 National Service Industries, Inc.
............................................ 7,157
313 New York Times Co., Class A
Shares............................................
15,494
260 Nordstrom, Inc.
..........................................................
.. .. 12,756
196 Pep Boys-Manny, Moe and
Jack..................................................
6,676
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
CONSUMER SERVICES -- 8.5% (CONTINUED)
397 Rite Aid Corp.
..........................................................
.. ... $ 19,800
488 R.R. Donnelley & Sons Co.
....................................................
17,873
188 Safety-Kleen Corp.
..........................................................
. 3,173
1,267 Sears, Roebuck & Co.
.........................................................
68,101
763 Service Corp.
International.............................................
.. .... 25,084
65 Spring Industries, Inc.
......................................................
3,429
217 Super Valu, Inc.
..........................................................
.. . 7,487
572 Sysco Corp.
..........................................................
.. ...... 20,878
189 Tandy Corp.
..........................................................
.. ...... 10,584
2,149 Tele-Communications, Inc., Class A Shares
(a)................................. 31,966
1,840 Time Warner, Inc.
..........................................................
.. 88,780
303 Times Mirror Co., Class A
Shares..............................................
16,741
504 TJX Cos. Inc.
..........................................................
.. .... 13,292
940 Toys 'R' Us, Inc.
(a).......................................................
.. 32,900
399 Tribune Co.
..........................................................
.. ...... 19,177
1,145 Viacom, Inc., Class B Shares
(a)..............................................
34,350
797 Walgreen Co.
..........................................................
.. ..... 42,739
7,423 Wal-Mart Stores, Inc.
........................................................
250,990
2,185 Walt Disney Co.
..........................................................
.. .. 175,346
419 Wendy's International, Inc.
..................................................
10,868
486 Winn Dixie Stores, Inc.
......................................................
18,104
434 Woolworth Corp.
(a).......................................................
.. .. 10,416 --------------------------------------
- ----------------------------------------------------------
- --------
1,884,306 ------------------------------------------------
- --------------------------------------------------------
ENERGY -- 9.7%
301 Amerada Hess Corp.
..........................................................
. 16,724
1,609 Amoco Corp.
..........................................................
.. ...... 139,882
240 Ashland, Inc.
..........................................................
.. .... 11,130
1,042 Atlantic Richfield Co.
.......................................................
73,461
471 Baker Hughes, Inc.
..........................................................
. 18,222
404 Burlington Resources, Inc.
...................................................
17,827
2,111 Chevron Corp.
..........................................................
.. .... 156,082
510 CINergy Corp.
..........................................................
.. .... 17,754
341 Coastal Corp.
..........................................................
.. .... 18,137
569 Dresser Industries, Inc.
.....................................................
21,195
66 Eastern
Enterprises...............................................
.. .......... 2,289
1,402 Edison
International.............................................
.. ........... 34,875
823 Enron Corp.
..........................................................
.. ...... 33,589
225 Enserch Corp.
..........................................................
.. .... 5,006
8,037 Exxon Corp.
(b).......................................................
.. ...... 494,276
405 Halliburton Co.
..........................................................
.. .. 32,096
81 Helmerich & Payne, Inc.
......................................................
4,668
157 Kerr McGee Corp.
..........................................................
.. . 9,950
454 LSI Logic Corp.
(a).......................................................
.. .. 14,528
111 Louisiana Land & Exploration Co.
.............................................
6,341 178 McDermott International, Inc.
................................................
5,195
2,550 Mobil Corp.
..........................................................
.. ...... 178,181
444 Noram Energy Corp.
..........................................................
. 6,771
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
ENERGY -- 9.7% (CONTINUED)
1,064 Occidental Petroleum Corp.
................................................... $
26,667
339 Oryx Energy Co.
(a).......................................................
.. .. 7,161
151 Pennzoil Co.
..........................................................
.. ..... 11,589
852 Phillips Petroleum Co.
.......................................................
37,275
277 Rowan Cos., Inc.
(a).......................................................
.. . 7,808
6,940 Royal Dutch Petroleum Co.
(b).................................................
377,363
294 Santa Fe Energy Resources, Inc.
(a)...........................................
4,318 797 Schlumberger Ltd.
..........................................................
.. 99,625
279 Sonat Inc.
..........................................................
.. ....... 14,299
236 Sun Co., Inc.
..........................................................
.. .... 7,316
553 Tenneco, Inc.
..........................................................
.. .... 24,989
856 Texaco, Inc.
..........................................................
.. ..... 93,090
808 Union Pacific Resources Group Inc.
........................................... 20,099
810 Unocal Corp.
..........................................................
.. ..... 31,438
930 USX-Marathon Group Inc.
......................................................
26,854
174 Western Atlas, Inc.
(a).......................................................
12,746
508 Williams Cos., Inc.
..........................................................
22,225 ---------------------------------------------------
- -----------------------------------------------------
2,143,041 ------------------------------------------------
- --------------------------------------------------------
FINANCIAL SERVICES -- 15.6%
488 Aetna Inc.
..........................................................
.. ....... 49,959
1,439 Allstate Corp.
..........................................................
.. ... 105,047
1,534 American Express Co.
.........................................................
114,283
780 American General Corp.
.......................................................
37,245
1,520 American International Group, Inc.
........................................... 227,050
1,883 Banc One Corp.
..........................................................
.. ... 91,208
495 Bank of Boston Corp.
.........................................................
35,670
1,269 Bank of New
York......................................................
.. ...... 55,202
2,322 BankAmerica Corp.
..........................................................
.. 149,914
265 Bankers Trust of New York Corp.
..............................................
23,055 675 Barnett Banks Inc.
..........................................................
. 35,438
175 Beneficial Corp.
..........................................................
.. . 12,436
1,420 Chase Manhattan Corp.
........................................................
137,829
600 Charles Schwab Corp.
.........................................................
24,413
563 Chubb Corp.
..........................................................
.. ...... 37,651
243 CIGNA Corp.
..........................................................
.. ...... 43,133
1,499 CitiCorp.
..........................................................
.. ........ 180,723
348 Comerica Inc.
..........................................................
.. .... 23,664
580 Conseco Inc.
..........................................................
.. ..... 21,460
724 CoreStates Financial Corp.
...................................................
38,915
300 Countrywide Credit Industries, Inc.
.......................................... 9,356
3,534 Fannie
Mae.......................................................
.. ........... 154,171
2,314 Federal Home Loan Mortgage Corp.
.............................................
79,544 343 Fifth Third BanCorp.
.........................................................
28,147
435 First Bank Systems, Inc.
.....................................................
37,138
1,032 First Chicago Corp.
..........................................................
62,436
1,448 First Data Corp.
..........................................................
.. . 63,622
918 First Union Corp.
..........................................................
.. 84,915
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
FINANCIAL SERVICES -- 15.6% (CONTINUED)
849 Fleet Financial Group, Inc.
.................................................. $
53,699
266 General Re Corp.
..........................................................
.. . 48,412
186 Golden West Financial Corp. of
Delaware.......................................
13,020
446 Great Western Financial Corp.
................................................
23,972
445 Green Tree Financial Corp.
...................................................
15,853
337 H&R Block, Inc.
..........................................................
.. .. 10,868
380 Hartford Financial Services Group, Inc.
...................................... 31,445
341 H.F. Ahmanson & Co.
..........................................................
14,663
314 Household International Inc.
.................................................
36,875
229 Jefferson Pilot Corp.
........................................................
16,001
599 J.P. Morgan & Co., Inc.
......................................................
62,521
729 KeyCorp.
..........................................................
.. ......... 40,733
338 Lincoln National Corp.
.......................................................
21,759
560 Lowes Corp.
..........................................................
.. ...... 20,790
528 Marsh & McLennan Cos., Inc.
..................................................
37,686
140 MBIA, Inc.
..........................................................
.. ....... 15,794
1,081 MBNA Corp.
..........................................................
.. ....... 39,592
838 Mellon Bank Corp.
..........................................................
.. 37,815
1,066 Merrill Lynch & Co., Inc.
....................................................
63,560
382 MGIC Investment Corp.
........................................................
18,312
1,853 Morgan Stanley, Dean Witter, Discover &
Co.................................... 79,795
722 National City Corp.
..........................................................
37,905
2,364 NationsBank Corp.
..........................................................
.. 152,478
1,198 Norwest Corp.
..........................................................
.. .... 67,388
1,086 PNC Bank Corp.
..........................................................
.. ... 45,205
303 Providian Corp.
..........................................................
.. .. 9,734
179 Republic New York Corp.
......................................................
19,242
408 SAFECO Corp.
..........................................................
.. ..... 19,049
353 Salomon Inc.
..........................................................
.. ..... 19,636
500 State Street Corp.
..........................................................
. 23,125
269 St. Paul Cos., Inc.
..........................................................
20,511
722 Suntrust Bank, Inc.
..........................................................
39,755
228 Torchmark Corp.
..........................................................
.. .. 16,245
214 Transamerica Corp.
..........................................................
. 20,022
2,068 Travelers Group, Inc.
........................................................
130,413
474 UNUM Corp.
..........................................................
.. ....... 19,908
489 U.S. Bancorp. of
Oregon....................................................
.. . 31,357
374 USF&G Corp.
..........................................................
.. ...... 8,976
535 Wachovia Corp.
..........................................................
.. ... 31,197
299 Wells Fargo & Co.
..........................................................
.. 80,581 ------------------------------------------------
- --------------------------------------------------------
3,459,516 ------------------------------------------------
- --------------------------------------------------------
HEALTH CARE -- 11.5%
2,514 Abbott
Laboratories..............................................
.. ........... 167,810
212 Allergan,
Inc.......................................................
.. ........ 6,744
274 ALZA Corp. (a)
..........................................................
.. ... 7,946
2,067 American Home Products Corp.
.................................................
158,126
856 Amgen, Inc.
(a).......................................................
.. ...... 49,755
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
HEALTH CARE -- 11.5% (CONTINUED)
527 Aon Corp.
..........................................................
.. ........ $ 27,272
180 Bausch & Lomb, Inc.
..........................................................
8,483
883 Baxter International, Inc.
...................................................
46,137
398 Becton, Dickinson & Co.
......................................................
20,149
321 Beverly Enterprises, Inc.
(a).................................................
5,216
370 Biomet, Inc.
(a).......................................................
.. ..... 6,891
628 Boston Scientific Corp.
(a)...................................................
38,582
3,241 Bristol-Myers Squibb & Co.
...................................................
262,521
300 Cardinal Health, Inc.
........................................................
17,175
2,173 Columbia HCA Healthcare Corp.
................................................
85,426
185 C.R. Bard, Inc.
..........................................................
.. .. 6,718
240 Guidant Corp.
..........................................................
.. .... 20,400
1,786 Eli Lilly & Co.
..........................................................
.. .. 195,232
1,019 HEALTHSOUTH Corp.
(a).......................................................
.. 25,411
526 Humana, Inc.
(a).......................................................
.. ..... 12,164
4,310 Johnson &
Johnson...................................................
.. ........ 277,456
239 Mallinckrodt Group, Inc.
.....................................................
9,082
203 Manor Care, Inc.
..........................................................
.. . 6,623
777 Medtronic, Inc.
..........................................................
.. .. 62,937
3,901 Merck & Co., Inc.
..........................................................
.. 403,754
140 Millipore Corp.
..........................................................
.. .. 6,160
407 Pall Corp.
..........................................................
.. ....... 9,463
2,086 Pfizer, Inc.
..........................................................
.. ..... 249,277
1,644 Pharmacia &
Upjohn....................................................
.. ...... 57,129
2,390 Schering-Plough Corp.
........................................................
114,421
296 St. Jude Medical, Inc.
(a)....................................................
11,544
975 Tenet Healthcare Corp.
(a)....................................................
28,823
596 United Healthcare Corp.
......................................................
30,992
227 US Surgical Corp.
..........................................................
.. 8,456
878 Warner Lambert Co.
..........................................................
. 109,092 ------------------------------------------------
- --------------------------------------------------------
2,553,367 ------------------------------------------------
- --------------------------------------------------------
TECHNOLOGY -- 14.1%
232 Adobe Systems, Inc.
..........................................................
8,135
442 Advanced Micro Devices, Inc.
(a)..............................................
15,912
606 ALLTEL Corp.
..........................................................
.. ..... 20,263
393 Amdahl Corp.
(a).......................................................
.. ..... 3,439
711 AMP, Inc.
..........................................................
.. ........ 29,684
294 Andrew Corp.
(a).......................................................
.. ..... 8,269
403 Apple Computer, Inc.
(a)......................................................
5,743
155 Autodesk, Inc.
..........................................................
.. ... 5,938
945 Automatic Data Processing, Inc.
..............................................
44,415 638 Bay Networks, Inc.
(a).......................................................
. 16,947
504 Cabletron Systems, Inc.
(a)...................................................
14,270
260 Ceridian Corp.
(a).......................................................
.. ... 10,985
2,128 Cisco Systems, Inc.
(a).......................................................
142,842
876 Compaq Computer Corp.
(a).....................................................
86,943
1,175 Computer Association International,
Inc....................................... 65,433
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
TECHNOLOGY -- 14.1% (CONTINUED)
248 Computer Sciences Corp.
(a)................................................... $
17,887
129 Data General Corp.
(a).......................................................
. 3,354
567 Dell Computer Corp.
(a).......................................................
66,587
509 Digital Equipment Corp.
(a)...................................................
18,038
379 DSC Communications Corp.
(a)..................................................
8,433
153 EG&G, Inc.
..........................................................
.. ....... 3,443
795 EMC Corp.
(a).......................................................
.. ........ 31,005
443 General Instrument Corp.
(a)..................................................
11,075
126 Harris Corp.
..........................................................
.. ..... 10,584
3,282 Hewlett Packard Co.
..........................................................
183,791
410 Honeywell, Inc.
..........................................................
.. .. 31,109
2,656 Intel Corp.
..........................................................
.. ...... 376,654
154 Intergraph Corp.
(a).......................................................
..
. 1,309
3,350 International Business Machines Corp.
........................................ 302,128
377 ITT Corp.
(a).......................................................
.. ........ 23,021
2,065 Lucent
Technologies..............................................
.. ........... 148,809
678 Micron Technology, Inc.
(a)...................................................
27,078
3,894 Microsoft Corp.
(a).......................................................
.. .. 492,104
1,353 Minnesota Mining & Manufacturing Co.
......................................... 138,006
1,919 Motorola, Inc.
..........................................................
.. ... 145,844
452 National Semiconductor Corp.
(a)..............................................
13,843
836 Northern Telecom Ltd.
........................................................
76,076
1,120 Novell, Inc.
(a).......................................................
.. ..... 7,770
2,188 Oracle Systems Corp.
(a)......................................................
110,221
413 Parametric Technology Corp.
(a)...............................................
17,577
141 Perkin-Elmer Corp.
..........................................................
. 11,218
480 Pitney Bowes, Inc.
..........................................................
. 33,360
250 Scientific Atlanta, Inc.
.....................................................
5,469
800 Seagate Technology, Inc.
(a)..................................................
28,150
76 Shared Medical Systems Corp.
.................................................
4,104
571 Silicon Graphics, Inc.
(a)....................................................
8,565
1,191 Sun Microsystems, Inc.
(a)....................................................
44,328
385 Tandem Computers, Inc.
(a)....................................................
7,796
107 Tektronix, Inc.
..........................................................
.. .. 6,420
580 Tellabs, Inc.
(a).......................................................
.. .... 32,408
616 Texas Instruments, Inc.
......................................................
51,783
1,069 3Com Corp.
(a).......................................................
.. ....... 48,105
698 Unicom Corp.
..........................................................
.. ..... 15,531
566 Unisys Corp.
(a).......................................................
.. ..... 4,316
1,050 Xerox Corp.
..........................................................
.. ...... 82,819
- ----------------------------------------------------------
- ----------------------------------------------
3,129,336 ------------------------------------------------
- -------------------------------------------------------
TRANSPORTATION -- 1.2%
294 AMR Corp.
(a).......................................................
.. ........ 27,195
495 Burlington Northern Santa
Fe..................................................
44,488
127 Caliber Systems, Inc.
........................................................
4,731
702 CSX Corp.
..........................................................
.. ........ 38,961
237 Delta Air Lines, Inc.
........................................................
19,434
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
TRANSPORTATION -- 1.2% (CONTINUED)
369 Federal Express Corp.
(a).....................................................
$ 21,310
405 Norfolk Southern Corp.
.......................................................
40,804
245 Ryder System, Inc.
..........................................................
. 8,085
469 Southwest Airlines Co.
.......................................................
12,135
792 Union Pacific Corp.
..........................................................
55,836
208 U.S. Airways Group, Inc.
(a)..................................................
7,280 ----------------------------------------------------
- ----------------------------------------------------
280,259 --------------------------------------------------
- ------------------------------------------------------
UTILITIES -- 8.5%
1,623 Airtouch Communications, Inc.
(a).............................................
44,430
607 American Electric Power, Inc.
................................................
25,494
1,778 Ameritech Corp.
..........................................................
.. .. 120,793
5,244 AT&T Corp.
(b).......................................................
.. ....... 183,868
478 Baltimore Gas & Electric Co.
.................................................
12,757
1,417 Bell Atlantic Corp.
..........................................................
107,515
3,208 BellSouth Corp.
..........................................................
.. .. 148,771
490 Carolina Power & Light Co.
...................................................
17,579
682 Central & South West Corp.
...................................................
14,493
179 Columbia Gas Systems, Inc.
...................................................
11,680
760 Consolidated Edison Co. New York, Inc.
....................................... 22,373
307 Consolidated Natural Gas Co.
.................................................
16,520
583 Dominion Resources Inc.
......................................................
21,352
470 DTE Energy Co.
..........................................................
.. ... 12,984
1,162 Duke Power Co.
..........................................................
.. ... 55,703
747 Entergy Corp.
..........................................................
.. .... 20,449
592 FPL Group, Inc.
..........................................................
.. .. 27,268
530 Frontier Corp.
..........................................................
.. ... 10,567
390 GPU, Inc.
..........................................................
.. ........ 13,991
3,113 GTE Corp.
..........................................................
.. ........ 136,583
759 Houston Industries, Inc.
.....................................................
16,271
2,216 MCI Communications Corp.
.....................................................
84,831
467 Niagara Mohawk Power Corp.
(a)................................................
3,999
161 Nicor, Inc.
..........................................................
.. ...... 5,776
224 Northern States Power Co. of
Minnesota........................................
11,592
1,424 NYNEX Corp.
..........................................................
.. ...... 82,058
494 Ohio Edison Co.
..........................................................
.. .. 10,775
88 Oneok, Inc.
..........................................................
.. ...... 2,833
275 Pacific
Enterprises...............................................
.. .......... 9,247
954 PacificCorp.
..........................................................
.. ..... 20,988
720 PECO Energy Co.
..........................................................
.. .. 15,120
113 Peoples Energy Corp.
.........................................................
4,230
1,334 PG&E Corp.
..........................................................
.. ....... 32,350
525 PP&L Resources, Inc.
.........................................................
10,467
772 Public Service Enterprise
Group...............................................
19,300
2,967 SBC Communications, Inc.
.....................................................
183,583
2,180 Southern Co.
..........................................................
.. ..... 47,688
1,393 Sprint Corp.
..........................................................
.. ..... 73,307
727 Texas Utilities Co.
..........................................................
25,036
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
UTILITIES -- 8.5% (CONTINUED)
1,551 U.S. West Communications
Group................................................ $
58,453
2,021 U.S. West Media Group
(a).....................................................
40,925
330 Union Electric Co.
..........................................................
. 12,437
2,801 Worldcom, Inc.
(a).......................................................
.. ... 89,632 -------------------------------------
- ----------------------------------------------------------
- ---------
1,886,068 ------------------------------------------------
- --------------------------------------------------------
TOTAL COMMON STOCKS (Cost -
$12,805,985).....................................
22,072,440 -----------------------------------------------
- ---------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
REPURCHASE AGREEMENT -- 0.5%
$113,000 Chase Securities Corp., 5.745% due 7/1/97;
Proceeds at maturity -- $113,018;
(Fully collateralized by U.S. Treasury Notes,
6.250% due 6/30/02; Market
value -- $115,260) (Cost -
$113,000).........................................
113,000 --------------------------------------------------
- ------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -
$12,918,985*).............................. $22,185,440
- ----------------------------------------------------------
- ----------------------------------------------
</TABLE>
(a) Non-income producing security.
(b) Security segregated by Custodian for futures contract
commitments.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
COMMON STOCKS -- 91.1% -----------------------------------
- ----------------------------------------------------------
- -----------
COMMERCIAL SERVICES -- 2.7%
7,000 Reuters Holdings PLC,
ADR................................................... $
441,000
9,000 W.W. Grainger,
Inc.......................................................
.. . 703,688
- ----------------------------------------------------------
- ----------------------------------------------
1,144,688 ------------------------------------------------
- --------------------------------------------------------
CONSUMER DURABLES -- 3.9%
20,000 Chrysler Corp.
..........................................................
.. . 656,250
15,000 Genuine Parts Co.
..........................................................
508,125
12,000 Leggett & Platt, Inc.
......................................................
516,000 --------------------------------------------------
- ------------------------------------------------------
1,680,375 ------------------------------------------------
- --------------------------------------------------------
CONSUMER NON-DURABLES -- 9.6%
17,000 Coca-Cola Corp.
..........................................................
.. 1,147,500
10,000 Colgate Palmolive Co.
......................................................
652,500
14,000 Kimberly-Clark Corp.
.......................................................
696,500
16,000 Liz Claiborne, Inc.
........................................................
746,000
6,000 Procter & Gamble Co.
.......................................................
847,500 --------------------------------------------------
- ------------------------------------------------------
4,090,000 ------------------------------------------------
- --------------------------------------------------------
CONSUMER SERVICES -- 3.9%
8,000 McDonald's Corp.
..........................................................
. 386,500
13,000 TCA Cable TV, Inc.
.........................................................
489,125
10,000 Walt Disney Co.
..........................................................
.. 802,500 -----------------------------------------------
- ---------------------------------------------------------
1,678,125 ------------------------------------------------
- --------------------------------------------------------
ELECTRONIC TECHNOLOGY -- 9.5%
17,000 AMP, Inc.
..........................................................
.. ...... 709,750
23,000 Ericsson LM Telephone,
ADR..................................................
905,625
1,000 Harris Corp.
..........................................................
.. ... 84,000
26,000 Hewlett Packard Co.
........................................................
1,456,000
12,000 Motorola, Inc.
..........................................................
.. . 912,000
- ----------------------------------------------------------
- ----------------------------------------------
4,067,375 ------------------------------------------------
- ------------
- ---------------------------------------------
ENERGY -- 4.6%
10,000 Exxon Corp.
..........................................................
.. .... 615,000
10,000 Mobil Corp.
..........................................................
.. .... 698,750
15,000 Phillips Petroleum Co.
.....................................................
656,250 --------------------------------------------------
- ------------------------------------------------------
1,970,000 ------------------------------------------------
- --------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
FINANCIAL SERVICES -- 17.3%
15,000 Arden Reality, Inc.
........................................................
$ 390,000
10,000 Beneficial Corp.
..........................................................
. 710,625
7,000 Chase Manhattan Corp.
......................................................
679,438
10,000 Greenpoint Financial Corp.
.................................................
665,625
7,000 J.P. Morgan & Co., Inc.
....................................................
730,625
15,000
KeyCorp...................................................
.. ................ 838,125
15,000 Kilroy Realty Corp.
........................................................
378,750
12,000 Mercury General Corp.
......................................................
873,000
17,000 NationsBank Corp.
..........................................................
1,096,500
11,000 Starwood Lodging
Trust.....................................................
. 469,562
12,000 State Street Corp.
.........................................................
555,000 --------------------------------------------------
- ------------------------------------------------------
7,387,250 ------------------------------------------------
- --------------------------------------------------------
HEALTH CARE -- 7.2%
10,000 Eli Lilly & Co.
..........................................................
.. 1,093,125
15,000 Johnson &
Johnson...................................................
.. ...... 965,625
10,000 Merck & Co., Inc.
..........................................................
1,035,000 ------------------------------------------------
- --------------------------------------------------------
3,093,750 ------------------------------------------------
- --------------------------------------------------------
INDUSTRIAL SERVICES -- 1.5%
12,000 Fluor Corp.
..........................................................
.. .... 662,250 ------------------------------------
- ----------------------------------------------------------
- ----------
MINERALS -- 1.1%
25,000 Worthington Industries, Inc.
...............................................
