SMITH BARNEY SERIES FUND
ANNUAL REPORT FOR
SYMPHONY
A Tax-Deferred Variable Annuity
[Paste up Art]
APPRECIATION PORTFOLIO
TOTAL RETURN PORTFOLIO
INTERMEDIATE
HIGH GRADE PORTFOLIO
DECEMBER 31, 1996
<P$GPCN>
ANNUAL REPORT FOR SMITH BARNEY SERIES FUND
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Dear Investor:
We are pleased to provide you with the annual report for
Smith Barney Series
Fund -- Intermediate High Grade, Appreciation and Total
Return Portfolios
("Portfolios") for the year ended December 31, 1996. 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. All
total return figures
given in this report are cumulative and exclude the effect
of sales charges. A
detailed summary of performance and current holdings for
each individual
Portfolio can be found in the appropriate sections that
follow in the report.
MARKET AND ECONOMIC OVERVIEW
The stock market continued its impressive climb in 1996,
soaring to record
levels by year end, while the bond market struggled because
of investor concerns
that the U.S. economy was overheating. The economy in 1996,
which had moderate
inflation, stable to lower interest rates, and strong
corporate earnings growth,
proved to be quite favorable not only for the domestic
equity markets, but
worldwide equity markets as well. Over the year, Standard
and Poor's 500 Index
("S&P 500"), a capitalization weighted-index of 500 widely
held common stocks,
gained 22.95%, driven primarily by the strong appreciation
of
large-capitalization stocks. In its only action all year,
the Federal Reserve
Board (the "Fed") lowered the discount rate from 5.25% to
5%. (The discount rate
is the interest rate the federal government charges banks
for overnight loans.)
The rate of inflation, as measured by the Consumer Price
Index, remained a
modest 3% in 1996. Investors also signaled their approval of
the continuance of
a divided federal government and the recently elected
Republican majority in
Congress with a vigorous post-election rally.
Disappointing earnings reports from the technology and
healthcare sectors caused
many investors to believe these stocks had become overvalued
and unable to
sustain their spectacular recent growth rates, and that
triggered a mid-year
correction. In our view, this correction has been healthy
for the stock market
because it removed some excessive speculation and paved the
way for more
sustainable economic growth. Seeking stability and
liquidity, investors
gravitated towards blue chip and large-capitalization
stocks. The Dow Jones
Industrial Average, a price-weighted average of 30 actively
traded blue chip
stocks, rose 26% for the year, closing at 6448.
Conversely, the domestic bond market experienced significant
volatility as
reports of a stronger than expected U.S. economy were
released throughout the
year. Bond prices fluctuated while investors monitored key
economic indicators.
Jobless claims rose slightly in January, attributable mostly
to an especially
harsh winter on the east coast, and then dropped steadily to
its lowest point in
years. At the end of the year, the unemployment rate was
approximately 5.3%.
Higher employment, coupled with a surge in consumer
spending, lead many bond
investors to think the economy was growing faster than
expected, which would
cause inflation ultimately to rise. Although U.S. Treasuries
performed well in
the fall, especially in the months of October and November,
renewed fears of
inflation and the specter of a possible rate hike by the Fed
pushed down prices
of the benchmark 30-year Treasury bonds, driving its yield
up 0.70% to finish
the year at 6.64%.
Stock markets in Germany and Great Britain posted gains
comparable to those in
the United States while Japan's financial markets continued
to falter. On the
other hand, emerging market debt investments flourished
during the reporting
period. For example, The J.P. Morgan Emerging Markets Bond
Index (a basket of
popular debt instruments from representative countries in
Europe, Asia, Africa,
and Latin America) jumped 40% for the year, making emerging
market bonds one of
the few investments that exceeded the performance of stocks
in 1996.
Looking ahead to 1997, we anticipate a continuation of this
favorable economic
environment for financial assets. We believe that large-
capitalization growth
stocks, which significantly outperformed other segments of
the market in 1996,
should hold their gains but experience less appreciation in
1997. On the other
hand, small and mid-capitalization stocks, which were
relatively flat in 1996,
should show better performance. With respect to the fixed-
income market, we do
not anticipate any major development that will cause the
market to move
dramatically in either direction. In our view, the bulk of
any returns in
fixed-income investments will probably come from coupon
interest and not price
appreciation.
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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
year ended December
31, 1996, the Intermediate High Grade Portfolio had a total
return of 1.69%,
slightly underperforming the Lehman Brothers Government
Corporate Bond Index
total return of 2.9%. (The Lehman Brothers
Government/Corporate Bond Index is an
unmanaged index composed of U.S. Government Treasuries and
agency securities,
corporate, and Yankee bonds.)
As of December 31, 1996, approximately 100% of the
Intermediate High Grade
Portfolio was invested in securities rated investment grade
by Standard and
Poor's Corporation or Moody's Investors Service Inc., with
80% of the
Portfolio's investments rated "AA" or better. (Standard and
Poor's Corporation
and Moody's Investors Service Inc. are two major credit
reporting and bond
rating agencies.) The following is a breakdown of the
Portfolio's composition as
of December 31, 1996:
<TABLE>
<CAPTION>
SECURITY
PERCENTAGE OF PORTFOLIO
----------------------------------------------------
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<S>
<C>
Cash Equivalents
2.6%
Asset-Backed Securities
3.5
Mortgage-Backed Securities
13.5
U.S. Government and Agency Obligations
20.0
Corporate Bonds and Notes
60.4
</TABLE>
After rising above 7% earlier in the year, reports of a weak
housing market and
a slowing consumer debt rate indicated an economic slowdown
and sparked a strong
rally in the U.S. Treasury market in October and November.
Toward the end of the
year, signs of a strengthening economy surfaced and bond
markets began to trade
lower in December.
Despite having five fewer shopping days during the holiday
season, consumers
increased their spending by approximately 5% over the same
period last year. In
addition, rising production among manufacturers, higher
energy prices, and a
drop in unemployment to a historically low rate of about
5.3% all contributed to
heightened investor concerns over rising inflation.
In December, we lowered our average bond maturity and
increased our holdings of
higher yielding U.S. agency mortgage-backed securities and
callable bonds. In
the corporate sector, we are watching the market closely,
searching for
opportunities in high quality debt issues while focusing on
maturity structure
and sound credit fundamentals as well as a competitive
yield. Given the current
economic climate, we feel that an acceleration in economic
growth will likely
lead to higher short-term interest rates. We also believe
that this recent
growth is a seasonal occurrence that is not likely to lead
to a prolonged
expansion of the economy. Over the next six months we will
be looking for signs
of a slower U.S. economy and a more positive interest rate
environment. We
remain confident that this strategy will deliver competitive
returns in the
coming year.
APPRECIATION PORTFOLIO
Coming out of a very strong 1995, our strategy was to
position the Portfolio to
have some downside protection, along with the potential for
appreciation. For
the year ended December 31, 1996, the Portfolio had a total
return of 19.77%,
trailing slightly the S&P 500 Index, which gained 22.95%
over the same time
period.
Last year, we expressed caution coming off the terrific
stock market of 1995.
Clearly, our caution, which was expressed in the form of
cash reserves and the
sale of some of our seemingly overpriced stocks, was
misplaced. However, we were
able to provide shareholders with a competitive return with
lower levels of risk
than the stock market as a whole. Our goal has always been
to deliver consistent
positive returns over the long term. Over the past six years
we have owned great
companies, allowing them to compound earnings and dividend
growth, and taking
some money off the table when the market seemed euphoric.
Core positions are
maintained for very long periods of time. Such stocks as
Johnson & Johnson,
Minnesota Mining and Manufacturing, Procter and Gamble, and
Wal-Mart have been
represented in the Portfolio since its inception.
The rapid rise in interest rates in early 1996 had no
negative impact on stock
prices. In our view, this is attributable to two factors --
rising productivity
leading to sharp profit growth, and big inflows of money in
the market as more
and more people across the country decided to invest. With
the exception of a
brief dip in July, the stock market seemed to have a life of
its own. Corporate
earnings increased at a good pace, but the price investors
were willing to pay
for those earnings went up even faster. For some of our long-
time holdings such
as Coca Cola, Microsoft, and Gillette, stock prices went to
levels we viewed
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as extreme, and some profits were taken. On the other hand,
we also found stocks
that seemed to offer compelling value. Allstate, for
example, became the
Portfolio's top position as its operations were
strengthening rapidly and
sharply, a fact that many investors were slow to notice.
Other insurance stocks
were selected for the Portfolio as well as based on our
perception they were
undervalued relative to their prospects. We believe that the
insurance group is
undergoing a transformation similar to that experienced by
the banking sector
during the last two years. In short, it appears companies
are exiting low return
businesses and focusing on better capital management to
enhance shareholder
returns. In our view, Chubb and Hartford Insurance are clear
examples of this
trend.
During the reporting period, energy stocks were and still
remain prominent
holdings of the Appreciation Portfolio. Our prediction a
year ago of surprises
on the upside for oil prices was on the button and stocks
such as Amoco, Mobil,
Amerada Hess, Unocal, and Royal Dutch began to rise as
investors began to
realize that these energy stocks offered better-than-average
dividends,
lower-than-average valuations and improving fundamentals.
Healthcare companies continue to be a favorite long-term
theme for the
Portfolio, and the presence of Johnson & Johnson and Merck
in its top-ten
holdings attests to this fact. Earnings growth for many
healthcare companies has
continued in the mid-teens range driven primarily by new
products. Technology
has been more of a challenge for us, and Intel has been our
focus stock with
smaller, but profitable positions in Hewlett Packard, Texas
Instruments and IBM.
However, we have been underweighted in other areas of
technology based on our
fears of rapid product obsolescence. Finally, our biggest
disappointment of the
year was AT&T, where despite a huge restructuring, the
company continues to face
heavy competition in its core long-distance business.
After many years of reminding investors of the wisdom of
owning stocks, we are
now in the peculiar position of being asked why we have cash
reserves, since the
stock market is obviously such a great place to be. In other
words, people have
asked us: "Why the caution over the past year, and
especially now, when the U.S.
economy is performing well?" It is not because we expect a
recession (we do
not); or that we expect inflation to surge (we do not); or
that we expect
interest rates to soar (we do not). Rather, we have remained
cautious because
the rise in the stock market over the past few years has
discounted an awful lot
of good news, and leaves little margin for accidents or
disappointments. At
current levels of valuation, everything needs to continue to
go right for stocks
to advance materially, while not much needs to go wrong for
prices to stumble.
We will continue to try and provide reasonable returns by
owning the best
companies we can find, while building a cushion against the
market volatility
that has lately become so prevalent.
TOTAL RETURN PORTFOLIO
During 1996, the value of an investment in the Total Return
Portfolio increased
25.33% versus 22.95% for the S&P 500. However, these
performance figures do not
begin to tell the story of the Total Return Portfolio in
1996 because this was a
very unusual year in many respects.
Factors Affecting Performance in 1996
It would be easy to conclude that the performance of the
Total Return Portfolio
mirrored that of the S&P 500 and most of its holdings showed
appreciation
consistent with that of this leading index. Nothing could be
further from the
truth. In reality, 1996 was a year in which a favored few
stocks did exceedingly
well while most lagged behind. For example, the largest 25
names in the S&P 500
accounted for more than 50% of the S&P 500's gain of 22.95%
for the year,
indicating that the returns for the remaining 475 stocks
which make up this
index failed to reach the overall return for the index.
Therefore, if a
portfolio were overweighted in the largest companies in the
S&P 500, it had a
much better chance of matching or exceeding the index's
return for 1996.
The Total Return Portfolio had only one company in the top
25 largest within the
S&P 500 and that company (Bristol Myers) accounted for about
1.3% of total
investments. In light of that development, how were we able
to slightly
outperform the S&P 500 in 1996?
In late 1995, we identified the REIT (real estate investment
trust) sector as
having compelling investment characteristics. The Total
Return Portfolio has
several objectives, one of which is to maintain a portfolio
yield of 33% more
than the S&P 500, which means we closely examined sectors of
the market where
dividends and current income are important. Our analysis
revealed that REITs had
performed poorly for most of the previous year and yet their
yields relative to
intermediate bonds and utility yields, possible competing
investments, were at
all time highs. It seemed to us that the REIT sector
represented the
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best of all possible worlds because it offered high and
secure yields with
prospects for significant capital appreciation. In fact,
during 1996, the REIT
sector advanced 33%, on a total return basis, and our
average weighting in the
group was approximately 20%.
A second area which helped the Total Return Portfolio in
1996 was energy, where
we were overweighted by more than 50%. Energy accounts for
about 9% of the S&P
500. Rising oil and natural gas prices, cold weather, and
low inventory levels
translated into higher prices for companies involved in the
energy business.
Many issues advanced 30-50% during the year.
Although we have cut back rather dramatically on our
financial services
exposure, we maintained a commitment during 1996 which
approximated the S&P 500
weighting of 14-15%. Many financial services companies
appreciated significantly
more than the leading indexes during the year. The Total
Return Portfolio had a
minimal exposure to technology in 1996 and maintained an
average cash position
during 1996 of 18%.
Recent Changes
In recent months, we have reduced our exposure to financial
service issues. Late
in 1996, there appeared to be a growing consensus that
interest rates had
nowhere to go but down and 70% of bond advisors indicated
they were bullish on
bond market prospects. This extreme level of conviction
suggested that we might
lighten our positions in financial issues in light of their
outstanding
performance for most of 1996.
One area in which we committed funds was communications
services which covers
companies such as AT&T, GTE, and U.S. West. During the
fourth quarter of last
year, these high yielding stocks were selling near their
year's low, reflecting
bearish sentiment surrounding the group. Many analysts felt
these companies were
ill-equipped to compete in the markets opened up by
telecommunications
deregulation that became effective during 1996. However,
these issues' low share
prices seemed to discount many of the risks and gave little
credit for
"incumbency." Almost every week, new technological
innovations or inventions are
announced that enable existing companies to compete more
effectively with new
entrants. Communications services now account for
approximately 9% of the assets
in the Portfolio.
Looking Ahead Into 1997
Cash flows into mutual funds continue to set new records and
the narrow,
large-capitalization rally shows no sign of ending. Some
household names, which
are outstanding companies, now carry price-to-earnings
ratios in the range of 30
to 40. (Price-to-earnings ratios, or P/E ratios, compares a
stock's price to its
dividends and is a common method used by investors to
evaluate a stock's worth.
High P/E ratios may indicate that an individual stock is
currently overvalued by
the market relative to its present earning power.) We think
these valuations are
excessive and we believe the market rally will eventually
broaden to include a
wider range of companies.
Moreover, we believe yield has been ignored by many
investment decision makers
and we are actively looking for convertible bonds and other
higher yielding
issues. Yield now accounts for the lowest percentage of
total return for stocks
over the last 20 years. Paying somewhat more attention to
higher yielding common
stocks makes sense to us today in light of these trends.
A debate between some of the largest companies in the
brokerage and investment
banking business had begun in 1996. One side argues that
business is strong and
will continue that way as the year unfolds. The other side
points to high debt
levels at the consumer level, low employment, and the
likelihood that corporate
profits will be growing more slowly to bolster its case that
the economy will
weaken in the immediate future.
We suspect that the key to the stock market and the economy
in 1997 lies with
Alan Greenspan, who has made his position clear. The Federal
Reserve Chairman
would like a trading range in the stock market in 1997 that
is neither too
"excessive" nor too weak. Greenspan's concern is that a
frothy stock market and
the liquidity it generates could spill over into real estate
and other markets
and ultimately lead to higher inflation. Although we are far
from the Japan of
1990, the lesson of that bubble economy are all too clear
seven years later.
Parting Thoughts
The Total Return Portfolio is designed to be the low risk
equity alternative
within the annuity program. We limit our investments to 30-
35 names and hope to
achieve a long-term annual return of 12% from a combination
of capital
appreciation, current income and selected covered writing of
options on stocks
in the portfolio.
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ANNUAL REPORT FOR SMITH BARNEY SERIES FUND
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Since its inception at the end of 1993, the Total Return
Portfolio has generated
returns comparable to the S&P 500. The average annualized
return for the Total
Return Portfolio in the last three years has been about 19%.
We have been able
to accomplish this performance with 80% of the risk of the
broad market.
Although the last few years have been gratifying, each year
presents new
challenges and the need to manage client assets prudently.
We look forward to
earning your continuing support in 1997 and we thank you for
your confidence in
our investment management approach.
In closing, we would like to thank you for your investment
in the Smith Barney
Series Fund. We look forward to serving your financial needs
in the years ahead.
Sincerely,
[SIG]
Heath B. McLendon
Chairman and Chief Executive Officer
January 31, 1997
5
<P$GPCN>
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PERFORMANCE COMPARISON -- INTERMEDIATE HIGH GRADE PORTFOLIO
AS OF 12/31/96
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN.69%
- ----------------------------------------------
<S> <C>
Year Ended 12/31/96 1.69%
Five Years Ended 12/31/96 5.71%
10/16/91* through 12/31/96 5.95%
CUMULATIVE TOTAL RETURN
- ----------------------------------------------
10/16/91* through 12/31/96 35.18%
* Commencement of operations
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</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 December 31, 1996 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 Mortgage-Backed
Securities Index and
includes treasury issues, agency issues, corporate bond
issues and mortgage-
backed securities. 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.
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<TABLE>
<CAPTION>
LEHMAN BROTHERS
GOVERNMENT/
MEASUREMENT PERIOD INTERMEDIATE HIGH AGGREGATE BOND
CORPORATE
(FISCAL YEAR COVERED) GRADE PORTFOLIO INDEX
BOND INDEX
<S> <C> <C>
<C>
10/16/91 10000.00 10000.00
10000.00
12/91 10240.00 10507.00
10440.00
12/92 10781.00 11285.00
11231.00
12/93 11643.00 12386.00
12470.00
12/94 11287.00 12024.00
12032.00
12/95 13292.00 14246.00
14348.00
12/31/96 13518.00 14763.00
14764.00
</TABLE>
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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.
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PERFORMANCE COMPARISON -- APPRECIATION PORTFOLIO AS OF
12/31/96
<TABLE>
<CAPTION>
- -----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------------------
<S> <C>
Year Ended 12/31/96 19.77%
Five Years Ended 12/31/96 11.65%
10/16/91* through 12/31/96 12.17%
CUMULATIVE TOTAL RETURN
- -----------------------------------------------
10/16/91* through 12/31/96 81.97%
* Commencement of operations
- -----------------------------------------------
</TABLE>
The chart to the right compares the growth in value of a
hypothetical $10,000
investment in Appreciation Portfolio on October 16, 1991
(commencement of
operations) through December 31, 1996 with that of a similar
investment in the
Standard & Poor's 500 Index. Index information is available
at month-end only;
therefore, the closest month- end to inception date of the
Portfolio has been
used. The Standard & Poor's 500 Index is an unmanaged index
composed of 500
widely held common stocks listed on the New York Stock
Exchange, American Stock
Exchange and over-the-counter market.
- ------------------------------------------------------------
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<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) APPRECIATION PORTFOLIO STANDARD
INDEX
<S> <C> <C>
10/16/91 10000.00
10000.00
12/91 10490.00
10838.00
12/92 11133.00
11668.00
12/93 11926.00
12844.00
12/94 11792.00
13012.00
12/95 15193.00
17898.00
12/31/96 18197.00
22005.00
</TABLE>
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The performance shown represents past performance and is not
a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses associated
with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
6
<P$GPCN>
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PERFORMANCE COMPARISON -- TOTAL RETURN PORTFOLIO AS OF
12/31/96
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------
<S> <C>
Year Ended 12/31/96 25.33%
12/3/93* through 12/31/96 19.56%
CUMULATIVE TOTAL RETURN
- ----------------------------------------------
12/3/93* through 12/31/96 73.35%
* Commencement of operations
- ----------------------------------------------
</TABLE>
The chart to the right compares the growth in value of a
hypothetical $10,000
investment in Total Return Portfolio on December 3, 1993
(commencement of
operations) through December 31, 1996 with that of a similar
investment in the
Standard & Poor's 500 Index. Index information is available
at month-end only;
therefore, the composed of 500 widely held common stocks
listed on the New York
Stock Exchange, American Stock Exchange, and over-the-
counter market. [/TABLE]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) TOTAL RETURN PORTFOLIO STANDARD
INDEX
<S> <C> <C>
12/3/93 10000.00
10000.00
12/93 10300.00
10121.00
12/94 11062.00
10253.00
12/95 13832.00
14103.00
12/31/96 17335.00
17340.00
</TABLE>
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The performance shown represents past performance and is not
a guarantee of
future results. A mutual fund's share price and investment
return will vary with
market conditions, and the principal value of shares, when
redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and
measure net investment
income and capital gain or loss from portfolio investments
assuming reinvestment
of dividends. The returns do not reflect expenses associated
with the subaccount
such as administrative fees, account charges and surrender
charges which, if
reflected, would reduce the performance shown.
- ------------------------------------------------------------
- --------------------
7
<P$GPCN>
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SCHEDULES OF INVESTMENTS
DECEMBER 31, 1996
INTERMEDIATE HIGH GRADE PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 20.0%
$ 170,000 U.S. Treasury Notes, 7.750% due
12/31/99..................................... $ 177,907
U.S. Treasury Bonds:
1,500,000 8.125% due
8/15/19.....................................................
...... 1,734,405
700,000 7.125% due
2/15/23.....................................................
...... 731,059
250,000 Federal Home Loan Bank, 7.045% due
6/27/02................................... 248,840
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost -- $2,930,026)............ 2,892,211
- ------------------------------------------------------------
- ---------------------------------------------
ASSET-BACKED SECURITY -- 3.5%
500,000 Carco Auto Loan Master, 7.875% due 7/15/99
(Cost -- $512,578)................ 506,880
- ------------------------------------------------------------
- ---------------------------------------------
MORTGAGE-BACKED SECURITIES -- 13.5%
1,010,242 Government National Mortgage Association,
6.500% due 2/15/26................. 963,195
1,000,000 Government National Mortgage Association,
7.500% due 7/15/26................. 999,370
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (Cost --
$1,991,459)........................ 1,962,565
- ------------------------------------------------------------
- ---------------------------------------------
CORPORATE BONDS AND NOTES -- 60.4%
- ------------------------------------------------------------
- ---------------------------------------------
BANKING -- 21.5%
500,000 ABN AMRO Bank, Sub. Debentures, 7.550% due
6/28/06........................... 518,125
500,000 Capital Desjardins Inc., 7.370% due 8/8/05
(a)............................... 506,250
500,000 Malayan Banking, N.Y., Sub. Debentures, 7.125%
due 9/15/05................... 496,875
500,000 National Westminster Bank, N.Y., 9.450% due
5/1/01........................... 548,750
500,000 Norwest Corp., 6.250% due
4/15/99............................................
500,625
500,000 Republic New York Corp., Debentures, 9.500%
due 7/1/00....................... 545,000
- ------------------------------------------------------------
- ---------------------------------------------
3,115,625
- ------------------------------------------------------------
- ---------------------------------------------
FINANCIAL SERVICES -- 14.9%
700,000 Associates Corp. N.A., 8.180% due
2/15/05.................................... 751,625
700,000 Exxon Capital Corp., 7.875% due
8/15/97...................................... 709,324
200,000 General Electric Capital Corp., Notes, 8.100%
due 1/26/99.................... 207,500
500,000 Santander Financial Corp., 7.000% due
4/1/06................................. 496,875
- ------------------------------------------------------------
- ---------------------------------------------
2,165,324
- ------------------------------------------------------------
- ---------------------------------------------
GAS PIPELINE -- 7.6%
500,000 HNG Internorth, 9.625% due
3/15/06...........................................
586,875
500,000 Transcontinental Gas Pipeline Corp., 7.080%
due 7/15/26...................... 509,375
- ------------------------------------------------------------
- ---------------------------------------------
1,096,250
- ------------------------------------------------------------
- ---------------------------------------------
HEALTHCARE -- 6.1%
386,000 Hospital Corp., 9.000% due
3/15/16...........................................
387,447
500,000 Service Corp. International, 7.000% due
6/1/15............................... 502,500
- ------------------------------------------------------------
- ---------------------------------------------
889,947
- ------------------------------------------------------------
- ---------------------------------------------
INSURANCE -- 3.3%
500,000 Metropolitan Life Insurance Co., 6.300% due
11/1/03.......................... 483,125
- ------------------------------------------------------------
- ---------------------------------------------
INTEGRATED OIL -- 3.5%
500,000 Shell Oil Co., 6.950% due
12/15/98...........................................
508,750
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<P$GPCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
INTERMEDIATE HIGH GRADE PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
TECHNOLOGY -- 3.5%
$ 500,000 Philips Electronics Corp., 7.200% due
6/1/26................................. $ 505,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost --
$8,793,220)......................... 8,764,021
- ------------------------------------------------------------
- ---------------------------------------------
REPURCHASE AGREEMENT -- 2.6%
374,000 Chase Manhattan Bank, 6.497% due 1/2/97;
Proceeds at maturity -- $374,135;
(Fully collateralized by U.S. Treasury Notes,
5.875% due 10/31/98;
Market value -- $381,936) (Cost --
$374,000)................................. 374,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$14,601,283*)............................. $14,499,677
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Security exempt from registration under Rule 144A of the
Securities Act of
1933. These securities may be resold in transactions
that are exempt from
registration, normally to qualified institutional
buyers.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<P$GPCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
COMMON STOCKS -- 87.2%
- ------------------------------------------------------------
- ---------------------------------------------
BASIC INDUSTRIES -- 5.2%
5,000 Aluminum Co. of
America....................................................
$ 318,750
19,500 E.I. du Pont De Nemours & Co.
............................................. 1,840,313
15,000 Hercules, Inc.
............................................................
648,750
24,000 IMC Global, Inc.
..........................................................
939,000
25,000 Olin Corp.
............................................................
.... 940,625
9,100 St. Joe Paper Co.
.........................................................
591,500
- ------------------------------------------------------------
- ---------------------------------------------
5,278,938
- ------------------------------------------------------------
- ---------------------------------------------
CAPITAL GOODS -- 9.8%
21,000 AlliedSignal Inc.
.........................................................
1,407,000
14,000 AMP, Inc.
............................................................
..... 537,250
10,252 Boeing Co.
............................................................
.... 1,090,557
7,000 Emerson Electric Co.
......................................................
677,250
17,000 General Electric Co.
......................................................
1,680,875
20,000 Honeywell, Inc.
...........................................................
1,315,000
16,000 Kennametal, Inc.
..........................................................
622,000
7,000 Lockheed Martin Corp.
.....................................................
640,500
2,400 Newport News Shipbuilding Inc.
(a)......................................... 36,000
15,000 Tyco International Ltd.
...................................................
793,125
36,000 WMX Technologies, Inc.
....................................................
1,174,500
- ------------------------------------------------------------
- ---------------------------------------------
9,974,057
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER DURABLES -- 3.3%
19,000 Chrysler Corp.
............................................................
627,000
26,000 General Motors Corp.
......................................................
1,449,500
11,000 Goodyear Tire & Rubber Co.
................................................
565,125
6,000 Rockwell International Corp.
(a)...........................................
365,250
12,000 Stanley
Works.......................................................
....... 324,000
- ------------------------------------------------------------
- ---------------------------------------------
3,330,875
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER NON-DURABLES -- 11.1%
10,000 CPC International, Inc.
...................................................
775,000
43,000 Eastman Kodak Co.
.........................................................
3,450,750
10,000 First Brand Corp.
.........................................................
283,750
11,000 Gap, Inc.
............................................................
..... 331,375
12,000 Gillette Co.
............................................................
.. 933,000
17,000 J.C. Penny Co.
............................................................
828,750
10,000 Kimberly-Clark Corp.
......................................................
952,500
10,000 Mattel, Inc.
............................................................
.. 277,500
25,500 Newell Co.
............................................................
.... 803,250
13,000 Procter & Gamble Co.
......................................................
1,397,500
7,000 Unilever NV, New York
Shares...............................................
1,226,750
- ------------------------------------------------------------
- ---------------------------------------------
11,260,125
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<P$GPCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
CONSUMER SERVICES -- 8.6%
19,000 Gannett Co.
............................................................
... $ 1,422,625
27,000 McDonalds Corp.
...........................................................
1,221,750
11,000 Meredith Corp.
............................................................
580,250
30,000 New York Times Co., Class A
Shares.........................................
1,140,000
12,000 Scandinavian Broadcasting System SA
(a).................................... 208,500
6,000 Scholastic Corp.
(a).......................................................
403,500
1,800 TCI Satellite Entertainment Inc., Class A
Shares (a)....................... 17,775
16,000 The Walt Disney Production Co.
............................................ 1,114,000
13,000 Time Warner, Inc.
.........................................................
487,500
8,500 Tribune Co.
............................................................
... 670,438
5,000 UAL Corp.
(a).........................................................
..... 312,500
50,000 Wal-Mart Stores, Inc.
.....................................................
1,143,750
- ------------------------------------------------------------
- ---------------------------------------------
8,722,588
- ------------------------------------------------------------
- ---------------------------------------------
DIVERSIFIED CONGLOMERATE -- 2.5%
25,200 Minnesota Mining & Manufacturing Co.
...................................... 2,088,450
10,000 Thermo Electron Corp.
.....................................................
412,500
- ------------------------------------------------------------
- ---------------------------------------------
2,500,950
- ------------------------------------------------------------
- ---------------------------------------------
ENERGY -- 8.9%
20,000 Amerada Hess Corp.
........................................................
1,157,500
27,800 Amoco Corp.
............................................................
... 2,237,900
2,000 Atlantic Richfield Co.
....................................................
265,000
10,000 Chevron Corp.
............................................................
. 650,000
1,116 El Paso Natural Gas Co.
...................................................
56,358
10,000 Enron Corp.
............................................................
... 431,250
20,500 Mobil Corp.
............................................................
... 2,506,125
6,000 Royal Dutch Petroleum, New York
Shares..................................... 1,024,500
12,000 Tenneco, Inc.
............................................................
. 541,500
8,000 USX Marathon
Group.......................................................
.. 191,000
- ------------------------------------------------------------
- ---------------------------------------------
9,061,133
- ------------------------------------------------------------
- ---------------------------------------------
FINANCIAL SERVICES -- 15.4%
55,000 Allstate Corp.
............................................................
3,183,125
28,000 American Express Co.
......................................................
1,582,000
10,000 American International Group, Inc.
........................................ 1,082,500
8,000 Associated First Capital Corp.
............................................ 353,000
25,520 Chase Manhattan Corp.
.....................................................
2,277,660
23,000 Chubb Corp.
............................................................
... 1,236,250
5,000 CNA Financial Corp.
(a)....................................................
535,000
24,000 Federal National Mortgage
Association......................................
894,000
5,000 First of America Bank Corp.
...............................................
300,625
10,000 First Virginia Banks, Inc.
................................................
478,750
15,000 Household International, Inc.
............................................. 1,383,750
6,000 ITT Hartford Group, Inc.
..................................................
405,000
10,000 Leucadia National Corp.
...................................................
267,500
6,000 Union Planters Corp.
......................................................
234,000
5,000 Wells Fargo & Co.
.........................................................
1,348,750
- ------------------------------------------------------------
- ---------------------------------------------
15,561,910
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<P$GPCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S> <C>
<C>
HEALTHCARE -- 9.9%
26,000 Abbott
Laboratories................................................
........ $ 1,319,500
22,000 American Home Products Corp.
..............................................
1,289,750
6,000 Amgen, Inc.
(a).........................................................
... 326,250
14,000 Bristol-Myers Squibb
Co....................................................
1,522,500
10,000 Hillenbrand Industries,
Inc................................................
362,500
37,000 Johnson &
Johnson.....................................................
..... 1,840,750
29,000 Merck & Co.,
Inc.........................................................
.. 2,298,250
5,000 SmithKline Beecham ADR
....................................................
340,000
10,000 Warner Lambert Co.
........................................................
750,000
- ------------------------------------------------------------
- ---------------------------------------------
10,049,500
- ------------------------------------------------------------
- ---------------------------------------------
TECHNOLOGY -- 7.9%
6,000 Electronic Data System
Corp................................................
259,500
23,000 Hewlett-Packard Co.
.......................................................
1,155,750
15,000 Intel Corp.
............................................................
... 1,964,055
7,000 International Business Machines Corp.
..................................... 1,057,000
8,426 Lucent Technologies, Inc.
(a)..............................................
389,703
6,000 Microsoft Corp.
(a)........................................................
495,750
12,000 Teradyne, Inc.
(a).........................................................
292,500
1,000 Texas Instruments, Inc.
...................................................
63,750
45,000 Xerox
Corp........................................................
......... 2,368,125
- ------------------------------------------------------------
- ---------------------------------------------
8,046,133
- ------------------------------------------------------------
- ---------------------------------------------
TELECOMMUNICATION -- 3.7%
26,000 AT&T
Corp........................................................
.......... 1,131,000
20,000 Bell Atlantic Corp.
.......................................................
1,295,000
13,500 GTE
Corp........................................................
........... 614,250
10,000 SBC Communications, Inc.
..................................................
517,500
18,000 Tele-Communications Inc., Class A Shares
(a)............................... 235,128
- ------------------------------------------------------------
- ---------------------------------------------
3,792,878
- ------------------------------------------------------------
- ---------------------------------------------
TRANSPORTATION -- 0.9%
3,000 AMR Corp. (a)
............................................................
. 264,376
22,000 Union Pacific
Corp........................................................
. 643,501
- ------------------------------------------------------------
- ---------------------------------------------
907,877
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL COMMON STOCKS (Cost --
$63,450,007)..................................
88,486,964
- ------------------------------------------------------------
- ---------------------------------------------
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
REPURCHASE AGREEMENT -- 12.8%
$12,960,000 Citibank, 6.893% due 1/2/97; Proceeds at
maturity -- $12,964,963; (Fully
collateralized by U.S. Treasury Notes, 5.750%
due 12/31/98; Market
value -- $13,236,126) (Cost --
$12,960,000)................................ 12,960,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS --100% (Cost --
$76,410,007*)............................ $101,446,964
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<P$GPCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
<S> <C>
<C>
- ------------------------------------------------------------
- ---------------------------------------------
COMMON STOCKS -- 74.6%
- ------------------------------------------------------------
- ---------------------------------------------
BEVERAGES -- 2.4%
140,000 PepsiCo,
Inc.........................................................
...... $ 4,112,500
- ------------------------------------------------------------
- ---------------------------------------------
BROADCAST -- 2.0%
100,000 Viacom, Inc., Non-Voting Shares
(a)........................................ 3,487,500
- ------------------------------------------------------------
- ---------------------------------------------
CHEMICALS -- 3.7%
61,000 BetzDearborn, Inc.
........................................................
3,568,500
50,000 Eastman Chemical Co.
......................................................
2,762,500
- ------------------------------------------------------------
- ---------------------------------------------
6,331,000
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER CYCLICALS -- 3.6%
42,000 Eastman Kodak Co.
.........................................................
3,370,500
60,000 Weyerhauser Co.
...........................................................
2,842,500
- ------------------------------------------------------------
- ---------------------------------------------
6,213,000
- ------------------------------------------------------------
- ---------------------------------------------
ENERGY -- 10.1%
60,000 Amoco Corp.
............................................................
... 4,830,000
16,000 Atlantic Richfield Co.
....................................................
2,120,000
75,000 Coastal Corp.
............................................................
. 3,665,625
180,000 Oryx Energy Co.
(a)........................................................
4,455,000
50,000 Phillips Petroleum Co.
....................................................
2,212,500
- ------------------------------------------------------------
- ---------------------------------------------
17,283,125
- ------------------------------------------------------------
- ---------------------------------------------
FINANCIAL SERVICES -- 5.2%
70,000 Bank of New York Co., Inc.
................................................
2,362,500
21,000
Citicorp....................................................
............... 2,163,000
150,000 H & R Block, Inc.
.........................................................
4,350,000
- ------------------------------------------------------------
- ---------------------------------------------
8,875,500
- ------------------------------------------------------------
- ---------------------------------------------
HEALTHCARE -- 3.6%
21,000 Bristol-Myers Squibb Co.
..................................................
2,283,750
200,000 Value Health, Inc.
(a).....................................................
3,900,000
- ------------------------------------------------------------
- ---------------------------------------------
6,183,750
- ------------------------------------------------------------
- ---------------------------------------------
HOTEL/RESTAURANT -- 2.6%
325,000 Innkeepers USA
Trust.......................................................
4,509,375
- ------------------------------------------------------------
- ---------------------------------------------
IRON/STEEL -- 2.7%
275,000 Oregon Steel Mills, Inc.
..................................................
4,606,250
- ------------------------------------------------------------
- ---------------------------------------------
MINING -- 1.7%
200,000 Homestake Mining Co.
......................................................
2,850,000
- ------------------------------------------------------------
- ---------------------------------------------
OIL SERVICES -- 2.7%
200,000 Occidental Petroleum Corp.
................................................
4,675,000
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<P$GPCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S> <C>
<C>
REAL ESTATE -- 12.8%
175,000 Irvine Apartment Communities, Inc.
........................................ $ 4,375,000
175,000 Rouse Co.
............................................................
..... 5,556,250
150,000 Simon DeBartolo Group, Inc.
...............................................
4,650,000
106,000 Spieker Properties, Inc.
..................................................
3,816,000
100,000 TriNet Corporate Realty Trust, Inc.
....................................... 3,550,000
- ------------------------------------------------------------
- ---------------------------------------------
21,947,250
- ------------------------------------------------------------
- ---------------------------------------------
RETAIL -- 3.9%
75,000 Sears Roebuck & Co.
.......................................................
3,459,375
106,000 Toys 'R' Us, Inc.
(a)......................................................
3,180,000
- ------------------------------------------------------------
- ---------------------------------------------
6,639,375
- ------------------------------------------------------------
- ---------------------------------------------
STORAGE -- 2.6%
150,000 Shurgard Storage Centers, Inc.
............................................ 4,443,750
- ------------------------------------------------------------
- ---------------------------------------------
TELECOMMUNICATIONS -- 11.2%
100,000 CIA Anonima Nacional Telefonos de Venezuela
ADR............................ 2,812,500
143,000 Comsat Corp.
............................................................
.. 3,521,375
100,000 GTE Corp.
............................................................
..... 4,550,000
250,000 Tele-Communications, Inc.
.................................................
3,265,625
155,000 US West Communications Inc.
...............................................
4,998,750
- ------------------------------------------------------------
- ---------------------------------------------
19,148,250
- ------------------------------------------------------------
- ---------------------------------------------
TELEPHONE - LONG DISTANCE -- 3.8%
150,000 AT&T Corp.
............................................................
.... 6,525,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL COMMON STOCKS (Cost --
$108,041,973).................................
127,830,625
- ------------------------------------------------------------
- ---------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 6.3%
49,868 Aetna, Inc., Class C Shares, Exchangeable
6.250%........................... 3,958,273
100,000 General Datacom Industries, Exchangeable
9.000% (b)........................ 2,662,500
85,000 Kmart Financing Corp., Exchangeable
7.750%................................. 4,143,750
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost --
$9,891,203).................... 10,764,523
- ------------------------------------------------------------
- ---------------------------------------------
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
CORPORATE BONDS -- 1.8%
$3,000,000 Heartland Wireless Communications, Inc.,
14.000% due 10/15/04 (b)
(Cost --
$3,000,000).................................................
...... 3,097,500
- ------------------------------------------------------------
- ---------------------------------------------
SUB-TOTAL INVESTMENTS (Cost --
$120,933,176)............................... 141,692,648
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<P$GPCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<S> <C>
<C>
REPURCHASE AGREEMENTS -- 17.3%
$ 9,645,000 Citibank, 6.893% due 1/2/97; Proceeds at
maturity -- $9,648,693; (Fully
collateralized by U.S. Treasury Notes, 5.750%
due 12/31/98; Market
value --
$9,838,184).................................................
...... $ 9,645,000
20,000,000 CS First Boston Corp., 6.495% due 1/2/97;
Proceeds at maturity --
$20,007,217; (Fully collateralized by U.S.
Treasury Notes, 7.500% due
1/31/97; Market value --
$20,409,348)......................................
20,000,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL REPURCHASE AGREEMENTS (Cost --
$29,645,000).......................... 29,645,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$150,578,176*).......................... $171,337,648
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Non-income producing security.
(b) Security exempt from registration under Rule 144A of the
Securities Act of
1933. These securities may be resold in transactions
that are exempt from
registration, normally to qualified institutional
buyers.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<P$GPCN>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C>
ASSETS:
Investments --
Cost......................................... $14,601,283
$ 63,450,007 $120,933,176
Repurchase agreements --
Cost............................... --
12,960,000 29,645,000
- ------------------------------------------------------------
- ------------------------------------------------
Investments, at
value....................................... $14,499,677
$ 88,486,964 $141,692,648
Repurchase
agreements.......................................
- -- 12,960,000 29,645,000
Cash........................................................
19,577 214 198
Receivable for Fund shares
sold............................. --
27,691 --
Dividends and interest
receivable........................... 262,898
139,251 423,650
Deferred organization
costs................................. --
- -- 6,147
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL
ASSETS................................................
14,782,152 101,614,120 171,767,643
- ------------------------------------------------------------
- ------------------------------------------------
LIABILITIES:
Payable for Fund shares
purchased........................... 11,933
151,277 99,412
Investment advisory fees
payable............................ 8,839
46,717 76,873
Administration fees
payable................................. 4,231
16,988 29,661
Accrued
expenses............................................
20,788 167,310 58,298
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL
LIABILITIES...........................................
45,791 382,292 264,244
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL NET
ASSETS..............................................
$14,736,361 $101,231,828 $171,503,399
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS:
Par value of shares of beneficial
interest.................. $ 1,377 $ 6,385
$ 10,900
Capital paid in excess of par
value......................... 14,167,887 66,984,603
139,047,085
Undistributed net investment
income......................... 960,969
1,535,683 3,780,179
Accumulated net realized gain (loss) from security
transactions and
options................................. (292,266)
7,668,200 7,905,763
Net unrealized appreciation (depreciation) of
investments... (101,606) 25,036,957 20,759,472
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL NET
ASSETS..............................................
$14,736,361 $101,231,828 $171,503,399
- ------------------------------------------------------------
- ------------------------------------------------
SHARES
OUTSTANDING............................................
1,377,431 6,384,643 10,899,666
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE, PER
SHARE.................................... $10.70
$15.86 $15.73
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<P$GPCN>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C>
INVESTMENT INCOME:
Interest..................................................
$1,102,433 $ 557,473 $ 1,295,906
Dividends.................................................
- -- 1,825,241 3,411,639
Less: Foreign withholding tax.............................
- -- (10,525) --
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL INVESTMENT INCOME...................................
1,102,433 2,372,189 4,707,545
- ------------------------------------------------------------
- ------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3).........................
60,847 536,120 665,417
Administration fees (Note 3)..............................
30,424 194,953 241,844
Shareholder communications................................
19,895 15,000 17,329
Audit and legal...........................................
17,276 18,000 13,500
Shareholder and system servicing fees.....................
12,056 12,000 12,249
Trustees' fees............................................
3,477 10,000 12,001
Amortization of deferred organization costs...............
2,890 3,533 3,231
Pricing service fees......................................
2,531 -- --
Custody...................................................
918 6,000 5,999
Registration fees.........................................
- -- -- 22,400
Other.....................................................
11,807 32,564 2,999
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL EXPENSES............................................
162,121 828,170 996,969
Less: Investment advisory and administration fee waiver
(Note 3)...............................................
(24,677) -- --
- ------------------------------------------------------------
- ------------------------------------------------
NET EXPENSES..............................................
137,444 828,170 996,969
- ------------------------------------------------------------
- ------------------------------------------------
NET INVESTMENT INCOME.......................................
964,989 1,544,019 3,710,576
- ------------------------------------------------------------
- ------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
OPTIONS (NOTES 4 AND 6):
Realized Gain (Loss) From:
Security transactions (excluding short-term
securities)..........................................
(4,603) 7,668,200 7,923,520
Options written........................................
- -- -- 139,920
- ------------------------------------------------------------
- ------------------------------------------------
NET REALIZED GAIN (LOSS)..................................
(4,603) 7,668,200 8,063,440
- ------------------------------------------------------------
- ------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of
Investments:
Beginning of year......................................
636,929 17,032,486 4,217,824
End of year............................................
(101,606) 25,036,957 20,759,472
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION (DEPRECIATION)....
(738,535) 8,004,471 16,541,648
- ------------------------------------------------------------
- ------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND OPTIONS..................
(743,138) 15,672,671 24,605,088
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS......................
$ 221,851 $ 17,216,690 $ 28,315,664
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<P$GPCN>
- ------------------------------------------------------------
- --------------------
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 $3,780,179
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<P$GPCN>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR
ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C>
OPERATIONS:
Net investment
income......................................... $
1,012,045 $ 1,457,778 $ 1,708,845
Net realized
gain.............................................
137,970 6,749,135 2,235,356
Increase in net unrealized
appreciation....................... 1,345,439
14,002,209 4,978,702
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS........................ 2,495,454
22,209,122 8,922,903
- ------------------------------------------------------------
- ------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment
income.........................................
(1,080,907) (1,410,859) (1,506,614)
Net realized
gains............................................
- -- (1,392,571) (686,521)
- ------------------------------------------------------------
- ------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS..... (1,080,907) (2,803,430)
(2,193,135)
- ------------------------------------------------------------
- ------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of
shares.............................. 2,606,497
2,790,750 48,877,204
Net asset value of shares issued for reinvestment of
dividends..................................................
1,080,907 2,803,430 2,193,135
Cost of shares
reacquired.....................................
(2,229,692) (11,330,660) (2,953,026)
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS...............................................
1,457,712 (5,736,480) 48,117,313
- ------------------------------------------------------------
- ------------------------------------------------
INCREASE IN NET
ASSETS..........................................
2,872,259 13,669,212 54,847,081
NET ASSETS:
Beginning of
year.............................................
13,280,162 80,822,616 23,195,891
- ------------------------------------------------------------
- ------------------------------------------------
END OF
YEAR*..................................................
$16,152,421 $94,491,828 $78,042,972
- ------------------------------------------------------------
- ------------------------------------------------
* Includes undistributed net investment income of:
............. $105,681 $1,457,158 $978,046
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<P$GPCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS
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. 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.
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
financial statements and
financial highlights for the other portfolios are presented
in a separate 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 market value; (d) dividend
income is recorded on the
ex-dividend date; foreign dividends are 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 $39 was reclassified to paid-in capital. Net
investment income, net
realized gains and net assets were not affected by this
change; and (k)
estimates and assumptions are required to be made regarding
assets, liabilities
and changes in net assets resulting from operations when
financial statements
are prepared. Changes in the economic environment, financial
markets and any
other parameters used in determining these estimates could
cause actual results
to differ.
In addition, for the Total Return Portfolio,
organization costs have been
deferred and are currently being amortized on a straight-
line basis over a five
year period, beginning with the commencement of operations
in December 1993.
Organization costs for the Appreciation and
Intermediate High Grade
Portfolios have been deferred and amortized on a straight-
line basis over a five
year period, beginning with the commencement of operations
in October 1991. As
of December 31, 1996, deferred organization costs had been
fully amortized for
both of these portfolios.
2. DIVIDENDS
The Fund's Board of Trustees changed the dividend
policy for all
portfolios, to declare and distribute dividends from net
investment income
annually. Net realized capital gains, if any, are also
declared and distributed
annually.
3. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION
AGREEMENT AND OTHER
TRANSACTIONS
The Fund, on behalf of the Portfolios, has entered into
an investment
advisory agreement (the "Advisory Agreement") with Smith
Barney Mutual Funds
Management Inc. ("SBMFM"). SBMFM is a wholly-owned
subsidiary of Smith Barney
20
<P$GPCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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.
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
annuity insurance 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
investment advisory
and administration fees in the amount of $16,451 and $8,226,
respectively, for
the year ended December 31, 1996.
For the year ended December 31, 1996, Smith Barney
received brokerage
commissions of $6,000.
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 year ended December 31, 1996, 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.....................................................
$17,091,528 $18,031,745
Appreciation................................................
................ 33,574,183 46,927,471
Total
Return......................................................
.......... 144,177,884 79,062,113
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
At December 30, 1996, the aggregate gross unrealized
appreciation and
depreciation of investments were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
PORTFOLIO
APPRECIATION* DEPRECIATION* (DEPRECIATION)*
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C>
Intermediate High Grade.................................
$ 65,948 $ (167,554) $ (101,606)
Appreciation............................................
25,516,064 (479,107) 25,036,957
Total Return............................................
23,183,666 (2,424,194) 20,759,472
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
* Substantially the same for Federal income tax purposes.
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.
21
<P$GPCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
As of December 31, 1996, 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 December 31, 1996, 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 year ended December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF
PREMIUMS CONTRACTS
<S>
<C> <C>
- ------------------------------------------------------------
- ------------------------------------
<CAPTION>
Options written, outstanding at December 31,
1995................. $ -- --
<S>
<C> <C>
Options written during the year ended December 31,
1996........... 1,019,861 7,353
Options cancelled in closing purchase
transactions................ (620,947) (4,213)
Options
expired...................................................
(398,914) (3,140)
- ------------------------------------------------------------
- ------------------------------------
Options written, outstanding at December 31,
1996................. $ -- --
- ------------------------------------------------------------
- ------------------------------------
</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.
22
<P$GPCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 December 31, 1996, there were no open reverse
repurchase agreements in
the Portfolio.
9. SHARES OF BENEFICIAL INTEREST
At December 31, 1996, 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
<S>
<C> <C>
- ------------------------------------------------------------
- --------------------------------------------
<CAPTION>
<S>
<C> <C>
INTERMEDIATE HIGH GRADE PORTFOLIO
Shares
sold....................................................
103,151 261,586
Shares issued on
reinvestment..................................
10,195 107,108
Shares
redeemed................................................
(260,275) (218,646)
- ------------------------------------------------------------
- --------------------------------------------
Net Increase
(Decrease)........................................
(146,929) 150,048
- ------------------------------------------------------------
- --------------------------------------------
APPRECIATION PORTFOLIO
Shares
sold....................................................
400,926 211,124
Shares issued on
reinvestment..................................
509,874 224,994
Shares
redeemed................................................
(1,094,435) (872,074)
- ------------------------------------------------------------
- --------------------------------------------
Net
Decrease...................................................
(183,635) (435,956)
- ------------------------------------------------------------
- --------------------------------------------
TOTAL RETURN PORTFOLIO
Shares
sold....................................................
4,997,848 4,028,225
Shares issued on
reinvestment..................................
168,616 186,081
Shares
redeemed................................................
(390,187) (242,324)
- ------------------------------------------------------------
- --------------------------------------------
Net
Increase...................................................
4,776,277 3,971,982
- ------------------------------------------------------------
- --------------------------------------------
</TABLE>
10. 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 $291,000
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
11. SECURITIES TRADED ON A WHEN-ISSUED OR TO-BE-
ANNOUNCED BASIS
The Intermediate High Grade and Total Return Portfolios
may from time to
time purchase securities on a when-issued or to-be-announced
("TBA") basis.
In a TBA transaction, the Portfolio commits to
purchasing or selling
securities for which specific information is not yet known
at the time of the
trade, particularly the face amount and maturity date in
GNMA transactions.
Securities purchased on a TBA basis are not settled until
they are delivered to
the Portfolio, normally 15 to 45 days later. These
transactions are subject to
market fluctuations and their current value is determined in
the same manner as
for other securities.
As of December 31, 1996, there were no when-issued or
TBA securities held
in the Portfolios.
23
<P$GPCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. 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 December 31, 1996, there were no open mortgage
roll transactions in
the Portfolio.
13. SHORT SALES OF SECURITIES
The Total Return Portfolio has the ability to engage in
the short sales of
securities.
A short sale is a transaction in which the Portfolio
sells securities it
does not own (but has borrowed) in anticipation of a decline
in the market price
of the securities. To complete a short sale, the Portfolio
may arrange through a
broker to borrow the securities to be delivered to the
buyer. The proceeds
received by the Portfolio for the short sale are retained by
the broker until
the Portfolio replaces the borrowed securities. In borrowing
the securities to
be delivered to the buyer, the Portfolio becomes obligated
to replace the
securities borrowed at their market price at the time of
replacement, whatever
that price may be.
As of December 31, 1996, the Portfolio had no open
short sale transactions.
14. 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, and receive a lenders fee, which is
shared 60% by the
Portfolios and 40% by the custodian. 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. The Portfolios
maintain exposure for the risk of any losses in the
investment of amounts
received as collateral.
As of December 31, 1996, the Portfolios had no
securities on loan.
24
<P$GPCN>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
INTERMEDIATE HIGH GRADE PORTFOLIO
1996 1995 1994 1993 1992
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR......................
$10.60 $9.66 $10.69 $10.29 $10.24
- ------------------------------------------------------------
- ------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (1).............................
0.71 0.66 0.61 0.55 0.45
Net realized and unrealized gain (loss)...............
(0.53) 1.00 (0.94) 0.26 0.08
- ------------------------------------------------------------
- ------------------------------------------------
Total Income (Loss) From Operations.....................
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 YEAR............................
$10.70 $10.60 $9.66 $10.69 $10.29
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL RETURN............................................
1.69% 17.76% (3.05)% 8.00% 5.28%
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS, END OF YEAR (000'S).........................
$14,736 $16,152 $13,280 $9,859 $3,621
- ------------------------------------------------------------
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (1)..........................................
0.90% 0.86% 0.85% 0.85% 0.85%
Net investment income.................................
6.35 6.63 6.57 5.25 4.75
- ------------------------------------------------------------
- ------------------------------------------------
PORTFOLIO TURNOVER RATE.................................
116% 121% 90% 139% 124%
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
(1) For the Intermediate High Grade Portfolio, the
Investment adviser waived all
or part of its fees for 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
-----------------
- ------------------------------ ---------------------------
- ---------
1996 1995
1994 1993 1992 1996 1995 1994 1993
1992
------- -------
- ------- ------- ------- ---- ---- ---- ----
- ----
<S> <C> <C>
<C> <C> <C> <C> <C> <C> <C>
<C>
Intermediate High Grade.............. $0.020 $0.009
$0.020 $0.050 $0.130 1.07% 0.94% 1.05% 1.36%
2.28%
</TABLE>
25
<P$GPCN>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
APPRECIATION PORTFOLIO 1996
1995 1994 1993 1992
- ------------------------------------------------------------
- --------------------------------------------------
<S> <C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.................
$14.39 $11.54 $11.80 $11.13 $10.49
- ------------------------------------------------------------
- --------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (1)........................
0.27 0.23 0.20 0.15 0.11
Net realized and unrealized gain (loss)..........
2.60 3.04 (0.32) 0.63 0.53
- ------------------------------------------------------------
- --------------------------------------------------
Total Income (Loss) From Operations................
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 YEAR.......................
$15.86 $14.39 $11.54 $11.80 $11.13
- ------------------------------------------------------------
- --------------------------------------------------
TOTAL RETURN.......................................