457,813 --------------------------------------------------
- ------------------------------------------------------
PROCESS INDUSTRIES -- 7.9%
11,000 Bemis Inc.
..........................................................
.. ..... 475,750
18,000 M.A. Hanna Co.
..........................................................
.. . 518,625
25,000 Monsanto Co.
..........................................................
.. ... 1,076,563
28,000 Pall Corp.
..........................................................
.. ..... 651,000
12,000 Temple-Inland, Inc.
........................................................
648,000 --------------------------------------------------
- ------------------------------------------------------
3,369,938 ------------------------------------------------
- --------------------------------------------------------
PRODUCER MANUFACTURER -- 7.1%
7,000 Belden, Inc.
..........................................................
.. ... 238,438
22,000 General Electric Co.
.......................................................
1,438,250
10,000 Hubbell, Inc., Class B
Shares...............................................
440,000
9,000 Minnesota Mining & Manufacturing Co.
....................................... 918,000 ----
- ----------------------------------------------------------
- ------------------------------------------
3,034,688 ------------------------------------------------
- --------------------------------------------------------
RETAIL -- 4.2%
9,000 May Department Stores Co.
..................................................
425,250
15,000 Nordstrom Inc.
..........................................................
.. . 735,938
13,000 Rite Aid Corp.
..........................................................
.. . 648,375
- ----------------------------------------------------------
- ----------------------------------------------
1,809,563 ------------------------------------------------
- --------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
TECHNOLOGY -- 3.2%
16,000 Automatic Data Processing, Inc.
............................................ $ 752,000
15,000 Electronic Data Systems Corp.
..............................................
615,000 --------------------------------------------------
- ------------------------------------------------------
1,367,000 ------------------------------------------------
- ------------
- --------------------------------------------TRANSPORTATION
- -- 2.7%
17,000 Knightbridge Tanker Ltd.
...................................................
429,250
10,000 Union Pacific Corp.
........................................................
705,000 --------------------------------------------------
- ------------------------------------------------------
1,134,250 ------------------------------------------------
- --------------------------------------------------------
UTILITIES -- 4.7%
10,000 Ameritech Corp.
..........................................................
.. 679,375
15,000 Duke Energy Corp.
..........................................................
719,060
14,000 GTE Corp.
..........................................................
.. ...... 614,250 ----------------------------------
- ----------------------------------------------------------
- ------------
2,012,685 ------------------------------------------------
- --------------------------------------------------------
TOTAL COMMON STOCKS (Cost --
$24,491,703)...................................
38,959,750 -----------------------------------------------
- ---------------------------------------------------------
FOREIGN COMMON STOCK -- 1.3% -----------------------------
- ----------------------------------------------------------
- -----------------
AUSTRALIA -- 1.3%
38,287 Broken Hill Proprietary Co. Ltd. (Cost --
$434,391)......................... 558,861 ---------
- ----------------------------------------------------------
- -------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 1.3% ---------------------
- ----------------------------------------------------------
- -------------------------
ENERGY -- 1.3%
10,044 Unocal Corp., Convertible 6.250% (Cost --
$485,250)......................... 569,997 ---------
- ----------------------------------------------------------
- -------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
CORPORATE DEBENTURES -- 3.5% -----------------------------
- ----------------------------------------------------------
- -----------------
FINANCIAL SERVICES -- 2.3%
$ 500,000 General Motors Acceptance Corp., 7.000% due
9/15/02......................... 503,125
500,000 Morgan Stanley, Dean Witter, Discover &
Co.,
6.875% due 3/1/03.............. 496,250 ------------
- ----------------------------------------------------------
- ----------------------------------
999,375 --------------------------------------------------
- ------------------------------------------------------
RETAIL TRADE -- 1.2%
500,000 Limited Inc., 7.800% due
5/15/02............................................
508,750 --------------------------------------------------
- ------------------------------------------------------
TOTAL CORPORATE DEBENTURES (Cost -
$1,559,314)............................. 1,508,125 ---
- ----------------------------------------------------------
- -------------------------------------------
REPURCHASE AGREEMENT -- 2.8%
1,182,000 Chase Securities Corp., 5.745% due 7/1/97;
Proceeds at maturity -- $1,182,189;
(Fully collateralized by U.S. Treasury
Notes, 6.250% due 6/30/02;
Market value -- $1,205,641) (Cost -
$1,182,000)............................ 1,182,000 ----
- ----------------------------------------------------------
- ------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -
$28,152,658*)............................ $42,778,733 --
- ----------------------------------------------------------
- --------------------------------------------
</TABLE>
(a) Security is exempt from registration under Rule 144A
of Securities Act of
1933. This security may be resold in transactions that
are exempt from
registration, normally to qualified institutional
buyers.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
COMMON STOCKS -- 93.1% -----------------------------------
- ----------------------------------------------------------
- -----------
BASIC INDUSTRIES/RAW MATERIALS -- 1.1% 1,450 BMC
Industries, Inc.
..........................................................
$ 49,663
750 Cytec Industries, Inc.
........................................................
28,031
1,000 Mueller Industries, Inc.
(a)...................................................
43,750
900 Sealed Air Corp.
(a).......................................................
.. .. 42,750
1,500 U.S. Filter Corp.
(a).......................................................
.. . 40,875
- ----------------------------------------------------------
- ----------------------------------------------
205,069 --------------------------------------------------
- ------------------------------------------------------
CAPITAL GOODS/PRODUCTION -- 1.6%
1,700 Danaher Corp.
..........................................................
.. ..... 86,381
1,000 Gulfstream Aerospace Corp.
(a).................................................
29,500
1,350 Mastec, Inc.
..........................................................
.. ...... 63,872
1,450 Precision Castparts Corp.
.....................................................
86,456
1,000 Tower Automotive, Inc.
(a).....................................................
43,000 ---------------------------------------------------
- -----------------------------------------------------
309,209 --------------------------------------------------
- ------------------------------------------------------
CHEMICALS -- 0.6%
1,900 Praxair, Inc.
..........................................................
.. ..... 106,400
- ----------------------------------------------------------
- ----------------------------------------------
COMMERCIAL SERVICES -- 4.0%
1,395 Accustaff, Inc.
(a).......................................................
.. ... 33,044
2,500 Cambridge Technology Partners, Inc.
(a)........................................ 80,000
1,300 Ciber, Inc.
..........................................................
.. ....... 44,444
1,300 Computer Horizons Corp.
(a)....................................................
44,525
1,700 Consolidated Graphics, Inc.
...................................................
70,975
3,200 Corrections Corp. of America
(a)...............................................
127,200
650 Keane, Inc.
(a).......................................................
.. ....... 33,800
1,600 National Data Corp.
..........................................................
. 69,300
1,000 National Techteam, Inc.
.......................................................
21,375
2,400 Paychex, Inc.
..........................................................
.. ..... 91,200
1,500 Robert Half International, Inc.
...............................................
70,594
2,300 Sitel Corp.
(a).......................................................
.. ....... 47,437
800 Technology Solutions Co.
......................................................
31,600 ---------------------------------------------------
- -----------------------------------------------------
765,494 --------------------------------------------------
- ------------------------------------------------------
CONSUMER DISTRIBUTION -- 10.6%
1,300 Barnes & Noble, Inc.
(a).......................................................
55,900
2,300 Bed, Bath & Beyond, Inc.
......................................................
69,863
4,000 Borders Group, Inc.
(a).......................................................
. 96,500
1,600 Brightpoint, Inc.
(a).......................................................
.. . 52,100
2,100 Cellstar Corp.
(a).......................................................
.. .... 64,313
1,700 CompUSA, Inc.
(a).......................................................
.. ..... 36,550
3,375 Consolidated Stores Corp.
(a)..................................................
117,281
6,350 Costco Cos., Inc.
(a).......................................................
.. . 208,756
1,600 CVS Corp.
..........................................................
.. ......... 82,000
2,000 Dollar General Corp.
..........................................................
75,000
1,550 Eagle Hardware & Garden, Inc.
.................................................
35,456
2,000 Family Dollar Stores, Inc.
....................................................
54,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
CONSUMER DISTRIBUTION -- 10.6% (CONTINUED)
1,300 Fred Meyer, Inc.
(a).......................................................
.. .. $ 67,194
1,900 General Nutrition Cos., Inc.
(a)...............................................
53,200
1,700 Gucci Group N.V.
..........................................................
.. .. 109,438
800 Inacom Corp.
..........................................................
.. ...... 24,900
1,800 Ingram Micro Inc., Class A
Shares..............................................
43,425
1,700 Pacific Sunware of California
(a)..............................................
54,825
2,000 Pier 1 Imports, Inc.
..........................................................
53,000
1,250 Proffitt's, Inc.
(a).......................................................
.. .. 54,844
5,000 Ross Stores, Inc.
..........................................................
.. . 163,436
1,576 Safeway, Inc.
..........................................................
.. ..... 72,705
1,400 Stein Mart, Inc.
(a).......................................................
.. .. 42,000
2,000 Tiffany & Co., Inc.
..........................................................
. 92,375
5,200 TJX Cos., Inc.
..........................................................
.. .... 137,150
1,300 Wet Seal, Inc., Class A Shares
(a).............................................
41,031
2,000 Williams Sonoma, Inc.
(a)......................................................
85,500 ---------------------------------------------------
- -----------------------------------------------------
2,043,242 ------------------------------------------------
- --------------------------------------------------------
CONSUMER DURABLES -- 1.1%
1,300 Ethan Allen
Interior..................................................
.. ....... 74,100
2,800 Miller, Inc.
..........................................................
.. ...... 100,800
500 SPX Corp.
..........................................................
.. ......... 32,406
- ----------------------------------------------------------
- ----------------------------------------------
207,306 --------------------------------------------------
- ------------------------------------------------------
CONSUMER NON-DURABLES -- 4.3%
750 Action Performance Cos., Inc.
(a)..............................................
18,188
800 Consolidated Cigar Holdings, Inc.
(a)..........................................
22,200 1,800 Interstate Bakeries Corp.
.....................................................
106,763
2,300 Jones Apparel Group, Inc.
(a)..................................................
109,825
1,500 Liz Claiborne, Inc.
..........................................................
. 69,938
1,000 Morningstar Group, Inc.
(a)....................................................
29,375
1,500 Nautica Enterprises, Inc.
(a)..................................................
39,657
1,400 Rexall Sundown, Inc.
(a).......................................................
54,600
2,100 Smithfield Foods, Inc.
(a).....................................................
129,150
1,600 St. John Knits, Inc.
..........................................................
86,400
800 Tommy Hilfiger Corp.
..........................................................
32,150
1,300 Westpoint Stevens, Inc.
(a)....................................................
50,860
3,000 Wolverine World Wide, Inc.
....................................................
91,125 ---------------------------------------------------
- -----------------------------------------------------
840,231 --------------------------------------------------
- ------------------------------------------------------
CONSUMER SERVICES -- 2.6%
1,500 Apollo Group, Inc., Class A Shares
(a)......................................... 52,875
1,000 Capstar Hotel Co.
(a).......................................................
.. . 32,000
1,600 Caribiner International, Inc.
.................................................
52,200
1,000 Jacor Communications, Inc.
(a).................................................
38,250
1,600 Doubletree Corp.
(a).......................................................
.. .. 65,800
1,000 Foodmaker, Inc.
(a).......................................................
.. ... 16,375
1,300 HFS, Inc.
..........................................................
.. ......... 75,400
1,550 Prime Hospitality, Inc.
.......................................................
30,613
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
CONSUMER SERVICES -- 2.6% (CONTINUED)
1,500 Promus Hotel Corp.
(a).......................................................
.. $ 58,125
2,600 Regal Cinemas, Inc.
(a).......................................................
. 85,800 -------------------------------------------------
- -------------------------------------------------------
507,438 --------------------------------------------------
- ------------------------------------------------------
ELECTRONICS -- 7.0%
5,500 Altera Corp.
..........................................................
.. ...... 277,750
900 AMS Lithography Holding
(a)....................................................
52,650
4,000 Applied Materials, Inc.
(a)....................................................
283,250
750 Cymer, Inc.
(a).......................................................
.. ....... 36,562
1,800 Dallas Semiconductor Corp.
....................................................
70,650
1,200 Jabil Circuit, Inc.
(a).......................................................
. 100,650
1,400 KLA-Tencor Corp.
(a).......................................................
.. .. 68,250
1,000 Kulicke & Soffa Industries, Inc.
(a)...........................................
32,469 500 Micrel, Inc.
(a).......................................................
.. ...... 25,500
1,000 Micro Linear Corp.
..........................................................
.. 10,500
3,250 Teradyne, Inc.
(a).......................................................
.. .... 127,563
2,000 Texas Instruments, Inc.
.......................................................
168,125
3,350 Vitesse Semiconductors, Inc.
..................................................
109,503 --------------------------------------------------
- ------------------------------------------------------
1,363,422 ------------------------------------------------
- --------------------------------------------------------
ENERGY -- 7.9%
1,300 BJ Services Co.
(a).......................................................
.. ... 69,712
1,800 Cliffs Drilling Co.
..........................................................
. 65,700
3,200 Cooper Cameron Corp.
..........................................................
149,600
2,300 Diamond Offshore Drilling, Inc.
...............................................
179,688
2,300 ENSCO International, Inc.
(a)..................................................
121,325
2,200 Evi, Inc.
(a).......................................................
.. ......... 92,400
2,500 Falcon Drilling Co., Inc.
.....................................................
144,062
1,500 Forcenergy Gas Exploration, Inc.
(a)...........................................
46,500 5,500 Global Marine, Inc.
(a).......................................................
. 127,875
4,000 Marine Drilling Co., Inc.
(a)..................................................
78,500
750 Maverick Tube Corp.
..........................................................
. 28,125
650 National Oilwell, Inc.
(a).....................................................
37,375
1,250 Ocean Energy, Inc.
(a).......................................................
.. 57,813
1,100 Rowan Cos., Inc.
..........................................................
.. .. 31,006
2,800 Smith International, Inc.
(a)..................................................
170,100
2,000 Tidewater, Inc.
..........................................................
.. ... 88,000
1,000 Varco International, Inc.
(a)..................................................
32,250 ---------------------------------------------------
- -----------------------------------------------------
1,520,031 ------------------------------------------------
- --------------------------------------------------------
FINANCIAL SERVICES -- 6.7%
1,200 Astoria Financial Corp.
.......................................................
57,000
850 Coast Savings Financial, Inc.
(a)..............................................
38,622
1,950 Comdisco, Inc.
..........................................................
.. .... 50,700
1,350 Cullen Frost Bankers, Inc.
....................................................
57,206
1,900 Finova Group, Inc.
..........................................................
.. 145,350
1,500 Glendale Federal Bank FSB
(a)..................................................
39,188
1,250 Greenpoint Financial Corp.
....................................................
83,200
1,000 Hartford Financial Services Group, Inc.
....................................... 82,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
- ----------------------------------------------------------
- ---------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
FINANCIAL SERVICES -- 6.7% (CONTINUED)
2,200 North Fork Bancorp.
..........................................................
. $ 47,025
1,200 Penncorp Financial Group, Inc.
................................................
46,200
1,300 People's Heritage Financial Group, Inc.
....................................... 49,238
400 National Commerce Bancorp.
....................................................
8,800
250 Silicon Valley Bancshares
(a)..................................................
11,313
2,750 Sovereign Bancorp., Inc.
......................................................
41,938
1,500 St. Paul Bancorp., Inc.
.......................................................
49,688
1,375 Star Banc Corp.
(a).......................................................
.. ... 58,094
2,250 State Street Corp.
(a).......................................................
.. 104,063
2,000 SunAmerica, Inc.
..........................................................
.. .. 97,500
3,700 Washington Mutual, Inc.
.......................................................
221,075 --------------------------------------------------
- ------------------------------------------------------
1,288,950 ------------------------------------------------
- --------------------------------------------------------
HEALTH CARE -- 10.8%
750 Curative Technologies, Inc.
(a)................................................
21,563
5,000 Dura Pharmaceuticals, Inc.
(a).................................................
199,375
625 ESC Medical Systems Ltd.
......................................................
15,938
1,500 FPA Medical Management, Inc.
(a)...............................................
35,531
2,600... Guidant
Corp......................................................
.. ........... 221,000
4,250... HBO & Co.
..........................................................
.. ......... 292,718
4,000 Health Management Associates, Inc., Class A
Shares (a)......................... 114,000
8,800 HEALTHSOUTH Corp.
(a).......................................................
.. . 219,450
1,900 Jones Medical Industries, Inc.
................................................
90,250
2,250 Medicis Pharmaceutical Corp.
..................................................
112,217
1,850 MiniMed, Inc.
(a).......................................................
.. ..... 49,256
5,500 Omnicare Group, Inc.
..........................................................
172,563
2,900 Oxford Health Plans, Inc.
(a)..................................................
208,075
1,800 Parexel International Corp.
(a)................................................
57,150
1,500 Quintiles Transnational Corp.
(a)..............................................
104,438
1,600 Renal Treatment Centers, Inc.
(a)..............................................
43,000
650 Teva Pharmaceutical Industries Ltd.
........................................... 42,088
1,200 Total Renal Care Holdings, Inc.
(a)............................................
48,225
1,300 Universal Health Service, Inc., Class B Shares
(a)............................. 50,050 -----------
- ----------------------------------------------------------
- -----------------------------------
2,096,887 ------------------------------------------------
- --------------------------------------------------------
INSURANCE -- 3.4%
1,100 American Bankers Insurance Group, Inc.
........................................ 69,575
2,650 CMAC Investment Corp.
.........................................................
126,538
9,000 Conseco, Inc.
..........................................................
.. ..... 333,000
1,000 Everest Reinsurance Holdings, Inc.
............................................ 39,625
125 Mercury General Corp.
.........................................................
9,094
1,000 MGIC Investment Corp.
.........................................................
47,938
200 Trans-Atlantic Holdings, Inc.
.................................................
19,850
425 Vesta Insurance Group, Inc.
...................................................
18,380 ---------------------------------------------------
- -----------------------------------------------------
664,000 --------------------------------------------------
- ------------------------------------------------------
MEDIA -- 2.8%
1,300 Clear Channel Communications, Inc.
(a)......................................... 79,950
2,600 Evergreen Media Corp.
(a)......................................................
116,025
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
MEDIA -- 2.8% (CONTINUED)
1,750 Interpublic Group of Cos., Inc.
............................................... $
107,297
4,400 Meredith Corp.
..........................................................
.. .... 127,600
1,475 Omnicom Group, Inc.
..........................................................
. 90,897
750 Valassis Communications, Inc.
(a)..............................................
18,000 ---------------------------------------------------
- -----------------------------------------------------
539,769 --------------------------------------------------
- ------------------------------------------------------
PRODUCER MANUFACTURING -- 2.6%
1,300 Allied Waste Industries, Inc.
(a)..............................................
22,588
1,750 Newpark Resources, Inc.
(a)....................................................
59,063
1,650 Tyco International Ltd.
.......................................................
114,778
3,100 United Waste Systems, Inc.
(a).................................................
127,100
4,500 U.S.A. Waste Service, Inc.
....................................................
173,812 --------------------------------------------------
- ------------------------------------------------------
497,341 --------------------------------------------------
- ------------------------------------------------------
SHIPBUILDING -- 0.1%
1,000 Halter Marine Group Inc.
(a)...................................................
24,000 ---------------------------------------------------
- -----------------------------------------------------
TECHNOLOGY -- 23.3%
2,300 ADC Telecommunications, Inc.
..................................................
76,763
1,000 Advanced Fibre Communications
(a)..............................................
60,375
2,000 Aspen Technologies, Inc.
(a)...................................................
75,250
1,750 Baan Co. N.V.
(a).......................................................
.. ..... 120,531
4,700 BMC Software, Inc.
(a).......................................................
.. 260,262
1,500 Ciena Corp.
(a).......................................................
.. ....... 70,687
1,250 Citrix Systems, Inc.
(a).......................................................
54,844
7,000 Compuware Corp.
..........................................................
.. ... 334,250
2,250 Comverse Technologies, Inc.
...................................................
117,000
7,750 Dell Computer Corp.
..........................................................
. 910,146
1,400 Discreet Logic, Inc.
(a).......................................................
23,100
1,400 Dynatech Corp.
..........................................................
.. .... 50,050
1,000 HNC Software, Inc.
(a).......................................................
.. 38,125
5,300 McAfee Associates, Inc.
(a)....................................................
334,563
5,450 Microsoft Corp.
(a).......................................................
.. ... 688,744
5,800 Peoplesoft, Inc.
(a).......................................................
.. .. 305,950
1,600 Sanmina Corp.
..........................................................
.. ..... 101,600
1,000 Saville Systems Ireland PLC
ADR................................................
52,000
500 Siebel Systems, Inc.
(a).......................................................
16,125
1,250 Stratus Computer, Inc.
(a).....................................................
62,500
1,500 Sun Microsystems, Inc.
........................................................
55,828
1,000 Sundstrand Corp.
..........................................................
.. .. 55,813
2,200 Sunguard Data Systems, Inc.
...................................................
102,300
4,500 Tellabs, Inc.
..........................................................
.. ..... 251,437
1,000 Uniphase Corp.
..........................................................
.. .... 58,250
2,950 VIASOFT, Inc.
(a).......................................................
.. ..... 149,713
300 Visio Corp.
..........................................................
.. ....... 21,150
500 Wyman-Gordon Co.
(a).......................................................
.. .. 13,500
1,400 Wind River
Systems...................................................
.. ........ 53,550
- ----------------------------------------------------------
- ----------------------------------------------
4,514,406 ------------------------------------------------
- --------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
TRANSPORTATION -- 1.2%
1,200 Airborne Freight
Corp......................................................
.. .. $ 50,250
2,400 Continental Airlines Corp., Class B Shares
(a)................................. 83,850
2,900 U.S. Air Group, Inc.
(a).......................................................
101,500 --------------------------------------------------
- ------------------------------------------------------
235,600 --------------------------------------------------
- ------------------------------------------------------
UTILITIES -- 1.4%
1,500 AES
Corp......................................................
.. ............... 106,125
4,500 Cincinnati Bell,
Inc.......................................................
.. .. 141,750
1,000 U.S. Long Distance Corp.
(a)...................................................
17,250 ---------------------------------------------------
- -----------------------------------------------------
265,125 --------------------------------------------------
- ------------------------------------------------------
TOTAL COMMON STOCKS (Cost -
$12,561,142)......................................
17,993,920 -----------------------------------------------
- ---------------------------------------------------------
WARRANTS -- 0.1%
900 BJ Services Co., Expire 4/12/00 (Cost --
$4,275)............................... 26,325 -----
- ----------------------------------------------------------
- -----------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 6.8%
$195,000 U.S. Treasury Bills, 4.70% due 7/10/97
(b).....................................
194,770
540,000 U.S. Treasury Bills, 4.64% due 7/17/97
(b).....................................
538,886
115,000 U.S. Treasury Bills, 4.66% due 7/17/97
(b).....................................
114,762
155,000 U.S. Treasury Bills, 4.74% due 7/31/97
(b).....................................
154,388
305,000 U.S. Treasury Bills, 4.97% due 8/21/97
(b)..................................... 302,853 ---
- ----------------------------------------------------------
- -------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost -- $1,305,659).............. 1,305,659
- ----------------------------------------------------------
- ----------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -
$13,871,076*)............................... $19,325,904
- ----------------------------------------------------------
- ----------------------------------------------
</TABLE>
(a) Non-income producing security.
(b) Rate represents annualized yield to maturity.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
STOCKS -- 100.0% -----------------------------------------
- ----------------------------------------------------------
- -----
AUSTRALIA -- 3.4%
86,403 Coca-Cola Amatil Ltd.
........................................................
$ 1,113,407 ----------------------------------------------
- ----------------------------------------------------------
AUSTRIA -- 2.8%
2,000 VA Technologie
AG........................................................
.. ... 366,079
6,000 Wolford
AG........................................................
.. .......... 582,334 ------------------------------
- ----------------------------------------------------------
- ----------------
948,413 --------------------------------------------------
- ------------------------------------------------------
BELGIUM -- 4.2%
7,000 Barco
N.V.......................................................
.. ............ 1,419,471
- ----------------------------------------------------------
- ----------------------------------------------
DENMARK -- 2.0%
10,000 Coloplast, Class B
Shares....................................................
. 668,104 ------------------------------------------------
- --------------------------------------------------------
FINLAND -- 3.1%
14,000 Nokia OY AB, Class A
Shares...................................................