19.77% 28.84% (1.12)% 7.03% 6.13%
- ------------------------------------------------------------
- --------------------------------------------------
NET ASSETS, END OF YEAR (000'S)....................
$101,232 $94,492 $80,823 $77,843 $53,450
- ------------------------------------------------------------
- --------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (1).....................................
0.85% 0.97% 0.88% 1.01% 1.00%
Net investment income............................
1.59 1.65 1.75 1.35 1.61
- ------------------------------------------------------------
- --------------------------------------------------
PORTFOLIO TURNOVER RATE............................
39% 43% 61% 33% 14%
- ------------------------------------------------------------
- --------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID ON EQUITY
TRANSACTIONS (2).................................
$0.06 $0.06 -- -- --
- ------------------------------------------------------------
- --------------------------------------------------
</TABLE>
(1) 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%.
(2) As of September 1995, the SEC instituted new guidelines
requiring the
disclosure of average commissions per share.
* Amount represents less than $0.01.
26
<P$GPCN>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO
1996 1995 1994 1993(1)
- ------------------------------------------------------------
- -----------------------------------------------
<S>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR.............................. $12.75 $10.78
$10.30 $10.00
- ------------------------------------------------------------
- -----------------------------------------------
INCOME FROM OPERATIONS:
Net investment income
(2)..................................... 0.26
0.43 0.34 0.01
Net realized and unrealized
gain.............................. 2.97 2.19
0.42* 0.29
- ------------------------------------------------------------
- -----------------------------------------------
Total Income From
Operations.................................... 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
YEAR.................................... $15.73
$12.75 $10.78 $10.30
- ------------------------------------------------------------
- -----------------------------------------------
TOTAL
RETURN....................................................
25.33% 25.04% 7.40% 3.00%++
- ------------------------------------------------------------
- -----------------------------------------------
NET ASSETS, END OF YEAR
(000'S)................................. $171,503
$78,042 $23,196 $2,777
- ------------------------------------------------------------
- -----------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses
(2)..................................................
0.83% 1.00% 1.00% 0.85%+
Net investment
income......................................... 3.06
3.80 3.84 1.93+
- ------------------------------------------------------------
- -----------------------------------------------
PORTFOLIO TURNOVER
RATE......................................... 82%
81% 118% --
- ------------------------------------------------------------
- -----------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS
(3).................................... $0.06
$0.06 -- --
- ------------------------------------------------------------
- -----------------------------------------------
(1) For the period from December 3, 1993 (commencement of
operations) to December 31, 1993.
(2) 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>
<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%+
(3) 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.
</TABLE>
- ------------------------------------------------------------
- --------------------
TAX INFORMATION (UNAUDITED)
The Appreciation Portfolio and Total Return Portfolio
paid distributions
from long-term capital gains of $5,530,886 and $425,453,
respectively, which are
taxable as such.
27
<P$GPCN>
- ------------------------------------------------------------
- --------------------
INDEPENDENT AUDITORS' REPORT
THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
SMITH BARNEY SERIES FUND:
We have audited the accompanying statements of assets and
liabilities, including
the schedules of investments, of the Intermediate High
Grade, Appreciation and
Total Return Portfolios ("Portfolios") of Smith Barney
Series Fund ("Fund") as
of December 31, 1996, the related statements of operations
for the year then
ended, and the statements of changes in net assets and
financial highlights for
each of the years in the two-year period then ended. These
financial statements
and financial highlights are the responsibility of the
Fund's management. Our
responsibility is to express an opinion on these financial
statements and
financial highlights based on our audits. The financial
highlights for each of
the years in the three-year period ended December 31, 1994
with respect to the
Intermediate High Grade and Appreciation Portfolios and for
the year ended
December 31, 1994 and the period from December 3, 1993
(commencement of
operations) to December 31, 1993 with respect to the Total
Return Portfolio,
were audited by other auditors whose report thereon, dated
February 10, 1995,
expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of
December 31, 1996, by correspondence with the custodian. An
audit also includes
assessing the accounting principles used and significant
estimates made by
management, as well as evaluating the overall financial
statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to
above present fairly, in all material respects, the
financial position of the
Portfolios as of December 31, 1996, the results of their
operations for the year
then ended, and the changes in their net assets and their
financial highlights
for each of the years in the two-year period then ended, in
conformity with
generally accepted accounting principles.
/s/ KPMG Peat
Marwick LLP
New York, New York
February 19, 1997
28
<P$GPCN>
This report is
submitted for the general
information of the
owners of the Smith
Barney Series Fund.
It is not authorized
for distribution to
prospective
investors unless
accompanied or preceded
by an effective
Prospectus for the Fund,
which contains
information concerning
the Fund's
investment policies, fees and
expenses, as well as
other pertinent
information.
SYMPHONY
investments are
sponsored and managed
by:
Smith Barney Inc.
and subsidiaries
SYMPHONY
is underwritten,
issued and serviced by:
IDS Life Insurance
Company and
IDS Life Insurance
Company of New York
S-6223-1 A (2/97)
<P$GPCN>
SMITH BARNEY SERIES FUND
ANNUAL REPORT
APPRECIATION PORTFOLIO
TOTAL RETURN PORTFOLIO
INTERMEDIATE
HIGH GRADE PORTFOLIO
DECEMBER 31, 1996
<P$GPCN>
This report is
submitted for the general
information of the
owners of the Smith
Barney Series Fund.
It is not authorized
for distribution to
prospective
investors unless
accompanied or preceded
by an effective
Prospectus for the Fund,
which contains
information concerning
the Fund's
investment policies, fees and
expenses, as well as
other pertinent
information.
S-6223-1 A (2/97)
<P$GPCN>
SMITH BARNEY SERIES FUND
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
DECEMBER 31, 1996
<PG$PCN>
ANNUAL REPORT FOR SMITH BARNEY SERIES FUND
- ------------------------------------------------------------
- --------------------
Dear Investor:
We are pleased to provide you with the annual report for
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 year ended December 31, 1996. 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 (with
the exception of the
Money Market Portfolio). A detailed summary of performance
and current holdings
for each Portfolio can be found in the appropriate sections
that follow in the
report.
MARKET AND ECONOMIC OVERVIEW
The stock market continued its impressive climb in 1996,
soaring to record
levels by year end, while the bond market struggled because
of investor concerns
that the U.S. economy was overheating. The economy in 1996,
which had moderate
inflation, stable to lower interest rates, and strong
corporate earnings growth,
proved to be quite favorable not only for the domestic
equity markets, but
worldwide equity markets as well. Over the year, Standard
and Poor's 500 Index
("S&P 500"), a capitalization weighted-index of 500 widely
held common stocks,
gained 22.95%, driven primarily by the strong appreciation
of
large-capitalization stocks. In its only action all year,
the Federal Reserve
Board (the "Fed") lowered the discount rate from 5.25% to
5%. (The discount rate
is the interest rate the federal government charges banks
for overnight loans.)
The rate of inflation, as measured by the Consumer Price
Index, remained a
modest 3% in 1996. Investors also signaled their approval of
the continuance of
a divided federal government and the recently elected
Republican majority in
Congress with a vigorous post-election rally.
Disappointing earnings reports from the technology and
healthcare sectors caused
many investors to believe these stocks had become overvalued
and unable to
sustain their spectacular recent growth rates, and that
triggered a mid-year
correction. In our view, this correction has been healthy
for the stock market
because it removed some excessive speculation and paved the
way for more
sustainable economic growth. Seeking stability and
liquidity, investors
gravitated towards blue chip and large-capitalization
stocks. The Dow Jones
Industrial Average, a price-weighted average of 30 actively
traded blue chip
stocks, rose 26% for the year, closing at 6448.
Conversely, the domestic bond market experienced significant
volatility as
reports of a stronger than expected U.S. economy were
released throughout the
year. Bond prices fluctuated while investors monitored key
economic indicators.
Jobless rates rose slightly in January, attributable mostly
to an especially
harsh winter on the east coast, and then dropped steadily to
their lowest point
in years. At the end of the year, the unemployment rate was
approximately 5.3%.
Higher employment, coupled with a surge in consumer
spending, lead many bond
investors to think the economy was growing faster than
expected, which would
cause inflation ultimately to rise. Although U.S. Treasuries
performed well in
the fall, especially in the months of October and November,
renewed fears of
inflation and the specter of a possible rate hike by the Fed
pushed down prices
of the benchmark 30-year Treasury bonds, driving its yield
up 0.70% to finish
the year at 6.64%.
Stock markets in Germany and Great Britain posted gains
comparable to those in
the United States while Japan's financial markets continued
to falter. On the
other hand, emerging market debt investments flourished
during the reporting
period. For example, the J.P. Morgan Emerging Markets Bond
Index (a basket of
popular debt instruments from representative countries in
Europe, Asia, Africa,
and Latin America) jumped 40% for the year, making emerging
market bonds one of
the few investments that exceeded the performance of stocks
in 1996.
Looking ahead to 1997, we anticipate a continuation of this
favorable economic
environment for financial assets. We believe that large-
capitalization growth
stocks, which significantly outperformed other segments of
the market in 1996,
should hold their gains but experience less appreciation in
1997. On the other
hand, small and mid-capitalization stocks, which were
relatively flat in 1996,
should show better performance. With respect to the fixed-
income market, we do
not anticipate any major development that will cause the
market to move
dramatically in either direction. In our view, the bulk of
any returns in
fixed-income investments will probably come from coupon
interest and not price
appreciation.
1
<PG$PCN>
ANNUAL REPORT FOR SMITH BARNEY SERIES FUND
- ------------------------------------------------------------
- --------------------
MONEY MARKET PORTFOLIO
For the year ended December 31, 1996, the Money Market
Portfolio generated a
total return of 4.80%.
The year 1996 posed a dilemma for both the Fed and investors
because of
widespread expectations that the Fed would raise short-term
interest rates.
Instead, the Fed chose to remain on the sidelines and left
interest rates
unchanged. The last Fed action came in January 1996 when it
lowered the federal
funds rate from 5.25% to 5.00%. However, despite making few
changes to its
existing policy, the Fed has signaled that it will not
hesitate to raise
interest rates should any signs of inflationary pressures
emerge.
During the third quarter, U.S. economic growth, as measured
by Gross Domestic
Product (GDP), rose at a 2.1% annual rate after the second
quarter's 4.7% annual
rate. Most of this increase in GDP came not from higher
consumer spending but
from a build-up in inventories. This was a departure since
U.S. economic growth
in recent quarters has primarily come from investments by
businesses and
consumers. The fixed-income markets generally performed
better in the fourth
quarter due to modest U.S. economic growth, little or no
inflation, positive job
growth in line with market expectations and generally upbeat
consumers. The
yet-to-be released fourth quarter GDP is expected to show
above-trend growth
with estimates ranging from 3.3% to 4.7%. Most of the
strength is predicted to
come from exports and overall good Christmas sales.
In our view, the U.S. economy appears to be operating at a
sustainable level.
Inventories are under control and real estate prices are
fairly stable. Although
job creation remains strong, many U.S. consumers have
started to save more and
consumer spending has slowed down from early 1996. Given
these conditions, we do
not believe a recession is likely. However, given the fact
that the U.S. economy
is now in its sixth year of expansion, it is less likely
that the economy can
post two or three quarters of 3.5% annual growth -- a
scenario which would worry
the Fed and cause it to tighten monetary policy.
In light of the current state of the U.S. economy, we
believe short-term
interest rates will stay in a narrow trading range over the
next few months.
Federal Reserve Chairman Alan Greenspan's widely circulated
comments about too
much speculation in the equity market suggest to us that the
Fed is
uncomfortable with the stock market's historically high
levels and will monitor
the situation closely in the months ahead.
We expect to maintain an average maturity of between 40 and
50 days and continue
to focus on highly rated securities. Over the course of the
fourth quarter of
1996, we increased our domestic holdings from 40 to 47%,
most which have been
quality domestic banks.
You should be aware than 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 of $1.00 per share.
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
The Diversified Strategic Income Portfolio seeks to provide
investors with high
current income by investing in a combination of U.S.
government and mortgage
related securities, high-yielding corporate bonds and
foreign government bonds.
The Portfolio's management team allocates assets based on
its analysis of
current economic and market conditions, taking into account
the relative risks
and income opportunities within each of the fixed-income
sectors of the
Portfolio. For the year ended December 31, 1996, Diversified
Strategic Income
Portfolio had an annual return of 11.16%.
In our view, one of the most important events for the market
in 1996 was the
unexpected strength of the U.S. economy during the first
half of the year and
weaker economic growth during the second half. In addition
to President
Clinton's re-election and Republicans retaining their
majority Congress, other
significant events in 1996 included the U.S. Treasury's
plans to introduce
inflation-indexed securities, the Boskin Report that
suggests inflation may be
roughly 1% lower than previously reported, and Russian
President Boris Yeltsin
surviving both medically and politically.
The high yield market generated relatively strong
performance throughout 1996
with total returns in excess of 11%. The current
"goldilocks" economic
environment (i.e., not too hot, nor too cold) has been
particularly positive for
the better quality high yield issues as we have seen their
performance begin to
outstrip the more speculative lower quality issues that had
outperformed earlier
in the year. In addition, record levels of cash inflows from
new subscriptions
and the reallocation of some institutional assets into
better quality bond
issues contributed to the improved performance of this
sector. We believe this
trend will continue into 1997 as investors search for higher
yielding
alternatives.
2
<PG$PCN>
ANNUAL REPORT FOR SMITH BARNEY SERIES FUND
- ------------------------------------------------------------
- --------------------
There is no doubt that through the first nine months of 1996
investors who
assumed higher credit risk were well rewarded. Through the
end of September,
lower-quality high yield bonds posted significantly greater
returns than their
higher quality counterparts. However, the inherent risks of
lower-rated bonds
became clear as their performance fell to negative returns
while higher rated
bonds tended to hold their value. We believe the decline
among lower-quality
bonds was caused by a combination of the slower economic
growth and an
increasing number of highly publicized bond defaults. We
view this development
as a natural outgrowth of a more competitive environment
where there is little
pricing power across the broad range of industries. The most
visible defaults or
failures in 1996 included Marvel Entertainment, Moblemedia,
Anchor Glass, CAI
Wireless and MidAmerican Waste. In fact, a number of these
deteriorating issues
experienced price declines exceeding 60% to 80%. Given our
relatively
conservative investment philosophy, we are pleased to report
that we avoided
these issues. In this more challenging environment, we
believe most high-yield
investors should put their money in conservatively managed
and diversified high
yield funds than can more effectively monitor and control
credit risk.
In the global government bond market, dollar-based investors
benefited from a
well diversified portfolio. Performance across the world's
major bond markets
varied widely during the year. Of these markets, the higher-
yielding European
markets were the best performing sector during 1996, as
interest rates leveled
across countries in anticipation of a possible European
Monetary Union. The
convergence of interest rates was accentuated by low
economic growth rates in
Europe which led officials in Germany to cut official
interest rates. Interest
rate cuts were followed elsewhere in Europe, further
underpinning the relative
outperformance of these bond markets. The dollar bloc
markets other than the
U.S. also performed well, with Canadian and Australian
government bonds both
returning more than 11% and 19% respectively in U.S. dollar
terms. Economic
activity and falling inflation in both countries enabled
policy makers to ease
monetary policy substantially over the course of the year.
Looking ahead to 1997, we believe there may be some possible
(although not
necessarily probable) market challenges on the horizon such
as weaker U.S.
economic growth, political uncertainty in Washington, D.C.,
and geopolitical
strife in the Middle East and Russia. In our opinion, the
yield on the 30 year
U.S. Treasury bond should remain in a broad range of 6% to
7%. However, if any
of the events outlined above take place, the yield on the 30
year U.S. Treasury
bond could temporarily rise above the 7% level. Ultimately,
we think this would
represent a buying opportunity because U.S. economic
fundamentals do not, in our
view, warrant higher rates.
Despite past disappointments, the outlook for the high yield
market in 1997 is
still positive for a large number of companies to
successfully compete. These
companies tend to be in industries that are experiencing
dramatic benefits from
new technology. During the reporting period, we have
identified a large number
of attractive growth opportunities in telecommunications,
media, cable TV and
oil and natural industries and the Portfolio remains heavily
weighted in those
sectors. Some of the issues we have continued to find
attractive include Time
Warner, Brooks Fiber, Teleport, and Revlon, to name but a
few. All of these
companies continue to generate improving results through
either market share
gains and/or solid cost controls over their businesses. We
still firmly believe
that the best risk reward in the high yield market exists in
the better quality
B- and BB- rated issues that have greater financial
flexibility than their lower
quality counterparts. Considering the long-term trend
towards more intense
competition and little pricing power in most sectors of the
U.S. economy, we
believe our prudent approach to high yield investing should
continue to generate
the most consistently positive returns in 1997.
EQUITY INCOME PORTFOLIO
The Equity Income Portfolio seeks to provide current income
and as a secondary
goal, capital appreciation, by investing at least 25% of its
assets in the
utility industry. As of December 31, 1996, approximately 78%
of the Equity
Income Portfolio's assets were invested in common stocks
(60% in electric
utilities, 5% in telecommunications companies, and 13% in
natural gas
companies), 20% was invested in long-term bonds and 2% was
invested in cash. For
the year ended December 31, 1996, the Equity Income
Portfolio had a total return
of 5.99%.
As of December 31, 1996, the portfolio's top ten holdings
were:
<TABLE>
<S> <C>
1. Texas Utilities Co. 6.
Carolina Power & Light Co.
2. Nipsco Industries, Inc. 7.
DTE Energy Co.
3. FPL Group Inc. 8.
GPU Inc.
4. Pinnacle West Capital Co. 9.
American Electric Power Inc.
5. DQE Inc. 10.
CINergy Corp.
</TABLE>
3
<PG$PCN>
ANNUAL REPORT FOR SMITH BARNEY SERIES FUND
- ------------------------------------------------------------
- --------------------
The past year was frustrating for electric utility
investors. As a group,
utilities underperformed the broad based equity market. A
strong stock market
combined with a relatively weak bond market caused attention
to move away from
defensive sectors such as utilities. Nevertheless, we
believe the electric
utility sector should continue to benefit from industry
restructuring and the
rapid pace of mergers and acquisitions. For example, several
state restructuring
proposals have focused on the need to lower customer rates
and create
opportunities for electric utilities to recover their
capital investments. In
our opinion, these proposals should create a more positive
environment for
investors by removing some of the uncertainty that has
plagued utilities over
the past few years. The consolidation of electric utility
and natural gas
companies dominated merger activity during 1996 as
management teams attempted to
enlarge their customer base and become full service energy
providers in a more
competitive industry. Furthermore, several electric utility
companies continue
to diversify by aggressively expanding into foreign markets.
We remain positive for electric utilities in 1997 based on
continued
clarification of the impact of deregulation and competition
in the industry and
its favorable defensive characteristics. In addition, we
expect more individual
state initiatives regarding electric utility industry
restructuring.
Consolidation should continue involving electric sector and
electric companies
with natural gas companies. In this dynamic and rapidly
changing environment,
individual stock selection will continue to be extremely
important in achieving
competitive total returns. We expect performance among
individual companies to
vary significantly. In our view, special situation
companies, with above average
dividend growth, favorable regulatory rulings or positive
deregulatory proposals
are exciting new investment opportunities. We continue to
focus on higher
quality companies with strong earnings and dividend growth,
superior management
teams and favorable environments. Moreover, we favor lower-
cost companies in
this more competitive environment. We believe investors
should view utility
investing from a total return perspective and not simply
evaluate the sector's
current yield.
The economic outlook for 1997 calls for a continuance of
slow to moderate U.S.
economic growth without renewed inflation and the long-term
U.S. Treasury bond
is expected to trade in a range of 6.25% to 7%. These
conditions should be
generally favorable for fixed-income markets and interest
rate-sensitive sectors
such as electric utilities. However, higher overall market
volatility may
increase if there is a surprise regarding the economy or
corporate earnings.
Our portfolio strategy continues to focus on income and long-
term growth. We
have increased our natural gas holdings and gradually
reduced telecommunications
holdings awaiting a clearer competitive picture or more
favorable valuations in
that industry. After two years of above historical returns,
an increase in stock
market volatility could enhance the appeal of electric
utilities as a stable
long-term investment vehicle.
EQUITY INDEX PORTFOLIO
During 1996, the financial markets were repeatedly jolted by
changes in
sentiment about the strength of the U.S. economy and the
direction of Federal
Reserve monetary policy. When investors gained confidence
that the U.S. economy
was continuing on a path of moderate, non-inflationary
growth, the stock market
advanced strongly and posted another year of outstanding
performance. For the
year ended December 31, 1996, the S&P 500 provided a total
return of 22.95%.
Over the past two years, the S&P 500 Index has achieved an
impressive compound
total return of nearly 70%. Only twice before since World
War II has the S&P 500
generated comparable back-to-back annual gains.
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 Index. For the year ended December 31, 1996, the
performance of the
Equity Index Portfolio closely approximated the 22.95%
return of the S&P 500
Index. The Portfolio provided a total return of 21.68% over
the same period.
After a weak start in January, the stock market moved
broadly higher through the
first months of spring. Small company shares advanced
strongly in April and May,
led by the technology sector. In late June and July, when
long bond yields moved
back over 7%, the stock market traded back down to where it
began the year.
Recent initial public offerings ("IPOs") and more
speculative issues were
particularly hard hit during this correction. However, large
company stocks
quickly recovered their losses when the bond market
stabilized at the end of
July. Yet, small company stocks did not rebound as strongly.
During the fall,
against the backdrop of lower bond yields, low inflation,
and surprisingly
resilient corporate earnings, the stock market made its
strongest advance of the
year, with large-company issues leading the way.
Given the frequent alarms raised in 1996 about slowing
corporate earnings
growth, investors showed an understandable preference for
industries with
visible earnings momentum. In the energy sector, analysts'
earnings estimates
and share prices
4
<PG$PCN>
ANNUAL REPORT FOR SMITH BARNEY SERIES FUND
- ------------------------------------------------------------
- --------------------
moved sharply higher in response to firmer prices for both
oil and natural gas.
Stocks in the finance sector also performed exceptionally
well and in the
consumer sector, specialty and broad-line retail stocks were
up strongly in
response to higher-than-expected levels of consumer
spending.
The technology sector provided superior returns for
investors last year, led by
Intel and Microsoft. Within the technology sector, software,
semiconductor and
computer product stocks had the strongest relative
performance. Industrial
cyclical stocks underperformed, as both soft domestic and
export demand led to
declining commodity prices for paper, copper, aluminum,
steel and fertilizer
products. The performance of the health care sector was
mixed. Drug stocks kept
pace with the market due to strong earnings gains, while
HMOs declined sharply
on repeated earnings disappointments. Utilities were the
weakest overall sector
during the year, held back by the relatively poor
performance of local telephone
carriers and electrical utilities.
GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio seeks long-term capital
growth and income. The
Portfolio invests in companies with consistent dividend-
paying histories,
relatively high levels of dividends, the capacity to raise
dividends in the
future, and the potential for capital appreciation. For the
year ended December
31, 1996, the Growth and Income Portfolio posted an annual
return of 19.83%.
During 1996, stock investors enjoyed their second
consecutive year of
outstanding returns. Bond returns were modestly positive,
with interest income
compensating for an erosion of bond principal as interest
rates rose over the
course of the year. Within the stock market, the technology
and financial
sectors outperformed during the second half of the year.
The percentage of assets that the Growth and Income
Portfolio has invested in
these two sectors is roughly equivalent to their percentage
of the S&P 500
Index. The technology stocks in our fund, however, tend to
be mature and
established companies given our strategy of only buying
dividend-paying stocks.
Although a disadvantage last year as many of the "hottest"
technology stocks do
not pay dividends, we believe this strategy makes good sense
for conservative
long-term investors. Moreover, the Portfolio was
underweighted in utility
stocks, an advantage for the period.
The investment strategy of the Growth and Income Portfolio
has remained
unchanged during the reporting period. As stated above, we
buy quality or "blue
chip" companies with a history of rising dividends. We
believe that our focus on
increasing dividends is an excellent way to identify
successful companies.
Besides dividend increases, we also look for companies with
strong balance
sheets, excellent management teams and promising product
lines.
During the past six months we decreased our fixed-income
exposure and halved our
holdings of the 7% GMAC notes. In addition, the
Thermoelectron convertibles were
called by the company. The remaining trades were stock
transactions. We describe
several below.
Stocks positions we sold in their entirety during the second
half of 1996
included International Flavors and Fragrances, Raytheon, and
Schulman. We sold
International Flavors following a series of earnings
disappointments that made
it clear that growth in the company's core markets was
slowing. Raytheon's
consumer businesses sputtered, prompting us to sell the
stock, and Schulman was
hard hit by slow sales in key European markets.
New purchases included Disney, Ericcson Telephone, Chrysler
and Pall
Corporation. In our view, investor concerns over Disney's
ABC network provided
an opportunity to purchase a great company at a very
reasonable valuation.
Ericcson is a key player in the worldwide move to wireless
communication.
Chrysler was selling at an inexpensive valuation even as its
vans and Jeeps were
setting sales records. Pall Corporation, a world leader in
filters and fluid
control, was selling at attractive prices relative to its
great long-term growth
record.
Over the next six months, we believe that the stock market
will work its way
higher. Importantly, we do not believe that the stock market
is over valued; we
believe that it is in a fair value range. In our opinion,
stock returns should
approximate the growth in corporate earnings, which have
been growing ahead of
expectations at a 10% clip. Finally, inflation remains in
check, leaving little
reason for the Federal Reserve to aggressively raise short-
term interest rates.
5
<PG$PCN>
ANNUAL REPORT FOR SMITH BARNEY SERIES FUND
- ------------------------------------------------------------
- --------------------
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 have the
potential to become major enterprises.
The Emerging Growth Portfolio had a total return of 17.83%
for 1996, having a
terrific first nine months followed by a very weak fourth
quarter to end the
year ahead of the Russell 2000 Index (which gained 14.80%),
about even with the
S&P 500 Midcap Index (which gained 17.30%), but the
Portfolio fell behind the
Nasdaq Composite Index which rose 22.70%. (The Russell 2000
Index represents
companies with small to mid-sized market capitalizations;
the S&P 500 Midcap
Index is a capitalization weighted-index of 500 widely held
mid-capitalization
common stocks; and the Nasdaq Composite Index is an index of
over-the-counter
stocks.) We believe that the Portfolio, with its emphasis on
small and
mid-capitalization growth stocks, was ideally positioned in
the first nine
months of 1996 as investors focused on growth companies as
the U.S. economy
slowed. In the fourth quarter, investor sentiment shifted
toward value and
liquidity found in the larger companies. The best performing
group was energy,
while health care was the worst group; although the best-
performing and
worst-performing stocks have come from many different
sectors. In our opinion,
this is a stock picker's market rather than a sector-betting
market.
The investment style employed by the Emerging Growth
Portfolio is a bottom-up
approach which focuses on stock selection rather than
"market timing" or "sector
rotation." Risk is controlled by maintaining a broadly
diversified portfolio,
rather than making big bets on any one sector or stock. Our
objective is to
outperform the market by picking the best stocks in each
sector. In our view,
this investment style should deliver consistent results.
We select stocks based on the company's potential to deliver
upside earnings
surprises. To find such companies, we look for rising
earnings estimates and
improving valuations. Investments are made in the highest
growth companies in
each sector that meet this disciplined buy criteria. In
general, these
candidates tend to be smaller companies with annual revenues
of less than $2
billion.