1,039,502 ------------------------------------------------
- --------------------------------------------------------
FRANCE -- 1.7%
800 Carrefour Supermarche
S.A.....................................................
581,626 --------------------------------------------------
- ------------------------------------------------------
GERMANY -- 4.1%
10,000 SGL Carbon
AG........................................................
.. ....... 1,366,923 ---------------------------------
- ----------------------------------------------------------
- -------------
HONG KONG -- 9.0%
200,000 Cheung Kong Infrastructure
Holdings...........................................
579,557
288,000 Hong Kong & China Gas Co.
Ltd.................................................
576,201
20,000 Hong Kong & China Gas Co. Ltd. Warrants,
Expire
9/30/97 (a)................... 21,427
31,631 HSBC Holdings
PLC.......................................................
.. .... 951,303
100,000 Hutchinson Whampoa Ltd.
......................................................
864,818 --------------------------------------------------
- ------------------------------------------------------
2,993,306 ------------------------------------------------
- --------------------------------------------------------
IRELAND -- 8.2%
63,714 Bank of
Ireland...................................................
.. .......... 696,921
115,833 Greencore Group
PLC.......................................................
.. .. 567,963
199,999 Independent Newspapers
PLC....................................................
1,176,789
25,475 Irish Continental Group
PLC...................................................
288,257 --------------------------------------------------
- ------------------------------------------------------
2,729,930 ------------------------------------------------
- --------------------------------------------------------
ISRAEL -- 2.0%
20,000 Gilat Satellite Networks Ltd.
(a).............................................
665,000 --------------------------------------------------
- ------------------------------------------------------
ITALY -- 4.9%
10,000 Luxottica Group S.p.A.
ADR....................................................
678,125
300,000 Telecom Italia Mobile S.p.A.
.................................................
963,914 --------------------------------------------------
- ------------------------------------------------------
1,642,039 ------------------------------------------------
- --------------------------------------------------------
JAPAN -- 8.5%
660 Doutor Coffee Co., Ltd.
......................................................
26,820
9,000 Matsushita-Kotobuki
Electronics...............................................
298,873
11,000 Murata Manufacturing Co., Ltd.
...............................................
438,347
7,000 Noritsu Koki Co., Ltd.
.......................................................
345,626
4,000 Rohm Co., Ltd.
..........................................................
.. ... 412,480
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
JAPAN -- 8.5% (CONTINUED)
3,000 Shohkoh
Fund......................................................
.. .......... $ 909,727
46,000 Sumitomo Realty &
Development...............................................
.. 406,012 -----------------------------------------------
- -------------
- ---------------------------------------------
2,837,885 ------------------------------------------------
- --------------------------------------------------------
MALAYSIA -- 1.5%
246,400 Sungei Way Holdings
Berhad....................................................
464,685
25,887 Sungei Way Holdings Berhad Warrants, Expire
6/29/99 (a)....................... 25,436 ---------
- ----------------------------------------------------------
- -------------------------------------
490,121 --------------------------------------------------
- ------------------------------------------------------
MEXICO -- 0.8%
56,069 Gruma S.A. de C.V., Class B Shares
(a)........................................ 257,985
- ----------------------------------------------------------
- ----------------------------------------------
NETHERLANDS -- 9.7%
45,821 Getronics
N.V.......................................................
.. ........ 1,482,699
10,000 IHC Caland
N.V.......................................................
.. ....... 547,645
50,000 ING Groep N.V. Warrants, Expire 3/15/01
(a)................................... 576,992
5,051 Wolters Kluwer
C.V.A.....................................................
.. ... 616,133 -------------------------------------
- ----------------------------------------------------------
- ---------
3,223,469 ------------------------------------------------
- --------------------------------------------------------
NORWAY -- 3.1%
50,000 Tomra Systems
ASA.......................................................
.. .... 1,024,478 ------------------------------------
- ----------------------------------------------------------
- ----------
PANAMA -- 2.0%
20,000 Panamerican Beverages Inc.
ADR................................................
657,500 --------------------------------------------------
- ------------------------------------------------------
PHILIPPINES -- 2.6%
1,500,000 Belle Corp.
(a).......................................................
.. ...... 437,898
1,500,000 SM Prime Holdings Inc.
.......................................................
443,585 --------------------------------------------------
- ------------------------------------------------------
881,483 --------------------------------------------------
- ------------------------------------------------------
SINGAPORE -- 1.6%
70,000 Cerebos Pacific Ltd.
.........................................................
318,226
125,000 Van Der Horst Ltd.
..........................................................
. 229,927 ------------------------------------------------
- --------------------------------------------------------
548,153 --------------------------------------------------
- ------------------------------------------------------
SWEDEN -- 9.5%
21,333 Astra AB, Class A
Shares....................................................
.. 397,289
5,333 Astra AB, Class B
Shares....................................................
.. 94,149
25,000 Autoliv AB
Free......................................................
.. ....... 982,813
35,000 Nobel Biocare
AB........................................................
.. .... 493,379
30,800 Telefonaktiebolaget LM Ericsson, Class B
Shares............................... 1,212,897 ------
- ----------------------------------------------------------
- ----------------------------------------
3,180,527 ------------------------------------------------
- --------------------------------------------------------
SWITZERLAND -- 2.4%
500 Novartis
AG........................................................
.. ......... 800,466
- ----------------------------------------------------------
- ----------------------------------------------
THAILAND -- 0.8%
90,000 Krung Thai Bank Public Co. Ltd.
..............................................
93,804 60,000 Siam Makro Public Co. Ltd.
...................................................
164,447 --------------------------------------------------
- ------------------------------------------------------
258,251 --------------------------------------------------
- ------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
UNITED KINGDOM -- 12.1%
125,000 Boxmore International
PLC.....................................................
$ 529,458
225,000 British Biotech PLC
(a).......................................................
853,790
150,000 Capita Group
PLC.......................................................
.. ..... 587,917
20,000 IONA Technologies PLC ADR
(a).................................................
395,000
30,542 Misys
PLC.......................................................
.. ............ 692,577
6,000 Reuters Holdings PLC
ADR......................................................
378,000
50,000 Serco Group
PLC.......................................................
.. ...... 585,835
- ----------------------------------------------------------
- ----------------------------------------------
4,022,577 ------------------------------------------------
- --------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -
$21,849,259*).............................. $33,350,616
- ----------------------------------------------------------
- ----------------------------------------------
</TABLE>
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE> ---------------------------------------------------
- ----------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
- ----------------------------------------------------------
- ---------------------------------------------
<S>
<C> <C>
ASSETS:
Investments, at
cost................................................
$5,851,061 $56,106,753
Foreign currency, at
cost...........................................
- -- 36,624 -------------------------------------
- ----------------------------------------------------------
- --------
Investments, at
value...............................................
$5,851,061 $56,854,187
Foreign currency, at
value..........................................
- -- 36,179
Cash......................................................
.. ........ 17 --
Receivable for securities
sold...................................... -
369,712
Dividends and interest
receivable...................................
5,748 955,216
Receivable for open forward foreign currency contracts
(Note 7)..... -- 59,707
Receivable from
manager.............................................
8,937 --
Deferred organization
costs.........................................
- -- --
Other
assets....................................................
.. .. 4,076 ---------------------
- ----------------------------------------------------------
- -------------------------
TOTAL
ASSETS....................................................
.. .. 5,869,839 58,275,001 ------------------
- ----------------------------------------------------------
- ---------------------------
LIABILITIES:
Dividends
payable...................................................
10,575 --
Payable to
bank.....................................................
- -- 272,284
Payable for securities
purchased....................................
- - 32,850
Administration fees
payable.........................................
- -- 9,442
Investment advisory fees
payable.................................... -
21,246
Payable for open forward foreign currency contracts (Note
7)........ -- 5,522
Accrued
expenses..................................................
..
2,677 71,672 ----------------------------------
- ----------------------------------------------------------
- -----------
TOTAL
LIABILITIES...............................................
.. .. 13,252 413,016
- ----------------------------------------------------------
- ---------------------------------------------
TOTAL NET
ASSETS....................................................
.. $5,856,587 $57,861,985 --------------------------
- ----------------------------------------------------------
- -------------------
NET ASSETS:
Par value of shares of beneficial
interest.......................... $ 5,857 $
5,130
Capital paid in excess of par
value................................. 5,850,730
49,894,816
Undistributed (overdistributed) net investment
income............... -- 7,842,642
Accumulated net realized gain (loss) from security
transactions,
options and futures
contracts....................................
- - (673,855)
Net unrealized appreciation of investments and foreign
currencies... -- 793,252
- ----------------------------------------------------------
- ---------------------------------------------
TOTAL NET
ASSETS....................................................
.. $5,856,587 $57,861,985 --------------------------
- ----------------------------------------------------------
- -------------------
SHARES
OUTSTANDING...............................................
.. ... 5,856,587 5,129,616
- ----------------------------------------------------------
- ---------------------------------------------
NET ASSET VALUE, per
share............................................
$1.00 $11.28 ----------------------------------
- ----------------------------------------------------------
- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE>
--------------
--------------
--------------
--------------
JUNE 30, 1997
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH
EMERGING INTERNATIONAL
INCOME INDEX & INCOME
GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
PORTFOLIO PORTFOLIO -----------------------------
- -------------------------------
- -------------------------
<S> <C> <C> <C>
<C>
$36,777,088 $12,918,985 $28,152,658
$13,871,076 $ 21,849,259
-- -- --
- -- 36,231
- ----------------------------------------------------------
- --------------------------
$42,458,381 $22,185,440 $42,778,733
$19,325,904 $ 33,350,616
-- -- --
- -- 35,869
584 62 168
2,749 175,443
-- 4,519 --
- -- --
270,335 26,341 94,994
4,246 47,779
-- -- --
- -- --
-- -- --
- -- --
-- -- --
4,462 4,550
-- -- --
- -- --
- ----------------------------------------------------------
- --------------------------
42,729,300 22,216,362 42,873,895
19,337,361 33,614,257
- ----------------------------------------------------------
- --------------------------
-- -- --
- -- --
-- -- --
- -- --
-- 24,640 41,279
- -- --
7,255 5,849 7,062
4,170 5,469
16,222 1,309 15,889
10,842 23,243
-- -- --
- -- --
22,862 695 64,702
19,988 85,972
- ----------------------------------------------------------
- --------------------------
46,339 32,493 128,932
35,000 114,684
- ----------------------------------------------------------
- --------------------------
$42,682,961 $22,183,869 $42,744,963
$19,302,361 $ 33,499,573
- ----------------------------------------------------------
- --------------------------
$ 3,154 $ 1,007 $ 2,273 $
1,129 $ 2,627
33,840,580 11,482,609 22,711,523
10,671,990 25,153,721
3,168,735 333,375 920,008
(65,986) (140,200)
(10,801) 1,100,423 4,485,084
3,240,400 (3,015,799)
5,681,293 9,266,455 14,626,075
5,454,828 11,499,224 ----------------------------
- --------------------------------------------------------
$42,682,961 $22,183,869 $42,744,963
$19,302,361 $ 33,499,573 --------------------------
- ----------------------------------------------------------
3,154,222 1,006,838 2,272,957
1,128,819 2,627,127 ----------------------------
- --------------------------------------------------------
$13.53 $22.03 $18.81
$17.10 $12.75 -------------------------------
- -----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE> ---------------------------------------------------
- ----------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO --------------------------------
- ----------------------------------------------------------
- --------------
<S>
<C> <C>
INVESTMENT INCOME:
Interest..................................................
.. ............ $147,591 $2,288,854
Dividends.................................................
.. ............ -- 59,598
Less: Foreign withholding
tax........................................... -
- ----------------------------------------------------------
- -----------------------------------------------
TOTAL INVESTMENT
INCOME.................................................
147,591 2,348,452 --------------------------------
- ----------------------------------------------------------
- --------------
EXPENSES:
Investment advisory fees (Note
3)....................................... 8,030
129,986
Audit and
legal.....................................................
.. .. 6,500 6,652
Administration fees (Note
3)............................................
5,354 57,771
Shareholder and system servicing
fees................................... 5,350
4,853
Custody...................................................
.. ............ 3,856 23,009
Shareholder
communications............................................
.. 1,288 8,368
Trustees'
fees......................................................
.. .. 700 3,137
Amortization of deferred organization
costs............................. --
- --
Registration
fees......................................................
. -- --
Pricing service
fees.................................................... -
- - 3,903
Other.....................................................
.. ............ -- 1,538 -----------
- ----------------------------------------------------------
- -----------------------------------
TOTAL
EXPENSES..................................................
.. ...... 31,078 239,217 -----------------
- ----------------------------------------------------------
- -----------------------------
NET INVESTMENT INCOME
(LOSS)..............................................
116,513 2,109,235 --------------------------------
- ----------------------------------------------------------
- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND
FOREIGN CURRENCIES (NOTES 4, 5 AND 7):
Realized Gain (Loss) From:
Security transactions (excluding short-term
securities).............. -- 181,614
Foreign currency
transactions........................................
- -- 569,405
- ----------------------------------------------------------
- ----------------------------------------------
NET REALIZED GAIN
(LOSS)................................................
- -- 751,019
- ----------------------------------------------------------
- ----------------------------------------------
Change in Net Unrealized Appreciation of Investments
and Foreign Currencies:
Beginning of
period.................................................. -
- - 2,120,086
End of
period....................................................
.. .. -- 793,252
- ----------------------------------------------------------
- ----------------------------------------------
INCREASE (DECREASE) IN NET UNREALIZED
APPRECIATION...................... --
(1,326,834) ----------------------------------------------
- ----------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND
FOREIGN
CURRENCIES................................................
.. ............ -- (575,815)
- ----------------------------------------------------------
- ----------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS....................................
$116,513 $1,533,420 --------------------------------------
- ----------------------------------------------------------
- --------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
-----------------------------------------
-------------FOR THE SIX MONTHS ENDED
JUNE 30, 1997
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH
EMERGING INTERNATIONAL
INCOME INDEX & INCOME
GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
PORTFOLIO PORTFOLIO
- ----------------------------------------------------------
- ---------------------------
<S> <C> <C> <C>
<C>
$ 476,434 $ 6,475 $ 68,613 $
28,894 $ 15,385
702,644 189,826 394,113
24,144 254,940
-- (1,295) (2,596)
- -- (22,778)
- ----------------------------------------------------------
- ---------------------------
1,179,078 195,006 460,130
53,038 247,547
- ----------------------------------------------------------
- ---------------------------
96,873 40,692 89,158
68,337 139,232
7,083 8,009 8,627
7,981 8,621
43,055 20,346 39,626
18,223 32,760
5,933 6,334 5,933
4,939 7,137
1,403 8,927 1,730
8,402 25,693
4,945 6,017 5,708
4,811 5,709
2,456 1,907 2,051
1,632 2,684
-- -- --
1,618 1,600
-- 344 --
- -- --
1,484 -- --
- -- 2,839
1,000 2,638 700
1,948 2,870
- ----------------------------------------------------------
- ---------------------------
164,232 95,214 153,533
117,891 229,145
- ----------------------------------------------------------
- ---------------------------
1,014,846 99,792 306,597
(64,853) 18,402
- ----------------------------------------------------------
- ---------------------------
(527) 469,918 1,644,451
963,241 205,942
-- -- --
- -- (14,888)
- ----------------------------------------------------------
- ---------------------------
(527) 469,918 1,644,451
963,241 191,054
- ----------------------------------------------------------
- ---------------------------
5,070,190 6,100,145 11,152,771
4,950,310 9,893,328
5,681,293 9,266,455 14,626,075
5,454,828 11,499,224
- ----------------------------------------------------------
- ---------------------------
611,103 3,166,310 3,473,304
504,518 1,605,896
- ----------------------------------------------------------
- ---------------------------
610,576 3,636,228 5,117,755
1,467,759 1,796,950
- ----------------------------------------------------------
- ---------------------------
$1,625,422 $3,736,020 $5,424,352
$1,402,906 $ 1,815,352
- ----------------------------------------------------------
- ---------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE> ---------------------------------------------------
- ----------------------------
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO -----------------------------
- ----------------------------------------------------------
- -----------------
<S>
<C> <C>
OPERATIONS:
Net investment income
(loss)........................................ $
116,513 $ 2,109,235
Net realized gain
(loss)............................................
- -- 751,019
Increase (decrease) in net unrealized
appreciation.................. --
(1,326,834) ----------------------------------------------
- ----------------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS.............................. 116,513
1,533,420 ------------------------------------------------
- -------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment
income...............................................
(116,513) ---------------------------------
- ----------------------------------------------------------
- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS........... (116,513) --
- ----------------------------------------------------------
- ---------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of
shares.................................... 2,750,456
1,449,768
Net asset value of shares issued for reinvestment of
dividends...... 118,729 --
Cost of shares
reacquired...........................................
(2,900,506) (4,636,058) ---------------------------
- ----------------------------------------------------------
- -------------------
DECREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS................. (31,321)
(3,186,290) ----------------------------------------------
- ----------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS.....................................
(31,321) (1,652,870)
NET ASSETS:
Beginning of
period.................................................
5,887,908 59,514,855 -----------------------------
- ----------------------------------------------------------
- -----------------
END OF
PERIOD*...................................................
.. . $ 5,856,587 $57,861,985
- ----------------------------------------------------------
- ----------------------------------------------
* Includes undistributed (overdistributed) net investment
income
of:.......................................................
..
........ -- $7,842,642
- ----------------------------------------------------------
- ----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
-------------------------------------
---------------------FOR THE SIX
MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH
EMERGING INTERNATIONAL
INCOME INDEX & INCOME
GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
PORTFOLIO PORTFOLIO ----------------------------
- ----------------------------------------------------------
- --
<S> <C> <C>
<C>
<C>
$ 1,014,846 $ 99,792 $ 306,597 $
(64,853) $ 18,402
(527) 469,918 1,644,451
963,241 191,054
611,103 3,166,310 3,473,304
504,518 1,605,896 -----------------------------
- ----------------------------------------------------------
- -
1,625,422 3,736,020 5,424,352
1,402,906 1,815,352
- ----------------------------------------------------------
- ------------------------------
-- -- --
- -- --
- ----------------------------------------------------------
- ------------------------------
-- -- --
- -- --
- ----------------------------------------------------------
- ------------------------------
441,317 905,621 1,626,799
704,197 830,017
-- -- --
- -- --
(4,999,623) (1,715,580) (2,808,315)
(1,705,874) (2,482,852)
- ----------------------------------------------------------
- ------------------------------
(4,558,306) (809,959) (1,181,516)
(1,001,677) (1,652,835)
- ----------------------------------------------------------
- ------------------------------
(2,932,884) 2,926,061 4,242,836
401,229 162,517
45,615,845 19,257,808 38,502,127
18,901,132 33,337,056
- ----------------------------------------------------------
- --
- -----------------------------
$42,682,961 $22,183,869 $42,744,963
$19,302,361 $ 33,499,573 -------------------------
- ----------------------------------------------------------
- -----
$3,168,735 $333,375 $920,008
$(65,986) $(140,200) ---------------------------
- ----------------------------------------------------------
- ---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE> ---------------------------------------------------
- ----------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO ------------------------------
- ----------------------------------------------------------
- ----------------
<S>
<C> <C>
OPERATIONS:
Net investment income
(loss)........................................ $
280,454 $ 4,697,494
Net realized gain
(loss)............................................
- -- 1,216,193
Increase (decrease) in net unrealized
appreciation.................. --
356,725 --------------------------------------------------
- ------------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS.............................. 280,454
6,270,412 ------------------------------------------------
- -------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment
income...............................................
(280,454) (788,174)
Net realized
gains..................................................
- -- ----------------------------------------
- ----------------------------------------------------------
- -------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS........... (280,454)
(788,174) ------------------------------------------------
- --------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 10):
Net proceeds from sale of
shares....................................
4,806,909 2,168,649
Net asset value of shares issued for reinvestment of
dividends...... 284,142 788,591
Cost of shares
reacquired...........................................
(4,856,413) (8,240,160) ----------------------------
- ----------------------------------------------------------
- ------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS...... 234,638 (5,282,920)
- ----------------------------------------------------------
- ----------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS.....................................
234,638 199,318
NET ASSETS:
Beginning of
year...................................................
5,653,270 59,315,537 ------------------------------
- ----------------------------------------------------------
- ----------------
END OF
YEAR*.....................................................
.. . $ 5,887,908 $59,514,855
- ----------------------------------------------------------
- ----------------------------------------------
* Includes undistributed (overdistributed) net investment
income
of:
..........................................................
.. .... -- $5,164,002 ---------------
- ----------------------------------------------------------
- -------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE>
-------------------------------------
-------------------FOR THE YEAR ENDED
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH
EMERGING INTERNATIONAL
INCOME INDEX & INCOME
GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
PORTFOLIO PORTFOLIO -----------------------------
- -------------------------------------------------------
<S> <C> <C> <C>
<C>
$ 2,158,929 $ 236,040 $ 614,342 $
(121,085) $ (66,052)
2,077,070 639,818 2,842,198
2,277,045 (576,982)
(1,702,067) 2,569,432 3,230,536
935,006 6,833,360 ------------------------------
- ------------------------------------------------------
2,533,932 3,445,290 6,687,076
3,090,966 6,190,326
- ----------------------------------------------------------
- --------------------------
(279,331) (233,642) (53,652)
- -- (118,973)
-- (386,017) --
(445,756) --
- ----------------------------------------------------------
- --------------------------
(279,331) (619,659) (53,652)
(445,756) (118,973)
- ----------------------------------------------------------
- --------------------------
438,507 3,253,118 1,940,036
2,152,668 2,716,330
279,331 619,658 53,651
445,756 118,973
(9,800,862) (2,670,818) (5,283,170)
(3,805,437) (4,548,187)
- ----------------------------------------------------------
- --------------------------
(9,083,024) 1,201,958 (3,289,483)
(1,207,013) (1,712,884)
- ----------------------------------------------------------
- --------------------------
(6,828,423) 4,027,589 3,343,941
1,438,197 4,358,469
52,444,268 15,230,219 35,158,186
17,462,935 28,978,587
- ----------------------------------------------------------
- --------------------------
$45,615,845 $19,257,808 $38,502,127
$18,901,132 $ 33,337,056 --------------------------
- ----------------------------------------------------------
$2,153,889 $233,583 $613,411
$(1,133) $(143,714) -----------------------------
- -------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PAGE> ---------------------------------------------------
- ----------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Money Market, Diversified Strategic Income,
Equity Income, Equity
Index, Growth & Income, Emerging Growth and International
Equity Portfolios
("Portfolios") are separate investment portfolios of the
Smith Barney Series
Fund ("Fund"). The Fund, a Massachusetts business trust,
is registered under the
Investment Company Act of 1940, as amended, as a
diversified, open-ended
management investment company. Shares of the Fund can be
acquired through
investing in an individual flexible premium deferred
combination fixed and
variable annuity contract or a certificate evidencing
interest in a master group
flexible premium deferred annuity offered by certain
insurance companies. The
Fund offers three other portfolios: Appreciation,
Intermediate High Grade and
Total Return Portfolios. The financial statements and
financial highlights for
the other portfolios are presented in a separate semi-
annual report.
The significant accounting policies consistently
followed by the Portfolios
are: (a) security transactions are accounted for on trade
date; (b) securities
traded on national securities markets are valued at the
closing prices on such
markets or, if there were no sales during the day, at
current quoted bid price;
securities primarily traded on foreign exchanges are
generally valued at the
preceding closing values of such securities on their
respective exchanges,
except that when a significant occurrence subsequent to
the time a value was so
established is likely to have significantly changed the
value then the fair
value of those securities will be determined by
consideration of other factors
by or under the direction of the Board of Trustees or its
delegates;
over-the-counter securities are valued on the basis of the
bid price at the
close of business on each day; U.S. government and agency
obligations are valued
at the average between bid and ask prices; (c) securities
maturing within 60
days are valued at cost plus accreted discount, or minus
amortized premium,
which approximates market value; (d) interest income is
recorded on the accrual
basis; (e) dividend income is recorded on the ex-dividend
date; foreign dividend
income is recorded on the ex-dividend date or as soon as
practical after the
Portfolios determine the existence of a dividend
declaration after exercising
reasonable due diligence; (f) gains or losses on the sale
of securities are
calculated by using the specific identification method;
(g) dividends and
distributions to shareholders are recorded by the
Portfolios on the ex-dividend
date; (h) the accounting records of the Portfolios are
maintained in U.S.
dollars. All assets and liabilities denominated in foreign
currencies are
translated into U.S. dollars based on the rate of exchange
of such currencies
against U.S. dollars on the date of valuation. Purchases
and sales of
securities, and income and expenses are translated at the
rate of exchange
quoted on the respective date that such transactions are
recorded. Differences
between income and expense amounts recorded and collected
or paid are adjusted
when reported by the custodian bank; (i) each Portfolio
intends to comply with
the requirements of the Internal Revenue Code of 1986, as
amended, pertaining to
regulated investment companies and to make distributions of
taxable income
sufficient to relieve it from substantially all federal
income and excise tax;
(j) the character of income and gains distributed are
determined in accordance
with income tax regulations which may differ from generally
accepted accounting
principles. At December 31, 1996, reclassifications were
made to the Portfolios'
capital accounts to reflect permanent book/tax differences
and income and gains
available for distributions under income tax regulations.