The Portfolio's biggest gainers over the second half of the
year were: Clarify
(software); Dell Computer (computers); Marine Drilling (oil
service); Forcenergy
Gas (oil and gas exploration); and Vitesse Semiconductor
(electronics).
We remain optimistic about the long-term prospects for
smaller capitalization
growth stocks. Although we cannot ignore the recent poor
relative performance of
this sector of the market, we expect small growth stocks to
catch up with the
rest of the market in the coming year for three reasons.
First, small company
stocks are now priced very attractively compared to larger
company stocks.
Moreover, we continue to see aggressive inflows into growth
mutual funds.
Finally, there has been talk in Washington, D.C. of reducing
the capital gains
tax rate. In the past, any reduction in the capital gains
tax rate has usually
been beneficial to growth stock performance.
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio seeks growth of capital
and income. The
Portfolio seeks to achieve these objectives by investing at
least 65% of its
assets in a diversified portfolio of equity securities of
established non-U.S.
issuers that have the potential for growth of capital or
income. For the year
ended December 31, 1996, the International Equity Portfolio
had a total return
of 21.38%.
The backdrop of international affairs during the twelve
months ended December
31, 1996 has been marked by political and economic
uncertainties. Sluggish
conditions persist in several of the major European, Asian
and Latin economies
in which we invest. Yet the international equity markets
have provided solid
investment returns during the period, supported by favorable
corporate
developments and a hospitable level of interest rates and
inflation.
In our view, Europe is undergoing profound structural
changes, driven by
recognition that "business as usual" is no longer affordable
or desirable. Many
European corporations have embarked on U.S.-style
restructuring programs to
improve corporate profitability, sharpen their company focus
and ultimately
enhance shareholder value. In order to become more
competitive, many European
corporations have narrowed their strategic focus to core
businesses, and are
spinning off low-margin and unproductive assets. At the same
time, there has
also been a substantial increase in merger and acquisition
activity in Europe.
In particular, there has been an increase in cross-border
mergers within the
financial services industry, as well as in
6
<PG$PCN>
ANNUAL REPORT FOR SMITH BARNEY SERIES FUND
- ------------------------------------------------------------
- --------------------
the pharmaceutical industry. Companies continue to build
economies of scale
across an increasingly unified Europe, which should
contribute to a higher
long-term earnings outlook.
In addition, one of the significant long-term attractions in
Europe is that
corporations are becoming more "shareholder friendly." Many
European companies
are moving toward international accounting standards, and
are now disclosing
more financial information than they had in the past. Many
countries have
recently begun, or are in the process of, authorizing
corporate share
repurchases, and stock splits are now occurring for the
first time in history in
countries such as Germany and Switzerland.
Moreover, European governments are striving toward a
monetary union in 1999,
which has important macroeconomic implications. Budget
deficits must be reduced
and inflation contained, which suggests continued fiscal
restraint. As a result,
many European governments introduced austere budget plans
this fall. Monetary
conditions are positive for European stocks, with interest
rates at relatively
modest levels. In our view, stable interest rates are likely
to remain for the
foreseeable future.
With the exception of Hong Kong and Malaysia, the Pacific
Rim equity markets
have disappointed in the past twelve months. Japan, the
largest Pacific market,
has been a laggard. Despite a materially weakened currency
versus its major
trading partners (which has improved its export
competitiveness), as well as low
interest rates, economic recovery in Japan remains
problematic. We have
invested, however, in select Japanese companies that
represent, in our view,
outstanding investment opportunities.
We continue to find greater investment opportunities in
Southeast Asia than in
Northern Asia. The July 1, 1997 transition of Hong Kong from
British to Chinese
rule could lead to a favorable upward revaluation of that
market, a process
which has already begun. Residential property prices in Hong
Kong, an important
barometer of local sentiment, have firmed considerably in
the past year.
The Pacific Rim has also been home to many disappointing
markets over the past
year, such as Korea, Thailand and Australia. For example,
there is political and
economic uncertainty in Thailand and Indonesia. Singapore
and South Korea have
lowered economic-growth projections. We are diligently
searching for new
opportunities in some of these lagging Pacific Rim markets.
The Latin American markets have performed well in the past
year with clear signs
that Mexico is on the mend -- interest rates have declined
and consumer spending
has picked up. These factors have helped drive the economy
higher. However, we
believe that significant risks still exist in Mexico.
In closing, we thank you for your investment in the Smith
Barney Series Fund. We
look forward to serving your financial needs in the years
ahead.
Sincerely,
McLendon sig
Heath B. McLendon
Chairman and Chief Executive Officer
February 5, 1997
7
<PG$PCN>
- ------------------------------------------------------------
- --------------------
PERFORMANCE COMPARISON -- DIVERSIFIED STRATEGIC INCOME
PORTFOLIO AS OF 12/31/96
(UNAUDITED)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD DIVERSIFIED
STRATEGIC LEHMAN B
(FISCAL YEAR COVERED) INCOME
PORTFOLIO GATE BOND INDEX
<S> <C>
<C>
10/16/91 10000.00
10000.00
12/91 10140.00
10507.00
12/92 10284.00
11285.00
12/93 11576.00
12386.00
12/94 11251.00
12024.00
12/95 13071.00
14246.00
12/31/96 14530.00
14944.00
</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
12/31/96 (UNAUDITED)
<TABLE>
<CAPTION>
VARIABLE ANNUITY
LIPPER EQUITY
MEASUREMENT PERIOD EQUITY INCOME
INCOME FUNDS PEER STANDARD & POOR'S
(FISCAL YEAR COVERED) PORTFOLIO
GROUP AVERAGE 500 INDEX
<S> <C>
<C> <C>
10/16/91 10000.00
10000.00 10000.00
12/91 10200.00
10559.00 10838.00
12/92 11397.00
11782.00 11668.00
12/93 12583.00
13758.00 12844.00
12/94 11308.00
14094.00 13012.00
12/95 14979.00
16510.00 17898.00
12/31/96 15876.00
18034.00 19988.00
</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.
- -------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-------------------------------------------
Year
Ended
12/31/96
Five
Years
Ended
12/31/96
10/16/91*
through
CUMULATIVE TOTAL RETURN 12/31/96
10/16/91*
through
12/31/96
-------------------------------------------
* Commencement
of operations
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 December 31, 1996 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
Mortgage-Backed Securities Index
and includes treasury issues,
agency issues, corporate bond
issues and mortgage-backed
-------------------------------------------
<S> <C>
securities.
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
------------------------------------------
<S> <C>
Year Ended 12/31/96 5.99%
Five Years Ended 2/31/96 9.25%
10/16/91* through 12/31/96 9.27%
CUMULATIVE TOTAL RETURN
------------------------------------------
10/16/91* through 12/31/96 58.76%
* Commencement of operations
</TABLE>
The chart to the right compares
the growth in value of a
hypothetical $10,000 investment
in Equity Income Portfolio on
October 16, 1991 (commencement of
operations) through December 31,
1996 with that of a similar
investment in the Variable
Annuity Lipper Equity Income
Funds Peer Group Average and
Standard & Poor's 500 Index.
Index information is available at
month-end only; therefore, the
closest month-end to inception
date of the Portfolio has been
used. The Standard & Poor's 500
Index is an unmanaged index
composed of 500 widely held
common stocks listed on the New
York Stock Exchange, American
Stock Exchange and over-the-
counter market.
The Variable Annuity Lipper
Equity Income Funds Peer Group
Average is composed of 41 equity
income funds which underlie
variable annuities.
<PG$PCN>
- ------------------------------------------------------------
- --------------------
PERFORMANCE COMPARISON -- EQUITY INDEX PORTFOLIO AS OF
12/31/96 (UNAUDITED)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
STANDARD & POOR'S
(FISCAL YEAR COVERED) EQUITY INDEX
PORTFOLIO 500 INDEX
<S> <C>
<C>
10/16/91 10000.00
10000.00
12/91 10620.00
10838.00
12/92 11335.00
11668.00
12/93 12316.00
12844.00
12/94 12421.00
13012.00
12/95 16870.00
17898.00
12/31/96 20526.00
22005.00
</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 AND INCOME PORTFOLIO AS OF
12/31/96
(UNAUDITED)
<TABLE>
<CAPTION>
VARIABLE ANNUITY
LIPPER GROWTH &
MEASUREMENT PERIOD GROWTH AND INCOME
INCOME FUNDS PEER STANDARD & POOR'S
(FISCAL YEAR COVERED) PORTFOLIO
GROUP AVERAGE 500 INDEX
<S> <C>
<C> <C>
10/16/91 10000.00
10000.00 10000.00
12/91 10140.00
10746.00 10838.00
12/92 10996.00
11551.00 11668.00
12/93 11995.00
12802.00 12844.00
12/94 11611.00
12646.00 13012.00
12/95 15152.00
16514.00 17898.00
12/31/96 18157.00
18211.00 19988.00
</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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-------------------------------------------
Year Ended 12/31/96 21.68%
Five Years Ended 12/31/96 14.09%
10/16/91* through 12/31/96 14.79%
CUMULATIVE TOTAL RETURN
-------------------------------------------
10/16/91* through 12/31/96 105.26%
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 December 31,
1996 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.
* Commencement of operations
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-------------------------------------------
<S> <C>
Year Ended 12/31/96 19.83%
Five Years Ended 12/31/96 12.36%
10/16/91* through 12/31/96 12.12%
CUMULATIVE TOTAL RETURN
-------------------------------------------
10/16/91* through 12/31/96 81.57%
* Commencement of operations
</TABLE>
The chart to the right compares
the growth in value of a
hypothetical $10,000 investment
in Growth and Income Portfolio on
October 16, 1991 (commencement of
operations) through December 31,
1996 with that of a similar
investment in the Variable
Annuity Lipper Growth & Income
Funds Peer Group Average and
Standard & Poor's 500 Index.
Index information is available at
month-end only; therefore, the
closest month-end to inception
date of the Portfolio has been
used. The Standard & Poor's 500
Index is an unmanaged index
composed of 500 widely held
common stocks listed on the New
York Stock Exchange, American
Stock Exchange and
over-the-counter market.
The Variable Annuity Lipper
Growth & Income Funds Peer Group
Average is composed of 40 growth
and income funds which underlie
variable annuities.
<PG$PCN>
- ------------------------------------------------------------
- --------------------
PERFORMANCE COMPARISON -- EMERGING GROWTH PORTFOLIO AS OF
12/31/96 (UNAUDITED)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD EMERGING
GROWTH
(FISCAL YEAR COVERED)
PORTFOLIO NASDAQ COMPOSITE INDEX
<S> <C>
<C>
12/3/93
10000.00 10000.00
12/93
10410.00 10297.00
12/94
9631.00 9968.00
12/95
13762.00 13947.00
12/31/96
16215.00 17115.00
</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 12/31/96
(UNAUDITED)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
INTERNATIONAL EQUITY MORGAN STANLEY EAFE
(FISCAL YEAR COVERED)
PORTFOLIO INDEX
<S> <C>
<C>
12/3/93
10000.00 10000.00
12/93
10050.00 10724.00
12/94
9210.00 10850.00
12/95
10020.00 12103.00
12/31/96
12163.00 12873.00
</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.
- -------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------------------
Year Ended 12/31/96 17.83%
<S> <C> <C> <C>
12/3/93* through 12/31/96 17.00%
CUMULATIVE TOTAL RETURN
- -------------------------------------------------
12/3/93* through 12/31/96 62.15%
* Commencement of operations
- -------------------------------------------------
</TABLE>
The chart to the right compares
the growth in value of a
hypothetical $10,000 investment
in Emerging Growth Portfolio on
December 3, 1993 (commencement of
operations) through December 31,
1996 with that of a similar
investment in the NASDAQ
Composite Index. Index
information is available at
month-end only; therefore, the
closest month-end to inception
date of the Portfolio has been
used. The NASDAQ Composite Index
is a market capitalization
price-only index that tracks the
performance of domestic common
stocks traded on the regular
NASDAQ market as well as foreign
common stocks and ADRs traded on
the National Market System.
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS
DECEMBER 31, 1996
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
ANNUALIZED
AMOUNT SECURITY
YIELD VALUE
- ------------------------------------------------------------
- ----------------------------------------------
<C> <S>
<C> <C>
U.S. GOVERNMENT AGENCIES AND INSTRUMENTALITIES -- 7.4%
$250,000 Federal Home Loan Bank matures
3/27/97............................. 5.43% $
246,836
200,000 Federal Home Loan Mortgage Corp. matures
3/31/97................... 5.42 197,651
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES (Cost --
$444,487)...............................
444,487
- ------------------------------------------------------------
- ----------------------------------------------
BANK NOTES -- 5.8%
100,000 Bank of America matures
3/25/97.................................... 5.59
100,000
250,000 NationsBank matures
2/10/97........................................ 5.38
250,000
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL BANK NOTES (Cost --
$350,000)................................
350,000
- ------------------------------------------------------------
- ----------------------------------------------
COMMERCIAL PAPER -- 66.6%
200,000 Bank Brussels Lambert matures
1/27/97.............................. 5.38
199,232
100,000 Bank of America Corp. matures
3/11/97.............................. 5.76
98,928
250,000 Bank of New York matures
1/14/97................................... 5.39
249,519
200,000 Bear Stearns & Co. matures
2/14/97................................. 5.48
197,674
200,000 Cades matures
1/22/97..............................................
5.63 199,348
150,000 Cafco matures
1/2/97...............................................
6.75 149,973
200,000 Cariplo matures
1/24/97............................................
5.46 199,308
200,000 Chase Manhattan Corp. matures
3/10/97.............................. 5.37
197,999
225,000 Ciesco matures
1/16/97.............................................
5.36 224,504
100,000 CIT Group Holdings Inc. matures
3/13/97............................ 5.41
99,956
200,000 Commerzbank U.S. Finance matures
2/28/97........................... 5.46
198,261
150,000 Dean Witter Discover Co. matures
1/29/97........................... 5.38
149,379
250,000 First Union National Bank matures
2/18/97.......................... 5.36 248,238
200,000 General Electric Capital Corp. matures
4/9/97...................... 5.49 197,089
200,000 Halifax Building Society matures
3/13/97........................... 5.52
197,852
144,000 J.P. Morgan & Co. matures
1/7/97................................... 5.40
143,872
200,000 Merrill Lynch matures
1/24/97...................................... 5.39
199,319
200,000 Preferred Receivable Funding matures
2/13/97....................... 5.42 198,718
250,000 Shell Oil Co. matures
1/2/97....................................... 6.50
249,955
200,000 Siemans Corp. matures
2/4/97....................................... 5.37
198,999
200,000 USAA Capital Corp. matures
2/25/97................................. 5.50
198,335
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL COMMERCIAL PAPER (Cost --
$3,996,458)........................
3,996,458
- ------------------------------------------------------------
- ----------------------------------------------
FOREIGN CERTIFICATES OF DEPOSIT -- 16.7%
250,000 Bank of Montreal matures
1/13/97................................... 5.40
250,000
150,000 Deutsche Bank matures
2/3/97....................................... 5.70
149,981
200,000 National Westminster Bank PLC matures
1/21/97...................... 5.40 200,001
200,000 Rabobank matures
4/28/97........................................... 5.39
200,050
200,000 Societe Generale matures
1/16/97................................... 5.54
200,000
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL FOREIGN CERTIFICATES OF DEPOSIT (Cost --
$1,000,032)......... 1,000,032
- ------------------------------------------------------------
- ----------------------------------------------
REPURCHASE AGREEMENT -- 3.5%
207,000 Citibank, 6.900% due 1/2/97; Proceeds at
maturity -- $207,079;
(Fully collateralized by U.S. Treasury Notes,
5.750% due 12/31/98;
Market value -- $211,146) (Cost --
$207,000)....................... 207,000
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$5,997,977*).................... $5,997,977
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ----------------------------------------------
<C> <S>
<C>
U.S. GOVERNMENT SECTOR -- 40.7%
- ------------------------------------------------------------
- ----------------------------------------------
U.S. GOVERNMENT AGENCY AND OBLIGATIONS -- 40.7%
$ 4,000,000 U.S. Treasury Notes, 5.875% due
11/30/01.................................. $ 3,943,680
685,656 FHLMC, 9.000% due 1/1/20 through
5/1/21................................... 724,438
1,189,683 GNMA, 8.000% due 7/15/17 through
12/15/21................................. 1,214,583
397,057 GNMA, 7.500% due
2/15/24..................................................
397,427
2,034,635 GNMA, 7.000% due 9/1/23 through
5/15/24................................... 1,990,749
14,714,381 GNMA, 9.000% due 11/15/16 through
9/15/24................................. 15,594,817
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL U.S. GOVERNMENT SECTOR (Cost --
$23,861,480)........................ 23,865,694
- ------------------------------------------------------------
- ----------------------------------------------
HIGH YIELD SECTOR -- 28.2%
- ------------------------------------------------------------
- ----------------------------------------------
CORPORATE BONDS AND NOTES -- 27.2%
- ------------------------------------------------------------
- ----------------------------------------------
AEROSPACE AND DEFENSE -- 1.2%
250,000 Airplanes Pass Through Trust, 10.875% due
3/15/19......................... 275,764
225,000 Tracor Inc., 10.875% due
8/15/01..........................................
240,468
150,000 UNC Inc., 11.000% due
6/1/06..............................................
160,500
- ------------------------------------------------------------
- ----------------------------------------------
676,732
- ------------------------------------------------------------
- ----------------------------------------------
BROADCASTING - TV, CABLE AND RADIO -- 7.2%
200,000 Australis Holdings, step bond to yield
15.000% due 11/1/02 (a)(b)......... 118,000
350,000 Australis Media Ltd. Units, step bond to
yield 15.750% due 5/15/03 (a).... 199,500
275,000 Bell Cable Media PLC., step bond to yield
11.875% due 9/15/05............. 222,750
300,000 Comcast UK Cable, step bond to yield
11.200% due 11/15/07................. 212,250
Globo Communicacoes Participation:
250,000 9.875% due 12/20/04
(b)...................................................
250,000
250,000 10.500% due 12/20/06
(b)..................................................
250,000
250,000 Groupe Videotron Ltd., 10.625% due
2/15/05................................ 277,500
200,000 Marcus Cable Co., step bond to yield
13.500% due 8/1/04................... 162,500
300,000 NWCG Holdings Corp., zero coupon bond to
yield 7.228% due 6/15/99......... 252,000
Rogers Cablesystems Ltd.:
325,000 10.000% due
12/1/07.....................................................
.. 342,875
400,000 11.000% due
12/1/15.....................................................
.. 432,000
250,000 Rogers Communication Inc., 10.875% due
4/15/04............................ 263,125
200,000 SFX Broadcasting Inc., 10.750% due
5/15/06................................ 211,500
450,000 UIH Australia Pacific Inc., step bond to
yield 14.000% due 5/15/06........ 238,500
600,000 United International Holdings, zero coupon
bond to yield 11.389% due 436,500
11/15/99....................................................
..............
400,000 Videotron Holdings PLC, step bond to yield
11.000% due 8/15/05............ 324,000
- ------------------------------------------------------------
- ----------------------------------------------
4,193,000
- ------------------------------------------------------------
- ----------------------------------------------
CHEMICALS/PLASTICS/RUBBER -- 0.8%
175,000 Pt. Polysindo Eka, 13.000% due
6/15/01.................................... 196,438
250,000 Terra Industries, Inc., 10.500% due
6/15/05............................... 272,813
- ------------------------------------------------------------
- ----------------------------------------------
469,251
- ------------------------------------------------------------
- ----------------------------------------------
CONSUMER DURABLE GOODS/HOME FURNISHINGS -- 0.3%
130,000 TAG-Heuer International, 12.000% due
12/15/05............................. 150,150
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
<C> <S>
<C>
- ------------------------------------------------------------
- ----------------------------------------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING -- 0.5%
$ 260,000 American Pad & Paper Co., 13.000% due
11/15/05............................ $ 306,150
- ------------------------------------------------------------
- ----------------------------------------------
ELECTRIC UTILITIES -- 0.5%
200,000 Calpine Corp., 10.500% due
5/15/06........................................
212,750
58,186 Midland Cogeneration Venture, 10.330% due
7/23/02......................... 62,332
- ------------------------------------------------------------
- ----------------------------------------------
275,082
- ------------------------------------------------------------
- ----------------------------------------------
ELECTRONICS/COMPUTERS -- 1.4%
250,000 Graphic Controls Corp., 12.000% due
9/15/05............................... 277,500
375,000 International Semi-Tech Microelectronics
Inc., step bond to yield 11.500% 246,563
due
8/15/03.....................................................
..........
300,000 Unisys Corp., 12.000% due
4/15/03.........................................
319,875
- ------------------------------------------------------------
- ----------------------------------------------
843,938
- ------------------------------------------------------------
- ----------------------------------------------
FOODS -- 1.3%
300,000 TLC Beatrice International Holdings,
11.500% due 10/1/05.................. 318,750
400,000 Van De Kamp Inc., 12.000% due
9/15/05..................................... 443,000
- ------------------------------------------------------------
- ----------------------------------------------
761,750
- ------------------------------------------------------------
- ----------------------------------------------
GROCERY/CONVENIENCE STORES -- 0.4%
410 Kash N' Karry, 11.500% due
2/1/03.........................................
415
200,000 Pathmark Stores Inc., 12.625% due
6/15/02................................. 207,500
- ------------------------------------------------------------
- ----------------------------------------------
207,915
- ------------------------------------------------------------
- ----------------------------------------------
HEALTHCARE/DRUGS/HOSPITAL SUPPLIES -- 1.0%
200,000 Magellan Health Services, Inc., 11.250%
due 4/15/04....................... 221,500
330,000 OrNda Healthcorp, 12.250% due
5/15/02..................................... 351,862
- ------------------------------------------------------------
- ----------------------------------------------
573,362
- ------------------------------------------------------------
- ----------------------------------------------
HOTELS/GAMING -- 0.9%
300,000 Courtyard By Marriott, 10.750% due
2/1/08................................. 318,750
200,000 Mohegan Tribal Gaming Authority, 13.500%
due 11/15/02..................... 260,000
- ------------------------------------------------------------
- ----------------------------------------------
578,750
- ------------------------------------------------------------
- ----------------------------------------------
LEISURE/AMUSEMENT/MOTION PICTURES -- 0.2%
133,531 Gillett Holdings Inc., 12.250% due
6/30/02................................ 140,540
- ------------------------------------------------------------
- ----------------------------------------------
METALS/MINING -- 0.4%
200,000 Kaiser Aluminum & Chemical Corp., 12.750%
due 2/1/03...................... 214,250
- ------------------------------------------------------------
- ----------------------------------------------
OIL/NATURAL GAS -- 1.6%
200,000 Global Marine Inc., 12.750% due
12/15/99.................................. 215,500
150,000 Parker Drilling Co., 9.750% due 11/15/06
(b).............................. 158,250
300,000 Santa Fe Energy Resources Inc., 11.000%
due 5/15/04....................... 334,500
225,000 United Meridian Corp., 10.375% due
10/15/05............................... 247,219
- ------------------------------------------------------------
- ----------------------------------------------
955,469
- ------------------------------------------------------------
- ----------------------------------------------
PACKAGING/CONTAINERS -- 0.8%
600,000 Ivex Holdings Corp., step bond to yield
13.500% due 3/15/05............... 465,000
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
<C> <S>
<C>
- ------------------------------------------------------------
- ----------------------------------------------
PERSONAL CARE PRODUCTS/COSMETICS -- 0.4%
$ 300,000 Revlon Worldwide Corp., zero coupon bond
to yield 12.654% due 3/15/98..... $ 258,750
- ------------------------------------------------------------
- ----------------------------------------------
PRINTING -- 1.9%
350,000 Indah Kiat International Finance Co.,
11.875% due 6/15/02................. 384,562
275,000 SD Warren Co., 12.000% due
12/15/04.......................................
297,688
400,000 Tjiwi Kimia Industries, 13.250% due
8/1/01................................ 455,500
- ------------------------------------------------------------
- ----------------------------------------------
1,137,750
- ------------------------------------------------------------
- ----------------------------------------------
REAL ESTATE -- 0.6%
300,000 Trizec Finance, Ltd. 10.875% due
10/15/05................................. 332,250
- ------------------------------------------------------------
- ----------------------------------------------
RETAIL -- 0.5%
250,000 Barnes & Noble Inc., 11.875% due
1/15/03.................................. 274,375
- ------------------------------------------------------------
- ----------------------------------------------
TELEPHONE/COMMUNICATIONS -- 4.5%
150,000 Alvey Systems Inc., 11.375% due
1/13/03................................... 158,250
500,000 Clearnet Communications Inc., step bond to
yield 14.750% due 12/15/05..... 326,250
400,000 Colt Telecom Group PLC, step bond to yield
12.000% due 12/15/06 (a)....... 240,000
400,000 Dial Call Communication, Inc., step bond
to yield 12.250% due 4/15/04 288,500
(a).........................................................
..............
100,000 Fonorola Inc., 12.500% due
8/15/02........................................
109,500
150,000 Intelcom Group USA, step bond to yield
12.500% due 5/1/06................. 98,250
375,000 Intermedia Communications Inc., step bond
to yield 12.500% due 5/15/06.... 255,000
375,000 Millicom International Cellular, step bond
to yield 13.500% due 6/1/06.... 232,500
500,000 Telewest Communication PLC, step bond to
yield 11.000% due 10/1/07........ 348,750
325,000 USA Mobile Communications Holdings, Inc.,
14.000% due 11/1/04............. 368,875
250,000 Wireless One, Inc., 13.000% due
10/15/03.................................. 238,125
- ------------------------------------------------------------
- ----------------------------------------------
2,664,000
- ------------------------------------------------------------
- ----------------------------------------------
TOBACCO -- 0.3%
150,000 Consolidated Cigar Corp., 10.500% due
3/1/03.............................. 157,687
- ------------------------------------------------------------
- ----------------------------------------------
TRANSPORTATION -- 0.5%
270,000 Sea Containers Ltd., Series A, 12.500% due
12/1/04........................ 298,350
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost --
$15,040,040)..................... 15,934,501
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
<C> <S>
<C>
- ------------------------------------------------------------
- ----------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 1.0%
- ------------------------------------------------------------
- ----------------------------------------------
AUTOMOBILE/AUTO PARTS/TRUCK MANUFACTURING -- 0.4%
3,750 Navistar International Corp., Series G,
Exchangeable $6.00................ 211,875
- ------------------------------------------------------------
- ----------------------------------------------
TELEPHONE/COMMUNICATIONS -- 0.6%
298 Panamsat Corp., Exchangeable
12.750%...................................... 363,560
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost -
- - $504,611)..................... 575,435
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ----------------------------------------------
<C> <S>
<C>
WARRANTS -- 0.0%
- ------------------------------------------------------------
- ----------------------------------------------
BROADCASTING - TV, CABLE AND RADIO -- 0.0%
1,650 Clearnet Communications Inc., Expire
9/15/05 (c).......................... $ 7,013
600 Nextel Communications Inc., Expire 5/23/99
(c)............................ 6
750 Wireless One Inc., Expire 10/19/00
(c).................................... 3,750
- ------------------------------------------------------------
- ----------------------------------------------
10,769
- ------------------------------------------------------------
- ----------------------------------------------
HOMEBUILDING -- 0.0%
600 Degeorge Financial Corp., Expire 3/31/97
(c).............................. 6
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL WARRANTS (Cost --
$20,934)..........................................
10,775
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL HIGH YIELD SECTOR (Cost --
$15,565,585)............................. 16,520,711
- ------------------------------------------------------------
- ----------------------------------------------
<CAPTION>
FACE
AMOUNT+ SECURITY
VALUE
- ------------------------------------------------------------
- ----------------------------------------------
<C> <S>
<C>
INTERNATIONAL SECTOR -- 31.1%
- ------------------------------------------------------------
- ----------------------------------------------
BONDS -- 31.1%
- ------------------------------------------------------------
- ----------------------------------------------
ARGENTINA -- 0.4%
300,000 Argentina Discount, Series L, 6.438% due
3/31/23 (d)...................... 231,564
- ------------------------------------------------------------
- ----------------------------------------------
AUSTRALIA -- 3.3%
400,000 New South Wales Treasury Corp., 12.000%
due 12/1/01....................... 381,941
Queensland Treasury Corp.:
1,200,000 8.000% due
5/14/97.....................................................
... 954,352
700,000 8.000% due
5/14/03.....................................................
... 575,192
- ------------------------------------------------------------
- ----------------------------------------------
1,911,485
- ------------------------------------------------------------
- ----------------------------------------------
CANADA -- 2.1%
Government of Canada:
150,000 7.500% due
7/1/97......................................................
... 111,644
650,000 11.750% due
2/1/03......................................................
.. 615,848
100,000 International Finance Corp., 7.750% due
8/18/98........................... 76,968
300,000 KFW International Finance, 9.500% due
5/13/02............................. 255,253
250,000 Rogers Cablesystem, 9.650% due
1/15/14.................................... 178,741
- ------------------------------------------------------------
- ----------------------------------------------
1,238,454
- ------------------------------------------------------------
- ----------------------------------------------
DENMARK -- 3.2%
Kingdom of Denmark:
7,000,000 6.000% due
12/10/99....................................................
... 1,234,366
3,250,000 8.000% due
5/15/03.....................................................
... 611,610
- ------------------------------------------------------------
- ----------------------------------------------
1,845,976
- ------------------------------------------------------------
- ----------------------------------------------
FINLAND -- 2.1%
2,000,000 Finnish Export Credit Corp., 6.000% due
1/15/99........................... 451,833
3,000,000 Government of Finland, 9.500% due
3/15/04................................. 789,217
- ------------------------------------------------------------
- ----------------------------------------------
1,241,050
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT+ SECURITY
VALUE
<C> <S>
<C>
- ------------------------------------------------------------
- ----------------------------------------------
<CAPTION>
<C> <S>
<C>
GERMANY -- 3.4%
3,000,000 Bundesrepublic, 5.250% due
2/21/01........................................ $
2,004,867
- ------------------------------------------------------------
- ----------------------------------------------
IRELAND -- 1.8%
600,000 Irish Government, 8.000% due
10/18/00..................................... 1,082,425
- ------------------------------------------------------------
- ----------------------------------------------
ITALY -- 4.6%
3,300,000,000 Buoni Poliennali Del Tesoro, 8.500% due
8/1/99............................ 2,268,221
600,000,000 Italian Certificati di Credito Del Tesoro,
9.300% due 8/1/99 (d).......... 401,434
- ------------------------------------------------------------
- ----------------------------------------------
2,669,655
- ------------------------------------------------------------
- ----------------------------------------------
MEXICO -- 0.6%
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...................... 366,875
- ------------------------------------------------------------
- ----------------------------------------------
366,875
- ------------------------------------------------------------
- ----------------------------------------------
NEW ZEALAND -- 1.6%
New Zealand Government:
750,000 6.500% due
2/15/00.....................................................
... 522,371
500,000 10.000% due
3/15/02.....................................................
.. 396,296
- ------------------------------------------------------------
- ----------------------------------------------
918,667
- ------------------------------------------------------------
- ----------------------------------------------
SPAIN -- 3.5%
40,000,000 Banco National, 13.000% due
1/29/97....................................... 309,053
200,000,000 Government of Spain, 10.100% due
2/28/01.................................. 1,770,517
- ------------------------------------------------------------
- ----------------------------------------------
2,079,570
- ------------------------------------------------------------
- ----------------------------------------------
SWEDEN -- 1.5%
5,000,000 Swedish Government, 10.250% due
5/5/03.................................... 891,168
- ------------------------------------------------------------
- ----------------------------------------------
UNITED KINGDOM -- 3.0%
1,000,000 United Kingdom Treasury Bill, 7.750% due
9/8/06........................... 1,736,972
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL INTERNATIONAL SECTOR (Cost --
$17,128,639).......................... 18,218,728
- ------------------------------------------------------------
- ----------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$56,555,704*).......................... $58,605,133
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
(a) Security issued with attached warrants.
(b) Security is exempt from registration under Rule 144A of
the Securities Act
of 1933. This security may be resold in transactions
that are exempt from
registration, normally to qualified institutional
buyers.
(c) Non-income producing security.
(d) Represents current rate on floating rate security.
+ Represents local currency.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
COMMON STOCKS -- 78%
- ------------------------------------------------------------
- ---------------------------------------------
GAS -- 12.5%
17,000 Coastal Corp.
............................................................
... $ 830,875
15,000 El Paso Natural Gas Co.
.....................................................
757,500
20,000 Enron Corp.
............................................................
..... 862,500
15,000 Equitable Resources Inc.
....................................................
446,250
12,000 MCN Corp.
............................................................
....... 346,500
20,000 PanEnergy Corp.
............................................................
. 900,000
35,000 Southwest Gas Corp.
.........................................................
673,750
22,500 Williams Cos. Inc.
..........................................................
843,750
- ------------------------------------------------------------
- ---------------------------------------------
5,661,125
- ------------------------------------------------------------
- ---------------------------------------------
TELECOMMUNICATIONS -- 5.4%
25,000 Frontier Corp.
............................................................
.. 565,625
20,000 MCI Communications Corp.
....................................................
653,750
25,000 Teleport Communications Group, Inc.
(a)...................................... 762,500
25,000 U.S. West Media Group
(a)....................................................
462,500
- ------------------------------------------------------------
- ---------------------------------------------
2,444,375
- ------------------------------------------------------------
- ---------------------------------------------
UTILITIES -- 60.1%
30,000 Allegheny Power System, Inc.
................................................
911,250
25,000 American Electric Power Inc.
................................................
1,028,125
15,000 Baltimore Gas & Electric Co.
................................................
401,250
31,500 Carolina Power & Light Co.
..................................................
1,149,750
15,000 Central & South West Corp.
..................................................
384,375
30,000 CINergy Corp.
............................................................
... 1,001,250
20,000 CIPSPO, Inc.
............................................................
.... 722,500
25,000 CMS Energy Corp.
............................................................
840,625
29,000 Consolidated Edison Co. of New York, Inc.
................................... 848,250
15,000 Dominion Resources Inc.
.....................................................
577,500
30,000 DPL Inc.
............................................................
........ 735,000
40,000 DQE Inc.
............................................................
........ 1,160,000
35,000 DTE Energy Co.
............................................................
.. 1,133,125
35,000 Edison
International...............................................
.......... 695,625
25,000 Enova Corp.
............................................................
..... 568,750
35,000 Entergy Corp.
............................................................
... 971,250
30,000 FPL Group Inc.
............................................................
.. 1,380,000
31,000 GPU Inc.
............................................................
........ 1,042,375
30,000 Houston Industries
Inc.......................................................
678,750
30,000 Illinova Corp.
............................................................
.. 825,000
25,000 Long Island Lighting Co.
....................................................
553,125
8,400 New England Electric
System..................................................
292,950
35,000 NIPSCO Industries, Inc.
.....................................................
1,386,875
27,000
Pacificorp..................................................
................. 553,500
37,000 Pinnacle West Capital Co.
...................................................
1,174,750
11,000 PECO Energy Co.
............................................................
. 277,750
10,000 Potomac Electric Power
Co....................................................
257,500
20,000 Public Service Co. of
Colorado...............................................
777,500
25,000 Public Service Co. of New Mexico
(a)......................................... 490,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
<C> <S>
<C>
- ------------------------------------------------------------
- ---------------------------------------------
<CAPTION>
<C> <S>
<C>
UTILITIES -- 60.1% (CONTINUED)
25,000 SCANA
Corp........................................................
........... $ 668,750
30,600 Sierra Pacific
Resources...................................................
.. 879,750
35,000 Southern
Co..........................................................
........ 791,875
35,000 Texas Utilities
Co..........................................................
. 1,426,250
20,000 Unicom
Corp........................................................
.......... 542,500
7,000 Wisconsin Energy
Corp........................................................
188,125
- ------------------------------------------------------------
- ---------------------------------------------
27,316,575
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL COMMON STOCKS (Cost --
$30,449,952)....................................
35,422,075
- ------------------------------------------------------------
- ---------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
CORPORATE BONDS AND NOTES -- 19.7%
- ------------------------------------------------------------
- ---------------------------------------------
UTILITIES -- 19.7%
Arizona Public Service Co., First Mortgage:
$ 250,000 7.250% due
8/1/23......................................................
.... 235,938
250,000 8.750% due
1/15/24.....................................................
.... 272,188
200,000 8.000% due
2/1/25......................................................
.... 203,250
255,000 Central Illinois Public Service Co., 8.500%
due 5/15/22...................... 271,894
200,000 Cincinnati Gas & Electric Co., 8.500% due
9/1/22............................. 202,750
250,000 Commonwealth Edison Co., 8.375% due
9/15/22.................................. 253,125
250,000 Dayton Power & Light Co., First Mortgage,
8.150% due 1/15/26................. 262,500
Duquesne Light Co., First Collateral Trust:
200,000 8.375% due
5/15/24.....................................................
.... 209,750
250,000 7.550% due
6/15/25.....................................................
.... 239,687
200,000 Idaho Power Co., First Mortgage, 8.750% due
3/15/27.......................... 215,000
500,000 Illinois Power Co., 8.000% due
2/15/23....................................... 500,625
300,000 Kentucky Utilities Co., First Mortgage, 8.550%
due 5/15/27................... 317,625
Madison Gas & Electric Co., First Mortgage:
200,000 8.500% due
4/15/22.....................................................
.... 216,000
500,000 7.700% due
2/15/28.....................................................
.... 508,750
250,000 Midwest Power Systems Inc., 8.125% due
2/1/23................................ 264,062
200,000 New England Power Co., General & Reference,
8.000% due 8/1/22................ 202,000
New York State Electric & Gas Corp., First
Mortgage:
250,000 8.300% due
12/15/22....................................................
.... 252,500
250,000 7.450% due
7/15/23.....................................................
.... 238,125
250,000 Niagara Mohawk Power Co., First Mortgage,
8.500% due 7/1/23.................. 230,938
250,000 Pacific Gas & Electric Co., 6.750% due
10/1/23............................... 225,938
500,000 Pennsylvania Power & Light Co., First
Mortgage, 8.500% due 5/1/22............ 523,750
300,000 Public Service Co., Oklahoma, First Mortgage,
7.375% due 4/1/23.............. 296,250
196,000 Public Service Electric & Gas Co., First &
Refunding, 8.750% due 2/1/22...... 209,720
200,000 San Diego Gas & Electric Co., 8.500% due
4/1/22.............................. 210,750
550,000 Tampa Electric Co., First Mortgage, 7.750% due
11/1/22....................... 558,937
500,000 Texas Utilities Co., First Mortgage, 7.625%
due 7/1/25....................... 484,375
250,000 Virginia Electric & Power Co., First Mortgage,
7.500% due 6/1/23............. 239,062
400,000 Wisconsin Electric Power Co., First Mortgage,
7.050% due 8/1/24.............. 381,500
300,000 Wisconsin Power & Light Co., Notes, 8.600% due
3/15/27....................... 322,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
UTILITIES -- 19.7% (CONTINUED)
$ 425,000 Wisconsin Public Service Corp., First
Mortgage, 7.125% due 7/1/23............ $ 406,937
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost --
$8,858,359)......................... 8,956,426
- ------------------------------------------------------------
- ---------------------------------------------
REPURCHASE AGREEMENT -- 2.3%
1,041,000 Chase Manhattan Corp., 6.500% due 1/2/97;
Proceeds at maturity -- $1,041,376;
(Fully collateralized by U.S. Treasury Notes,
5.875% due 10/31/98; Market
value -- $1,063,089) (Cost --
$1,041,000)....................................
1,041,000
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS (Cost --
$40,349,311*).....................................
$45,419,501
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<C> <S>
<C>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
COMMON STOCKS -- 97.2%
- ------------------------------------------------------------
- ---------------------------------------------
BASIC INDUSTRIES -- 6.7%
379 Air Products & Chemicals, Inc.
............................................. $ 26,198
768 Alcan Aluminum Ltd.
........................................................
25,824
421 Alco Standard Corp.
........................................................
21,734
555 Allegheny Teledyne, Inc.
...................................................
12,765
937 Allied Signal, Inc.
........................................................
62,779
579 Aluminum Co. of
America.....................................................
36,911
590 Applied Materials, Inc.
(a).................................................
21,203
358 Armco, Inc.
(a).........................................................
.... 1,477
137 ASARCO, Inc.
............................................................
... 3,408
336 Avery Dennison Corp.
.......................................................
11,886
1,200 Barrick Gold Corp.
.........................................................
34,500
842 Battle Mountain Gold Corp.
.................................................
5,789
168 Bemis, Inc.
............................................................
.... 6,195
368 Bethlehem Steel Corp.
(a)...................................................
3,312
168 B.F. Goodrich Co.
..........................................................
6,804
158 Boise Cascade Corp.
........................................................
5,017
316 Champion International Corp.
...............................................
13,667
305 Cyprus Amax Minerals Co.
...................................................
7,129
832 Dow Chemical Co.
...........................................................
65,208
421 Echo Bay Mines Ltd.
........................................................
2,789
1,874 E.I. du Pont De Nemours & Co.
.............................................. 176,859
479 Engelhard Corp.
............................................................
9,161
116 FMC Corp.
(a).........................................................
...... 8,135
663 Freeport-McMoRan Copper & Gold Corp., Class B
Shares........................ 19,807
168 General Signal Corp.
.......................................................
7,182
316 Georgia Pacific Corp.
......................................................
22,752
211 Great Lakes Chemical Corp.
.................................................
9,864
158 Harnischfeger Industries, Inc.
............................................. 7,604
385 Hercules, Inc.
............................................................
. 16,651
495 Homestake Mining Co.
.......................................................
7,054
600 Inco Ltd.
............................................................
...... 19,125
158 Inland Steel Industries, Inc.
.............................................. 3,160
1,001 International Paper Co.
....................................................
40,415
390 ITT Industries Inc.
........................................................
9,555
274 James River Corp. of
Virginia...............................................
9,076
944 Kimberly-Clark Corp.
.......................................................
89,916
358 Louisiana Pacific Corp.
....................................................
7,563
179 Mead Corp.
............................................................
..... 10,404
1,959 Monsanto Co.
............................................................
... 76,156
484 Morton International Industries, Inc.
...................................... 19,723
32 Nacco Industries, Inc.
.....................................................
1,712
221 Nalco Chemical Co.
.........................................................
7,984
325 Newmont Mining Corp.
.......................................................
14,544
284 Nucor Corp.
............................................................
.... 14,484
221 Phelps Dodge Corp.
.........................................................
14,918
800 Placer Dome, Inc.
..........................................................
17,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
BASIC INDUSTRIES -- 6.7% (CONTINUED)
95 Potlatch Corp.
............................................................
. $ 4,085
632 PPG Industries, Inc.
.......................................................
35,471
516 Praxair, Inc.
............................................................
.. 23,801
211 Reynolds Metals Co.
........................................................
11,895
221 Rohm & Haas Co.
............................................................
18,039
158 Sigma-Aldrich Corp.
........................................................
9,865
328 Stone Container Corp.
......................................................
4,879
179 Temple Inland, Inc.
........................................................
9,688
95 Trinova Corp.
............................................................
.. 3,456
232 Union Camp Corp.
...........................................................
11,078
453 Union Carbide Corp.
........................................................
18,516
274 USX-U.S. Steel
Group.......................................................
. 8,597
326 Westvaco Corp.
............................................................
. 9,373
684 Weyerhaeuser Co.
...........................................................
32,405
179 Willamette Industries,
Inc..................................................
12,441
1,642 WMX Technologies, Inc.
.....................................................
53,570
295 Worthington Industries, Inc.
...............................................
5,347
326 W.R. Grace & Co.
...........................................................
16,871
- ------------------------------------------------------------
- ---------------------------------------------
1,305,176
- ------------------------------------------------------------
- ---------------------------------------------
CAPITAL GOODS -- 7.9%
116 Armstrong World Industries, Inc.
........................................... 8,062
1,194 Boeing Co.
............................................................
..... 127,012
95 Briggs & Stratton Corp.
....................................................
4,180
705 Browning Ferris Industries, Inc.
........................................... 18,506
642 Caterpillar, Inc.
..........................................................
48,311
84 Centex Corp.
............................................................
... 3,161
137 Cincinnati Milacron, Inc.
..................................................
2,997
358 Cooper Industries, Inc.
....................................................
15,081
142 Crane Co.
............................................................
...... 4,118
126 Cummins Engine, Inc.
.......................................................
5,796
337 Dana Corp.
............................................................
..... 10,995
863 Deere & Co.
............................................................
.... 35,059
368 Dover Corp.
............................................................
.... 18,492
253 Eaton Corp.
............................................................
.... 17,647
200 Echlin, Inc.
............................................................
... 6,325
743 Emerson Electric Co.
.......................................................
71,885
274 Fluor Corp.
............................................................
.... 17,193
126 Foster Wheeler Corp.
.......................................................
4,678
200 General Dynamics Corp.
.....................................................
14,100
5,517 General Electric Co.
(b)....................................................
545,493
105 Giddings & Lewis, Inc.
.....................................................
1,352
400 Illinois Tool Works, Inc.
..................................................
31,950
358 Ingersoll Rand Co.
.........................................................
15,931
126 Johnson Controls, Inc.
.....................................................
10,442
126 Kaufman & Broad Home Corp.
.................................................
1,622
677 Lockheed Martin Corp.
......................................................
61,900
737 McDonnell Douglas Corp.
....................................................
47,168
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
CAPITAL GOODS -- 7.9% (CONTINUED)
326 Moore Corp. Ltd.
...........................................................
$ 6,642
253 Navistar International Corp.
(a)............................................
2,308
189 Northrop Grumman Corp.
.....................................................
15,640
168 Owens-Corning Fiberglass Corp.
............................................. 7,161
122 Paccar, Inc.
............................................................
... 8,296
242 Parker Hannifin Corp.
......................................................
9,377
147 Raychem Corp.
............................................................
.. 11,778
800 Raytheon Corp.
............................................................
. 38,500
726 Rockwell International Corp.
...............................................
44,195
432 Santa Fe Pacific Gold Corp.
................................................
6,642
295 Stanley
Works.......................................................
........ 7,965
274 Textron, Inc.
............................................................
.. 25,824
500 Thermo Electron Corp.
(a)...................................................
20,625
126 Thomas & Betts Corp.
.......................................................
5,591
105 Timken Co.
............................................................
..... 4,817
422 TRW, Inc.
............................................................
...... 20,889
505 Tyco International Ltd.
....................................................
26,702
822 United Technologies Corp.
..................................................
54,252
2,090 Westinghouse Electric Corp.
................................................
41,539
168 W.W. Grainger, Inc.
........................................................
13,482
- ------------------------------------------------------------
- ---------------------------------------------
1,521,681
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER DURABLES -- 2.7%
284 Black & Decker Corp.
.......................................................
8,556
232 Case Corp.
............................................................
..... 12,644
2,485 Chrysler Corp.
............................................................
. 82,005
274 Cooper Tire & Rubber Co.
...................................................
5,411
758 Corning, Inc.
............................................................
.. 35,058
147 Fleetwood Enterprises, Inc.
................................................
4,042
3,907 Ford Motor Co.
............................................................
. 124,536
2,517 General Motors Corp.
.......................................................
140,323
411 Genuine Parts Co.
..........................................................
18,289
516 Goodyear Tire & Rubber Co.
.................................................
26,509
537 Masco Corp.
............................................................
.... 19,332
358 Maytag Corp.
............................................................
... 7,070
526 Newell Co.
............................................................
..... 16,569
84 Pulte Corp.
............................................................
.... 2,583
189 Snap-On Tools Corp.
........................................................
6,733
242 Whirlpool Corp.
............................................................
11,283
- ------------------------------------------------------------
- ---------------------------------------------
520,943
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER NON-DURABLES -- 13.2%
600 American Brands, Inc.
......................................................
29,775
1,705 Anheuser Busch Co., Inc.
...................................................
68,200
1,820 Archer-Daniels-Midland Co.
.................................................
40,040
500 Autozone, Inc.
(a).........................................................
. 13,750
442 Avon Products, Inc.
........................................................
25,249
95 Ball Corp.
............................................................
..... 2,470
221 Brown Forman Corp., Class B
Shares..........................................
10,111
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
CONSUMER NON-DURABLES -- 13.2% (CONTINUED)
798 Campbell Soup Co.
..........................................................
$ 64,039
168 Clorox Co.
............................................................
..... 16,863
8,287 Coca Cola Co.
(b).........................................................
.. 436,103
495 Colgate Palmolive Co.
......................................................
45,664
821 Conagra, Inc.
............................................................
.. 40,845
116 Coors Adolph Co., Class B Shares
........................................... 2,204
484 CPC International, Inc.
....................................................
37,510
421 Crown Cork & Seal, Inc.
....................................................
22,892
258 Eastman Chemical Co.
.......................................................
14,254
1,158 Eastman Kodak Co.
..........................................................
92,930
242 Fruit of the Loom, Inc. (a)
................................................
9,166
526 General Mills, Inc.
........................................................
33,335
1,484 Gillette Co.
............................................................
... 115,381
284 Hasbro, Inc.
............................................................
... 11,040
505 Hershey Foods Corp.
........................................................
22,094
1,227 H.J. Heinz Co.
............................................................
. 43,865
368 International Flavors & Fragrances, Inc.
................................... 16,560
705 Kellogg Co.
............................................................
.... 46,266
242 Liz Claiborne, Inc.
........................................................
9,347
916 Mattel, Inc.
............................................................
... 25,419
2,338 McDonald's Corp.
...........................................................
105,795
990 Nike Inc., Class B Shares
..................................................
59,153
5,201 PepsiCo, Inc.
............................................................
.. 152,779
2,759 Philip Morris Cos., Inc.
(b)................................................
310,732
274 Pioneer Hi Bred International, Inc.
........................................ 19,180
147 Polaroid Corp.
............................................................
. 6,393
2,275 Procter & Gamble Co.
.......................................................
244,562
442 Quaker Oats Co.
............................................................
16,851
347 Ralston Purina
Group.......................................................
. 25,461
211 Reebok International Ltd.
..................................................
8,862
526 Rubbermaid, Inc.
...........................................................
11,966
126 Russell Corp.
............................................................
.. 3,748
1,611 Sara Lee Corp.
............................................................
. 60,010
1,242 Seagram Ltd.
............................................................
... 48,128
274 Sherwin Williams Co.
.......................................................
15,344
158 Stride Rite Corp.
..........................................................
1,580
190 Tupperware Corp.
...........................................................
10,189
550 Unilever N.V.
............................................................
.. 96,388
674 UST, Inc.
............................................................
...... 21,821
211 VF Corp.
............................................................
....... 14,242
347 Whitman Corp.
............................................................
.. 7,938
379 W.M. Wrigley Jr. Co.
.......................................................
21,319
- ------------------------------------------------------------
- ---------------------------------------------
2,557,813
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER SERVICES -- 8.1%
84 Alberto Culver, Class B
Shares..............................................
4,032
842 Albertsons, Inc.
...........................................................
29,996
242 American Greetings Corp., Class A
Shares.................................... 6,867
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
CONSUMER SERVICES -- 8.1% (CONTINUED)
495 American Stores Co.
........................................................ $
20,233
6 Brunos, Inc.
(a).........................................................
... 104
316 Brunswick Corp.
............................................................
7,584
347 Charming Shoppes, Inc.
(a)..................................................
1,757
316 Circuit City Stores, Inc.
..................................................
9,520
568 Cognizant Corp.
............................................................
18,744
1,000 Comcast Corp., Class A Shares
(Special)..................................... 17,813
20 Cox Communications, Inc., Class A Shares
(a)................................ 463
1,263 CUC International, Inc.
(a).................................................
29,996
347 CVS Corp.
............................................................
...... 14,357
526 Darden Restaurants, Inc.
...................................................
4,602
695 Dayton Hudson Corp.
........................................................
27,279
274 Deluxe Corp.
............................................................
... 8,973
368 Dillard Department Stores, Inc., Class A
Shares............................. 11,362
316 Dow Jones & Co. Inc.
.......................................................
10,705
568 Dun & Bradstreet Corp.
.....................................................
13,490
211 Ecolab, Inc.
............................................................
... 7,939
684 Federated Department Stores
(a).............................................
23,341
126 Fleming Co., Inc.
..........................................................
2,174
474 Gannett, Inc.
............................................................
.. 35,491
969 Gap, Inc.
............................................................
...... 29,191
189 Giant Food Inc., Class A
Shares.............................................
6,521
126 Great Atlantic & Pacific Tea Co., Inc.
..................................... 4,016
242 Harcourt General, Inc.
.....................................................
11,162
337 Harrah's Entertainment, Inc
(a).............................................
6,698
421 HFS, Inc.
(a).........................................................
...... 25,155
832 Hilton Hotels Corp.
........................................................
21,736
1,583 Home Depot,
Inc.........................................................
.... 79,348
253 Interpublic Group Co., Inc.
................................................
12,017
747 J.C. Penney
Co..........................................................
.... 36,416
105 John H. Harland Co.
........................................................
3,465
126 Jostens, Inc.
............................................................
.. 2,662
1,611 K mart Corp.
(a).........................................................
... 16,714
116 King World Productions, Inc.
...............................................
4,278
316 Knight Ridder, Inc.
........................................................
12,087
411 Kroger Co.
(a).........................................................
..... 19,112
979 Laidlaw, Inc., Class B
Shares...............................................
11,259
895 Limited,
Inc.........................................................
....... 16,446
400 Loews Cos., Inc.
...........................................................
37,700
63 Longs Drug Stores Corp.
....................................................
3,095
74 Lubys Cafeterias, Inc.
.....................................................
1,471
421 Marriott International, Inc.
...............................................
23,260
835 May Department Stores Co.
..................................................
39,036
337 McGraw Hill Cos., Inc.
.....................................................
15,544
116 Mercantile Stores, Inc.
....................................................
5,728
84 Meredith Corp.
............................................................
. 4,431
158 National Service Industries, Inc.
.......................................... 5,905
316 New York Times Co., Class A
Shares..........................................
12,008
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
CONSUMER SERVICES -- 8.1% (CONTINUED)
263 Nordstrom, Inc.
............................................................
$ 9,320
200 Pep Boys-Manny, Moe and
Jack................................................
6,150
642 Price Costco Inc.
(a).......................................................
16,130
374 Rite Aid
Corp........................................................
....... 14,867
505 R.R. Donnelley & Sons Co.
..................................................
15,844
168 Ryan's Family Steak Houses, Inc.
(a)........................................ 1,155
190 Safety-Kleen Corp.
.........................................................
3,111
1,316 Sears, Roebuck & Co.
.......................................................
60,701
800 Service Corp.
International...............................................
.. 22,400
137 Shoney's, Inc.
(a).........................................................
. 959
63 Spring Industries, Inc.
....................................................
2,709
221 Supervalv, Inc.
............................................................
6,271
611 Sysco Corp.
............................................................
.... 19,934
211 Tandy Corp.
............................................................
.... 9,284
2,180 Tele-Communications, Inc., Class A Shares
(a)............................... 28,476
1,842 Time Warner,
Inc.........................................................