Accordingly, for the
Diversified Strategic Income Portfolio, a portion of
undistributed net
investment income amounting to $420 was reclassified to
paidin capital. In
addition, for the Emerging Growth Portfolio, portions of
accumulated net
realized loss and accumulated net investment loss amounting
to $57 and $119,952,
respectively, were reclassified to paid-in capital. For the
International Equity
Portfolio, a portion of undistributed net investment income
amounting to $76,812
was reclassified to paid-in capital. Net investment income,
net realized gains
and net assets were not affected by this change; and (k)
estimates and
assumptions are required to be made regarding assets,
liabilities and changes in
net assets resulting from operations when financial
statements are prepared.
Changes in the economic environment, financial markets and
any other parameters
used in determining these estimates could cause actual
results to differ.
In addition, for the Emerging Growth and International
Equity Portfolios,
organization costs have been deferred and are currently
being amortized on a
straight-line basis over a five-year period, beginning with
commencement of
operations in December 1993.
In addition, certain Portfolios may enter into forward
exchange contracts
in order to hedge against foreign currency risk. These
contracts are
marked-to-market daily, by recognizing the difference
between the contract
exchange rate and the current market rate as an unrealized
gain or loss.
Realized gains or losses are recognized when contracts are
settled.
2. DIVIDENDS
The Money Market Portfolio declares dividends daily
from net investment
income and distributes such dividends monthly. Net
realized capital gains, if
any, are declared and distributed annually.
54
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION
AGREEMENT AND OTHER
TRANSACTIONS
The Fund, on behalf of the Money Market, Diversified
Strategic Income,
Equity Income, Growth & Income and International Equity
Portfolios, has entered
into an investment advisory agreement ("Advisory
Agreement") with Smith Barney
Mutual Funds Management Inc. ("SBMFM"). SBMFM is a wholly
owned subsidiary of
Smith Barney Holdings Inc. ("SBH"), which is in turn a
wholly-owned subsidiary
of Travelers Group Inc. ("Travelers"). Under each
respective investment advisory
agreement, the Portfolios pay an investment advisory fee
calculated at an annual
rate of their respective average daily net assets. These
fees are calculated
daily and paid monthly.
The respective advisers and annual rates are as
follows:
<TABLE>
<CAPTION>
PORTFOLIO
ADVISOR RATE
- ----------------------------------------------------------
- ------------------------------------------------
<S> <C>
<C>
Money Market Smith Barney Mutual
Funds Management Inc. 0.30%
Diversified Strategic Income Smith Barney Mutual
Funds Management Inc. 0.45
Equity Income Smith Barney
Mutual
Funds Management Inc. 0.45
Equity Index Travelers
Investment
Management Company 0.15
Growth & Income Smith Barney
Mutual
Funds Management Inc. 0.45
Emerging Growth Van Kampen
American
Capital Asset Management, Inc. 0.75
International Equity Smith Barney
Mutual
Funds Management Inc. 0.85
- ----------------------------------------------------------
- ------------------------------------------------
</TABLE>
Smith Barney Global Capital Management, Inc.
("SBGCM") serves as
sub-investment adviser to the Diversified Strategic Income
Portfolio and is paid
a monthly fee by SBMFM calculated at an annual rate of
0.15% of the Portfolio's
average daily net assets. The Diversified Strategic Income
Portfolio does not
make any direct payments to SBGCM.
The Fund, on behalf of the Portfolios, has also
entered into an
administration agreement with SBMFM. Under the agreement,
each Portfolio pays an
administration fee calculated at an annual rate of 0.20%
of the average daily
net assets; except for the Equity Index Portfolio which
pays an administration
fee of 0.06%. These fees are calculated daily and paid
monthly.
By mutual agreement of the parties involved, in the
event the aggregate
expenses of a Portfolio (exclusive of interest, taxes,
brokerage expenses and
extraordinary expenses) exceed an agreed upon limitation,
SBMFM will, as
appropriate, reduce its fees by one half the excess
expenses in the proportion
that its respective fees bear to the aggregate of such
fees paid by the
Portfolio. IDS Life Insurance Company ("IDS Life"), one of
the insurance
companies offering variable annuities through which
investments can be made in
the Fund, will bear the remaining half of such excess
expenses.
For the six months ended June 30, 1997, the Equity
Income and Emerging
Growth Portfolios paid Smith Barney brokerage commissions
of $180 and $120
respectively.
No officer, Director or employee of Smith Barney or
its affiliates receives
any compensation from the Fund for serving as a Trustee or
officer of the Fund.
4. INVESTMENTS
During the six months ended June 30, 1997, the
aggregate costs of purchases
and proceeds from sales of investments (including
maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
PORTFOLIO
PURCHASES SALES -----------------------------------
- ----------------------------------------------------------
- -----------
<S>
<C> <C>
Diversified Strategic
Income................................................
$12,304,969 $13,989,299
Equity
Income....................................................
.. ......... 7,131,542 12,345,673
Equity
Index.....................................................
.. ......... 679,428 1,073,948
Growth &
Income....................................................
.. ....... 3,995,815 5,290,280
Emerging
Growth....................................................
.. ....... 8,199,326 9,923,687
International
Equity....................................................
.. .. 4,701,096 5,983,194
- ----------------------------------------------------------
- ----------------------------------------------
</TABLE>
55
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
At June 30, 1997, the aggregate gross unrealized
appreciation and
depreciation of investments for Federal income tax
purposes were substantially
as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
PORTFOLIO
APPRECIATION DEPRECIATION APPRECIATION --------------
- ----------------------------------------------------------
- -----------------------------------
<S>
<C> <C> <C>
Diversified Strategic
Income.................................. $ 2,035,501 $
(909,455) $ 1,126,046
Equity
Income.................................................
6,070,776 (389,483) 5,681,293
Equity
Index..................................................
9,455,247 (188,792) 9,266,455
Growth &
Income...............................................
14,839,671 (213,596) 14,626,075
Emerging
Growth...............................................
5,556,499 (101,671) 5,454,828
International
Equity..........................................
12,572,500 (1,071,143) 11,501,357 ---------------
- ----------------------------------------------------------
- ----------------------------------
</TABLE>
5. FUTURES CONTRACTS
The Diversified Strategic Income, Equity Income,
Equity Index, Growth &
Income, Emerging Growth and International Equity
Portfolios may from time to
time enter into futures contracts.
Initial margin deposits made upon entering into
futures contracts are
recognized as assets. The initial margin is segregated by
the custodian as is
noted in the schedule of investments. During the period
the futures contract is
open, changes in the value of the contract are recognized
as unrealized gains or
losses by "marking to market" on a daily basis to reflect
the market value of
the contract at the end of each day's trading. Variation
margin payments are
made or received and recognized as assets due from or
liabilities due to broker,
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 transaction and
the Portfolio's basis in the contract. The Portfolio
enters into such contracts
to hedge a portion of its portfolio. The Portfolio bears
the market risk that
arises from changes in the value of the financial
instruments and securities
indices (futures contracts) and the credit risk should a
counterparty fail to
perform under such contracts.
At June 30, 1997, the Portfolios had no open futures
contracts.
6. OPTION CONTRACTS
The Diversified Strategic Income, Equity Income,
Equity Index, Growth &
Income, Emerging Growth and International Equity
Portfolios may from time to
time enter into option contracts.
Upon the purchase of a put option or a call option by
the Portfolio, the
premium paid is recorded as an investment, the value of
which is
marked-to-market daily. When a purchased option expires,
the Portfolio will
realize a loss in the amount of the cost of the option.
When the Portfolio
enters into a closing sales transaction, the Portfolio
will realize a gain or
loss depending on whether the sales proceeds from the
closing sales transaction
are greater or less than the cost of the option. When the
Portfolio exercises a
put option, it will realize a gain or loss from the sale
of the underlying
security and the proceeds from such sale will be decreased
by the premium
originally paid. When the Portfolio exercises a call
option, the cost of the
security which the Portfolio purchases upon exercise will
be increased by the
premium originally paid.
As of June 30, 1997, the Portfolios held no purchased
call or put options.
When a Portfolio writes a call option or a put
option, an amount equal to
the premium received by the Portfolio is recorded as a
liability, the value of
which is marked-to-market daily. When a written option
expires, the Portfolio
realizes a gain equal to the amount of the premium
received. When the Portfolio
enters into a closing purchase transaction, the Portfolio
realizes a gain (or
loss if the cost of the closing purchase transaction
exceeds the premium
received when the option was sold) without regard to any
unrealized gain or loss
on the underlying security, and the liability related to
such option is
eliminated. When a written call option is exercised, the
Portfolio realizes a
gain or loss from the sale of the underlying security and
the proceeds from such
sale are increased by the premium originally received.
When a written put option
is exercised, the amount of the premium originally
received will reduce the cost
of the security which the Portfolio purchased upon
exercise. When written index
options are exercised, settlement is made in cash.
56
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The risk associated with purchasing options is
limited to the premium
originally paid. The Portfolio enters into options for
hedging purposes. The
risk in writing a covered call option is that the
Portfolio gives up the
opportunity to participate in any increase in the price of
the underlying
security beyond the exercise price. The risk in writing a
covered put option is
that the Portfolio is exposed to the risk of loss if the
market price of the
underlying security declines.
During the six months ended June 30, 1997,
the Portfolios did not write any
call or put options.
7. FORWARD FOREIGN CURRENCY
CONTRACTS
The Diversified Strategic Income, Emerging Growth and
International Equity
Portfolios have the ability to enter into forward foreign
currency contracts.
At June 30, 1997, Diversified Strategic Income
Portfolio had open forward
foreign currency contracts as described below. The
Portfolio bears the market
risk that arises from changes in foreign currency exchange
rates. The unrealized
gain (loss) on the contracts reflected in the accompanying
financial statements
were as follows:
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
LOCAL MARKET SETTLEMENT UNREALIZED
FOREIGN CURRENCY
CURRENCY VALUE DATE GAIN (LOSS)
- ----------------------------------------------------------
- -------------------------------------------------------
<S> <C>
<C> <C> <C>
TO SELL:
Danish Krone......................................
11,000,000 $ 1,660,580 7/16/97 $17,529
German Deutschemark...............................
3,000,000 1,723,718 7/16/97 19,455
Irish Punt........................................
660,000 995,480 7/16/97 2,440
Italian Lira......................................
4,000,000,000 2,349,527 7/16/97
5,104
Spanish Peseta....................................
250,000,000 1,700,087 7/16/97 15,179
Swedish Krona.....................................
6,300,000 815,291 7/16/97 (5,522)
- ----------------------------------------------------------
- ------------------------------------------------------
TOTAL UNREALIZED GAIN ON FORWARD FOREIGN
CURRENCY CONTRACTS................................
$54,185 --------------------------------------------------
- ----------------------------------------------------------
- ----</TABLE>
8. REPURCHASE AGREEMENTS
The Portfolios purchase (and its custodian takes
possession of) U.S.
government securities from banks and securities dealers
subject to agreements to
resell the securities to the sellers at a future date
(generally, the next
business day) at an agreed-upon higher repurchase price.
The Portfolios require
continual maintenance of the market value of the
collateral in amounts at least
equal to the repurchase price.
9. REVERSE REPURCHASE AGREEMENTS
The Diversified Strategic Income, Equity Income and
International Equity
Portfolios may enter into reverse repurchase agreement
for leveraging purposes.
A reverse repurchase agreement involves a sale by
the Portfolio of
securities that it holds with an agreement by the
Portfolio to repurchase the
same securities at an agreed upon price and date. A
reverse repurchase agreement
involves risk that the market value of the securities
sold by the Fund may
decline below the repurchase price of the securities. The
Portfolio will
establish a segregated account with its custodian, in
which the Portfolio will
maintain cash, U.S. government securities or other liquid
high grade debt
obligations equal in value to its obligations with
respect to the reverse
repurchase agreements.
At June 30, 1997, the Portfolios had no open reverse
repurchase agreements.
57
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
10. SHARES OF BENEFICIAL INTEREST
As of June 30, 1997, the Fund had an unlimited number
of shares of
beneficial interest authorized with a par value of $0.001
per share.
Transactions in shares for each portfolio were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996 ---------------------
- ----------------------------------------------------------
- ------------------------
<S>
<C> <C>
MONEY MARKET PORTFOLIO
Shares
sold....................................................
2,750,456 4,806,909
Shares issued on
reinvestment..................................
118,729 284,142
Shares
redeemed................................................
(2,900,506) (4,856,413) -------------------------
- ----------------------------------------------------------
- --------------------
Net Increase
(Decrease)........................................
(31,321) 234,638
- ----------------------------------------------------------
- ---------------------------------------------
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
Shares
sold....................................................
130,719 210,123
Shares issued on
reinvestment..................................
- -- 71,886
Shares
redeemed................................................
(419,934) (790,515)
- ----------------------------------------------------------
- ---------------------------------------------
Net
Decrease..................................................
. (289,215) (508,506)
- ----------------------------------------------------------
- ---------------------------------------------
EQUITY INCOME PORTFOLIO
Shares
sold....................................................
33,601 35,646
Shares issued on
reinvestment..................................
- -- 21,388
Shares
redeemed................................................
(385,962) (797,407)
- ----------------------------------------------------------
- ---------------------------------------------
Net
Decrease..................................................
. (352,361) (740,373)
- ----------------------------------------------------------
- ---------------------------------------------
EQUITY INDEX PORTFOLIO
Shares
sold....................................................
44,979 215,955
Shares issued on
reinvestment..................................
- -- 12,461
Shares
redeemed................................................
(87,051) (157,107) ----------------------------
- ----------------------------------------------------------
- -----------------
Net Increase
(Decrease)........................................
(42,072) 71,309
- ----------------------------------------------------------
- ---------------------------------------------
GROWTH & INCOME PORTFOLIO
Shares
sold....................................................
93,048 131,558
Shares issued on
reinvestment..................................
- -- 3,219
Shares
redeemed................................................
(163,410) (352,087)
- ----------------------------------------------------------
- ---------------------------------------------
Net
Decrease..................................................
. (70,362) (217,310) --------------------------
- ----------------------------------------------------------
- -------------------
EMERGING GROWTH PORTFOLIO
Shares
sold....................................................
44,445 139,846
Shares issued on
reinvestment..................................
- -- 28,230
Shares
redeemed................................................
(109,328) (243,591) ---------------------------
- ----------------------------------------------------------
- ------------------
Net
Decrease..................................................
. (64,883) (75,515) --------------------------
- ----------------------------------------------------------
- -------------------
INTERNATIONAL EQUITY PORTFOLIO
Shares
sold....................................................
68,241 248,948
Shares issued on
reinvestment..................................
- -- 9,955
Shares
redeemed................................................
(203,350) (401,765) ---------------------------
- ----------------------------------------------------------
- ------------------
Net
Decrease..................................................
. (135,109) (142,862) -------------------------
- ----------------------------------------------------------
- --------------------
</TABLE>
11. CONCENTRATION OF RISK
Under normal market conditions, the Money Market
Portfolio invests at least
25% of its assets in short-term bank instruments and the
Equity Income Portfolio
invests at least 25% of its assets in the utility
industry. Because of their
concentration policy, these Portfolios may be subject to
greater risk and market
fluctuation than a portfolio that has securities
representing a broader range of
investment alternatives. Various factors could adversely
affect the ability and
inclination of companies in these industries to declare
and pay dividends or
interest and the ability of holders of securities of such
companies to realize
any value from the assets of the issuer upon liquidation
or bankruptcy.
58
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
12. FOREIGN SECURITIES
Investing in securities of foreign companies and
foreign governments
involves special risks and considerations not typically
associated with
investing in U.S. companies and the U.S. Government. These
risks include
revaluation of currencies and future adverse political and
economic
developments. Moreover, securities of many foreign
companies and foreign
governments and their markets may be less liquid and their
prices more volatile
than those of securities of comparable U.S. companies and
the U.S. Government.
13. CAPITAL LOSS CARRYFORWARD
At December 31, 1996, the following Portfolios had,
for Federal income tax
purposes, capital loss carryforwards available to offset
future realized capital
gains. To the extent that these capital loss carryforwards
can be used to offset
net realized capital gains, it is probable such gains will
not be distributed.
The approximate amounts and expiration of carryforwards
are indicated below.
Expiration occurs on December 31 in the year indicated:
<TABLE>
<CAPTION>
PORTFOLIO
2002 2003 2004 TOTAL ------------------
- ----------------------------------------------------------
- ------------------------------
<S>
<C> <C> <C> <C>
Diversified Strategic
Income................................. $ 33,000 $
807,000 $ -- $ 840,000
Equity
Income................................................
- -- 10,000 -- 10,000
International
Equity......................................... 56,000
2,460,000 706,000 3,222,000 -------------------------
- ----------------------------------------------------------
- -----------------------
</TABLE>
14. SECURITIES TRADED ON A WHEN-ISSUED OR TO-BE-
ANNOUNCED BASIS
The Diversified Strategic Income, Equity Income,
Growth & Income, Emerging
Growth and International Equity Portfolios may from time
to time purchase
securities on a when-issued or to-be-announced ("TBA")
basis.
In a TBA transaction, the Portfolio commits to
purchasing or selling
securities for which specific information is not yet
known at the time of the
trade, particularly the face amount and maturity date in
GNMA transactions.
Securities purchased on a TBA basis are not settled until
they are delivered to
the Fund, normally 15 to 45 days later. Beginning on the
date the Portfolio
enters into the TBA transaction, the custodian maintains
cash, U.S. Government
securities or other liquid high grade debt obligations in
a segregated account
equal in value to the purchase price of the TBA security.
These transactions are
subject to market fluctuations and their current value is
determined in the same
manner as for other securities.
As of June 30, 1997, there were no when-issued or
TBA securities held by
the Portfolios.
15. MORTGAGE ROLL TRANSACTIONS
The Diversified Strategic Income Portfolio has the
ability to participate
in mortgage roll transactions.
A mortgage roll transaction involves a sale by the
Fund of securities that
it holds with an agreement by the Portfolio to purchase
similar securities at an
agreed upon price and date. The securities repurchased
will bear the same
interest as those sold, but generally will be
collateralized by pools of
mortgages with different prepayment histories than those
securities sold.
Proceeds of the sale will be invested and the income from
these investments,
together with any additional income from the Portfolio
exceeding the yield on
the securities sold.
As of June 30, 1997, there were no open mortgage
roll transactions in the
Portfolio.
59
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
16. SHORT SALES AGAINST THE BOX
The Equity Income, Emerging Growth and International
Equity Portfolios each
have the ability to engage in short sales against the box.
A short sale against the box is a short sale of
common stock such that when
the short position is open the Portfolio involved owns an
equal amount of
preferred stocks or debt securities, convertible or
exchangeable, without
payment of further consideration, into an equal number of
shares of common stock
sold short. The proceeds of the sale will be held by the
broker until the
settlement date when the Portfolio delivers the
convertible or exchangeable
securities to close out its short position. Although prior
to delivery a
Portfolio will have to pay an amount equal to any
dividends paid on the common
stock sold short, the Portfolio will receive the dividends
from the preferred
stock or interest from the debt securities convertible or
exchangeable into the
stock sold short, plus a portion of the interest earned
from the proceeds of the
short sale. The Portfolio will deposit, in a segregated
account with the Fund's
custodian, convertible preferred stock or convertible debt
securities in
connection with short sales against the box.
As of June 30, 1997, the Portfolios had no open short
sales against the
box.
17. LENDING OF SECURITIES
The Diversified Strategic Income, Equity Income,
Equity Index, Growth &
Income, Emerging Growth and International Equity
Portfolios each have the
ability to lend its securities to brokers, dealers and
other financial
organizations.
The Portfolio has an agreement with its custodian
whereby the custodian may
lend securities owned by the Portfolio to brokers, dealers
and other financial
organizations. Fees earned by the Portfolio on securities
lending are recorded
in interest income. Loans of securities by the Portfolio
are collateralized by
cash, U.S. Government securities or high quality money
market instruments that
are maintained at all times in an amount at least equal to
the current market
value of the loaned securities, plus a margin which may
vary between 2% and 5%
depending on the type of securities loaned. The custodian
establishes and
maintains the collateral in a segregated account.
As of June 30, 1997, the Portfolios had no securities
on loan.
18. SUBSEQUENT EVENT
The Board of Trustees of the Fund voted to change the
name of the Fund to
Greenwich Street Series Fund, effective July 24, 1997.
This
name change does not
affect the investment policies or objectives of the Fund.
60
<PAGE>
- ----------------------------------------------------------
- ---------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout
each period:
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO 1997(1)
1996 1995 1994 1993 1992
- ----------------------------------------------------------
- ---------------------------------------------------
<S> <C>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $1.000
$1.000 $1.000 $1.000 $1.000 $1.000
- ----------------------------------------------------------
- ---------------------------------------------------
Net investment income (2).................. 0.022
0.047 0.052 0.035 0.023 0.027
Dividends from net investment income....... (0.022)
(0.047) (0.052) (0.035) (0.023) (0.027)
- ----------------------------------------------------------
- ---------------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $1.000
$1.000 $1.000 $1.000 $1.000 $1.000
- ----------------------------------------------------------
- ---------------------------------------------------
TOTAL RETURN................................. 2.18%++
4.80% 5.31% 3.56% 2.37% 2.75%
- ----------------------------------------------------------
- ---------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)............ $5,857
$5,888 $5,653 $7,141 $3,703 $2,108
- ----------------------------------------------------------
- ---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2)............................... 1.16%+
0.75% 0.75% 0.75% 0.75% 0.75%
Net investment income...................... 4.35+
4.70 5.19 3.65 2.34 2.79
- ----------------------------------------------------------
- --------------------------------------------------</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED STRATEGIC INCOME PORTFOLIO 1997(1)
1996 1995 1994 1993 1992
- ----------------------------------------------------------
- ---------------------------------------------------
<S> <C>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $10.98
$10.01 $ 9.18 $10.07 $ 9.61 $10.14
- ----------------------------------------------------------
- ---------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (2)(3)............... 0.46
0.88 0.74 0.58 0.70 0.67
Net realized and unrealized gain (loss).... (0.16)
0.24 0.70 (0.86) 0.47 (0.53) --------
- ----------------------------------------------------------
- -------------------------------------------
Total Income (Loss) From Operations.......... 0.30
1.12 1.44 (0.28) 1.17 0.14 ---------
- ----------------------------------------------------------
- ------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income...................... --
(0.15) (0.61) (0.58) (0.61) (0.67)
Net realized gains......................... --
- -- -- -- (0.09) -
Capital.................................... --
- -- -- (0.03) (0.01) --------------
- ----------------------------------------------------------
- --------------------------------------
Total Distributions.......................... -
(0.15) (0.61) (0.61) (0.71) (0.67) -------
- ----------------------------------------------------------
- --------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $11.28
$10.98 $10.01 $ 9.18 $10.07 $ 9.61 -------
- ----------------------------------------------------------
- --------------------------------------------
TOTAL RETURN................................. 2.73%++
11.16% 16.18% (2.81)% 12.56% 1.42% -------
- ----------------------------------------------------------
- --------------------------------------------
NET ASSETS, END OF PERIOD (000'S)............ $57,862
$59,515 $59,316 $55,260 $43,244 $19,991 ------
- ----------------------------------------------------------
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2)............................... 0.82%+
0.84% 0.90% 0.95% 1.00% 1.00%
Net investment income...................... 7.23+
7.94 7.73 7.31 7.14 7.70 ---------
- ----------------------------------------------------------
- -----------------------------------------PORTFOLIO
TURNOVER RATE...................... 22% 106%
46% 54% 94% 65% ---------------------
- ----------------------------------------------------------
- -----------------------------</TABLE>
(1) For the six months ended June 30, 1997 (unaudited).