... 69,075
358 Times Mirror Co., Class A
Shares............................................
17,811
232 TJX Cos.
Inc.........................................................
....... 10,991
905 Toys 'R' Us, Inc.
(a).......................................................
27,150
211 Tribune
Co..........................................................
........ 16,643
1,221 Viacom, Inc., Class B Shares
(a)............................................
42,582
821 Walgreen
Co..........................................................
....... 32,840
7,645 Wal-Mart Stores,
Inc........................................................
174,879
2,247 Walt Disney Co.
............................................................
156,447
421 Wendy's International, Inc.
................................................
8,630
505 Winn Dixie Stores, Inc.
....................................................
15,971
442 Woolworth Corp.
(a).........................................................
9,669
- ------------------------------------------------------------
- ---------------------------------------------
1,573,282
- ------------------------------------------------------------
- ---------------------------------------------
ENERGY -- 9.7%
305 Amerada Hess Corp.
.........................................................
17,652
1,653 Amoco Corp.
............................................................
.... 133,067
211 Ashland, Inc.
............................................................
.. 9,257
537 Atlantic Richfield Co.
.....................................................
71,152
474 Baker Hughes, Inc.
.........................................................
16,353
421 Burlington Resources, Inc.
.................................................
21,208
2,170 Chevron Corp.
............................................................
.. 141,050
516 CINergy Corp.
............................................................
.. 17,222
347 Coastal Corp.
............................................................
.. 16,960
621 Dresser Industries, Inc.
...................................................
19,251
63 Eastern
Enterprises.................................................
........ 2,229
1,484 Edison
International...............................................
......... 29,495
832 Enron Corp.
............................................................
.... 35,880
221 Enserch Corp.
............................................................
.. 5,083
4,157 Exxon Corp.
(b).........................................................
.... 407,386
379 Halliburton Co.
............................................................
22,835
74 Helmerich & Payne, Inc.
....................................................
3,857
168 Kerr McGee Corp.
...........................................................
12,096
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
ENERGY -- 9.7% (CONTINUED)
421 LSI Logic Corp.
(a).........................................................
$ 11,262
105 Louisiana Land & Exploration Co.
........................................... 5,631
189 McDermott International, Inc.
.............................................. 3,142
1,316 Mobil Corp.
............................................................
.... 160,881
421 Noram Energy Corp.
.........................................................
6,473
1,053 Occidental Petroleum Corp.
.................................................
24,614
347 Oryx Energy Co.
(a).........................................................
8,588
147 Pennzoil Co.
............................................................
... 8,305
863 Phillips Petroleum Co.
.....................................................
38,188
295 Rowan Co., Inc.
(a).........................................................
6,674
1,790 Royal Dutch Petroleum Co.
(b)...............................................
305,643
295 Santa Fe Energy Resources, Inc.
(a)......................................... 4,093
811 Schlumberger Ltd.
..........................................................
80,999
284 Sonat Inc.
............................................................
..... 14,626
243 Sun Co, Inc.
............................................................
... 5,923
579 Tenneco, Inc.
............................................................
.. 26,127
874 Texaco, Inc.
............................................................
... 85,761
831 Union Pacific Resources Group Inc.
......................................... 24,307
821 Unocal Corp.
............................................................
... 33,353
947 USX-Marathon Group Inc.
....................................................
22,610
168 Western Atlas, Inc.
(a).....................................................
11,907
518 Williams Co.,
Inc.........................................................
.. 19,406
- ------------------------------------------------------------
- ---------------------------------------------
1,890,546
- ------------------------------------------------------------
- ---------------------------------------------
FINANCIAL SERVICES -- 14.5%
495 Aetna Inc.
............................................................
..... 39,600
168 Alexander & Alexander Services, Inc.
....................................... 2,919
1,501 Allstate Corp.
............................................................
. 86,870
1,611 American Express Co.
.......................................................
91,022
695 American General Corp.
.....................................................
28,408
1,569 American International Group, Inc.
......................................... 169,844
1,510 Banc One Corp.
............................................................
. 64,930
526 Bank of Boston Corp.
.......................................................
33,796
1,305 Bank of New York
...........................................................
44,044
1,219 BankAmerica Corp.
..........................................................
121,595
274 Bankers Trust of New York Corp.
............................................ 23,633
653 Barnett Banks Inc.
.........................................................
26,855
189 Beneficial Corp.
...........................................................
11,978
547 Boatmens Bancshares, Inc.
..................................................
35,282
1,453 Chase Manhattan Corp.
......................................................
129,680
611 Chubb Corp.
............................................................
.... 32,841
274 CIGNA Corp.
............................................................
.... 37,435
1,632 CitiCorp.
............................................................
...... 168,096
411 Comerica Inc.
............................................................
.. 21,526
737 CoreStates Financial Corp.
.................................................
38,232
563 Dean Witter Discover & Co.
.................................................
37,299
600 Federal Home Loan Mortgage Corp.
........................................... 66,075
3,633 Federal National Mortgage Association
...................................... 135,329
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
FINANCIAL SERVICES -- 14.5% (CONTINUED)
347 Fifth Third BanCorp.
....................................................... $
21,796
474 First Bank Systems, Inc.
...................................................
32,351
1,069 First Chicago Corp.
........................................................
57,459
1,474 First Data Corp.
...........................................................
53,801
963 First Union Corp.
..........................................................
71,262
895 Fleet Financial Group, Inc.
................................................
44,638
284 General Re Corp.
...........................................................
44,801
211 Golden West Financial Corp. of
Delaware..................................... 13,319
463 Great Western Financial Corp.
.............................................. 13,427
463 Green Tree Financial Corp.
.................................................
17,883
347 Household International Inc.
...............................................
32,011
411 H.F. Ahmanson & Co.
........................................................
13,358
358 H&R Block, Inc.
............................................................
10,382
411 ITT Hartford
Group.......................................................
... 27,742
253 Jefferson Pilot Corp.
......................................................
14,326
642 J.P. Morgan & Co., Inc.
....................................................
62,675
800 KeyCorp.
............................................................
....... 40,400
358 Lincoln National Corp.
.....................................................
18,795
632 Lowes Corp.
............................................................
.... 22,436
253 Marsh & McLennan Cos., Inc.
................................................
26,312
140 MBIA, Inc.
............................................................
..... 14,175
747 MBNA Corp.
............................................................
..... 31,001
463 Mellon Bank Corp.
..........................................................
32,873
579 Merrill Lynch & Co., Inc.
..................................................
47,189
211 MGIC Investment Corp.
......................................................
16,036
537 Morgan Stanley Group, Inc.
.................................................
30,676
747 National City Corp.
........................................................
33,522
1,000 NationsBank Corp.
..........................................................
97,750
1,221 Norwest Corp.
............................................................
.. 53,113
1,147 PNC Bank Corp.
............................................................
. 43,156
337 Providian Corp.
............................................................
17,313
195 Republic New York Corp.
....................................................
15,917
432 SAFECO Corp.
............................................................
... 17,037
368 Salomon Inc.
............................................................
... 17,342
295 St. Paul Cos., Inc.
........................................................
17,294
779 Suntrust Bank, Inc.
........................................................
38,366
253 Torchmark Corp.
............................................................
12,777
242 Transamerica Corp.
.........................................................
19,118
263 UNUM Corp.
............................................................
..... 19,002
516 U.S. Bancorp. of
Oregon.....................................................
23,188
400 USF&G Corp.
............................................................
.... 8,350
126 USLIFE Corp.
............................................................
... 4,190
579 Wachovia Corp.
............................................................
. 32,714
315 Wells Fargo & Co.
..........................................................
84,971
- ------------------------------------------------------------
- ---------------------------------------------
2,813,533
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
HEALTHCARE -- 10.2%
2,622 Abbott
Laboratories................................................
......... $ 133,067
274 ALZA Corp.
(a).........................................................
..... 7,090
211 Allergan, Inc.
............................................................
. 7,517
2,106 American Home Products Corp.
...............................................
123,464
884 Amgen, Inc.
(a).........................................................
.... 48,068
368 Aon Corp.
............................................................
...... 22,862
189 Bausch & Lomb, Inc.
........................................................
6,615
895 Baxter International, Inc.
.................................................
36,695
421 Becton, Dickinson & Co.
....................................................
18,261
326 Beverly Enterprises, Inc.
(a)...............................................
4,157
389 Biomet, Inc.
............................................................
... 5,884
600 Boston Scientific Corp.
(a).................................................
36,000
1,663 Bristol-Myers Squibb Co.
...................................................
180,851
2,230 Columbia HCA Healthcare Corp.
.............................................. 90,873
179 C.R. Bard, Inc.
............................................................
5,012
270 Guidant Corp.
............................................................
.. 15,390
1,842 Eli Lilly & Co.
............................................................
134,466
537 Humana, Inc.
(a).........................................................
... 10,270
4,422 Johnson &
Johnson.....................................................
...... 219,995
264 Mallinckrodt Group, Inc.
...................................................
11,649
200 Manor Care, Inc.
...........................................................
5,400
768 Medtronic, Inc.
............................................................
52,224
4,075 Merck & Co., Inc.
..........................................................
322,944
147 Millipore Corp.
............................................................
6,082
371 Pall Corp.
............................................................
..... 9,461
2,127 Pfizer, Inc.
............................................................
... 176,275
1,695 Pharmacia &
Upjohn......................................................
.... 67,164
1,232 Schering-Plough Corp.
......................................................
79,772
263 St. Jude Medical, Inc.
(a)..................................................
11,210
716 Tenet Healthcare Corp.
(a)..................................................
15,663
611 United Healthcare Corp.
....................................................
27,495
189 US Surgical Corp.
..........................................................
7,442
947 Warner Lambert Co.
.........................................................
71,025
- ------------------------------------------------------------
- ---------------------------------------------
1,970,343
- ------------------------------------------------------------
- ---------------------------------------------
TECHNOLOGY -- 13.3%
432 Advanced Micro Devices, Inc.
...............................................
11,124
621 ALLTEL Corp.
............................................................
... 19,484
389 Amdahl Corp. (a)
...........................................................
4,717
723 AMP, Inc.
............................................................
...... 27,745
189 Andrew Corp.
(a).........................................................
... 10,029
411 Apple Computer, Inc.
(a)....................................................
8,580
147 Autodesk, Inc.
............................................................
. 4,116
958 Automatic Data Processing, Inc.
............................................ 41,074
621 Bay Networks, Inc
(a).......................................................
12,963
526 Cabletron Systems, Inc.
(a).................................................
17,490
221 Ceridian Corp.
(a).........................................................
. 8,951
2,212 Cisco Systems, Inc.
(a).....................................................
140,739
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
TECHNOLOGY -- 13.3% (CONTINUED)
884 Compaq Computer Corp.
(a)................................................... $
65,637
1,204 Computer Associates International, Inc.
.................................... 59,899
263 Computer Sciences Corp.
(a).................................................
21,599
126 Data General Corp.
(a)......................................................
1,827
632 Dell Computer Corp.
(a).....................................................
33,575
495 Digital Equipment Corp.
(a).................................................
18,006
379 DSC Communications Corp.
(a)................................................
6,775
158 EG&G, Inc.
............................................................
..... 3,180
768 EMC Corp.
(a).........................................................
...... 25,440
421 General Instrument Corp.
(a)................................................
9,104
126 Harris Corp.
............................................................
... 8,647
3,391 Hewlett Packard Co.
........................................................
170,398
421 Honeywell,
Inc.........................................................
..... 27,681
2,738 Intel Corp.
............................................................
.... 358,507
147 Intergraph Corp.
(a)........................................................
1,507
1,800 International Business Machines Corp.
...................................... 271,800
400 ITT Corp.
(a).........................................................
...... 17,350
2,151 Lucent
Technologies................................................
......... 99,484
684 Micron Technology, Inc.
....................................................
19,922
3,960 Microsoft Corp.
(a).........................................................
327,195
1,390 Minnesota Mining & Manufacturing Co.
....................................... 115,196
1,959 Motorola, Inc.
............................................................
. 120,234
453 National Semiconductor Corp.
(a)............................................
11,042
853 Northern Telecom Ltd.
......................................................
52,779
1,221 Novell, Inc.
(a).........................................................
... 11,561
2,195 Oracle Systems Corp.
(a)....................................................
91,641
137 Perkin-Elmer Corp.
.........................................................
8,066
495 Pitney Bowes, Inc.
.........................................................
26,978
253 Scientific Atlanta, Inc.
...................................................
3,795
866 Seagate Technology Corp.
(a)................................................
34,207
74 Shared Medical Systems Corp.
...............................................
3,645
537 Silicon Graphics, Inc.
(a)..................................................
13,694
1,242 Sun Microsystems, Inc.
(a)..................................................
31,904
390 Tandem Computers, Inc.
(a)..................................................
5,363
105 Tektronix, Inc.
............................................................
5,381
568 Tellabs, Inc.
(a).........................................................
.. 21,371
621 Texas Instruments, Inc.
....................................................
39,589
558 3Com Corp.
(a).........................................................
..... 40,943
716 Unicom Corp.
............................................................
... 19,422
569 Unisys Corp.
(a).........................................................
... 3,841
1,074 Xerox Corp.
............................................................
.... 56,519
- ------------------------------------------------------------
- ---------------------------------------------
2,571,716
- ------------------------------------------------------------
- ---------------------------------------------
TRANSPORTATION -- 1.4%
295 AMR Corp.
(a).........................................................
...... 25,977
516 Burlington Northern Santa
Fe................................................
44,570
126 Caliber Systems, Inc.
......................................................
2,426
264 Conrail, Inc.
............................................................
.. 26,301
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
TRANSPORTATION -- 1.4% (CONTINUED)
716 CSX Corp.
............................................................
...... $ 30,251
263 Delta Air Lines, Inc.
......................................................
18,640
358 Federal Express Corp. (a)
..................................................
15,931
421 Norfolk Southern Corp.
.....................................................
36,838
263 Ryder System, Inc.
.........................................................
7,397
474 Southwest Airlines Co.
.....................................................
10,487
800 Union Pacific Corp.
........................................................
48,100
211 U.S. Air Group, Inc. (a)
...................................................
4,932
- ------------------------------------------------------------
- ---------------------------------------------
271,850
- ------------------------------------------------------------
- ---------------------------------------------
UTILITIES -- 9.5%
1,653 Airtouch Communications Inc.
(a)............................................
41,738
621 American Electric Power, Inc.
.............................................. 25,539
1,853 Ameritech Corp.
............................................................
112,338
5,338 AT&T Corp.
(b).........................................................
..... 232,203
495 Baltimore Gas & Electric Co.
...............................................
13,241
1,463 Bell Atlantic Corp.
........................................................
94,729
3,317 BellSouth Corp.
............................................................
133,924
505 Carolina Power & Light Co.
.................................................
18,432
695 Central & South West Corp.
.................................................
17,809
179 Columbia Gas Systems, Inc.
.................................................
11,389
779 Consolidated Edison Co. New York, Inc.
..................................... 22,786
305 Consolidated Natural Gas Co.
...............................................
16,851
579 Dominion Resources Inc.
....................................................
22,292
474 DTE Energy Co.
............................................................
. 15,346
674 Duke Power Co.
............................................................
. 31,173
758 Entergy Corp.
............................................................
.. 21,035
611 FPL Group, Inc.
............................................................
28,106
600 Frontier Corp.
............................................................
. 13,575
390 GPU, Inc.
............................................................
...... 13,114
3,243 GTE Corp.
............................................................
...... 147,557
874 Houston Industries, Inc.
...................................................
19,774
2,306 MCI Communications Corp.
...................................................
75,377
474 Niagara Mohawk Power Corp.
(a)..............................................
4,681
158 Nicor, Inc.
............................................................
.... 5,649
221 Northern States Power Co. of
Minnesota......................................
10,138
1,453 NYNEX Corp.
............................................................
.... 69,926
505 Ohio Edison Co.
............................................................
11,489
84 Oneok, Inc.
............................................................
.... 2,520
969 PacificCorp.
............................................................
... 19,865
274 Pacific
Enterprises.................................................
........ 8,323
1,400 Pacific Gas & Electric Co.
.................................................
29,400
1,432 Pacific Telesis
Group.......................................................
52,626
495 PanEnergy Corp.
............................................................
22,275
737 PECO Energy Co.
............................................................
18,609
526 PP&L Resources, Inc.
.......................................................
12,098
116 Peoples Energy Corp.
.......................................................
3,930
811 Public Service Enterprise
Group.............................................
22,100
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
UTILITIES -- 9.5% (CONTINUED)
2,043 SBC Communications, Inc.
................................................... $
105,725
2,233 Southern Co.
............................................................
... 50,522
1,474 Sprint Corp.
............................................................
... 58,776
747 Texas Utilities Co.
........................................................
30,440
1,579 U.S. West Communications, Inc.
............................................. 50,923
2,064 U.S. West Media Group
(a)...................................................
38,184
337 Union Electric Co.
.........................................................
12,975
2,763 Worldcom, Inc.
(a).........................................................
. 72,011
- ------------------------------------------------------------
- ---------------------------------------------
1,841,513
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL COMMON STOCKS (Cost --
$12,738,942)...................................
18,838,396
- ------------------------------------------------------------
- ---------------------------------------------
PREFERRED STOCKS -- 0.0%
310 Fresenius National Medical Care (a) (Cost --
$39)........................... 40
- ------------------------------------------------------------
- ---------------------------------------------
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
SHORT-TERM INVESTMENTS -- 2.8%
$ 439,000 Repurchase Agreement -- Chase Manhattan
Corp., 6.500% due 1/2/97; Proceeds
at maturity -- $439,158; (Fully
collateralized by U.S. Treasury Notes,
5.875% due 10/31/98; Market value --
$448,315).............................. 439,000
100,000 U.S. Treasury Bills, 4.810% due 3/13/97
(b)................................. 99,002
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost --
$538,051)............................. 538,002
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$13,277,032*)............................ $19,376,438
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Non-income producing security.
(b) Security segregated by Custodian for futures contract
commitments.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
COMMON STOCKS -- 90.2%
- ------------------------------------------------------------
- ---------------------------------------------
BANKS -- 1.0%
6,000 State Street Boston
Corp.................................................... $
387,000
- ------------------------------------------------------------
- ---------------------------------------------
COMMERCIAL SERVICES -- 3.6%
9,000 Reuters Holdings PLC,
ADR...................................................
688,500
9,000 W.W. Grainger, Inc.
........................................................
722,250
- ------------------------------------------------------------
- ---------------------------------------------
1,410,750
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER DURABLES -- 4.3%
20,000 Chrysler Corp.
............................................................
. 660,000
11,000 Genuine Parts Co.
..........................................................
489,500
15,000 Leggett & Platt, Inc.
......................................................
519,375
- ------------------------------------------------------------
- ---------------------------------------------
1,668,875
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER NON-DURABLES -- 6.3%
19,000 Coca-Cola Corp.
............................................................
999,875
7,000 Kimberly-Clark Corp.
.......................................................
666,750
7,000 Procter & Gamble Co.
.......................................................
752,500
- ------------------------------------------------------------
- ---------------------------------------------
2,419,125
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER SERVICES -- 2.7%
13,000 McDonald's Corp.
...........................................................
588,250
15,000 TCA Cable TV, Inc.
.........................................................
451,875
- ------------------------------------------------------------
- ---------------------------------------------
1,040,125
- ------------------------------------------------------------
- ---------------------------------------------
ELECTRONIC TECHNOLOGY -- 10.5%
16,000 AMP, Inc.
............................................................
...... 614,000
15,000 Electronic Data Systems
Corp................................................
648,750
8,000 Harris Corp.
............................................................
... 549,000
28,000 Hewlett Packard Co.
........................................................
1,407,000
14,000 Motorola, Inc.
............................................................
. 859,250
- ------------------------------------------------------------
- ---------------------------------------------
4,078,000
- ------------------------------------------------------------
- ---------------------------------------------
ENERGY -- 4.9%
5,000 Exxon Corp.
............................................................
.... 490,000
6,000 Mobil Corp.
............................................................
.... 733,500
15,000 Phillips Petroleum Co.
.....................................................
663,750
- ------------------------------------------------------------
- ---------------------------------------------
1,887,250
- ------------------------------------------------------------
- ---------------------------------------------
ENTERTAINMENT -- 1.8%
10,000 The Walt Disney
Co..........................................................
696,250
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
FINANCE -- 11.0%
11,000 Beneficial
Corp........................................................
..... $ 697,125
10,000 Greenpoint Financial Corp.
.................................................
472,500
15,000
KeyCorp.....................................................
................ 757,500
8,000 J.P. Morgan & Co.,
Inc......................................................
781,000
13,000 Mercury General Corp.
......................................................
682,500
9,000 NationsBank
Corp........................................................
.... 879,750
- ------------------------------------------------------------
- ---------------------------------------------
4,270,375
- ------------------------------------------------------------
- ---------------------------------------------
HEALTH TECHNOLOGY -- 6.3%
11,000 Eli Lilly &
Co..........................................................
.... 803,000
17,000 Johnson & Johnson
..........................................................
845,750
10,000 Merck & Co., Inc.
..........................................................
792,500
- ------------------------------------------------------------
- ---------------------------------------------
2,441,250
- ------------------------------------------------------------
- ---------------------------------------------
INDUSTRIAL SERVICES -- 1.8%
11,000 Fluor Corp.
............................................................
.... 690,250
- ------------------------------------------------------------
- ---------------------------------------------
MACHINERY -- 1.6%
25,000 Pall Corp.
............................................................
..... 637,500
- ------------------------------------------------------------
- ---------------------------------------------
MANUFACTURING -- 0.6%
7,000 John Harland
Co..........................................................
... 231,000
- ------------------------------------------------------------
- ---------------------------------------------
MINERALS -- 1.2%
25,000 Worthington Industries Inc.
................................................
453,123
- ------------------------------------------------------------
- ---------------------------------------------
PROCESS INDUSTRIES -- 6.6%
12,000 Bemis,
Inc.........................................................
......... 442,500
18,000 M.A. Hanna
Co..........................................................
..... 393,750
27,000 Monsanto
Co..........................................................
....... 1,049,625
12,000 Temple-Inland, Inc.
........................................................
649,500
- ------------------------------------------------------------
- ---------------------------------------------
2,535,375
- ------------------------------------------------------------
- ---------------------------------------------
PRODUCER MANUFACTURER -- 7.3%
12,000 Belden, Inc.
............................................................
... 444,000
12,000 General Electric Co.
.......................................................
1,186,500
10,000 Hubbell, Inc., Class B
Shares...............................................
432,500
9,000 Minnesota Mining & Manufacturing
Co......................................... 745,876
- ------------------------------------------------------------
- ---------------------------------------------
2,808,876
- ------------------------------------------------------------
- ---------------------------------------------
REAL ESTATE -- 1.1%
15,000 Arden Realty Group,
Inc.....................................................
416,250
- ------------------------------------------------------------
- ---------------------------------------------
RETAIL -- 3.9%
19,000 Circuit City Stores,
Inc....................................................
572,375
9,000 May Department Stores Co.
..................................................
420,750
15,000 Nordstrom
Inc.........................................................
...... 531,563
- ------------------------------------------------------------
- ---------------------------------------------
1,524,688
- ------------------------------------------------------------
- ---------------------------------------------
TECHNOLOGY SERVICES -- 1.8%
16,000 Automatic Data Processing,
Inc..............................................
686,000
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
TELECOMMUNICATIONS -- 1.8%
23,000 LM Ericsson Telephone Co.,
ADR.............................................. $
694,313
- ------------------------------------------------------------
- ---------------------------------------------
TEXTILES -- APPAREL MANUFACTURING -- 1.6%
16,000 Liz Claiborne,
Inc.........................................................
. 618,000
- ------------------------------------------------------------
- ---------------------------------------------
TRANSPORTATION -- 3.7%
6,124 Conrail, Inc.
............................................................
.. 610,104
5,000 CSX Corp.
............................................................
...... 211,250
10,000 Union Pacific
Corp........................................................
.. 601,250
- ------------------------------------------------------------
- ---------------------------------------------
1,422,604
- ------------------------------------------------------------
- ---------------------------------------------
UTILITIES -- 4.8%
12,000 Ameritech
Corp........................................................
...... 727,500
14,000 GTE Corp.
............................................................
...... 637,000
5,000 Northern States Power Co.
..................................................
229,375
8,469 Union Pacific Resources Corp.
.............................................. 247,718
- ------------------------------------------------------------
- ---------------------------------------------
1,841,593
- ------------------------------------------------------------
- ---------------------------------------------
34,858,572
TOTAL COMMON STOCKS (Cost --
$23,880,094)...................................
- ------------------------------------------------------------
- ---------------------------------------------
FOREIGN COMMON STOCKS -- 2.1%
- ------------------------------------------------------------
- ---------------------------------------------
AUSTRALIA -- 2.1%
57,380 Broken Hill Proprietary Co. Ltd. (Cost --
$696,013)......................... 816,738
- ------------------------------------------------------------
- ---------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 1.5%
- ------------------------------------------------------------
- ---------------------------------------------
ENERGY -- 1.5%
10,044 Unocal Corp., Convertible 7.000% (a) (Cost --
$485,250)..................... 572,508
- ------------------------------------------------------------
- ---------------------------------------------
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
CORPORATE DEBENTURES -- 3.9%
- ------------------------------------------------------------
- ---------------------------------------------
FINANCIAL SERVICES -- 2.6%
$ 500,000 Dean Witter Discover & Co., 6.875% due
3/1/03............................... 503,750
500,000 General Motors Acceptance Corp., 7.000% due
9/15/02......................... 508,125
- ------------------------------------------------------------
- ---------------------------------------------
1,011,875
- ------------------------------------------------------------
- ---------------------------------------------
RETAIL TRADE -- 1.3%
500,000 Limited Inc., 7.800% due
5/15/02............................................
513,750
- ------------------------------------------------------------
- ---------------------------------------------
1,525,625
TOTAL CORPORATE DEBENTURES (Cost --
$1,559,315).............................
- ------------------------------------------------------------
- ---------------------------------------------
REPURCHASE AGREEMENT -- 2.3%
884,000 Chase Manhattan Corp., 6.500% due 1/2/97;
Proceeds at maturity -- $884,319; 884,000
(Fully collateralized by U.S. Treasury Notes,
5.875% due 10/31/98;
Market value -- $902,758) (Cost --
$884,000)................................
- ------------------------------------------------------------
- ---------------------------------------------
$38,657,443
TOTAL INVESTMENTS -- 100% (Cost --
$27,504,672*)............................
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Security is exempt from registration under Rule 144A of
Securities Act of
1933. This security may be resold in transactions that
are exempt from
registration, normally to qualified institutional
buyers.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
COMMON STOCKS -- 93.9%
- ------------------------------------------------------------
- ---------------------------------------------
BASIC INDUSTRIES/RAW MATERIALS -- 1.8%
2,100 B.F. Goodrich, Inc.
...........................................................
$ 85,050
1,000 Mueller Industries, Inc.
(a)...................................................
38,500
1,500 Raychem
Corp........................................................
........... 120,188
3,000 U.S. Filter Corp.
(a).........................................................
. 95,250
- ------------------------------------------------------------
- ---------------------------------------------
338,988
- ------------------------------------------------------------
- ---------------------------------------------
CAPITAL GOODS/PRODUCTION -- 1.7%
1,700 Danaher Corp.
............................................................
..... 79,263
1,450 Precision Castparts Corp.
.....................................................
71,956
900 Sealed Air Corp.
(a).........................................................
.. 37,463
3,850 United Waste Systems, Inc.
(a).................................................
132,344
- ------------------------------------------------------------
- ---------------------------------------------
321,026
- ------------------------------------------------------------
- ---------------------------------------------
CHEMICALS -- 0.5%
1,800 Praxair,
Inc.........................................................
.......... 83,025
- ------------------------------------------------------------
- ---------------------------------------------
COMMERCIAL SERVICES -- 2.7%
2,695 Accustaff, Inc.
(a).........................................................
... 56,932
1,750 COREStaff, Inc.
(a).........................................................
... 41,453
2,650 Corrections Corp. of America
(a)...............................................
81,156
2,200 Gartner Group, Inc.
(a)........................................................
85,663
1,875 Ha-Lo Industries, Inc.
(a).....................................................
51,563
1,000 MGM Grand Inc.
(a).........................................................
.... 34,875
1,800 National Data
Corp........................................................
..... 78,300
3,300 Reynolds & Reynolds Co., Class A
Shares........................................ 85,800
- ------------------------------------------------------------
- ---------------------------------------------
515,742
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER DISTRIBUTION -- 8.9%
4,000 Bed, Bath & Beyond, Inc.
(a)...................................................
97,000
1,350 CDW Computer Centers, Inc.
(a).................................................
80,072
1,000 Central Garden & Pet Co.
(a)...................................................
21,063
4,000 CompUSA, Inc.
(a).........................................................
..... 82,500
2,875 Consolidated Stores Corp.
(a)..................................................
92,359
1,000 Danka Business Systems PLC
ADR.................................................
35,375
1,000 Dollar General Corp.
..........................................................
32,000
2,250 Eagle Hardware & Garden, Inc. (a)
............................................. 46,688
500 Herman Miller Inc.
............................................................
28,313
450 Hughes Supply,
Inc.........................................................
.... 19,406
1,300 Inacom Corp.
(a).........................................................
...... 52,000
1,800 Ingram Micro, Inc., Class A Shares
(a)......................................... 41,400
1,900 Interstate Bakeries Corp.
.....................................................
93,338
1,950 Just for Feet, Inc.
(a)........................................................
51,188
1,800 Kroger Co.
(a).........................................................
........ 83,700
2,250 Richfood Holdings, Inc.
.......................................................
54,563
2,000 Ross Stores, Inc.
............................................................
. 100,000
3,600 Safeway Inc.
(a).........................................................
...... 153,900
1,600 Saks Holdings, Inc.
(a)........................................................
43,200
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
CONSUMER DISTRIBUTION -- 8.9% (CONTINUED)
2,500 Staples, Inc.
(a).........................................................
..... $ 45,156
2,100 The Finish Line, Inc., Class A Shares
(a)...................................... 44,363
800 The Sports Authority, Inc.
(a).................................................
17,400
2,000 Tiffany & Co., Inc.
...........................................................
73,250
1,850 TJX Cos., Inc.
............................................................
.... 87,644
1,300 U.S. Office Products Co.
(a)...................................................
44,363
2,650 Vons Cos., Inc.
(a).........................................................
... 158,669
- ------------------------------------------------------------
- ---------------------------------------------
1,678,910
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER DURABLES -- 1.6%
500 Blyth Industries Inc.
(a)......................................................
22,813
1,000 Ethan Allen
Interior....................................................
....... 38,500
4,000 Nautica Enterprises, Inc.
(a)..................................................
101,000
2,650 Tommy Hilfiger Corp.
(a).......................................................
127,200
- ------------------------------------------------------------
- ---------------------------------------------
289,513
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER NON-DURABLES -- 4.4%
1,500 Borders Group, Inc.
(a)........................................................
53,813
1,800 Coca-Cola Enterprises, Inc.
...................................................
87,300
1,700 Gadzooks, Inc.
(a).........................................................
.... 31,025
900 Gucci Group
NV..........................................................
....... 57,488
1,900 Liz Claiborne, Inc.
...........................................................
73,388
4,200 Nike, Inc., Class B
Shares.....................................................
250,950
1,500 Rexall Sundown, Inc.
(a).......................................................
40,781
1,900 St. John Knits, Inc.
..........................................................
82,650
1,750 U.S.A. Detergents, Inc.
(a)....................................................
72,844
2,850 Wolverine World Wide, Inc.
....................................................
82,650
- ------------------------------------------------------------
- ---------------------------------------------
832,889
- ------------------------------------------------------------
- ---------------------------------------------
CONSUMER SERVICES -- 6.6%
2,000 AMRESCO, Inc.
(a).........................................................
..... 53,500
2,650 APAC Teleservices, Inc.
(a)....................................................
101,694
2,000 Apollo Group, Inc., Class A Shares
(a)......................................... 66,875
1,000 Boston Chicken, Inc.
(a).......................................................
35,875
450 Caribiner International, Inc.
(a)..............................................
22,613
500 CKE Restaurants, Inc.
.........................................................
18,000
850 Consolidated Graphics Inc.
(a).................................................
47,600
2,500 Doubletree Corp.
(a).........................................................
.. 112,500
3,500 HFS Inc.
(a).........................................................
.......... 209,125
2,000 International Game
Technology..................................................
36,500
1,450 Interpublic Group of Companies, Inc.
.......................................... 68,875
1,000 Landry's Seafood Restaurant, Inc.
(a).......................................... 21,375
2,200 Meredith Corp.
............................................................
.... 116,050
1,000 Penske Motorsports, Inc.
(a)...................................................
25,250
1,550 Prime Hospitality Inc.
(a).....................................................
24,994
1,850 Promus Hotel Corp.
(a).........................................................
54,806
1,000 RAC Financial Group, Inc.
(a)..................................................
21,125
750 Rainforest Cafe, Inc.
(a)......................................................
17,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
CONSUMER SERVICES -- 6.6% (CONTINUED)
3,150 Regal Cinemas, Inc.
(a)........................................................
$ 96,863
1,000 Robert Half International, Inc.
(a)............................................
34,375
3,900 Sitel Corp.
(a).........................................................
....... 55,575
- ------------------------------------------------------------
- ---------------------------------------------
1,241,195
- ------------------------------------------------------------
- ---------------------------------------------
ELECTRONICS -- 0.4%
1,500 SCI Systems, Inc.
(a).........................................................
. 66,938
- ------------------------------------------------------------
- ---------------------------------------------
ENERGY -- 10.7%
1,000 Baker Hughes, Inc.
............................................................
34,500
800 Barret Resources Corp.
(a).....................................................
34,100
1,400 Benton Oil & Gas Co.
(a).......................................................
31,675
1,031 BJ Services Co.
(a).........................................................
... 52,581
1,300 Camco International Corp.
.....................................................
59,963
3,400 Chesapeake Energy Corp.
(a)....................................................
189,125
900 Cliffs Drilling Co.
(a)........................................................
56,925
2,500 Comstock Resources, Inc.
(a)...................................................
32,500
1,700 Cooper Cameron Corp.
(a).......................................................
130,040
1,550 Diamond Offshore Drilling, Inc.
(a)............................................
88,350
1,400 ENSCO International, Inc.
(a)..................................................
67,900
2,500 Falcon Drilling Co., Inc.
(a)..................................................
98,125
1,250 Flores & Rucks, Inc.
(a).......................................................
66,563
2,000 Forcenergy, Inc.
(a).........................................................
.. 72,500
4,700 Global Marine, Inc.
(a)........................................................
96,938
2,500 Marine Drilling Co.,
Inc.(a)...................................................
49,219
2,000 Noble Drilling Corp.
(a).......................................................
39,750
500 Nuevo Energy Co.
(a).........................................................
.. 26,000
2,550 Pogo Producing Co.
............................................................
120,481
3,450 Reading & Bates Corp. New
(a)..................................................
91,425
5,000 Rowan Cos., Inc.
(a).........................................................
.. 113,125
3,000 Smith International, Inc.
(a)..................................................
134,615
1,800 Tidewater, Inc.
............................................................
... 81,450
2,650 Transocean Offshore Inc.
......................................................
165,956
1,500 United Meridian Corp.
(a)......................................................
77,625
- ------------------------------------------------------------
- ---------------------------------------------
2,011,431
- ------------------------------------------------------------
- ---------------------------------------------
FINANCIAL SERVICES -- 9.1%
1,950 Aames Financial Corp.
.........................................................
69,956
700 Astoria Financial Corp.
.......................................................
25,813
1,800 Bank of Boston Corp.
..........................................................
115,650
1,000 ContiFinancial Corp.
(a).......................................................
36,125
1,350 Cullen Frost Bankers, Inc.
....................................................
44,888
2,100 Finova Group, Inc.
............................................................
134,925
800 First Bank System, Inc.
.......................................................
54,600
2,650 Green Tree Financial Corp.
....................................................
102,356
1,050 GreenPoint Financial Corp.
....................................................
49,613
1,350 Household International, Inc.
.................................................
124,538
3,000 Imperial Credit Industries, Inc.
(a)........................................... 63,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
FINANCIAL SERVICES -- 9.1% (CONTINUED)
1,300 North Fork Bankcorp.
..........................................................
$ 46,313
2,400 PennCorp Financial Group, Inc.
................................................
86,400
1,500 People's Heritage Financial Group, Inc.
....................................... 42,000
750 Star Banc Corp.
............................................................
... 68,906
1,350 Student Loan Marketing Association, Inc.
...................................... 125,719
4,300 SunAmerica, Inc.
............................................................
.. 190,813
2,100 TCF Financial Corp.
...........................................................
91,350
2,000 The Money Store, Inc.
.........................................................
55,250
1,000 TIG Holdings Inc.
............................................................
. 33,875
3,600 Washington Mutual, Inc.
.......................................................
155,925
- ------------------------------------------------------------
- ---------------------------------------------
1,718,015
- ------------------------------------------------------------
- ---------------------------------------------
HEALTHCARE -- 7.0%
750 Curative Health Services Inc.
(a)..............................................
20,766
5,000 Dura Pharmaceuticals, Inc.
(a).................................................
238,750
2,000 HBO & Co.
............................................................
......... 118,750
4,000 Health Management Associates, Inc., Class A
Shares (a)......................... 90,000
3,500 HEALTHSOUTH Corp.
(a).........................................................
. 135,188
1,900 Jones Medical Industries, Inc.
................................................
69,588
1,500 Medicis Pharmaceutical Corp.
(a)...............................................
66,000
2,400 Mentor Corp./Minnesota
........................................................
70,800
1,850 MiniMed, Inc.
(a).........................................................
..... 59,663
5,500 Omnicare Group, Inc.
..........................................................
176,688
900 Parexel International Corp.
(a)................................................
46,463
1,250 Quintiles Transnational Corp.
(a)..............................................
82,813
2,600 Renal Treatment Centers, Inc.
(a)..............................................
66,300
1,200 Total Renal Care Holdings, Inc.
(a)............................................
43,500
1,300 Universal Health Services, Inc., Class B Shares
(a)............................ 37,213
- ------------------------------------------------------------
- ---------------------------------------------
1,322,482
- ------------------------------------------------------------
- ---------------------------------------------
INSURANCE -- 2.5%
1,100 American Bankers Insurance Group, Inc.
........................................ 56,238
2,650 CMAC Investment Corp.
.........................................................
97,388
4,251 Conseco, Inc.
............................................................
..... 270,989
1,500 Old Republic International Corp.
.............................................. 40,125
- ------------------------------------------------------------
- ---------------------------------------------
464,740
- ------------------------------------------------------------
- ---------------------------------------------
MEDIA -- 0.9%
2,300 Evergreen Media Corp.
(a)......................................................
57,500
1,475 Infinity Broadcasting Co., Class A Shares
(a).................................. 49,597
1,450 Omnicom Group, Inc.
...........................................................
66,338
- ------------------------------------------------------------
- ---------------------------------------------
173,435
- ------------------------------------------------------------
- ---------------------------------------------
PRODUCER MANUFACTURING -- 1.0%
900 Mastec, Inc.
(a).........................................................
...... 47,700
750 Shaw Group, Inc.
(a).........................................................
.. 17,531
4,000 U.S.A. Waste Service, Inc.
(a).................................................
127,500
- ------------------------------------------------------------
- ---------------------------------------------
192,731
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
<C> <S>
<C>
- ------------------------------------------------------------
- ---------------------------------------------
<CAPTION>
TECHNOLOGY -- 24.4%
3,600 Acxiom Corp.
(a).........................................................
...... $ 86,400
500 Altera Corp. (a)
............................................................
.. 36,344
1,450 American Power Conversion Corp.
(a)............................................
39,513
800 Applied Magnetics Corp. (a)
...................................................
23,900
5,000 Ascend Communications, Inc.
(a)................................................
310,625
1,100 Aspen Technologies, Inc.
(a)...................................................
88,275
1,450 BMC Industries, Inc.
..........................................................
45,675
4,700 BMC Software, Inc.
(a).........................................................
194,463
4,250 Cadence Design Systems, Inc.
(a)...............................................
168,938
2,500 Cambridge Technology Partners, Inc.
(a)........................................ 83,906
3,100 Cascade Communications Corp.
(a)...............................................
170,888
400 CBT Group Ltd. Sponsored ADR
(a)...............................................
21,700
1,000 CIBER Inc.
(a).........................................................
........ 30,000
1,600 Citrix Systems, Inc.
(a).......................................................
62,500
1,600 Clarify, Inc.
(a).........................................................
..... 76,800
1,500 Cognos, Inc.
(a).........................................................
...... 42,188
1,500 Compaq Computer Corp.
(a)......................................................
111,375
2,400 Compuware Corp.
(a).........................................................
... 120,300
1,900 Concord EFS, Inc.
(a).........................................................
. 53,675
750 Cytec Industries Inc.
(a)......................................................
30,469
5,600 Dell Computer Corp.
(a)........................................................
297,500
2,000 Dynatech Corp.
(a).........................................................
.... 88,500
800 ENCAD, Inc.
(a).........................................................
....... 33,000
1,285 Intel Corp.
............................................................
....... 168,255
750 ITT Hartford Group, Inc.
......................................................
50,625
1,600 Legato Systems, Inc.
(a).......................................................
52,200
8,100 McAfee Associates, Inc.
(a)....................................................
356,400
1,000 National TechTeam, Inc.
(a)....................................................
20,000
1,200 Network General Corp.
(a)......................................................
36,300
1,900 Oracle Systems Corp.
(a).......................................................
79,325
3,300 Parametric Technology Corp.
(a)................................................
169,538
2,250 Paychex, Inc.
............................................................
..... 115,734
6,800 PeopleSoft, Inc.
(a).........................................................
.. 325,975
1,200 Rational Software Corp.
(a)....................................................
47,475
700 Remedy Corp.
(a).........................................................
...... 37,625
1,000 Sanmina Corp.
(a).........................................................
..... 56,500
2,700 Security Dynamics Tech I Corp.
(a).............................................
85,050
3,400 Sun Microsystems, Inc.
(a).....................................................
87,338
2,600 Sungard Data Systems, Inc.
(a).................................................
102,700
1,400 Technology Solutions Co.
(a)...................................................
58,100
1,250 Titanium Metals Corp.
(a)......................................................
41,094
900 Uniphase Corp.
(a).........................................................
.... 47,250
700 Ultrak, Inc.
(a).........................................................
...... 21,350
2,600 Vanstar Corp.
(a).........................................................
..... 63,700
1,500 Vantive Corp.
(a).........................................................
..... 46,875
2,700 VIASOFT, Inc.
(a).........................................................
..... 127,575
300 Visio Corp.
(a).........................................................
....... 14,850
1,250 Wind River Systems
(a).........................................................
59,219
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
TECHNOLOGY -- 24.4% (CONTINUED)
1,500 3Com Corp.
(a).........................................................
........ $ 110,063
- ------------------------------------------------------------
- ---------------------------------------------
4,598,050
- ------------------------------------------------------------
- ---------------------------------------------
TELECOMMUNICATIONS -- 7.3%
4,000 ADC Telecommunications Inc.
(a)................................................
124,500
1,800 Andrew Corp.
(a).........................................................
...... 95,513
2,000 Aspect Telecommunications Corp.
(a)............................................
127,000
4,100 Cisco Systems, Inc.
(a)........................................................
260,863
1,350 Comverse Technology, Inc.
(a)..................................................
51,047
1,400 DSP Communications Inc.
(a)....................................................
27,125
1,400 Lucent Technologies, Inc.
.....................................................
64,750
10,300 Pairgain Technologies, Inc.
(a)................................................
313,506
1,000 Saville Systems Ireland PLC ADR
(a)............................................
40,625
4,500 Tellabs, Inc.
(a).........................................................
..... 169,313
2,050 Vitesse Semiconductors Corp.
(a)...............................................
93,275
- ------------------------------------------------------------
- ---------------------------------------------
1,367,517
- ------------------------------------------------------------
- ---------------------------------------------
TRANSPORTATION -- 0.8%
1,500 Comair Holdings, Inc.
.........................................................
36,000
2,400 Continental Airlines Corp., Class B Shares
(a)................................. 67,800
1,000 Trico Marine Services, Inc.
(a)................................................
48,000
- ------------------------------------------------------------
- ---------------------------------------------
151,800
- ------------------------------------------------------------
- ---------------------------------------------
UTILITIES -- 1.6%
1,600 ACC Corp. (a)
............................................................
..... 48,400
1,150 AES Corp. (a)
............................................................
..... 53,475
1,500 Billing Information Concepts
(a)...............................................
43,125
2,100 Cincinnati Bell, Inc.
.........................................................
129,413
500 VideoServer, Inc.
(a).........................................................
. 21,250
- ------------------------------------------------------------
- ---------------------------------------------
295,663
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL COMMON STOCKS (Cost --
$12,732,611)......................................
17,664,090
- ------------------------------------------------------------
- ---------------------------------------------
WARRANTS -- 0.1%
900 BJ Services Co., Expire 4/12/00 (a) (Cost --
$4,275)........................... 24,188
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 6.0%
$130,000 U.S. Treasury Bills, 4.490% due 1/9/97
(b)..................................... $ 129,870
355,000 U.S. Treasury Bills, 4.470% due 1/30/97
(b).................................... 353,722
120,000 U.S. Treasury Bills, 4.660% due 1/30/97
(b).................................... 119,549
130,000 U.S. Treasury Bills, 4.700% due 2/6/97
(b)..................................... 129,389
125,000 U.S. Treasury Bills, 4.800% due 2/6/97
(b)..................................... 124,400
140,000 U.S. Treasury Bills, 4.910% due 3/20/97
(b).................................... 138,511
130,000 Federal National Mortgage Association, 5.210%
due 2/3/97 (b)................... 128,297
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost -- $1,124,820).............. 1,123,738
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$13,861,706*)............................... $18,812,016
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Non-income producing security.
(b) Rate represents annualized yield to maturity.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
STOCKS -- 100.0%
- ------------------------------------------------------------
- ---------------------------------------------
ARGENTINA -- 1.0%
25,000 Quilmes Industrial S.A.
ADR................................................... $
200,000
12,500 Quilmes Industrial S.A. Preferred
ADR......................................... 114,063
- ------------------------------------------------------------
- ---------------------------------------------
314,063
- ------------------------------------------------------------
- ---------------------------------------------
AUSTRALIA -- 2.8%
85,672 Coca Cola Amatil Ltd.
........................................................
915,263
- ------------------------------------------------------------
- ---------------------------------------------
AUSTRIA -- 2.8%
2,000 VA Technologie
AG..........................................................
... 313,575
5,000 Wolford
AG..........................................................
.......... 604,271
- ------------------------------------------------------------
- ---------------------------------------------
917,846
- ------------------------------------------------------------
- ---------------------------------------------
BELGIUM -- 3.7%
7,000 Barco N.V.
(a).........................................................
....... 1,207,637
- ------------------------------------------------------------
- ---------------------------------------------
CHILE -- 1.4%
15,000 Embotellador Andina S.A.
ADR..................................................
457,500
- ------------------------------------------------------------
- ---------------------------------------------
DENMARK -- 2.1%
6,000 Coloplast, Class B
Shares.....................................................
681,483
- ------------------------------------------------------------
- ---------------------------------------------
FINLAND -- 2.5%
14,000 Nokia OY AB, Class A
Shares...................................................
805,000
- ------------------------------------------------------------
- ---------------------------------------------
FRANCE -- 2.7%
800 Carrefour Supermarche
S.A.....................................................
519,505
2,270 Castorama Dubois
Investisse..................................................
. 389,987
- ------------------------------------------------------------
- ---------------------------------------------
909,492
- ------------------------------------------------------------
- ---------------------------------------------
GERMANY -- 4.8%
12,500 SGL Carbon
AG..........................................................
....... 1,574,362
- ------------------------------------------------------------
- ---------------------------------------------
HONG KONG -- 10.2%
200,000 Cheung Kong Infrastructure Holdings
(a)....................................... 530,058
50,000 Guoco Group Ltd.
............................................................
. 279,897
240,000 Hong Kong & China Gas Co.
Ltd.................................................
463,866
20,000 Hong Kong & China Gas Co. Ltd. Warrants, Expire
9/30/97 (a)................... 11,118
31,085 HSBC Holdings
PLC.........................................................
.... 665,102
100,000 Hutchinson Whampoa Ltd.
......................................................
785,391
50,000 Sun Hung Kai Properties Ltd.
.................................................
612,476
- ------------------------------------------------------------
- ---------------------------------------------
3,347,908
- ------------------------------------------------------------
- ---------------------------------------------
IRELAND -- 9.0%
62,966 Bank of
Ireland.....................................................
.......... 570,231
40,942 CRH
PLC.........................................................
.............. 424,083
114,438 Greencore Group
PLC.........................................................
.. 732,137
199,999 Independent Newspapers
PLC....................................................
1,032,427
25,281 Irish Continental Group
PLC...................................................
179,711
- ------------------------------------------------------------
- ---------------------------------------------
2,938,589
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
ISRAEL -- 1.5%
20,000 Gilat Satellite Networks Ltd.
(a)............................................. $
492,500
- ------------------------------------------------------------
- ---------------------------------------------
ITALY -- 6.2%
5,000 Fila Holding S.p.A.
ADR.......................................................
290,625
20,000 Industrie Natuzzi S.p.A.
ADR..................................................
460,000
10,000 Luxottica Group S.p.A.
ADR....................................................
520,000
300,000 Telecom Italia Mobile
S.p.A...................................................
758,632
- ------------------------------------------------------------
- ---------------------------------------------
2,029,257
- ------------------------------------------------------------
- ---------------------------------------------
JAPAN -- 5.6%
15,000 Canon,
Inc.........................................................
........... 330,835
660 Doutor Coffee Co., Ltd.
......................................................
27,578
40,000 Hitachi Ltd.
............................................................
..... 372,189
44,000 Itochu
Corp........................................................
........... 235,789
28,000 Kajima
Corp........................................................
........... 199,742
66 Mr. Max
Corp........................................................
.......... 876
1,600 Ohmoto Gumi Co.
Ltd.........................................................
.. 22,883
3,000 Shohkoh
Fund........................................................
.......... 651,331
- ------------------------------------------------------------
- ---------------------------------------------
1,841,223
- ------------------------------------------------------------
- ---------------------------------------------
MALAYSIA -- 3.0%
125,000 Renong
Berhad......................................................
........... 221,738
25,000 Renong Berhad 4.00% ICUL 5/21/01
(a).......................................... 10,493
15,625 Renong Berhad Warrants, Expire 11/21/00
(a)................................... 7,672
224,000 Sungei Way Holdings
Berhad....................................................
665,215
25,887 Sungei Way Holdings Berhad Warrants, Expire
6/29/99 (a)....................... 48,177
22,400 Sungei Way Holdings Berhad Rights, Expire
1/17/97 (a)......................... 26,609
- ------------------------------------------------------------
- ---------------------------------------------
979,904
- ------------------------------------------------------------
- ---------------------------------------------
MEXICO -- 1.0%
54,970 Gruma S.A. de C.V., Class B Shares
(a)........................................ 335,183
- ------------------------------------------------------------
- ---------------------------------------------
NETHERLANDS -- 9.2%
45,568 Getronics
N.V.........................................................
........ 1,235,483
3,125 Heineken
N.V.........................................................
......... 552,448
10,000 IHC Caland
N.V.........................................................
....... 570,586
5,000 Wolters Kluwer
C.V.A.......................................................
... 663,371
- ------------------------------------------------------------
- ---------------------------------------------
3,021,888
- ------------------------------------------------------------
- ---------------------------------------------
NORWAY -- 1.9%
40,000 Tomra Systmems
ASA.........................................................
... 623,297
- ------------------------------------------------------------
- ---------------------------------------------
PANAMA -- 1.4%
10,000 Panamerican Beverages Inc.
ADR................................................
468,750
- ------------------------------------------------------------
- ---------------------------------------------
PHILIPPINES -- 0.9%
1,200,000 SM Prime Holdings
Inc.........................................................
310,266
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PG$PCN>
- ------------------------------------------------------------
- --------------------
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
- ------------------------------------------------------------
- ---------------------------------------------
<C> <S>
<C>
SINGAPORE -- 4.3%
70,000 Cerebos Pacific Ltd.
.........................................................
$ 520,446
100,000 DBS Land Ltd.
............................................................
.... 368,173
125,000 Van Der Horst Ltd.
...........................................................
522,770
- ------------------------------------------------------------
- ---------------------------------------------
1,411,389
- ------------------------------------------------------------
- ---------------------------------------------
SWEDEN -- 9.6%
8,000 Astra AB, Class A
Shares......................................................
394,845
2,000 Astra AB, Class B
Shares......................................................
96,368
25,000 Autoliv AB
Free........................................................
....... 1,094,757
35,000 Nobel Biocare
AB..........................................................
.... 615,114
30,800 Telefonaktiebolaget LM Ericsson, Class B
Shares............................... 951,787
- ------------------------------------------------------------
- ---------------------------------------------
3,152,871
- ------------------------------------------------------------
- ---------------------------------------------
SWITZERLAND -- 1.7%
500 Novartis AG Reg.
(a).........................................................
. 570,822
- ------------------------------------------------------------
- ---------------------------------------------
THAILAND -- 1.3%
90,000 Krung Thai Bank Public Co. Ltd.
.............................................. 173,752
60,000 Siam Makro Public Co. Ltd.
...................................................
252,730
- ------------------------------------------------------------
- ---------------------------------------------
426,482
- ------------------------------------------------------------
- ---------------------------------------------
UNITED KINGDOM -- 9.4%
125,000 Boxmore International
PLC.....................................................
677,034
225,000 British Biotech PLC
(a).......................................................
791,264
30,415 Misys
PLC.........................................................
............ 581,130
6,000 Reuters Holdings PLC
ADR......................................................
459,000
50,000 Serco Group
PLC.........................................................
...... 576,709
- ------------------------------------------------------------
- ---------------------------------------------
3,085,137
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost --
$22,927,395*).............................. $32,818,112
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is
substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PG$PCN>
(This page intentionally left blank.)
45
<PG$PCN>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- --------------------------------------------
<S>
<C> <C>
ASSETS:
Investments --
Cost.................................................
$5,997,977 $56,555,704
Foreign currency --
Cost............................................
- -- 94,498
- ------------------------------------------------------------
- --------------------------------------------
Investments, at
value...............................................
$5,997,977 $58,605,133
Foreign currency, at
value..........................................
- -- 94,944
Cash........................................................
........ -- --
Receivable for securities
sold...................................... --
8,109
Dividends and interest
receivable...................................
16,101 1,050,522
Receivable for Fund shares
sold..................................... --
633
Receivable for open forward foreign currency contracts
(Note 8)..... -- 79,542
Receivable from
manager.............................................
8,937 --
Deferred organization
costs.........................................
- -- --
- ------------------------------------------------------------
- --------------------------------------------
TOTAL
ASSETS......................................................