(2) For the Money Market Portfolio, the Investment adviser
waived all or part of
its fees for the five-year period ended December 31,
1996. In addition, for
the Diversified Strategic Income Portfolio, the
Investment adviser waived
all or part of its fees for the two-year period ended
December 31, 1993. For
the Money Market Portfolio, the Investment adviser
also reimbursed expenses
of $16,616, $17,889 and $14,624 for the three-year
period ended December 31,
1994. In addition, for the Diversified Strategic
Income Portfolio, IDS Life
reimbursed expenses of $2,816 and $25,396 for the two
year period ended
December 31, 1993. If such fees were not waived and
expenses reimbursed, the
per share effect on net investment income and the
expense ratios would have
been as follows:
<TABLE>
<CAPTION>
PER
SHARE DECREASES TO EXPENSE RATIOS
WITHOUT
NET
INVESTMENT INCOME WAIVERS AND
REIMBURSEMENTS
---------------
- ------------------------------ ------------------------
- -----------
PORTFOLIO 1996 1995
1994 1993 1992 1996 1995 1994 1993
1992
------------------------------------ ------ -----
- -
- ------ ------ ------ ---- ---- ---- ----
- ----
<S> <C> <C>
<C> <C> <C> <C> <C> <C> <C>
<C>
Money Market........................ $0.005
$0.005
$0.005 $0.014 $0.014 1.25% 1.21% 1.26%
2.15%
2.18%
Diversified Strategic Income........ N/A
N/A
N/A 0.00* 0.030 N/A N/A N/A 1.02
1.41
</TABLE>
(3) Includes realized gains and losses from foreign
currency transactions for
the four years ended December 31, 1995.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
61
<PAGE>
- ----------------------------------------------------------
- ---------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each period:
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO 1997(1)
1996 1995 1994 1993 1992
- ----------------------------------------------------------
- ---------------------------------------------------
<S> <C>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $13.01
$12.35 $ 9.87 $11.55 $10.90 $10.20
- ----------------------------------------------------------
- ---------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (2)................. 0.39
0.63 0.54 0.58 0.53 0.45
Net realized and unrealized gain (loss)... 0.13
0.11 2.56 (1.75) 0.60 0.72
- ----------------------------------------------------------
- ---------------------------------------------------
Total Income (Loss) From Operations......... 0.52
0.74 3.10 (1.17) 1.13 1.17
- ----------------------------------------------------------
- ---------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................... --
(0.08) (0.62) (0.49) (0.47) (0.47)
Net realized gains........................ --
- -- -- (0.02) (0.01) --
- ----------------------------------------------------------
- ---------------------------------------------------
Total Distributions......................... --
(0.08) (0.62) (0.51) (0.48) (0.47)
- ----------------------------------------------------------
- ---------------------------------------------------
NET ASSET VALUE, END OF PERIOD.............. $13.53
$13.01 $12.35 $ 9.87 $11.55 $10.90
- ----------------------------------------------------------
- ---------------------------------------------------
TOTAL RETURN................................ 4.00%++
5.99% 32.47% (10.20)% 10.41% 11.74% --------
- ----------------------------------------------------------
- -------------------------------------------
NET ASSETS, END OF PERIOD (000'S)........... $42,683
$45,616 $52,444 $44,417 $60,160 $25,985
- ----------------------------------------------------------
- ---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2).............................. 0.76%+
0.77% 0.95% 0.84% 0.87% 1.00%
Net investment income..................... 4.72+
4.53 4.95 5.51 4.54 4.93
- ----------------------------------------------------------
- --------------------------------------------------
PORTFOLIO TURNOVER RATE..................... 18%
28% 33% 21% 4% 4%
- ----------------------------------------------------------
- ---------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (3)................ $0.06
$0.06 $0.06 -- -- --
- ----------------------------------------------------------
- --------------------------------------------------</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX PORTFOLIO 1997(1)
1996 1995 1994 1993 1992
- ----------------------------------------------------------
- ---------------------------------------------------
<S> <C>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $18.36
$15.58 $11.69 $11.90 $11.27 $10.62
- ----------------------------------------------------------
- ---------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (2)................. 0.11
0.22 0.25 0.23 0.20 0.17
Net realized and unrealized gain (loss)... 3.56
3.17 3.88 (0.14) 0.71 0.55
- ----------------------------------------------------------
- ---------------------------------------------------
Total Income From Operations................ 3.67
3.39 4.13 0.09 0.91 0.72
- ----------------------------------------------------------
- ---------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................... --
(0.23) (0.23) (0.15) (0.16) (0.02)
Net realized gains........................ --
(0.38) (0.01) (0.15) (0.12) (0.05)
- ----------------------------------------------------------
- ---------------------------------------------------
Total Distributions......................... -
(0.61) (0.24) (0.30) (0.28) (0.07)
- ----------------------------------------------------------
- ---------------------------------------------------
NET ASSET VALUE, END OF PERIOD.............. $22.03
$18.36 $15.58 $11.69 $11.90 $11.27
- ----------------------------------------------------------
- ---------------------------------------------------
TOTAL RETURN................................ 19.99%++
21.68% 35.81% 0.85% 8.66% 6.74%
- ----------------------------------------------------------
- ---------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)........... $22,184
$19,258 $15,230 $10,225 $8,842 $4,178
- ----------------------------------------------------------
- ---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2).............................. 0.94%+
1.06% 1.00% 1.00% 1.00% 1.00%
Net investment income..................... 0.98+
1.37 1.84 2.10 1.77 2.10
- ----------------------------------------------------------
- --------------------------------------------------
PORTFOLIO TURNOVER RATE..................... 3%
7% 5% 1% 1% 8%
- ----------------------------------------------------------
- ---------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (3)................ $0.04
$0.04 $0.05 -- -- --
- ----------------------------------------------------------
- --------------------------------------------------</TABLE>
(1) For the six months ended June 30, 1997 (unaudited).
(2) For the Equity Income Portfolio, the Investment
adviser waived all or part
of its fees for the year ended December 31, 1992. In
addition, for the
Equity Index Portfolio, the Investment adviser waived
all or part of its
fees for the four-year period ended December 31,
1995. For the Equity
Income Portfolio, IDS Life also reimbursed expenses
of $19,510 for year
ended December 31, 1992. In addition, for Equity
Index Portfolio, IDS Life
reimbursed expenses of $6,842, $25,496, $28,169 and
$31,633 for the
four-year period ended December 31, 1995. If such
fees were not waived and
expenses reimbursed, the per share effect on net
investment income and the
expense ratios would have been as follows:
<TABLE>
<CAPTION>
EXPENSE RATIOS WITHOUT
PER SHARE DECREASES TO WAIVERS
NET INVESTMENT INCOME AND REIMBURSEMENTS
- -------------------------------- ----------------------
- -----
PORTFOLIO
1995 1994 1993 1992 1995 1994 1993
1992 -------------------------------------------------
-------
- -- ----- ----- ----- ----- ---- ---- -
- --
- - ----
<S>
<C> <C> <C> <C> <C> <C> <C>
<C>
Equity
Income.............................................
N/A N/A N/A $0.02 N/A
N/A N/A 1.27%
Equity
Index..............................................
$0.02 $0.06 $0.10 0.15 1.17% 1.53%
1.88% 2.89
</TABLE>
(3) As of September 1995, the SEC instituted new
guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
62
<PAGE>
- ----------------------------------------------------------
- ---------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each period:
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO 1997(1)
1996 1995 1994 1993 1992
- ----------------------------------------------------------
- ---------------------------------------------------
<S> <C>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $16.43
$13.73 $10.75 $11.37 $10.68 $10.15
- ----------------------------------------------------------
- ---------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (2)................. 0.14
0.27 0.26 0.27 0.30 0.27
Net realized and unrealized gain (loss)... 2.24
2.45 2.99 (0.63) 0.67 0.55
- ----------------------------------------------------------
- --
- --------------------------------------------------
Total Income (Loss) From Operations......... 2.38
2.72 3.25 (0.36) 0.97 0.82
- ----------------------------------------------------------
- ---------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................... --
(0.02) (0.27) (0.26) (0.26) (0.29)
Overdistribution of net realized gains.... --
- -- -- -- (0.02) --
Capital................................... --
- -- -- -- -- (0.00)*
- ----------------------------------------------------------
- ---------------------------------------------------
Total Distributions......................... --
(0.02) (0.27) (0.26) (0.28) (0.29)
- ----------------------------------------------------------
- ---------------------------------------------------
NET ASSET VALUE, END OF PERIOD.............. $18.81
$16.43 $13.73 $10.75 $11.37 $10.68
- ----------------------------------------------------------
- ---------------------------------------------------
TOTAL RETURN................................ 14.49%++
19.83% 30.49% (3.20)% 9.09% 8.44%
- ----------------------------------------------------------
- ---------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)........... $42,745
$38,502 $35,158 $29,625 $25,549 $10,951
- ----------------------------------------------------------
- ---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2).............................. 0.78%+
0.83% 0.98% 0.93% 1.00% 1.00%
Net investment income..................... 1.55+
1.67 2.09 2.52 2.68 3.06
- ----------------------------------------------------------
- --------------------------------------------------
PORTFOLIO TURNOVER RATE..................... 10%
22% 17% 77% 78% 78%
- ----------------------------------------------------------
- ---------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (3)................ $0.06
$0.06 $0.06 -- -- --
- ----------------------------------------------------------
- --------------------------------------------------</TABLE>
<TABLE>
<CAPTION>
EMERGING GROWTH PORTFOLIO 1997(1)
1996 1995 1994 1993(4)
- ----------------------------------------------------------
- ---------------------------------------------------
<S> <C>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $15.83
$13.76 $ 9.63 $10.41 $10.00
- ----------------------------------------------------------
- ---------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (loss) (2).......... (0.06)
(0.10) (0.03) 0.00* 0.01
Net realized and unrealized gain (loss)... 1.33
2.55 4.16 (0.78) 0.40
- ----------------------------------------------------------
- --
- --------------------------------------------------
Total Income (Loss) From Operations......... 1.27
2.45 4.13 (0.78) 0.41 --------------------
- ----------------------------------------------------------
- -------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................... --
- -- -- (0.00)* --
Net realized gains........................ --
(0.38) -- -- ----------------------
- ----------------------------------------------------------
- ------------------------------
Total Distributions......................... -
(0.38) -- (0.00)* ----------------------
- ----------------------------------------------------------
- ------------------------------
NET ASSET VALUE, END OF PERIOD.............. $17.10
$15.83 $13.76 $ 9.63 $10.41 ------------------
- ----------------------------------------------------------
- ---------------------------------
TOTAL RETURN................................ 8.02%++
17.83% 42.89% (7.48)% 4.10%++ ----------------
- ----------------------------------------------------------
- -----------------------------------
NET ASSETS, END OF PERIOD (000'S)........... $19,302
$18,901 $17,463 $11,539 $2,257 -----------------
- ----------------------------------------------------------
- ----------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2).............................. 1.29%+
1.27% 1.20% 1.20% 1.05%+
Net investment income (loss).............. (0.71)+
(0.64) (0.24) (0.17) 1.37+ ------------------
- ----------------------------------------------------------
- --------------------------------PORTFOLIO TURNOVER
RATE..................... 50% 84% 121%
66% -----------------------------------------------
- ----------------------------------------------------------
- -----
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (3)................ $0.06
$0.05 $0.06 -- ----------------------
- ----------------------------------------------------------
- -----------------------------</TABLE>
(1) For the six months ended June 30, 1997 (unaudited).
(2) For the Growth & Income Portfolio, the Investment
adviser waived all or
part of its fees for the two-year period ended
December 31, 1993. In
addition, for the Emerging Growth Portfolio, the
Investment adviser waived
all or part of its fees for the two-year period ended
December 31, 1995
and the period ended December 31, 1993. For the
Growth & Income Portfolio,
IDS Life reimbursed expenses of $1,085 and $20,683
for the two-year period
ended December 31, 1993. In addition, for the
Emerging Growth Portfolio,
IDS Life reimbursed expenses of $5,265, $18,068 and
$2,915 for the
two-year period ended December 31, 1995 and the
period ended December 31,
1993. If such fees were not waived and expenses
reimbursed, the per share
effect on net investment income and the expense
ratios would have been as
follows:
<TABLE>
<CAPTION>
PER SHARE DECREASES TO EXPENSE RATIOS WITHOUT
WAIVERS
NET INVESTMENT INCOME AND REIMBURSEMENTS
- ---------------------------------- -------------------
- -----------
PORTFOLIO
1995 1994 1993 1992 1995 1994
1993 1992 --------------------------------------------
------ --
- --- ----- ----- ----- ---- ---- --
- -----
<S>
<C> <C> <C> <C> <C> <C>
<C> <C>
Growth & Income...................................
N/A N/A $0.01 $0.06 N/A N/A
1.01% 1.65%
Emerging Growth...................................
$0.02 $0.01 0.06 N/A 1.39% 1.59%
9.99+ N/A
</TABLE>
(3) As of September 1995, the SEC instituted new
guidelines requiring the
disclosure of average commissions per share.
(4) For the period from December 3, 1993 (commencement of
operations) to
December 31, 1993.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
63
<PAGE>
- ----------------------------------------------------------
- ---------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each period:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
1997(1) 1996 1995 1994 1993(2)
- ----------------------------------------------------------
- --------------------------------------------------
<S>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................
$12.07 $ 9.98 $ 9.21 $10.05 $10.00 -------
- ----------------------------------------------------------
- -------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (loss) (3)(4)..................
- -- (0.02) 0.03 0.00* 0.00*
Net realized and unrealized gain (loss)..............
0.68 2.15 0.78 (0.84) 0.05 ---------
- ----------------------------------------------------------
- -----------------------------------------
Total Income (Loss) From Operations....................
0.68 2.13 0.81 (0.84) 0.05 ---------
- ----------------------------------------------------------
- -----------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income................................
- -- (0.04) (0.04) -- --------------
- ----------------------------------------------------------
- -------------------------------------
Total Distributions....................................
- -- (0.04) (0.04) -- --------------
- ----------------------------------------------------------
- -------------------------------------
NET ASSET VALUE, END OF PERIOD.........................
$12.75 $12.07 $ 9.98 $ 9.21 $10.05 -------
- ----------------------------------------------------------
- -------------------------------------------
TOTAL RETURN...........................................
5.63%++ 21.38% 8.80% (8.36)% 0.50%++ ------
- ----------------------------------------------------------
- --------------------------------------------
NET ASSETS, END OF PERIOD (000'S)......................
$33,500 $33,337 $28,979 $28,413 $5,867 ------
- ----------------------------------------------------------
- --------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3)(5)......................................
1.39%+ 1.35% 1.43% 1.30% 1.08%+
Net investment income (loss).........................
0.11+ (0.20) 0.35 0.31 (0.51)+ -------
- ----------------------------------------------------------
- ------------------------------------------PORTFOLIO
TURNOVER RATE................................ 14%
33% 34% 12% --------------------------
- ----------------------------------------------------------
- -------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (6)...........................
$0.01 $0.03 $0.01 -- -----------
- ----------------------------------------------------------
- ----------------------------------------
</TABLE>
(1) For the six months ended June 30, 1997 (unaudited).
(2) For the period from December 3, 1993 (commencement of
operations) to
December 31, 1993.
(3) For the International Equity Portfolio, the Investment
adviser waived all or
part of its fees for the year ended December 31, 1994
and the period ended
December 31, 1993. IDS Life reimbursed expenses of
$23,712 and $1,902 for
the year ended December 31, 1994 and the period ended
December 31, 1993. If
such fees were not waived and expenses reimbursed, the
per share effect on
net investment income and the expense would have been
as follows:
<TABLE>
<CAPTION>
PER SHARE EXPENSE RATIOS DECREASES TO
WITHOUT NET INVESTMENT WAIVERS AND INCOME
REIMBURSEMENTS
- ----------------- -----------------
PORTFOLIO
1994 1993 1994 1993
------------------------------------------------------
- --------------------- ----- ----- ----
- ----
<S>
<C> <C> <C> <C>
International
Equity....................................................
.. .. $0.00* $0.02 1.51% 2.96%+
</TABLE>
(4) Includes realized gains and losses from foreign
currency transactions for
the two years ended December 31, 1995 and the period
ended December 31,
1993.
(5) During the year ended December 31, 1996 and the year
ended December 31,
1995, the International Equity Portfolio has earned
credits from the
custodian which reduce service fees incurred. If the
credits are taken into
consideration, the ratios of expenses to average net
assets would be 1.33%
and 1.37%, respectively.
(6) As of September 1995, the SEC instituted new
guidelines requiring the
disclosure of average commissions per share.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
64
<PAGE>
This report is
submitted for the general
information of the
owners of the Smith
Barney Series Fund.
It is not authorized
for distribution to
prospective
investors unless
accompanied or preceded
by an effective
Prospectus for the Fund,
which contains
information concerning
the Fund's
investment policies, fees and
expenses, as well
as other pertinent
information.
SYMPHONY
investments are
sponsored and managed by:
Smith Barney Inc.
and subsidiaries
SYMPHONY
is underwritten,
issued and serviced by:
IDS Life Insurance
Company and
IDS Life Insurance
Company of New York
S6225 G (8/97)
SMITH BARNEY SERIES FUND SEMI-
ANNUAL REPORT FOR
SYMPHONY
A Tax-Deferred Variable Annuity
[Paste up Art]
APPRECIATION PORTFOLIO
TOTAL RETURN PORTFOLIO
INTERMEDIATE HIGH GRADE PORTFOLIO
JUNE 30, 1997
<PAGE>
SEMI-ANNUAL REPORT FOR SMITH BARNEY SERIES FUND ----------
- ----------------------------------------------------------
- -----------
Dear Investor:
We are pleased to provide you with the semi-annual report
for the Smith Barney
Series Fund -- Intermediate High Grade, Appreciation and
Total Return Portfolios
("Portfolios") for the period ended June 30, 1997. This
letter will briefly
discuss general economic and market conditions. In
addition, detailed
comparisons showing the growth of a hypothetical $10,000
invested in each
Portfolio since inception can be found in this report. A
detailed summary of
performance and current holdings for each Portfolio can be
found in the
appropriate sections that follow.
MARKET AND ECONOMIC OVERVIEW
During the past six months, investors in both the U.S.
stock and bond markets
have benefitted from steady economic growth, robust
corporate earnings and
profits, a favorable interest-rate backdrop and little or
no signs of inflation.
All of these positive factors have produced an environment
that was virtually
ideal for financial assets during the reporting period.
The stock market began the year positively. Fueled by
strong fourth quarter
earnings and significant money flows into mutual funds,
the Standard & Poor's
500 Stock Index ("S&P 500"), a capitalization-weighted
index of 500 widely held
common stocks, gained more than 7% in January and February
and continued to move
to new highs in early March. However, as evidence of
unexpectedly strong
economic growth came to light, investors became
increasingly concerned about the
risks of higher inflation and rising interest rates.
A tightening labor market and rising production costs
prompted the Federal
Reserve Board ("Fed") to raise the federal-funds rate by
25 basis points (0.25%)
in late March of this year. (The federal-funds rate is the
interest rate banks
charge each other for overnight loans and a closely
watched indicator of the
direction of interest rates.) Higher interest rates
triggered a sharp sell-off
in the stock market during the last week of March, erasing
most of the market's
year-to-date gains.
The stock market correction that began in late March did
not last long. During
the second quarter of 1997, the S&P 500 generated a total
return of roughly
17.50%. This was the S&P 500's largest gain since the
first quarter of 1987 and
it has more than doubled since the end of 1994. The S&P
500 has posted positive
returns in all ten quarters during this time period.
Investors continue to favor
the quality, safety and liquidity of large multinational
corporations and the
stock market's historic climb has been driven primarily by
the strong
appreciation of large-capitalization stocks. In addition,
investors have
exhibited a growing confidence that inflation would remain
subdued and that
helped to push both the stock market's price/earnings
multiple and bond prices
higher. For most stock and bond investors, it does not get
any better than this.
The technology sector rebounded and led the market's broad
advance during the
six months under review. Based on their improving outlook
for sales and
earnings, networking, telecommunications equipment and
semiconductor equipment
stocks all went up sharply. A strong rally in the
healthcare sector was paced by
the pharmaceutical group. In addition, the financial
services sector performed
well as did consumer non-durable stocks. Because of weaker
commodity prices and
slowing relative earnings growth, the stocks of energy and
basic materials
lagged.
Although the U.S. unemployment rate is near a thirty-year
low and consumer
confidence is the highest it has been in over twenty
years, there has not been a
substantial increase in inflationary pressures. At their
May 20, 1997 meeting,
the Fed chose not to raise interest rates further,
indicating its view that the
U.S. economy could continue to grow at its present pace
without added
inflationary pressures. In addition, no Fed action was
taken at its July
meeting.
Slower economic growth and a steady stream of reports
indicating no meaningful
rise in inflation caused all of the major segments of the
bond market to perform
well in the second quarter. Interest rates generally
declined across the yield
curve and bond investors enjoyed solid returns after a
discouraging first
quarter. However, despite lower interest rates, bond
yields remained above the
levels at the end of 1996, a reflection that some
investors are still concerned
that the economy's strong growth and tight labor market
may result in an
eventual increase in inflation.
Why has the stock market continued its remarkable and
historic climb? We believe
one of the main reasons is the realization of the "peace
dividend." (The "peace
dividend" is a term used to describe the reallocation of
spending from military
purposes to peacetime priorities and the creation of huge
new markets throughout
the former Communist world.) As a result of the collapse
of communism and the
fall of the Berlin Wall, huge new markets have opened up
in China, Eastern
Europe and now even Russia. After the restructurings and
downsizings of the
1980s, major dominant companies with predictable-earnings
and
strong-balance-sheets in the U.S. and elsewhere have been
well positioned to
compete in the global economy
1
<PAGE>
SEMI-ANNUAL REPORT FOR SMITH BARNEY SERIES FUND ----------
- ----------------------------------------------------------
- -----------
and consequently their stock prices have generally
outperformed the mid- and
small-cap ones globally. Moreover, these types of large-
cap companies can
generate cash in a relatively slow growth environment. The
creation of a truly
global economy has begun to offer unprecedented investment
opportunities
throughout the world.
In our view, the strong growth in 401(k) plans has also
contributed to the stock
market's surge. According to Barron's magazine, assets in
401(k) plans have
grown at a compound annual rate of 18% since 1986, driving
the value from $155
billion to $810 billion.
Looking ahead at the next six months, we think investors
should not become too
complacent and expect these outsized returns to continue
indefinitely. While we
cannot say with certainty a market correction is imminent,
investors need to
stay patient, remain committed to their disciplined
investment plans and
consider further diversifying their portfolios into other
asset classes to help
minimize the effects of any sustained market downturn.
INTERMEDIATE HIGH GRADE PORTFOLIO
The investment objective of the Intermediate High Grade
Portfolio is to provide
investors with as high a level of current income as is
consistent with the
protection of capital. Under normal market conditions, the
Intermediate High
Grade Portfolio will invest at least 65% of its assets in
U.S. government
securities and in high-grade U.S. corporate bonds. For the
six months ended June
30, 1997, the Intermediate High Grade Portfolio had a
total return of 2.62%
which is slightly under the Lehman Government/Corporate
Bond Index total return
of 2.74%. (The Lehman Government/Corporate Bond Index is
an unmanaged index
composed of U.S. Government Treasuries and agency
securities, corporate and
Yankee bonds.)
The U.S. bond market rebounded from a weak first quarter
of 1997 to post its
best quarterly return since the fourth quarter of 1995.
Unlike the first quarter
of 1997 when a strong economy caused the Fed to tighten
rates by 25 basis points
(0.25%) and bond returns were relatively poor, the second
quarter of 1997
brought a slowing economy and low inflation. This
environment enabled the Fed to
keep monetary policy on hold and the fixed income markets
responded with solid
returns. Since the end of March, the long-term U.S.
Treasury bond has dropped in
yield by over 70 basis points (0.70%) from a peak of 7.20%
to 6.50% as of this
report.
Throughout the past three months, the high yield bond
market has generally
outperformed the more interest-rate sensitive, longer
maturity Treasury and
investment grade bond markets. The high yield bond market
has continued to rally
on strong demand from both new investors and mutual funds.
Given the market's
strong condition, we have seen a record amount of new high
yield bond issuance
(more than $60 billion) during the first six months of
this year. We expect this
trend to continue during the second half of the year.
There has been more than
adequate demand to absorb the heavy supply of new issues.
Increasing amounts of
capital are flowing into the high yield bond market from a
variety of sources.
Traditional open-end high yield bond funds have had more
than $10 billion of
cash inflows during the first six months of 1997, not to
mention the roughly $5
billion of dividends that were reinvested in additional
fund shares.
More importantly, the high yield bond market has continued
to broaden and mature
into a more widely accepted investment alternative among
more traditional
institutional investors. Pension funds are allocating
increasing percentages of
their portfolios to the high yield bond market. For
example, two large New York
City pension funds that together have nearly $13 billion
in assets recently
boosted their high yield bond investments by more than
$250 million,
concentrating on the better quality high yield issues.
Moreover, during the past twelve months there has been a
meaningful increase in
the number of structured transactions incorporating high
yield securities that
has caused the demand for high yield bonds to rise even
more. In the past two
years, a number of institutions, particularly insurance
companies, have begun to
create collateralized bond obligations ("CBOs") that use
high yield securities
as collateral. Given the intense demand on the part of
many investors for
current yield the past year has resulted in a significant
increase in the
creation of CBOs. The amount of total capital invested in
the high yield bond
market has risen to record levels.
Because of this record demand for high yield bonds, many
issues have appreciated
to fully valued levels with yield premiums over U.S.
Treasuries approximately
100 basis points (1.00%) tighter than their historical
averages. In addition to
the items we have noted, there are a number of positive
fundamental factors
driving the valuations of high yield bonds such as the
huge inflow of new
capital into the high yield market, and supportive
economic conditions remain
positive.
With its high valuations, the stock market has enabled
many companies that issue
high yield bonds to issue equity securities to further
bolster their balance
sheets. In addition, the highly liquid banking industry
has been able to meet
the needs of many high yield borrowers. Because of these
positive fundamental
factors, we do not believe that the high yield bond market
has
2
<PAGE>
SEMI-ANNUAL REPORT FOR SMITH BARNEY SERIES FUND ----------
- ----------------------------------------------------------
- -----------
become increasingly speculative. However, we are sensitive
that individual
issues may ultimately disappoint investors and
underperform.
We believe the high yield market is fully valued at this
time. Since we still
expect the U.S. economy to grow moderately over the
foreseeable future with
little serious threat of either an acceleration of
inflation or an economic
recession, we do not anticipate any material deterioration
in high yield bond
performance.
If the U.S. economy were to defy expectations and
strengthen too quickly and
cause the Fed to raise short-term interest rates, we would
expect the high yield
issues to be negatively affected. Given the recent
slowdown of economic growth
in the second quarter of 1997, we do not believe the Fed
will need to raise
interest rates unless economic growth begins to pick up
substantially. In our
view, the current environment of solid economic growth,
modest inflation and a
supportive equity market remains positive for the high
yield market.
Nevertheless, selectivity has become increasingly more
important when making
investment decisions, especially given the high yield
market's fully valued
levels and potential for disappointment among some
companies.
We still firmly believe that the better quality high-yield
issues offer superior
risk-adjusted returns and lower default risk relative to
lower-quality issues
over a full economic cycle. In light of the trend toward
greater industry
competition and the fact that most companies in the U.S.
economy have little
pricing power, we believe our prudent approach to
investing in high yield bonds
should generate consistent positive returns for the
remainder of the year.
APPRECIATION PORTFOLIO
For the six months ended June 30, 1997, the Appreciation
Portfolio posted a
total return of 16.58%, due to an outstanding first
quarter relative to the S&P
500 and a strong absolute return in the second quarter.
However, the Portfolio's
return trailed the S&P 500, which gained 20.60% during the
period. While our
caution, expressed in the form of cash reserves and the
sale of certain
seemingly "overvalued" stocks, restrained returns in the
short run, we continue
to view these actions as appropriate in the current market
environment.
The extraordinary returns of the stock market during the
last six months, coming
on the heels of two years of dramatic increases, have
exceeded the expectations
of virtually all veteran market observers. While
accompanied by rising corporate
profits and low inflation, a great deal of good news has
become built into stock
prices. In an economy characterized by some as a "perfect
world" or "sweet
spot," we are trying to live up to our long-standing
philosophy of providing a
combination of upside potential coupled with some downside
protection. To us,
that means going somewhat against the prevailing
overwhelming bullish sentiment
and behaving more cautiously.
The core of the Portfolio's investments consists of high
quality growth stocks
of companies we believe should provide stable,
predictable earnings and
dividends over the long term. However, due to a paucity
of sectors or groups of
stocks that offer a combination of attractive valuations
together with solid
fundamentals, we have employed a more diversified
portfolio strategy. This mix
includes cyclical stocks such as the basic materials
companies (papers,
chemicals, aluminum) and automobile manufacturers, as
well as companies that are
restructuring and have managements dedicated to enhancing
shareholder values.
Since our last letter, the Portfolio's top-ten holdings
have changed slightly.
Allstate, a leading provider of auto and home insurance,
is now the Portfolio's
top holding. This company has reduced its exposure to
"single event"
catastrophes, boosted its growth prospects in the auto and
property businesses,
and returned excess capital to shareholders through share
repurchases. Xerox, a
long-time top-ten holding, has provided exceptional
returns over the last six
months as new digital products and an intensified focus on
cost control have
restored the investor perception of this firm as a growth
company.
Traditionally, the Fund has held a sizable position in
pharmaceuticals, and
Merck, Johnson & Johnson and American Home Products remain
important
contributors. Another industry about which we have been
bullish for some time is
energy, where greater than expected global demand for oil
and gas, as well as
continued restructurings, have increased returns. Mobil
and Amoco also remain
top-ten holdings. Finally, General Electric, Minnesota
Mining and Manufacturing
and Chase Manhattan Bank have all been solid performers
during the last six
months.
The only major change during the period was a significant
reduction in our
position in Eastman Kodak, a company whose restructuring
we have championed
during the last few years. Our current less aggressive
investment posture with
respect to Eastman Kodak results from a more competitive
film pricing
environment, a slowly developing product transition and
some high level insider
stock sales. While we continue to hold a sizable position,
we feel that Kodak's
return to strong revenue growth could take longer than
anticipated.
3
<PAGE>
SEMI-ANNUAL REPORT FOR SMITH BARNEY SERIES FUND ----------
- ----------------------------------------------------------
- -----------
The stock market's momentum continues to be strong. The
economy is terrific, and
corporate profits continue to meet and, in many cases,
exceed expectations.
Inflation is almost nonexistent, due to job insecurity,
global competition and
productivity gains from technology investments. This is
why stocks have been
going up for the last several years. But valuations matter
and, based on
traditional measures, valuations are very high and leave
little room for error.
However, it is impossible for anyone to forecast when
valuations will peak.
Money continues to pour into stocks, and the bull market
will continue to run
until buyers are satiated or until something dramatic
changes the underlying
fundamentals. There is no sign of that yet, but caution
flags are waving.
TOTAL RETURN PORTFOLIO
Although the Total Return Portfolio has appreciated 7.69%
over the past six
months, it has underperformed the principal averages,
including the S&P 500,
which has appreciated in excess of 20%. It appears that
momentum money is moving
into index funds and that there has been little thought to
the P/E ratios that
many companies now command. We believe the risks inherent
in this penchant for
indexing will be apparent before long.
Our belief is that the U.S. economy is strong and that
Europe and Japan may
strengthen in 1998 as well, increasing the chances of the
first synchronous
world expansion in economic activity in a decade. For this
reason, we believe
that some increase in the basic materials sector was
justified; accordingly,
Aluminum Company of America is now the Portfolio's largest
holding. One
investment banking firm has projected that the demand for
energy will grow
faster in the 1997-1999 period than in any corresponding
twoyear period since
the mid 1970s. If so, it suggests that demand for many
natural resources and raw
materials should be increasing as well.
The financial services industry has generally outperformed
the market since the
early 1990s which means that many of these companies are no
longer compelling
values to other market segments. However, it appears that a
major restructuring
of the financial services industry, on a worldwide basis,
will occur in the next
few years. Recently we added American Express to the
Portfolio. It is one of the
cheapest financial services companies and may become a
building block as
financial services companies combine in the coming years.
We see consolidation also in the energy business. The
proposed merger of Mesa
and Parker & Parsley as well as Union Pacific Resources'
partial tender offer
for Pennzoil probably means that more will occur. We
believe Louisiana Land &
Exploration could be one of the most desirable takeover
candidates; it is now
the fifth largest position in the Portfolio.
The largest sector continues to be our 18% holding in the
real estate investment
trust ("REIT") industry. This group was a stellar performer last
year but has
been up only modestly so far this year. On a relative basis,
REITs are now as
cheap as they have been at any time in the last 24 months.
We continue to like
this industry's prospects going forward. We believe that
REITs can deliver 12%
to 13% total returns over time. In these highly charged
times for the stock
market, that may not seem like much. However, returns on
this order, which are
relatively low risk, compare favorably with the long-term
return to stocks of
10.5%.
In closing, we would like to thank you for your investment
in the Smith Barney
Series Fund -- Intermediate High Grade, Appreciation and
Total Return
Portfolios. We look forward to serving your financial needs
in the years ahead.
Sincerely,
/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman
August 6, 1997
4
<PAGE>
PERFORMANCE COMPARISON -- INTERMEDIATE HIGH GRADE PORTFOLIO
AS OF 6/30/97
(UNAUDITED)
<TABLE> ---------------------------------------
- ---------
AVERAGE ANNUAL TOTAL RETURN --------
-------------------
<S> <C>
Six Months Ended 6/30/97
2.62%
Year Ended 6/30/97
7.29%
Five Years Ended 6/30/97
5.91%
10/16/91* through 6/30/97
5.90%
CUMULATIVE TOTAL RETURN ----------
-------------
10/16/91* through 6/30/97
38.71%
* Commencement of operations --------------
- ----------------------------------</TABLE>
The chart to the right compares the growth in value of a
hypothetical $10,000
investment in Intermediate High Grade Portfolio on October
16, 1991
(commencement of operations) through June 30, 1997 with
that
of a similar
investment in the Lehman Brothers Government/Corporate
Bond Index. Index
information is available at month-end only; therefore, the
closest month-end to
inception date of the Portfolio has been used. The Lehman
Brothers
Government/Corporate Bond Index is a weighted composite of
the Lehman Brothers
Government Bond Index, which is a broad-based index of all
public debt
obligations of the U.S. Government and its agencies and
has an average maturity
of nine years and the Lehman Brothers Corporate Bond
Index, which is comprised
of all public fixed-rate non-convertible investment-grade
domestic corporate
debt, excluding collateralized mortgage obligations.
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MEASUREMENT PERIOD INTERMEDIATE HIGH GRADE
GOVERNMENT/CORPORATE
(FISCAL YEAR COVERED) PORTFOLIO
BOND INDEX
<S> <C>
<C>
10/16/91 10,000
10,000
12/91 10,240
10,440
12/92 10,781
11,231
12/93 11,643
12,470
12/94 11,287
12,032
12/95 13,292
14,348
12/96 13,518
14,764
6/30/97 13,871
14,764
</TABLE>
- ----------------------------------------------------------
- ---------------------
The performance shown represents past performance and is
not a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses
associated with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
PERFORMANCE COMPARISON -- APPRECIATION PORTFOLIO AS
OF 6/30/97 (UNAUDITED)
<TABLE> --------------------------------------------
- ----
AVERAGE ANNUAL TOTAL RETURN -------------
--------------
<S> <C>
Six Months Ended 6/30/97 16.58%
Year Ended 6/30/97 28.72%
Five Years Ended 6/30/97 15.64%
10/16/91* through 6/30/97 14.08%
CUMULATIVE TOTAL RETURN ---------------
--------
10/16/91* through 6/30/97 112.14%
* Commencement of operations -------------------
- -----------------------------</TABLE>
The chart to the right compares the growth in value of a
hypothetical $10,000
investment in Appreciation Portfolio on October 16, 1991
(commencement of
operations) through June 30, 1997 with that of a similar
investment in the
Standard & Poor's 500 Index. Index information is
available at month-end
only; therefore, the closest month-end to inception date
of the Portfolio has
been used. The Standard & Poor's 500 Index is an unmanaged
index composed of 500
widely held common stocks listed on the New York Stock
Exchange, American Stock
Exchange and over-the-counter market.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
STANDARD & POOR'S 500
(FISCAL YEAR COVERED) APPRECIATION PORTFOLIO
INDEX
<S> <C>
<C>
10/16/91 10,000
10,000
12/91 10,490
10,838
12/92 11,133
11,668
12/93 11,926
12,844
12/94 11,792
13,012
12/95 15,193
17,898
12/96 18,197
22,005
6/30/97 21,214
26,538
</TABLE>
- ----------------------------------------------------------
- ---------------------
The performance shown represents past performance and is
not a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses
associated with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
5
<PAGE>
PERFORMANCE COMPARISON -- TOTAL RETURN PORTFOLIO AS OF
6/30/97 (UNAUDITED)
<TABLE>
- -------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN -------------------
--------
<S> <C>
Six Months Ended 6/30/97 7.69%
Year Ended 6/30/97 20.51%
12/3/93* through 6/30/97 19.08%
CUMULATIVE TOTAL RETURN -----------------
------
12/3/93* through 6/30/97 86.69%
* Commencement of operations ---------------------
- ---------------------------</TABLE>
The chart to the right compares the growth in value of
a hypothetical $10,000
investment in Total Return Portfolio on December 3,
1993 (commencement of
operations) through June 30, 1997 with that of a
similar investment in the
Standard & Poor's 500 Index. Index information is
available at month-end only;
therefore, the closest month-end to inception date of the
Portfolio has been
used. The Standard & Poor's 500 Index is an unmanaged
index composed of 500
widely held common stocks listed on the New York Stock
Exchange, American Stock
Exchange and over-the-counter market.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
STANDARD & POOR'S 500
(FISCAL YEAR COVERED) TOTAL RETURN PORTFOLIO
INDEX
<S> <C>
<C>
12/3/93 10,000
10,000
12/93 10,300
10,121
12/94 11,062
10,253
12/95 13,832
14,103
12/96 17,335
17,340
6/30/97 18,669
20,912
</TABLE>
- ----------------------------------------------------------
- ---------------------
The performance shown represents past performance and is
not a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses
associated with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
6
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED)
JUNE 30, 1997
INTERMEDIATE HIGH GRADE PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 18.8%
$ 550,000 U.S. Treasury Notes, 9.250% due
8/15/98...................................... $
569,619
1,000,000 U.S. Treasury Bonds, 8.125% due
8/15/19......................................
1,141,530
50,000 U.S. Treasury Bonds, 7.125% due
2/15/23......................................
51,521
250,000 Federal Home Loan Bank, 7.045% due
6/27/02................................... 250,775
500,000 Federal Home Loan Bank, 7.790% due
1/24/07................................... 500,950
250,000 Federal National Mortgage Association,
Medium
Term Notes, 6.220% due
3/13/06...................................................
.. ................. 240,878 -----------------------
- ----------------------------------------------------------
- -----------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost -- $2,826,441)............ 2,755,273 -----------
- ----------------------------------------------------------
- -----------------------------------
ASSET-BACKED SECURITIES -- 3.4%
500,000 Carco Auto Loan Master, 7.875% due 7/15/99
(Cost -- $512,578)................ 503,030 ---------
- ----------------------------------------------------------
- ------------------------------------MORTGAGE-BACKED
SECURITIES -- 13.4%
1,003,548 Government National Mortgage Association,
6.500% due 2/15/26................. 960,576
994,248 Government National Mortgage Association,
7.500% due 12/15/26................ 997,977 --------
- ----------------------------------------------------------
- --------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (Cost -
$1,979,285)........................ 1,958,553 --------
- ----------------------------------------------------------
- --------------------------------------
CORPORATE BONDS AND NOTES -- 64.2% -----------------------
- ----------------------------------------------------------
- -----------------------
BANKING - DOMESTIC -- 14.9%
400,000 Banc One Corp., Sr. Notes, 6.700% due
3/24/00................................ 401,500
425,000 BankAmerica Corp., Sub. Notes, 8.375% due
3/15/02............................ 451,031
500,000 Norwest Corp., Sr. Notes, 6.250% due
4/15/99................................. 500,625
500,000 Republic New York Corp., Debentures, 9.500%
due 7/1/00....................... 540,000
275,000 Suntrust Banks, Debentures, 8.875% due
2/1/98................................ 279,414 -----
- ----------------------------------------------------------
- -----------------------------------------
2,172,570 ------------------------------------------------
- --------------------------------------------------------
BANKING - FOREIGN -- 16.2%
500,000 ABN AMRO Bank, Sub. Debentures, 7.550% due
6/28/06........................... 516,250
500,000 Capital Desjardins Inc., Sub. Notes, 7.370%
due 8/8/05 (a)................... 506,875
500,000 Malayan Banking-N.Y., Sub. Notes, 7.125% due
9/15/05......................... 495,625
500,000 National Westminster Bank-N.Y., Sub. Notes,
9.450% due 5/1/01................ 545,625
300,000 Swiss Bank Corp.-N.Y., Sub. Notes, 7.375%
due
6/15/17........................ 297,750 ------------
- ----------------------------------------------------------
- ----------------------------------
2,362,125
- ----------------------------------------------------------
- ----------------------------------------------
FINANCIAL SERVICES -- 13.3%
700,000 Associates Corp. N.A., Sr. Notes, 8.180% due
2/15/05......................... 745,500
700,000 Exxon Capital Corp., Debentures, 7.875% due
8/15/97.......................... 701,855
200,000 General Electric Capital Corp., Notes,
8.100%
due 1/26/99.................... 206,000
300,000 Xerox Capital Trust, Company Guaranteed
Notes,
8.000% due 2/1/27............. 300,000 -------------
- ----------------------------------------------------------
- ---------------------------------
1,953,355 ------------------------------------------------
- --------------------------------------------------------
GAS PIPELINE -- 7.4%
500,000 HNG Internorth, Debentures, 9.625% due
3/15/06............................... 582,500
500,000 Transcontinental Gas Pipeline Corp.,
Debentures, 7.080% due 7/15/26.......... 506,875 ---
- ----------------------------------------------------------
- -------------------------------------------
1,089,375 ------------------------------------------------
- --------------------------------------------------------
HEALTH CARE -- 3.5%
500,000 Service Corp. International, Notes, 7.000%
due
6/1/15........................ 505,625 -------------
- ----------------------------------------------------------
- ---------------------------------
INTEGRATED OIL -- 3.5%
500,000 Shell Oil Co., Debentures, 6.950% due
12/15/98............................... 505,375 ----
- ----------------------------------------------------------
- ------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
INTERMEDIATE HIGH GRADE PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
MACHINERY -- 2.0%
$ 300,000 Cummins Engine, Debentures, 6.750% due
2/15/27............................... $ 294,000 -----
- -------------------------------------------------------
- ---------------------------------------------
TECHNOLOGY -- 3.4%
500,000 Philips Electronics Corp., Notes, 7.200% due
6/1/26.......................... 501,875 -----------
- ----------------------------------------------------------
- -----------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -
$9,461,546)......................... 9,384,300
- ----------------------------------------------------------
- ----------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -
$14,779,850)..................................
14,601,156 -----------------------------------------------
- ---------------------------------------------------------
REPURCHASE AGREEMENT -- 0.2%
33,000 Chase Securities Corp., 5.745% due 7/1/97;
Proceeds at maturity -- $33,005;
(Fully collateralized by U.S. Treasury
Notes, 6.250% due 6/30/02; Market
value -- $33,660) (Cost -
$33,000)..........................................
33,000 ---------------------------------------------------
- -----------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$14,812,850*)............................. $14,634,156 -
- ----------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Security is exempt from registration under Rule 144A
of the Securities Act
of 1933. This security may be resold in transactions
that are exempt from
registration, normally to qualified institutional
buyers.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
COMMON STOCKS -- 85.4% -----------------------------------
- ----------------------------------------------------------
- -----------
BASIC INDUSTRIES -- 5.7%
5,000 Aluminum Co. of
America...................................................
.
$ 376,875
8,000 Cabot Corp.
..........................................................
.. ... 227,000
29,000 E.I. du Pont De Nemours & Co.
.............................................
1,823,375 15,000 Hercules, Inc.
..........................................................
.. 718,125
24,000 IMC Global, Inc.
..........................................................
840,000
11,000 Mead Corp.
..........................................................
.. .... 684,750
25,000 Olin Corp.
..........................................................
.. .... 976,563
5,000 Raychem Corp.
..........................................................
.. . 371,875
9,100 St. Joe Paper Co.
.........................................................
762,125 --------------------------------------------------
- ------------------------------------------------------
6,780,688 ------------------------------------------------
- --------------------------------------------------------
CAPITAL GOODS -- 9.3%
21,000 Allied Signal Inc.
........................................................
1,764,000
16,504 Boeing Co.
..........................................................
.. .... 875,743
14,000 Emerson Electric Co.
......................................................
770,875
38,000 General Electric Co.
......................................................
2,484,250
15,000 Honeywell, Inc.
..........................................................
. 1,138,125
13,000 Johnson Controls Inc.
.....................................................
533,813
7,000 Lockheed Martin Corp.
.....................................................
724,937
11,000 Rockwell International Corp.
(a)...........................................
649,000
15,000 Tyco International Ltd.
...................................................
1,043,437
36,000 Waste Management Inc.
.....................................................
1,156,500 ------------------------------------------------
- --------------------------------------------------------
11,140,680 -----------------------------------------------
- -------------
- ---------------------------------------------
CONSUMER DURABLES -- 2.3%
19,000 Chrysler Corp.
..........................................................
.. 623,437
26,000 General Motors Corp.
......................................................
1,447,875
11,000 Goodyear Tire & Rubber Co.
................................................
696,438 --------------------------------------------------
- ------------------------------------------------------
2,767,750 ------------------------------------------------
- --------------------------------------------------------
CONSUMER NON-DURABLES -- 7.2%
7,000 Conagra Inc.
..........................................................
.. .. 448,875
10,000 CPC International, Inc.
...................................................
923,125
24,000 Eastman Kodak Co.
.........................................................
1,842,000
8,000 Gillette Co.
..........................................................
.. .. 758,000
20,000 Kimberly-Clark Corp.
......................................................
995,000
25,500 Newell Co.
..........................................................
.. .... 1,010,438
5,000 Procter & Gamble Co.
......................................................
706,250
12,000 Stanley
Works.....................................................
.. ....... 480,000
7,000 Unilever NV, New York
Shares...............................................
1,526,000 ------------------------------------------------
- --------------------------------------------------------
8,689,688 ------------------------------------------------
- --------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
CONSUMER SERVICES -- 8.5%
15,000 Dow Jones & Co., Inc.
..................................................... $
602,812
18,000 Gannett Co.
..........................................................
.. ... 1,777,500
11,000 Gap, Inc.
..........................................................
.. ..... 427,625
20,000 J.C. Penney Co.
..........................................................
. 1,043,750
15,000 McDonald's Corp.
..........................................................
724,688
22,000 Meredith Corp.
..........................................................
.. 638,000
10,000 New York Times Co., Class A
Shares.........................................
495,000
12,000 Scandinavian Broadcasting System SA
(a).................................... 267,000
20,000 Time Warner, Inc.
.........................................................
965,000
10,000 Viacom Inc., Class A Shares
(a)............................................
300,000
50,000 Wal-Mart Stores, Inc.
.....................................................
1,690,625
16,000 Walt Disney Production Co.
................................................
1,284,000 ------------------------------------------------
- --------------------------------------------------------
10,216,000 -----------------------------------------------
- ---------------------------------------------------------
DIVERSIFIED CONGLOMERATE -- 2.0%
23,200 Minnesota Mining & Manufacturing Co.
...................................... 2,366,400 ----
- ----------------------------------------------------------
- ------------------------------------------
ENERGY -- 9.1%
20,000 Amerada Hess Corp.
........................................................
1,111,250
25,000 Amoco Corp.
..........................................................
.. ... 2,173,437
15,000 Ashland Inc.
..........................................................
.. .. 695,625
8,000 Barrett Resources Corp.
(a)................................................
239,500
10,000 Enron Corp.
..........................................................
.. ... 408,125
15,000 Exxon Corp.
..........................................................
.. ... 922,500
5,000 Halliburton Co.
..........................................................
. 396,250
36,000 Mobil Corp.
..........................................................
.. ... 2,515,500
9,000 Noble Affiliates Inc.
.....................................................
348,188
24,000 Royal Dutch Petroleum, New York Shares
ADR................................. 1,305,000
5,000 Sonat Inc.
..........................................................
.. .... 256,250
22,000 Union Pacific Corp.
.......................................................
547,250 --------------------------------------------------
- ------------------------------------------------------
10,918,875 -----------------------------------------------
- ---------------------------------------------------------
FINANCIAL SERVICES -- 17.6%
60,000 Allstate Corp.
..........................................................
.. 4,380,000
25,000 American Express Co.
......................................................
1,862,500
10,000 American International Group, Inc.
........................................ 1,493,750
15,000 Associated First Capital Corp.
............................................
832,500 24,520 Chase Manhattan Corp.
.....................................................
2,379,973
23,000 Chubb Corp.
..........................................................
.. ... 1,538,125
5,000 CNA Financial Corp.
(a)....................................................
527,188
35,000 Federal National Mortgage
Association......................................
1,526,875
10,000 First Virginia Banks, Inc.
................................................
603,125
5,000 General Re Corp.
..........................................................
910,000
13,000 Household International, Inc.
.............................................
1,526,687 10,000 Leucadia National Corp.
...................................................
309,375
10,000 National City Corp.
.......................................................
525,000
5,000 Provident Cos.
..........................................................
.. 267,500
15,000 St. Paul Cos.
..........................................................
.. . 1,143,750
5,000 Wells Fargo & Co.
.........................................................
1,347,500 ------------------------------------------------
- --------------------------------------------------------
21,173,848 -----------------------------------------------
- ---------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
<C> <S>
<C>
HEALTH CARE -- 10.6%
23,000 Abbott
Laboratories..............................................
.. ........ $ 1,535,250
25,000 American Home Products Corp.
..............................................
1,912,500
25,000 Bristol-Myers Squibb & Co.
................................................
2,025,000
39,000 Johnson &
Johnson...................................................
.. ..... 2,510,625
29,000 Merck & Co., Inc.
.........................................................
3,001,500
11,000 Novartis AG
ADR.......................................................
.. ... 882,406
10,000 Smithkline Beecham Sponsored
ADR...........................................
916,250 --------------------------------------------------
- ------------------------------------------------------
12,783,531
- ----------------------------------------------------------
- ----------------------------------------------
TECHNOLOGY -- 9.2%
5,000 Cisco Systems Inc.
(a).....................................................
335,625
23,000 Hewlett-Packard Co.
.......................................................
1,288,000
10,000 Imation Corp.
(a).......................................................
.. . 263,750
12,000 Intel Corp.
..........................................................
.. ... 1,701,750
16,000 International Business Machines Corp.
..................................... 1,443,000
6,000 Microsoft Corp.
(a).......................................................
. 758,250
15,000 Texas Instruments, Inc.
...................................................
1,260,937
30,000 Thermo Electron Corp.
(a)..................................................
1,020,000
38,000 Xerox Corp.
..........................................................
.. ... 2,997,250
- ----------------------------------------------------------
- ----------------------------------------------
11,068,562 -----------------------------------------------
- --------------------------------------------------------
TELECOMMUNICATIONS -- 3.7%
20,000 Ameritech Corp.
..........................................................
. 1,358,750
22,000 Bell Atlantic Corp.
(a)....................................................
1,669,250
33,000 GTE Corp.
..........................................................
.. ..... 1,447,875 ----------------------------------
- ----------------------------------------------------------
- ------------
4,475,875 ------------------------------------------------
- -------------------------------------------------------
TRANSPORTATION -- 0.2%
5,000 Wisconsin Central Transport
(a)............................................
186,250 --------------------------------------------------
- ------------------------------------------------------
TOTAL COMMON STOCKS (Cost --
$66,666,336)..................................
102,568,147 ----------------------------------------------
- ----------------------------------------------------------
FACE
AMOUNT SECURITY
VALUE ----------------------------------------------------
- --------
- ---------------------------------------------
REPURCHASE AGREEMENT -- 14.6%
$17,490,000 Chase Securities Corp., 5.745% due 7/1/97;
Proceeds at
maturity -- $17,492,791; (Fully
collateralized by U.S. Treasury Note,
6.250% due 6/30/02; Market value -
$17,839,818) (Cost -- $17,490,000)..... 17,490,000 ---
- ----------------------------------------------------------
- -------------------------------------------
TOTAL INVESTMENTS --100% (Cost --
$84,156,336*)............................ $120,058,147 -
- ----------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
<S> <C>
<C> ------------------------------------------------------
- --------------------------------------------------
COMMON STOCKS -- 73.2% -----------------------------------
- ----------------------------------------------------------
- -----------
BASIC MATERIALS -- 8.3%
100,000 Aluminum Co. of
America...................................................
. $ 7,537,500
50,000 Eastman Chemical Co.
......................................................
3,175,000
275,000 Oregon Steel Mills Inc.
...................................................
5,482,813
60,000 Weyerhauser Co.
..........................................................
. 3,120,000 ----------------------------------------------
- ----------------------------------------------------------
19,315,313 -----------------------------------------------
- --------------------------------------------------------
COMMUNICATION SERVICES -- 8.6%
150,000 American Telephone &
Telegraph.............................................
5,259,375
143,000 Comsat Corp.
..........................................................
.. .. 3,405,187
125,000 GTE Corp.
..........................................................
.. ..... 5,484,375
155,000 US West
Communications............................................
.. ....... 5,841,562 --------------------------------
- ----------------------------------------------------------
- --------------
19,990,499 -----------------------------------------------
- ---------------------------------------------------------
CONSUMER CYCLICALS -- 8.3%
69,898 Ascent Entertainment Group
(a).............................................
637,823
42,000 Eastman Kodak Co.
.........................................................
3,223,500
225,000 Toys "R" Us, Inc.
(a)......................................................
7,875,000
225,000 Wal-Mart Corp.
..........................................................
.. 7,607,813 ---------------------------------------------
- ----------------------------------------------------------
- -
19,344,136 -----------------------------------------------
- ---------------------------------------------------------
CONSUMER STAPLES -- 4.1%
175,000 PepsiCo, Inc.
..........................................................
.. . 6,573,438
100,000 Viacom Inc., Class B Shares
(a)............................................
3,000,000 ------------------------------------------------
- --------------------------------------------------------
9,573,438 ------------------------------------------------
- --------------------------------------------------------
ENERGY -- 9.3%
60,000 Amoco Corp.
(a).......................................................
.. ... 5,216,250
75,000 Coastal Corp.
..........................................................
.. . 3,989,062
120,000 Louisiana Land &
Exploration...............................................
6,855,000
225,000 Occidental Petroleum Corp.
................................................
5,639,062 ------------------------------------------------
- --------------------------------------------------------
21,699,374 -----------------------------------------------
- ---------------------------------------------------------
FINANCIAL SERVICES -- 5.1%
85,000 American Express Co.
......................................................
6,332,500
70,000 Bank of New York Co. Inc.
.................................................
3,045,000
21,000
Citicorp..................................................
.. ............... 2,531,812 ------------------------
- ----------------------------------------------------------
- ----------------------
11,909,312 -----------------------------------------------
- ---------------------------------------------------------
HEALTH CARE -- 4.4%
50,000 Bristol-Myers Squibb & Co.
................................................
4,050,000
175,000 Pharmacia & Upjohn, Inc.
..................................................
6,081,250 ------------------------------------------------
- --------------------------------------------------------
10,131,250 -----------------------------------------------
- ---------------------------------------------------------
REAL ESTATE -- 15.8%
175,000 Irvine Apartment Communities Inc.
......................................... 5,162,500
200,000 Rouse Co.
..........................................................
.. ..... 5,900,000
201,900 Shurgard Storage Centers
..................................................
5,653,200
150,000 Simon Debartolo Group Inc.
................................................
4,800,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> ---------------------------------------------------
- ----------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1997
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
<C> <S>
<C> ------------------------------------------------------
- --------------------------------------------------
REAL ESTATE -- 15.8% (CONTINUED)
150,000 Spieker Properties Inc.
................................................... $
5,278,125
150,000 Trinet Corporate Realty Trust Inc.
........................................ 4,959,375
300,000 Westfield America Inc.
....................................................
5,062,500 ------------------------------------------------
- --------------------------------------------------------
36,815,700 -----------------------------------------------
- ---------------------------------------------------------
TECHNOLOGY -- 1.5%
100,000 Adobe Systems Inc.
........................................................
3,506,250 ------------------------------------------------
- -------------------------------------------------------
TRANSPORTATION -- 2.5%
225,000 Knightsbridge
Tanker....................................................
.. . 5,681,250
- ----------------------------------------------------------
- ----------------------------------------------
UTILITIES -- 5.3%
90,000 Duke Energy Corp.
.........................................................
4,314,375
41,800 Orange & Rockland
Utilities................................................
1,405,525
275,000 Pacific Gas & Electric Corp.
..............................................
6,668,750 ------------------------------------------------
- --------------------------------------------------------
12,388,650 -----------------------------------------------
- ---------------------------------------------------------
TOTAL COMMON STOCKS (Cost --
$143,772,929).................................
170,355,172 ----------------------------------------------
- ----------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 11.0%
120,000 Cyprus Amax Minerals Co., Exchangeable
2.125%.............................. 6,615,000
100,000 K mart Financing Corp., Exchangeable
7.750%................................ 5,487,500
100,000 General Datacom Industries, Exchangeable
9.000% (b)........................ 2,250,000
250,000 Greyhound Lines, Exchangeable 8.250%
(b)................................... 7,343,750
80,000 Rouse Co., Exchangeable
$3.000.............................................
3,860,000 ------------------------------------------------
- --------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost -
$24,523,782)................... 25,556,250 -----------
- ----------------------------------------------------------
- -----------------------------------
SUB-TOTAL INVESTMENTS (Cost -
$168,296,711)...............................
195,911,422 ----------------------------------------------
- --------------
- ---------------------------------------------
FACE AMOUNT SECURITY
VALUE ----------------------------------------------------
- ----------------------------------------------------
REPURCHASE AGREEMENTS -- 15.8%
$14,761,000 Chase Securities Corp., 5.745% due 7/1/97;
Proceeds at
maturity -- 14,763,356; (Fully
collateralized by U.S. Treasury Notes,
6.250% due 6/30/02; Market value -
$15,056,235)........................... 14,761,000
7,488,000 Citibank, 5.934% due 7/1/97; Proceeds at
maturity -- $7,489,234; (Fully
collateralized by U.S. Treasury Notes,
6.500% due 8/31/01; Market
value -
$7,638,036)...............................................
.. ...... 7,488,000
4,512,000 Citibank, 5.956% due 7/1/97; Proceeds at
maturity -- $4,512,746; (Fully
collateralized by U.S. Treasury Notes,
6.250% due 6/30/02; Market
value -
$4,602,243)...............................................
.. ...... 4,512,000
10,000,000 Goldman Sachs & Co., 5.794% due 7/1/97;
Proceeds at
maturity -- $10,001,609; (Fully
collateralized by U.S. Treasury Notes,
6.125% due 8/31/98; Market value -
$10,204,549)........................... 10,000,000 ---
- ----------------------------------------------------------
- -------------------------------------------
TOTAL REPURCHASE AGREEMENTS (Cost -
$36,761,000).......................... 36,761,000 ----
- ----------------------------------------------------------
- ------------------------------------------
TOTAL INVESTMENTS (Cost --
$205,057,711*)..................................
$232,672,422 ---------------------------------------------
- ----------------------------------------------------------
- -
</TABLE>
(a) Non-income producing security.
(b) Security is exempt from registration under Rule 144A
of the Securities Act
of 1933. This security may be resold in transactions
that are exempt from
registration, normally to qualified institutional
buyers.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> ---------------------------------------------------
- ----------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO -----------------
- ----------------------------------------------------------
- --------------------------------
<S>
<C> <C> <C>
ASSETS:
Investments, at
cost........................................ $14,779,850
$ 66,666,336 $168,296,711
Repurchase agreements, at
cost.............................. 33,000
17,490,000 36,761,000
- ----------------------------------------------------------
- ------------------------------------------------
Investments, at
value....................................... $14,601,156
$102,568,147 $195,911,422
Repurchase agreements, at
value............................. 33,000
17,490,000 36,761,000
Cash......................................................
.. 650 -- 135
Receivable for securities
sold.............................. --
320,846 --
Dividends and interest
receivable........................... 303,029
136,246 541,690
Deferred organization
costs................................. --
- -- 4,560 ---------------------------------------
- ----------------------------------------------------------
- ----------
TOTAL
ASSETS................................................
14,937,835 120,515,239 233,218,807 ---------------
- ----------------------------------------------------------
- ---------------------------------LIABILITIES:
Investment advisory fees
payable............................ 11,971
53,484 97,672
Administration fees
payable................................. 5,795
19,449 37,014
Payable for options
written................................. --
- -- 2,788,250
Payable for securities
purchased............................ -790,390
7,877,678
Payable to
bank.............................................
- -- 6,288 --
Accrued
expenses............................................
20,105 27,933 53,719
- ----------------------------------------------------------
- --
- ------------------------------------------------
TOTAL
LIABILITIES...........................................
37,871 897,544 10,854,333 -------------------
- ----------------------------------------------------------
- ------------------------------
TOTAL NET
ASSETS..............................................
$14,899,964 $119,617,695 $222,364,474 --------------
- ----------------------------------------------------------
- -----------------------------------
NET ASSETS:
Par value of shares of beneficial
interest.................. $ 1,357 $ 6,468
$ 13,130
Capital paid in excess of par
value......................... 13,950,890
68,482,893 175,089,706
Undistributed net investment
income......................... 1,430,873
2,584,012 6,960,402
Accumulated net realized gain (loss) on security
transactions and
options................................. (304,462)
12,642,511 13,563,145
Net unrealized appreciation (depreciation) of investments
and
options..............................................
(178,694) 35,901,811 26,738,091 -----------------
- ----------------------------------------------------------
- --------------------------------
TOTAL NET
ASSETS..............................................
$14,899,964 $119,617,695 $222,364,474 --------------
- ----------------------------------------------------------
- -----------------------------------
SHARES
OUTSTANDING............................................
1,357,415 6,467,623 13,130,115 ----------------
- ----------------------------------------------------------
- ---------------------------------
NET ASSET VALUE, PER
SHARE.................................... $10.98
$18.49 $16.94 -----------------------------------
- ----------------------------------------------------------
- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> ---------------------------------------------------
- ----------------------------
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX
MONTHS
ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO ---------------
- ----------------------------------------------------------
- -----------------------------------
<S>
<C> <C> <C>
INVESTMENT INCOME:
Interest..................................................
. $ 539,327 $ 544,602 $ 1,247,786
Dividends.................................................
. -- 944,503 2,708,654
Less: Foreign withholding
tax.............................. --
(6,957) -------------------------------------
- ----------------------------------------------------------
- --------------
TOTAL INVESTMENT
INCOME.................................... 539,327
1,482,148 3,956,440 -------------------------------
- ----------------------------------------------------------
- ------------------EXPENSES:
Investment advisory fees (Note
3).......................... 29,195
297,845 531,006
Administration fees (Note
3)............................... 14,598
108,307 193,093
Audit and
legal............................................
8,009 7,898 8,661
Shareholder
communications.................................
7,846 7,055 16,218
Shareholder and system servicing
fees...................... 6,002 5,938
6,729
Trustees'
fees.............................................
2,748 3,400 8,480
Pricing service
fees....................................... 1,471 -
- - --
Custody...................................................
. 585 2,970 5,842
Amortization of deferred organization
costs................ -- -1,587
Other.....................................................
. 1,332 406 4,601 ---------------
- ----------------------------------------------------------
- -----------------------------------
TOTAL
EXPENSES.............................................
71,786 433,819 776,217
Less: Investment advisory and administration fee waiver
(Note
3)................................................
(2,363) -- -------------------
- ----------------------------------------------------------
- --------------------------------
NET
EXPENSES...............................................
69,423 433,819 776,217 ----------------
- ----------------------------------------------------------
- ----------------------------------
NET INVESTMENT
INCOME........................................
469,904 1,048,329 3,180,223 -----------------------
- ----------------------------------------------------------
- ---------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
OPTIONS (NOTES 4 AND 6):
Realized Gain (Loss) From:
Security transactions (excluding short-term
securities)...........................................
(12,196) 4,974,311 5,250,045
Options
written.........................................
- - -- 407,337
- ----------------------------------------------------------
- --------------------------------------------------
NET REALIZED GAIN
(LOSS)................................... (12,196)
4,974,311 5,657,382 -------------------------------
- ----------------------------------------------------------
- -------------------
Change in Net Unrealized Appreciation (Depreciation) of
Investments:
Beginning of
period..................................... (101,606)
25,036,957 20,759,472
End of
period...........................................
(178,694) 35,901,811 26,738,091 --------------
- ----------------------------------------------------------
- ------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION
(DEPRECIATION)..... (77,088) 10,864,854
5,978,619 ------------------------------------------------
- ----------------------------------------------------------
- --
NET GAIN (LOSS) ON INVESTMENTS AND
OPTIONS................... (89,284) 15,839,165
11,636,001 -----------------------------------------------
- ----------------------------------------------------------
- ---
INCREASE IN NET ASSETS FROM
OPERATIONS....................... $ 380,620 $
16,887,494 $ 14,816,224 ------------------------------
- ----------------------------------------------------------
- --------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> ---------------------------------------------------
- ----------------------------
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE
SIX MONTHS ENDED
JUNE 30, 1997
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------
- -------------------------------------------------
<S>
<C> <C> <C>
OPERATIONS:
Net investment
income....................................... $
469,904 $ 1,048,329 $ 3,180,223
Net realized gain
(loss).................................... (12,196)
4,974,311 5,657,382
Increase in net unrealized appreciation
(depreciation)...... (77,088) 10,864,854
5,978,619
- ----------------------------------------------------------
- -------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS...................... 380,620
16,887,494 14,816,224
- ----------------------------------------------------------
- ------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment
income....................................... -
- -- --
Net realized
gains..........................................
- - -- --
- ----------------------------------------------------------
- -------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS... -- --
- ----------------------------------------------------------
- -------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of
shares............................ 1,102,281
7,990,554 39,686,082
Cost of shares
reacquired...................................
(1,319,298) (6,492,181) (3,641,231)
- ----------------------------------------------------------
- -------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS.............................................
(217,017) 1,498,373 36,044,851
- ----------------------------------------------------------
- -------------------------------------------------
INCREASE IN NET
ASSETS........................................
163,603 18,385,867 50,861,075
NET ASSETS:
Beginning of
period.........................................
14,736,361 101,231,828 171,503,399
- ----------------------------------------------------------
- -------------------------------------------------
END OF
PERIOD*..............................................
$14,899,964 $119,617,695 $222,364,474 --------------
- ----------------------------------------------------------
- -----------------------------------
* Includes undistributed net investment income
of:............ $1,430,873 $2,584,012
$6,960,402 -----------------------------------------------
- ----------------------------------------------------------
- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> ---------------------------------------------------
- ----------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR
ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO -----------------
- ----------------------------------------------------------
- --------------------------------
<S>
<C> <C> <C>
OPERATIONS:
Net investment
income....................................... $
964,989 $ 1,544,019 $ 3,710,576
Net realized gain
(loss).................................... (4,603)
7,668,200 8,063,440
Increase in net unrealized appreciation
(depreciation)...... (738,535) 8,004,471
16,541,648 -----------------------------------------------
- ----------------------------------------------------------
- --
INCREASE IN NET ASSETS FROM
OPERATIONS...................... 221,851
17,216,690 28,315,664 -------------------------------
- ----------------------------------------------------------
- -----------------DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE
2):
Net investment
income.......................................
(109,701) (1,465,494) (744,542)
Net realized
gains..........................................
- - (6,748,581) (1,914,537)
- ----------------------------------------------------------
- -------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS... (109,701) (8,214,075)
(2,659,079) ----------------------------------------------
- ----------------------------------------------------------
- ---
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of
shares............................ 1,072,219
6,372,114 70,721,239
Net asset value of shares issued for reinvestment of
dividends................................................
109,701 8,214,075 2,659,079
Cost of shares
reacquired...................................
(2,710,130) (16,848,804) (5,576,476) -----------------
- ----------------------------------------------------------
- --------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS.............................................
(1,528,210) (2,262,615) 67,803,842 ---------------
- ----------------------------------------------------------
- ----------------------------------
INCREASE (DECREASE) IN NET
ASSETS............................. (1,416,060)
6,740,000 93,460,427
NET ASSETS:
Beginning of
year...........................................
16,152,421 94,491,828 78,042,972 ---------------
- ----------------------------------------------------------
- ----------------------------------
END OF
YEAR*................................................
$14,736,361 $101,231,828 $171,503,399 --------------
- ----------------------------------------------------------
- -----------------------------------
* Includes undistributed net investment income
of:............ $960,969 $1,535,683
$3,780,179 -----------------------------------------------
- ----------------------------------------------------------
- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> ---------------------------------------------------
- ----------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Intermediate High Grade, Appreciation and Total
Return Portfolios
("Portfolios") are separate investment portfolios of the
Smith Barney Series
Fund ("Fund"). The Fund, a Massachusetts business trust,
is registered under the
Investment Company Act of 1940, as amended, as a
diversified, open-end
management investment company. Shares of the Fund can be
acquired through
investing in an individual flexible premium deferred
combination fixed and
variable annuity contract or a certificate evidencing
interest in a master group
flexible premium deferred annuity offered by certain
insurance companies. The
Fund offers seven other managed investment portfolios:
Money Market, Diversified
Strategic Income, Equity Income, Equity Index, Growth and
Income, Emerging
Growth and International Equity Portfolios. The financial
statements and
financial highlights for the other portfolios are
presented in a separate
semi-annual report.
The significant accounting policies consistently
followed by the Portfolios
are: (a) security transactions are accounted for on trade
date; (b) securities
traded on national securities markets are valued at the
closing prices on such
markets or, if there were no sales during the day, at
current quoted bid price;
securities primarily traded on foreign exchanges are
generally valued at the
preceding closing values of such securities on their
respective exchanges,
except that when a significant occurrence subsequent to
the time a value was so
established is likely to have significantly changed the
value then the fair
value of those securities will be determined by
consideration of other factors
by or under the direction of the Board of Trustees or its
delegates;
over-the-counter securities are valued on the basis of the
bid price at the
close of business on each day; U.S. government and agency
obligations are valued
at the average between the bid and the ask prices; (c)
securities maturing
within 60 days are valued at cost plus accreted discount,
or minus amortized
premium, which approximates value; (d) dividend income is
recorded on the
ex-dividend date; foreign dividend income is recorded on
the ex-dividend date or
as soon as practical after the Fund determines the
existence of a dividend
declaration after exercising reasonable due diligence; (e)
interest income is
recorded on the accrual basis; (f) gains or losses on the
sale of securities are
calculated by using the specific identification method;
(g) dividends and
distributions to shareholders are recorded by the Fund on
the ex-dividend date;
(h) the accounting records of the Fund are maintained in
U.S. dollars. All
assets and liabilities denominated in foreign currencies
are translated into
U.S. dollars based on the rate of exchange of such
currencies against U.S.
dollars on the date of valuation. Purchases and sales of
securities, and income
and expenses are translated at the rate of exchange quoted
on the respective
date that such transactions are recorded. Differences
between income and expense
amounts recorded and collected or paid are adjusted when
reported by the
custodian bank; (i) each Portfolio intends to comply with
the requirements of
the Internal Revenue Code of 1986, as amended, pertaining
to regulated
investment companies and to make distributions of taxable
income sufficient to
relieve it from substantially all federal income and
excise tax; (j) the
character of income and gains distributed are determined
in accordance with
income tax regulations which may differ from generally
accepted accounting
principles. At December 31, 1996, reclassifications were
made to the
Intermediate High Grade Portfolio's capital accounts to
reflect permanent
book/tax differences and income and gains available for
distributions under
income tax regulations. Accordingly, a portion of
accumulated net realized gains
amounting to $39 was reclassified to paid-in capital. Net
investment income, net
realized gains and net assets were not affected by this
change; and (k)
estimates and assumptions are required to be made
regarding assets, liabilities
and changes in net assets resulting from operations when
financial statements
are prepared. Changes in the economic environment,
financial markets and any
other parameters used in determining these estimates could
cause actual results
to differ.
In addition, for the Total Return Portfolio,
organization costs have been
deferred and are currently being amortized on a straight
line basis over a five
year period, beginning with the commencement of operations
in December 1993.
2. DIVIDENDS
The Fund's declare and distribute dividends from net
investment income
annually. Net realized capital gains, if any, are also
declared and distributed
annually.
3. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION
AGREEMENT AND OTHER
TRANSACTIONS
The Fund, on behalf of the Portfolios, has entered
into an investment
advisory agreement ("Advisory Agreement") with Smith
Barney Mutual Funds
Management Inc. ("SBMFM"). SBMFM is a wholly-owned
subsidiary of Smith Barney
Holdings Inc. ("SBH"), which in turn is a wholly-owned
subsidiary of Travelers
Group Inc. ("Travelers"). Under the Advisory Agreement,
the Intermediate High
Grade, Appreciation and Total Return Portfolios each pay
an investment
18
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
advisory fee calculated at the annual rates of 0.40%,
0.55% and 0.55%,
respectively, of the value of their average daily net
assets. These fees are
calculated daily and paid monthly.
In addition, Davis Skaggs Investment Management, a
division of SBMFM acts
as the sub-investment advisor for the Total Return
Portfolio.
The Fund, on behalf of the Portfolios, has entered
into an administration
agreement with SBMFM. Under the agreement, each Portfolio
pays an administration
fee calculated at the annual rate of 0.20% of the value of
their average daily
net assets. These fees are calculated daily and paid
monthly.
By mutual agreement of the parties involved, in the
event the aggregate
expenses of a Portfolio (exclusive of interest, taxes,
brokerage expenses and
extraordinary expenses) exceed an agreed-upon limitation,
SBMFM will, as
appropriate, reduce its fees by one half the excess
expenses in the proportion
that its fees bear to the aggregate of such fees paid by
the Portfolio. IDS Life
Insurance Company ("IDS Life"), one of the insurance
companies offering variable
annuities through which investments can be made in the
Fund, will bear the
remaining half of such excess expenses.
For the Intermediate High Grade Portfolio, SBMFM
waived a portion of its
investment advisory and administration fees in the amounts
of $1,575 and $788,
respectively, for the six months ended June 30, 1997.
For the six months ended June 30, 1997, there were no
brokerage commissions
paid to Smith Barney.
No officer, Director or employee of Smith Barney or
its affiliates receives
any compensation from the Fund for serving as a Trustee or
officer of the Fund.
4. INVESTMENTS
During the six months ended June 30, 1997, the
aggregate costs of purchases
and proceeds from sales of investments (including
maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
PORTFOLIO
PURCHASES SALES -----------------------------------
- ----------------------------------------------------------
- -----------
<S>
<C> <C>
Intermediate High
Grade.....................................................
$ 3,816,837 $ 3,240,553
Appreciation..............................................
.. ................ 18,848,021 20,606,003
Total
Return....................................................
.. .......... 93,625,456 51,532,233 ---------------
- ----------------------------------------------------------
- -------------------------------
</TABLE>
At June 30, 1997, the aggregate gross unrealized
appreciation and
depreciation of investments for Federal income tax
purposes were substantially
as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
PORTFOLIO
APPRECIATION DEPRECIATION (DEPRECIATION) -----------
- ----------------------------------------------------------
- --------------------------------------
<S>
<C> <C> <C>
Intermediate High
Grade.................................... $ 51,426 $
(230,120) $ (178,694)
Appreciation..............................................
. 36,147,351 (245,540) 35,901,811
Total
Return...............................................
30,556,138 (2,941,427) 27,614,711
- ----------------------------------------------------------
- -------------------------------------------------
</TABLE>
5. FUTURES CONTRACTS
The Intermediate High Grade and Total Return
Portfolios may from time to
time enter into futures contracts.
Initial margin deposits made upon entering into
futures contracts are
recognized as assets. The initial margin is segregated by
the custodian as is
noted in the schedule of investments. During the period
the futures contract is
open, changes in the value of the contract are recognized
as unrealized gains or
losses by "marking to market" on a daily basis to reflect
the market value of
the contract at the end of each day's trading. Variation
margin payments are
made or received and recognized as assets due from or
liabilities due to broker,
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 transaction and
the Portfolio's basis in the contract. The Portfolio
enters into such contracts
to hedge
19
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
a portion of its portfolio. The Portfolio bears the market
risk that arises from
changes in the value of the financial instruments and
securities indices
(futures contracts) and the credit risk should a
counterparty fail to perform
under such contracts.
As of June 30, 1997, there were no open
futures contracts in the
Portfolios.
6. OPTION CONTRACTS
The Intermediate High Grade and Total Return
Portfolios may from time to
time enter into options contracts.
Upon the purchase of a put option or a call option by
the Portfolio, the
premium paid is recorded as an investment, the value of
which is
marked-to-market daily. When a purchased option expires,
the Portfolio will
realize a loss in the amount of the cost of the option.
When the Portfolio
enters into a closing sales transaction, the Portfolio
will realize a gain or
loss depending on whether the sales proceeds from the
closing sales transaction
are greater or less than the cost of the option. When the
Portfolio exercises a
put option, it will realize a gain or loss from the sale
of the underlying
security and the proceeds from such sale will be decreased
by the premium
originally paid. When the Portfolio exercises a call
option, the cost of the
security which the Portfolio purchases upon exercise will
be increased by the
premium originally paid.
As of June 30, 1997, there were no open purchased
call or put options in
the Portfolios.
When a Portfolio writes a call option or a put
option, an amount equal to
the premium received by the Portfolio is recorded as a
liability, the value of
which is marked-to-market daily. When a written option
expires, the Portfolio
realizes a gain equal to the amount of the premium
received. When the Portfolio
enters into a closing purchase transaction, the Portfolio
realizes a gain (or
loss if the cost of the closing purchase transaction
exceeds the premium
received when the option was sold) without regard to any
unrealized gain or loss
on the underlying security, and the liability related to
such option is
eliminated. When a written call option is exercised, the
Portfolio realizes a
gain or loss from the sale of the underlying security and
the proceeds from such
sale are increased by the premium originally received.
When a written put option
is exercised, the amount of the premium originally
received will reduce the cost
of the security which the Portfolio purchased upon
exercise. When written index
options are exercised, settlement is made in cash.
The risk associated with purchasing options is
limited to the premium
originally paid. The Portfolio enters into options for
hedging purposes. The
risk in writing a covered call option is that the
Portfolio gives up the
opportunity to participate in any increase in the price of
the underlying
security beyond the exercise price. The risk in writing a
put option is that the
Fund is exposed to the risk of loss if the market price of
the underlying
security declines.
The following covered call options transactions
occurred in the Total
Return Portfolio during the six months ended June 30,
1997:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
<S>
<C> <C> -----------------------------------------
- ----------------------------------------------------------
- ----
Options written, outstanding at December 31,
1996............................. -- $ -
Options written during the six months ended June 30,
1997..................... 14,641 2,450,129
Options cancelled in closing purchase
transactions............................ (750)
(332,114)
Options
expired...................................................
.. .......... (1,941) (197,486)
Options
exercised.................................................
.. .......... (40) (8,899) -----------------
- ----------------------------------------------------------
- ----------------------------
Options written, outstanding at June 30,
1997................................. 11,910
$1,911,630 -----------------------------------------------
- --------------------------------------------------------
</TABLE>
20
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The following table represents the written call
option contracts open as of
June 30, 1997:
<TABLE>
<CAPTION>
NUMBER OF
STRIKE
CONTRACTS
EXPIRATION PRICE VALUE
<C> <S>
<C> <C> <C>
- ----------------------------------------------------------
- --------------------------------------------------
500 Adobe Systems, Inc.
......................................... 1/16/98
$ 55 $ (50,000)
1,500 American Telephone & Telegraph Inc.
......................... 1/16/98 45 (70,313)
210
Citicorp..................................................
.. . 1/16/98 125
(186,375)
2,000 Occidental Petroleum Corp.
.................................. 1/16/98 30
(75,000)
1,400 PepsiCo, Inc.
...............................................
1/16/98 38 (498,750)
1,500 Pharmacia & Upjohn Inc.
..................................... 1/16/98
45 (79,687)
2,250 Toys "R" Us, Inc.
........................................... 1/16/98
30 (1,462,500)
1,550 U.S. West Communications
Group............................... 1/16/98 40
(290,625)
1,000 Viacom Inc.
.................................................
1/16/98 40 (75,000)
- ----------------------------------------------------------
- -------------------------------------------------
(Premiums received --
$1,911,630)............................
$(2,788,250) ---------------------------------------------
- ----------------------------------------------------------
- -----
</TABLE>
7. REPURCHASE AGREEMENTS
The Portfolios purchase (and its custodian takes
possession of) U.S.
government securities from banks and securities dealers
subject to agreements to
resell the securities to the sellers at a future date
(generally, the next
business day) at an agreed upon higher repurchase price.
The Portfolio requires
continual maintenance of the market value of the
collateral in amounts at least
equal to the repurchase price.
8. REVERSE REPURCHASE AGREEMENTS
The Intermediate High Grade Portfolio may enter into
reverse repurchase
agreements.
A reverse repurchase agreement involves a sale by the
Portfolio of
securities that it holds with an agreement by the
Portfolio to repurchase the
same securities at an agreed upon price and date. A
reverse repurchase agreement
involves risk that the market value of the securities sold
by the Portfolio may
decline below the repurchase price of the securities. The
Portfolio will
establish a segregated account with its custodian, in
which the Portfolio will
maintain cash, U.S. government securities or other liquid
high grade obligations
equal in value to its obligations with respect to the
reverse repurchase
agreements.
At June 30, 1997, there were no open reverse
repurchase agreements in the
Portfolio.
9. SECURITIES TRADED ON A WHEN-ISSUED OR TO-BE-
ANNOUNCED BASIS
The Intermediate High Grade and Total Return
Portfolios may from time to
time purchase securities on a when-issued or to-be-
announced ("TBA") basis.
In a TBA transaction, the Portfolio commits to
purchasing or selling
securities for which specific information is not yet known
at the time of the
trade, particularly the face amount and maturity date in
GNMA transactions.
Securities purchased on a TBA basis are not settled until
they are delivered to
the Portfolio, normally 15 to 45 days later. These
transactions are subject to
market fluctuations and their current value is determined
in the same manner as
for other securities.
As of June 30, 1997, there were no when-issued or
TBA securities held in
the Portfolios.
21
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
10. MORTGAGE ROLL TRANSACTIONS
The Intermediate High Grade Portfolio has the ability
to participate in
mortgage roll transactions.
A mortgage roll transaction involves a sale by the
Portfolio of securities
that it holds with an agreement by the Portfolio to
repurchase similar
securities at an agreed upon price and date. The
securities repurchased will
bear the same interest rate as those sold, but generally
will be collateralized
by pools of mortgages with different prepayment histories
than those securities
sold. Proceeds of the sale and the income from these
investments will be
invested, together with any additional income from the
Portfolio exceeding the
yield on the securities sold.
As of June 30, 1997, there were no open mortgage roll
transactions in the
Portfolio.
11. SHORT SALES AGAINST THE BOX
The Total Return Portfolio has the ability to engage
in short sales against
the box.
A short sale against the box is a short sale of
common stock such that when
the short position is open the Portfolio involved owns an
equal amount of
preferred stocks or debt securities, convertible or
exchangeable, without
payment of further consideration, into an equal number of
shares of common stock
sold short. The proceeds of the sale will be held by the
broker until the
settlement date when the Portfolio delivers the
convertible or exchangeable
securities to close out its short position. Although prior
to delivery a
Portfolio will have to pay an amount equal to any
dividends paid on the common
stock sold short, the Portfolio will receive the dividends
from the preferred
stock or interest from the debt securities convertible or
exchangeable into the
stock sold short, plus a portion of the interest earned
from the proceeds of the
short sale. The Portfolio will deposit, in a segregated
account with the Fund's
custodian, convertible preferred stock or convertible debt
securities in
connection with short sales against the box.
As of June 30, 1997, the Portfolio had no open short
sales against the box.
12. LENDING OF SECURITIES
The Portfolios have the ability to lend securities to
brokers, dealers and
other financial organizations.
The Portfolios have an agreement with its custodian
whereby the custodian
may lend securities owned by the Portfolios to brokers,
dealers and other
financial organizations. Fees earned by the Portfolios on
securities lending are
recorded in interest income. Loans of securities by the
Portfolios are
collateralized by cash, U.S. government securities or high
quality money market
instruments that are maintained at all times in an amount
at least equal to the
current market value of the loaned securities, plus a
margin which may vary
between 2% and 5% depending on the type of securities
loaned. The custodian
establishes and maintains the collateral in a segregated
account.
As of June 30, 1997, the Portfolios had no securities
on loan.
13. SHARES OF BENEFICIAL INTEREST
At June 30, 1997, the Fund had an unlimited number of
shares of beneficial
interest authorized with a par value of $0.001 per share.
Transactions in shares
for each portfolio were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996 ---------------------
- ----------------------------------------------------------
- ------------------------
<S>
<C> <C>
INTERMEDIATE HIGH GRADE PORTFOLIO
Shares
sold....................................................
102,948 103,151
Shares issued on
reinvestment..................................
- -- 10,195
Shares
redeemed................................................
(122,964) (260,275) ---------------------------
- ----------------------------------------------------------
- ------------------
Net
Decrease..................................................
. (20,016) (146,929) --------------------------
- ----------------------------------------------------------
- -------------------
APPRECIATION PORTFOLIO
Shares
sold....................................................
464,791 400,926
Shares issued on
reinvestment..................................
- -- 509,874
Shares
redeemed................................................
(381,811) (1,094,435) ---------------------------
- ----------------------------------------------------------
- ------------------
Net Increase
(Decrease)........................................
82,980 (183,635) -----------------------------
- ----------------------------------------------------------
- ----------------
TOTAL RETURN PORTFOLIO
Shares
sold....................................................
2,455,836 4,997,848
Shares issued on
reinvestment..................................
- -- 168,616
Shares
redeemed................................................
(225,387) (390,187) ---------------------------
- ----------------------------------------------------------
- ------------------
Net
Increase..................................................
. 2,230,449 4,776,277 -------------------------
- ----------------------------------------------------------
- --------------------
</TABLE>
22
<PAGE>
- ----------------------------------------------------------
- ---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
14. CAPITAL LOSS CARRYFORWARDS
At December 31, 1996, the following Portfolio had,
for Federal income tax
purposes, capital loss carryforwards available to offset
future realized gains.
To the extent that these carryforward losses can be used
to offset net realized
capital gains, such gains, if any, will not be
distributed. The amount and
expiration of the carryforwards are indicated below.
Expiration occurs on
December 31 of the year indicated:
<TABLE>
<CAPTION>
2002 2004 TOTAL
<S>
<C> <C> <C>
- ----------------------------------------------------------
- ----------------------------------------------Intermediate
High Grade Portfolio................... $288,000
$3,000 $291,000 --------------------------------
- ----------------------------------------------------------
- ---------------
</TABLE>
15. SUBSEQUENT EVENT
The Board of Trustees of the Fund voted to change the
name of the Fund to
Greenwich Street Series Fund, effective July 24, 1997.
This name change does not
affect the investment policies or objectives of the Fund.
23
<PAGE>
- ----------------------------------------------------------
- ---------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout
each period:
<TABLE>
<CAPTION>
INTERMEDIATE HIGH GRADE PORTFOLIO 1997(1)
1996 1995 1994 1993 1992 ----------
- ----------------------------------------------------------
- -----------------------------------------
<S> <C>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........... $10.70
$10.60 $9.66 $10.69 $10.29 $10.24 ---------
- ----------------------------------------------------------
- ------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (2).................... 0.36
0.71 0.66 0.61 0.55 0.45
Net realized and unrealized gain (loss)...... (0.08)
(0.53) 1.00 (0.94) 0.26 0.08 ----------
- ----------------------------------------------------------
- -----------------------------------------
Total Income (Loss) From Operations............ 0.28
0.18 1.66 (0.33) 0.81 0.53
- ----------------------------------------------------------
- ---------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income........................ --
(0.08) (0.72) (0.61) (0.36) (0.48)
Net realized gains........................... --
- -- -- (0.09) (0.05) --
- ----------------------------------------------------------
- ---------------------------------------------------
Total Distributions............................ -
(0.08) (0.72) (0.70) (0.41) (0.48)
- ----------------------------------------------------------
- ---------------------------------------------------
NET ASSET VALUE, END OF PERIOD................. $10.98
$10.70 $10.60 $9.66 $10.69 $10.29
- ----------------------------------------------------------
- ---------------------------------------------------
TOTAL RETURN...................................
2.62%++ 1.69% 17.76% (3.05)% 8.00% 5.28% --
- ----------------------------------------------------------
- -------------------------------------------------
NET ASSETS, END OF PERIOD (000'S).............. $14,900
$14,736 $16,152 $13,280 $9,859 $3,621 --------
- ----------------------------------------------------------
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2)................................. 0.95%+
0.90% 0.86% 0.85% 0.85% 0.85%
Net investment income........................ 6.44+
6.35 6.63 6.57 5.25 4.75
- ----------------------------------------------------------
- --------------------------------------------------
PORTFOLIO TURNOVER RATE........................ 23%
116% 121% 90% 139% 124%
- ----------------------------------------------------------
- --------------------------------------------------</TABLE>
(1) For the six months ended June 30, 1997 (unaudited).
(2) For the Intermediate High Grade Portfolio, the
Investment adviser waived all
or part of its fees for the six months ended June 30,
1997 and the five-year
period ended December 31, 1996. In addition, IDS Life
reimbursed expenses of
$3,006, $12,616, $16,459 and $15,865 for the four-year
period ended December
31, 1995. If such fees were not waived and expenses
reimbursed, the per
share effect on net investment income and the expense
ratios would have been
as follows:
<TABLE>
<CAPTION>
PER SHARE
DECREASES TO EXPENSE RATIOS
WITHOUT FEE
NET INVESTMENT
INCOME WAIVERS AND
REIMBURSEMENTS
-----------------------------
- ---------------------- ----------------------------------
- -----------
1997 1996 1995
1994 1993 1992 1997 1996 1995 1994
1993 1992
------- ------- ------- --
- ---- ------- ------- ------- ---- ---- ----
- --- ----
<S> <C> <C> <C>
<C>
<C> <C> <C> <C> <C> <C> <C>
<C>
Intermediate High
Grade.................... $0.030 $0.020 $0.009
$0.020 $0.050 $0.130 0.98%+ 1.07% 0.94% 1.05%
1.36% 2.28%
</TABLE>
++ Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
24
<PAGE> ---------------------------------------------------
- ----------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each period:
<TABLE>
<CAPTION>
APPRECIATION PORTFOLIO 1997(1)
1996 1995 1994 1993 1992
- ----------------------------------------------------------
- -----------------------------------------------------
<S> <C>
<C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $15.86
$14.39 $11.54 $11.80 $11.13 $10.49
- ----------------------------------------------------------
- ----------------------------------------------------INCOME
(LOSS) FROM OPERATIONS:
Net investment income (2)............. 0.16
0.27 0.23 0.20 0.15 0.11
Net realized and unrealized gain
(loss)............................. 2.47
2.60 3.04 (0.32) 0.63 0.53
- ----------------------------------------------------------
- -----------------------------------------------------
Total Income (Loss) From Operations..... 2.63
2.87 3.27 (0.12) 0.78 0.64
- ----------------------------------------------------------
- -----------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income................. --
(0.25) (0.21) (0.14) (0.11)
(0.00)*
Net realized gains.................... --
(1.15) (0.21) -- -- --
- ----------------------------------------------------------
- -----------------------------------------------------
Total Distributions..................... --
(1.40) (0.42) (0.14) (0.11) (0.00)*
- ----------------------------------------------------------
- -----------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......... $18.49
$15.86 $14.39 $11.54 $11.80 $11.13
- ----------------------------------------------------------
- -----------------------------------------------------
TOTAL RETURN............................ 16.58%++
19.77% 28.84% (1.12)% 7.03% 6.13%
- ----------------------------------------------------------
- -----------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)....... $119,618
$101,232 $94,492 $80,823 $77,843 $53,450
- ----------------------------------------------------------
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2).......................... 0.80%+
0.85% 0.97% 0.88% 1.01% 1.00%
Net investment income................. 1.93+
1.59 1.65 1.75 1.35 1.61
- ----------------------------------------------------------
- ----------------------------------------------------
PORTFOLIO TURNOVER RATE................. 20%
39% 43% 61% 33% 14% ------
- ----------------------------------------------------------
- ----------------------------------------------AVERAGE
COMMISSIONS PER SHARE PAID ON
EQUITY TRANSACTIONS (3)............... $0.06
$0.06 $0.06 -- -- --
- ----------------------------------------------------------
- ----------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 1997 (unaudited).
(2) For the Appreciation Portfolio, the Investment adviser
waived all or part of
its fees for the year ended December 31, 1992. In
addition, IDS Life
reimbursed expenses of $29,950 for the year ended
December 31, 1992. If such
fees were not waived and expenses reimbursed, the per
share effect on net
investment income would have been a decrease of $0.01
and the expense ratio
would have been 1.16%.
(3) As of September 1995, the SEC instituted new
guidelines requiring the
disclosure of average commissions per share.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
25
<PAGE> ---------------------------------------------------
- ----------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each period:
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO
1997(1) 1996 1995 1994 1993(2) ----
- ----------------------------------------------------------
- ----------------------------------------------
<S>
<C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..................
$15.73 $12.75 $10.78 $10.30 $10.00 -------
- -----------------------------------------------------
- -------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (3)...........................
0.18 0.26 0.43 0.34 0.01
Net realized and unrealized gain....................
1.03 2.97 2.19 0.42* 0.29
- ----------------------------------------------------------
- --------------------------------------------------
Total Income From Operations..........................
1.21 3.23 2.62 0.76 0.30
- ----------------------------------------------------------
- --------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income...............................
- -- (0.07) (0.41) (0.28) --
Net realized gains..................................
- -- (0.18) (0.24) -- --
- ----------------------------------------------------------
- --------------------------------------------------
Total Distributions...................................
- -- (0.25) (0.65) (0.28) --
- ----------------------------------------------------------
- --------------------------------------------------
NET ASSET VALUE, END OF PERIOD........................
$16.94 $15.73 $12.75 $10.78 $10.30 -------
- ----------------------------------------------------------
- -------------------------------------------
TOTAL RETURN..........................................
7.69%++ 25.33% 25.04% 7.40% 3.00%++
- ----------------------------------------------------------
- --------------------------------------------------
NET ASSETS, END OF PERIOD (000'S).....................
$222,364 $171,503 $78,042 $23,196 $2,777
- ----------------------------------------------------------
- --------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3)........................................
0.80%+ 0.83% 1.00% 1.00% 0.85%+
Net investment income...............................
3.28+ 3.06 3.80 3.84 1.93+
- ----------------------------------------------------------
- -------------------------------------------------PORTFOLIO
TURNOVER RATE...............................
34% 82% 81% 118% --------------
- ----------------------------------------------------------
- -------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (4)..........................
$0.06 $0.06 $0.06 -- --
- ----------------------------------------------------------
- --------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 1997 (unaudited).
(2) For the period from December 3, 1993 (commencement of
operations) to
December 31, 1993.
(3) For the Total Return Portfolio, the Investment
adviser waived all or part
of its fees for the year ended December 31, 1994 and
the period ended
December 31, 1993. In addition, IDS Life reimbursed
expenses of $7,873 and
$1,472 for the two-year period ended December 31,
1994. If such fees were
not waived and expenses reimbursed, the per share
effect on net investment
income and the expense ratios would have been as
follows:
<TABLE>
<CAPTION>
PER SHARE EXPENSE RATIOS
DECREASES TO NET WITHOUT WAIVERS
INVESTMENT INCOME AND REIMBURSEMENTS
- -------------------------- -----------------------
- ----------
1994 1993 1994
1993
- -------- -------- -------------- ---
- ----------
<S>
<C> <C> <C> <C>
Total Return..........................................
$0.01 $0.02 1.11%
4.14%+
</TABLE>
(4) As of September 1995, the SEC instituted new
guidelines requiring the
disclosure of average commissions per share.
* The amount shown in this caption for each share
outstanding throughout the
period may not accord with the change in the
aggregate gains and losses
in the portfolio securities for the period because
of the timing of
purchases and withdrawals of shares in relation to
the fluctuating market
values of the portfolio.
++ Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
26
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This report is
submitted for the general
information of
the owners of the Smith
Barney Series
Fund. It is not authorized
for distribution
to prospective
investors unless
accompanied or preceded
by an effective
Prospectus for the Fund,
which contains
information concerning
the Fund's
investment policies, fees and
expenses, as well
as other pertinent
information.
SYMPHONY
investments are
sponsored and managed
by:
Smith Barney Inc.
and subsidiaries
SYMPHONY
is underwritten,
issued and serviced by:
IDS Life Insurance
Company and
IDS Life Insurance
Company of New York
S6225-1 A (8/97)