.. 6,023,015 59,838,883
- ------------------------------------------------------------
- --------------------------------------------
LIABILITIES:
Payable to
bank.....................................................
119,295 219,303
Dividends
payable...................................................
12,791 --
Investment advisory fees
payable.................................... --
22,580
Administration fees
payable.........................................
- -- 10,035
Payable for Fund shares
purchased................................... --
- --
Payable for securities
purchased.................................... -
- - --
Payable to broker-variation margin (Note
6)......................... -- -
- -
Payable for open forward foreign currency contracts (Note
8)........ -- 5,839
Accrued
expenses....................................................
3,021 66,271
- ------------------------------------------------------------
- --------------------------------------------
TOTAL
LIABILITIES.................................................
.. 135,107 324,028
- ------------------------------------------------------------
- --------------------------------------------
TOTAL NET
ASSETS......................................................
$5,887,908 $59,514,855
- ------------------------------------------------------------
- --------------------------------------------
NET ASSETS:
Par value of shares of beneficial
interest.......................... $ 5,888 $
5,419
Capital paid in excess of par
value................................. 5,882,020
53,080,817
Undistributed (overdistributed) net investment
income............... -- 5,164,002
Accumulated net realized gain (loss) from security
transactions
and futures
contracts............................................
- -- (855,469)
Net unrealized appreciation of investments and foreign
currencies... -- 2,120,086
- ------------------------------------------------------------
- --------------------------------------------
TOTAL NET
ASSETS......................................................
$5,887,908 $59,514,855
- ------------------------------------------------------------
- --------------------------------------------
SHARES
OUTSTANDING.................................................
... 5,887,908 5,418,831
- ------------------------------------------------------------
- --------------------------------------------
NET ASSET VALUE, PER
SHARE............................................
$1.00 $10.98
- ------------------------------------------------------------
- --------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PG$PCN>
- ---------------------------------------------------------
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>
$ 40,349,311 $13,277,032 $27,504,672
$13,861,706 $ 22,927,395
-- -- --
- -- 16,054
- ------------------------------------------------------------
- --------------------------
$ 45,419,501 $19,376,438 $38,657,443
$18,812,016 $ 32,818,112
-- -- --
- -- 19,357
363 128 667
24,542 578,964
-- 2,735 --
153,541 --
331,582 33,003 111,222
6,661 24,397
-- 354 --
6,264 --
== == ==
== ==
-- -- --
6,080 6,150
- ------------------------------------------------------------
- --------------------------
45,751,446 19,412,658 38,769,332
19,009,104 33,446,980
- ------------------------------------------------------------
- --------------------------
== == ==
== ==
17,928 92,699 14,929
65,762 23,658
7,968 45,816 6,635
18,815 5,567
16,273 -- 37,285
- -- 6,955
-- 7,847 137,300
- -- --
-- 7,300 --
- -- --
-- -- --
- -- --
93,432 1,188 71,056
23,395 73,744
- ------------------------------------------------------------
- --------------------------
135,601 154,850 267,205
107,972 109,924
- ------------------------------------------------------------
- --------------------------
$ 45,615,845 $19,257,808 $38,502,127
$18,901,132 $ 33,337,056
- ------------------------------------------------------------
- --------------------------
$ 3,507 $ 1,049 $ 2,343 $
1,194 $ 2,762
38,398,533 12,292,526 23,892,969
11,673,602 26,806,421
2,153,889 233,583 613,411
(1,133) (143,714)
(10,274) 630,505 2,840,633
2,277,159 (3,221,741)
5,070,190 6,100,145 11,152,771
4,950,310 9,893,328
- ------------------------------------------------------------
- --------------------------
$ 45,615,845 $19,257,808 $38,502,127
$18,901,132 $ 33,337,056
- ------------------------------------------------------------
- --------------------------
3,506,583 1,048,910 2,343,319
1,193,702 2,762,236
- ------------------------------------------------------------
- --------------------------
$13.01 $18.36 $16.43
$15.83 $12.07
- ------------------------------------------------------------
- --------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PG$PCN>
- ------------------------------------------------------------
- --------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- ---------------------------------------------
<S>
<C> <C>
INVESTMENT INCOME:
Interest....................................................
............ $325,237 $5,048,505
Dividends...................................................
............ -- 150,177
Less: Foreign withholding
tax........................................... --
(5,399)
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL INVESTMENT
INCOME.................................................
325,237 5,193,283
- ------------------------------------------------------------
- ---------------------------------------------
EXPENSES:
Investment advisory fees (Note
4)....................................... 17,904
266,327
Audit and
legal.......................................................
.. 15,000 14,307
Administration fees (Note
4)............................................ 11,936
118,368
Shareholder and system servicing
fees................................... 11,000
13,359
Shareholder
communications..............................................
9,750 12,348
Custody.....................................................
............ 3,600 51,317
Amortization of deferred organization
costs............................. 2,937
3,090
Trustees'
fees........................................................
.. 1,400 7,808
Pricing service
fees....................................................
- -- 2,268
Other.......................................................
............ 1,096 6,597
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL
EXPENSES....................................................
...... 74,623 495,789
Less: Investment advisory and administration fee waiver
(Note 4)........ (29,840) --
Custody earnings credit (Note
3).................................. --
- --
- ------------------------------------------------------------
- ---------------------------------------------
NET
EXPENSES....................................................
........ 44,783 495,789
- ------------------------------------------------------------
- ---------------------------------------------
NET INVESTMENT INCOME
(LOSS)..............................................
280,454 4,697,494
- ------------------------------------------------------------
- ---------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES
CONTRACTS AND
FOREIGN CURRENCIES (NOTES 5, 6 AND 8):
Realized Gain (Loss) From:
Security transactions (excluding short-term
securities).............. -- 753,032
Futures
contracts...................................................
. -- --
Foreign currency
transactions........................................
- -- 463,161
- ------------------------------------------------------------
- ---------------------------------------------
NET REALIZED GAIN
(LOSS)................................................
- -- 1,216,193
- ------------------------------------------------------------
- ---------------------------------------------
Change in Net Unrealized Appreciation of Investments
and Foreign Currencies:
Beginning of
year....................................................
- -- 1,763,361
End of
year........................................................
.. -- 2,120,086
- ------------------------------------------------------------
- ---------------------------------------------
INCREASE (DECREASE) IN NET UNREALIZED
APPRECIATION...................... --
356,725
- ------------------------------------------------------------
- ---------------------------------------------
NET GAIN ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN
CURRENCIES......... -- 1,572,918
- ------------------------------------------------------------
- ---------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS.................................... $280,454
$6,270,412
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PG$PCN>
- --------------------------------------------------------
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>
$ 801,101 $ 61,054 $ 184,351 $
51,524 $ 20,466
1,727,831 359,115 738,751
69,046 382,681
(926) (2,227) (1,933)
(499) (33,150)
- ------------------------------------------------------------
- ---------------------------
2,528,006 417,942 921,169
120,071 369,997
- ------------------------------------------------------------
- ---------------------------
215,308 69,030 166,039
142,425 278,118
18,000 16,566 21,000
16,196 14,507
95,692 34,515 73,795
37,980 65,439
12,000 12,776 9,000
10,500 13,359
15,000 18,363 19,000
9,000 12,347
3,000 18,000 7,000
17,000 39,083
3,090 2,954 2,964
3,235 3,235
3,000 3,500 4,000
3,301 5,373
3,000 -- --
- -- 6,612
987 6,198 4,029
1,519 4,096
- ------------------------------------------------------------
- ---------------------------
369,077 181,902 306,827
241,156 442,169
-- -- --
- -- --
-- -- --
- -- (6,120)
- ------------------------------------------------------------
- ---------------------------
369,077 181,902 306,827
241,156 436,049
- ------------------------------------------------------------
- ---------------------------
2,158,929 236,040 614,342
(121,085) (66,052)
- ------------------------------------------------------------
- ---------------------------
2,077,070 445,793 2,842,198
2,277,045 (575,717)
-- 194,025 --
- -- --
-- -- --
- -- (1,265)
- ------------------------------------------------------------
- ---------------------------
2,077,070 639,818 2,842,198
2,277,045 (576,982)
- ------------------------------------------------------------
- ---------------------------
6,772,257 3,530,713 7,922,235
4,015,304 3,059,968
5,070,190 6,100,145 11,152,771
4,950,310 9,893,328
- ------------------------------------------------------------
- ---------------------------
(1,702,067) 2,569,432 3,230,536
935,006 6,833,360
- ------------------------------------------------------------
- ---------------------------
375,003 3,209,250 6,072,734
3,212,051 6,256,378
- ------------------------------------------------------------
- ---------------------------
$ 2,533,932 $3,445,290 $6,687,076
$3,090,966 $ 6,190,326
- ------------------------------------------------------------
- ---------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PG$PCN>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
- ---------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
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 11):
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:
............................................................
.... -- $5,164,002
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PG$PCN>
- ------------------------------------------------------------
- -------------
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)
$(143,714)
- ------------------------------------------------------------
- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PG$PCN>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
- ----------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- ----------------------------------------------
<S>
<C> <C>
OPERATIONS:
Net investment income
(loss)....................................... $
318,978 $ 4,580,033
Net realized gain
(loss)...........................................
- -- (863,120)
Increase in net unrealized
appreciation............................ --
4,818,775
- ------------------------------------------------------------
- ----------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS............................. 318,978
8,535,688
- ------------------------------------------------------------
- ----------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment
income..............................................
(318,978) (3,628,366)
Net realized
gains.................................................
- -- --
- ------------------------------------------------------------
- ----------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS.......... (318,978) (3,628,366)
- ------------------------------------------------------------
- ----------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of
shares................................... 4,160,876
2,483,761
Net asset value of shares issued for reinvestment of
dividends..... 302,497 3,327,194
Cost of shares
reacquired..........................................
(5,951,049) (6,662,995)
- ------------------------------------------------------------
- ----------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS..... (1,487,676) (852,040)
- ------------------------------------------------------------
- ----------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS....................................
(1,487,676) 4,055,282
NET ASSETS:
Beginning of
year..................................................
7,140,946 55,260,255
- ------------------------------------------------------------
- ----------------------------------------------
END OF
YEAR*.......................................................
$ 5,653,270 $59,315,537
- ------------------------------------------------------------
- ----------------------------------------------
* Includes undistributed (overdistributed) net investment
income
of:
............................................................
... -- $791,941
- ------------------------------------------------------------
- ----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PG$PCN>
- -----------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH
EMERGING INTERNATIONAL
INCOME INDEX & INCOME
GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------
- -----------------------------
<S> <C> <C> <C>
<C>
$ 2,391,282 $ 231,257 $ 679,667 $
(34,870) $ 62,287
(457,862) 432,091 421,958
1,846,715 (2,167,638)
11,689,689 3,093,598 7,510,283
3,232,511 4,469,756
- ------------------------------------------------------------
- -----------------------------
13,623,109 3,756,946 8,611,908
5,044,356 2,364,405
- ------------------------------------------------------------
- -----------------------------
(2,744,365) (200,991) (701,745)
- -- (110,647)
-- (12,638) --
- -- --
- ------------------------------------------------------------
- -----------------------------
(2,744,365) (213,629) (701,745)
- -- (110,647)
- ------------------------------------------------------------
- -----------------------------
1,968,215 3,063,195 1,543,081
2,521,682 2,702,681
2,744,365 213,629 701,745
- -- 110,647
(7,564,452) (1,815,334) (4,621,473)
(1,642,161) (4,501,305)
- ------------------------------------------------------------
- -----------------------------
(2,851,872) 1,461,490 (2,376,647)
879,521 (1,687,977)
- ------------------------------------------------------------
- -----------------------------
8,026,872 5,004,807 5,533,516
5,923,877 565,781
44,417,396 10,225,412 29,624,670
11,539,058 28,412,806
- ------------------------------------------------------------
- -----------------------------
$52,444,268 $15,230,219 $35,158,186
$17,462,935 $ 28,978,587
- ------------------------------------------------------------
- -----------------------------
$274,291 $231,185 $52,721
- -- $(11,017)
- ------------------------------------------------------------
- -----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PG$PCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS
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 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
dividends are 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 paid-
in 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 $76,812
was reclassified to paid-in capital. Net investment income,
net realized gains
and net assets were not affected by this change; and (k)
estimates and
assumptions are required to be made regarding assets,
liabilities and changes in
net assets resulting from operations when financial
statements are prepared.
Changes in the economic environment, financial markets and
any other parameters
used in determining these estimates could cause actual
results to differ.
In addition, for the Emerging Growth and International
Equity Portfolios,
organization costs have been deferred and are currently
being amortized on a
straight-line basis over a five-year period, beginning with
commencement of
operations in December 1993.
For the Money Market, Diversified Strategic Income,
Equity Income, Equity
Index and Growth & Income Portfolios, organization costs
have been deferred and
amortized on a straight-line basis over a five year period
that began with the
commencement of operations in October 1991. As of December
31, 1996, the
amortization of the deferred organization costs had been
completed for these
portfolios.
54
<PG$PCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 Fund's Board of Trustees changed the dividend
policy for the
Portfolios, except the Money Market Portfolio, to declare
and distribute
dividends from net investment income annually. The Money
Market Portfolio will
continue to declare dividends daily from net investment
income and distribute
such dividends monthly. Net realized capital gains, if any,
are declared and
distributed annually.
3. CUSTODY EARNINGS CREDIT
The International Equity Portfolio had an arrangement
with its former
custodian, The Bank of New York, where it earned custody
credits on available
cash balances. These credits offset custody fees charged to
the Portfolio. For
the period from January 1, 1996 through December 3, 1996,
the custody credits
totalled $6,120 for the Portfolio. Effective December 4,
1996, Chase Manhattan
Corp. became the custodian for the Porfolio.
4. 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 (the "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 Money Market, Diversified Strategic
Income, Equity
Income, Growth & Income and International Equity Portfolios
each pay an
investment advisory fee calculated at an annual rate of
0.30%, 0.45%, 0.45%,
0.45% and 0.85%, respectively, of their average daily net
assets. These fees are
calculated daily and paid monthly.
The Fund, on behalf of the Equity Index Portfolio, has
entered into an
investment advisory agreement with Travelers Investment
Management Company
("TIMCO"), a wholly-owned subsidiary of Travelers. Under the
investment advisory
agreement, the Equity Index Portfolio pays an investment
advisory fee calculated
at an annual rate of 0.40% of its average daily net assets.
This fee is
calculated daily and paid monthly.
The Fund, on behalf of the Emerging Growth Portfolio,
has entered into an
investment advisory agreement with Van Kampen American
Capital Asset Management,
Inc. Under the investment advisory agreement, the Emerging
Growth Portfolio pays
an investment advisory fee calculated at an annual rate of
0.75% of its average
daily net assets. This fee is calculated daily and paid
monthly.
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 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. 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 annuity insurance through which
investments can be
made in the Fund, will bear the remaining half of such
excess expenses.
For the Money Market Portfolio, SBMFM waived investment
advisory and
administration fees in the amount of $17,898 and $11,942,
respectively, for the
year ended December 31, 1996.
For the year ended December 31, 1996, the Equity
Income, Growth & Income,
Emerging Growth and International Equity Portfolios paid
Smith Barney brokerage
commissions of $4,320, $1,044, $566 and $1,859,
respectively.
No officer, Director or employee of Smith Barney or its
affiliates receives
any compensation from the Fund for serving as a Trustee or
officer of the Fund.
55
<PG$PCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENTS
During the year ended December 31, 1996, 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................................................
$61,081,279 $60,387,090
Equity
Income......................................................
......... 12,837,475 17,533,640
Equity
Index.......................................................
......... 2,717,887 1,130,240
Growth &
Income......................................................
....... 7,707,281 9,964,615
Emerging
Growth......................................................
....... 14,738,838 17,188,536
International
Equity......................................................
.. 10,675,013 12,303,309
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
At December 31, 1996, the aggregate gross unrealized
appreciation and
depreciation of investments were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
PORTFOLIO
APPRECIATION* DEPRECIATION* APPRECIATION*
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C>
Diversified Strategic Income.............................
$ 2,315,751 $ (266,322) $ 2,049,429
Equity Income............................................
5,571,683 (501,493) 5,070,190
Equity Index.............................................
6,313,092 (213,686) 6,099,406
Growth & Income..........................................
11,354,215 (201,444) 11,152,771
Emerging Growth..........................................
5,199,945 (249,635) 4,950,310
International Equity.....................................
11,119,357 (1,228,640) 9,890,717
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
* Substantially the same for Federal income tax purposes.
6. 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 December 31, 1996, the Equity Index Portfolio
purchased one financial
futures contracts on the Standard & Poor's 500 Index
expiring in March 1997. The
basic value of such contracts was $371,511. The market value
of such contracts
on December 31, 1996 was $372,250, thereby resulting in an
unrealized gain of
$739.
7. OPTION CONTRACTS
The Diversified Strategic Income, Equity Income, Equity
Index, Growth &
Income, Emerging Growth and International Equity Portfolios
may from time to
time enter into option contracts.
Upon the purchase of a put option or a call option by
the Portfolio, the
premium paid is recorded as an investment, the value of
which is
marked-to-market daily. When a purchased option expires, the
Portfolio will
realize a loss in the amount of the cost of the option. When
the Portfolio
enters into a closing sales transaction, the Portfolio will
realize a gain or
loss depending on whether the sales proceeds from the
closing sales transaction
are greater or less than the cost of the option. When the
Portfolio exercises a
put option, it will realize a gain or loss from the sale of
the underlying
security and the
56
<PG$PCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 December 31, 1996, 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. 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 year ended December 31, 1996, the Portfolios
did not write any
call or put options.
8. 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 December 31, 1996, 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:
Australian Dollar.................................
1,300,000 $ 1,032,169 1/28/97 $20,831
British Pound.....................................
170,000 290,756 1/27/97 (5,156)
Danish Krone......................................
7,500,000 1,273,298 1/27/97 24,571
Finnish Markka....................................
4,300,000 934,736 1/27/97 11,983
German Deutschemark...............................
600,000 390,041 1/27/97 (683)
Italian Lira......................................
1,350,000,000 886,525 1/27/97 10,932
Spanish Peseta....................................
73,000,000 560,808 1/27/97 11,225
- ------------------------------------------------------------
- ------------------------------------------------------
TOTAL UNREALIZED GAIN ON FORWARD FOREIGN
CURRENCY CONTRACTS................................
$73,703
- ------------------------------------------------------------
- ------------------------------------------------------
</TABLE>
9. REPURCHASE AGREEMENTS
The Portfolios purchase (and its custodian takes
possession of) U.S.
Government securities from banks and securities dealers
subject to agreements to
resell the securities to the sellers at a future date
(generally, the next
business day) at an agreed-upon higher repurchase price. The
Portfolios require
continual maintenance of the market value of the collateral
in amounts at least
equal to the repurchase price.
57
<PG$PCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. 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 December 31, 1996, the Portfolios had no open
reverse repurchase
agreements.
11. SHARES OF BENEFICIAL INTEREST
As of December 31, 1996, 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- ------------------------------------------------------------
- --------------------------------------------
<S>
<C> <C>
MONEY MARKET PORTFOLIO
Shares
sold....................................................
4,806,909 4,160,876
Shares issued on
reinvestment..................................
284,142 302,497
Shares
redeemed................................................
(4,856,413) (5,951,049)
- ------------------------------------------------------------
- --------------------------------------------
Net Increase
(Decrease)........................................
234,638 (1,487,676)
- ------------------------------------------------------------
- --------------------------------------------
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
Shares
sold....................................................
210,123 257,850
Shares issued on
reinvestment..................................
71,886 376,906
Shares
redeemed................................................
(790,515) (725,789)
- ------------------------------------------------------------
- --------------------------------------------
Net
Decrease...................................................
(508,506) (91,033)
- ------------------------------------------------------------
- --------------------------------------------
EQUITY INCOME PORTFOLIO
Shares
sold....................................................
35,646 183,214
Shares issued on
reinvestment..................................
21,388 253,960
Shares
redeemed................................................
(797,407) (692,366)
- ------------------------------------------------------------
- --------------------------------------------
Net
Decrease...................................................
(740,373) (255,192)
- ------------------------------------------------------------
- --------------------------------------------
EQUITY INDEX PORTFOLIO
Shares
sold....................................................
215,955 221,160
Shares issued on
reinvestment..................................
12,461 16,599
Shares
redeemed................................................
(157,107) (135,102)
- ------------------------------------------------------------
- --------------------------------------------
Net
Increase...................................................
71,309 102,657
- ------------------------------------------------------------
- --------------------------------------------
GROWTH & INCOME PORTFOLIO
Shares
sold....................................................
131,558 115,413
Shares issued on
reinvestment..................................
3,219 63,571
Shares
redeemed................................................
(352,087) (375,361)
- ------------------------------------------------------------
- --------------------------------------------
Net
Decrease...................................................
(217,310) (196,377)
- ------------------------------------------------------------
- --------------------------------------------
EMERGING GROWTH PORTFOLIO
Shares
sold....................................................
139,846 210,992
Shares issued on
reinvestment..................................
28,230 --
Shares
redeemed................................................
(243,591) (139,884)
- ------------------------------------------------------------
- --------------------------------------------
Net Increase
(Decrease)........................................
(75,515) 71,108
- ------------------------------------------------------------
- --------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Shares
sold....................................................
248,948 282,677
Shares issued on
reinvestment..................................
9,955 12,132
Shares
redeemed................................................
(401,765) (475,871)
- ------------------------------------------------------------
- --------------------------------------------
Net
Decrease...................................................
(142,862) (181,062)
- ------------------------------------------------------------
- --------------------------------------------
</TABLE>
58
<PG$PCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. 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.
13. 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.
14. 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>
15. 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 to-be-announced ("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 December 31, 1996, there were no when-issued or
TBA securities held
by the Portfolios.
16. 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 December 31, 1996, there were no open mortgage
roll transactions in
the Portfolio.
59
<PG$PCN>
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
17. SHORT SALES OF SECURITIES
The Growth & Income and Emerging Growth Portfolio each
have the ability to
engage in the short sales of securities.
A short sale is a transaction which the Portfolio sells
securities it does
not own (but has borrowed) in anticipation of a decline in
the market price of
the securities. To complete a short sale, the Portfolio may
arrange through a
broker to borrow the securities to be delivered to the
buyer. The proceeds
received by the Portfolio for the short sale are retained by
the broker until
the Portfolio replaces the borrowed securities. In borrowing
the securities to
be delivered to the buyer, the Portfolio becomes obligated
to replace the
securities borrowed at their market price at the time of
replacement, whatever
that price may be.
As of December 31, 1996, the Portfolios had no open
short sale
transactions.
18. 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, and receives a lenders fee, which is shared
60% by the Fund and
40% by the custodian. 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. The Portfolio
maintains exposure for the risk of any losses in the
investment of amounts
received as collateral.
As of December 31, 1996, the Portfolios had no
securities on loan.
60
<PG$PCN>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
1996 1995 1994 1993 1992
- ------------------------------------------------------------
- ------------------------------------------------
<S>
<C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR......................
$1.000 $1.000 $ 1.000 $1.000 $1.000
- ------------------------------------------------------------
- ------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (1).............................
0.047 0.052 0.035 0.023 0.027
Dividends from net investment income..................
(0.047) (0.052) (0.035) (0.023) (0.027)
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE, END OF YEAR............................
$1.000 $1.000 $1.000 $1.000 $1.000
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL RETURN............................................
4.80% 5.31% 3.56% 2.37% 2.75%
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS, END OF YEAR (000'S).........................
$5,888 $5,653 $7,141 $3,703 $2,108
- ------------------------------------------------------------
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (1)..........................................
0.75% 0.75% 0.75% 0.75% 0.75%
Net investment income.................................
4.70 5.19 3.65 2.34 2.79
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
1996 1995 1994 1993 1992
- ------------------------------------------------------------
- ------------------------------------------------
<S> <C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR....................
$10.01 $9.18 $10.07 $ 9.61 $10.14
- ------------------------------------------------------------
- ------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (1)(2)........................
0.88 0.74 0.58 0.70 0.67
Net realized and unrealized gain (loss).............
0.24 0.70 (0.86) 0.47 (0.53)
- ------------------------------------------------------------
- ------------------------------------------------
Total Income (Loss) From Operations...................
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..................................
- -- -- -- (0.04) --
Overdistribution of net realized gains..............
- -- -- -- (0.05) --
Capital.............................................
- -- -- (0.03) (0.01) --
- ------------------------------------------------------------
- ------------------------------------------------
Total Distributions...................................
(0.15) (0.61) (0.61) (0.71) (0.67)
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE, END OF YEAR..........................
$10.98 $10.01 $9.18 $10.07 $9.61
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL RETURN..........................................
11.16% 16.18% (2.81)% 12.56% 1.42%
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS, END OF YEAR (000'S).......................
$59,515 $59,316 $55,260 $43,244 $19,991
- ------------------------------------------------------------
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (1)........................................
0.84% 0.90% 0.95% 1.00% 1.00%
Net investment income...............................
7.94 7.73 7.31 7.14 7.70
- ------------------------------------------------------------
- ------------------------------------------------
PORTFOLIO TURNOVER RATE...............................
106% 46% 54% 94% 65%
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
(1) 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, 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>
(2) Includes realized gains and losses from foreign currency
transactions for
the four years ended December 31, 1995.
* Amount represents less than $0.01.
61
<PG$PCN>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO
1996 1995 1994 1993 1992
<S> <C>
<C> <C> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR....................
$12.35 $ 9.87 $11.55 $10.90 $10.20
- ------------------------------------------------------------
- ------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (1)...........................
0.63 0.54 0.58 0.53 0.45
Net realized and unrealized gain (loss).............
0.11 2.56 (1.75) 0.60 0.72
- ------------------------------------------------------------
- ------------------------------------------------
Total Income (Loss) From Operations...................
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 YEAR..........................
$13.01 $12.35 $ 9.87 $11.55 $10.90
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL RETURN..........................................
5.99% 32.47% (10.20)% 10.41% 11.74%
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS, END OF YEAR (000'S).......................
$45,616 $52,444 $44,417 $60,160 $25,985
- ------------------------------------------------------------
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (1)........................................
0.77% 0.95% 0.84% 0.87% 1.00%
Net investment income...............................
4.53 4.95 5.51 4.54 4.93
- ------------------------------------------------------------
- ------------------------------------------------
PORTFOLIO TURNOVER RATE...............................
28% 33% 21% 4% 4%
- ------------------------------------------------------------
- ------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (2)..........................
$0.06 $0.06 -- -- --
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX PORTFOLIO
1996 1995 1994 1993 1992
- ------------------------------------------------------------
- ------------------------------------------------
<S> <C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR....................
$15.58 $11.69 $11.90 $11.27 $10.62
- ------------------------------------------------------------
- ------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (1)...........................
0.22 0.25 0.23 0.20 0.17
Net realized and unrealized gain (loss).............
3.17 3.88 (0.14) 0.71 0.55
- ------------------------------------------------------------
- ------------------------------------------------
Total Income From Operations..........................
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 YEAR..........................
$18.36 $15.58 $11.69 $11.90 $11.27
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL RETURN..........................................
21.68% 35.81% 0.85% 8.66% 6.74%
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS, END OF YEAR (000'S).......................
$19,258 $15,230 $10,225 $8,842 $4,178
- ------------------------------------------------------------
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (1)........................................
1.06% 1.00% 1.00% 1.00% 1.00%
Net investment income...............................
1.37 1.84 2.10 1.77 2.10
- ------------------------------------------------------------
- ------------------------------------------------
PORTFOLIO TURNOVER RATE...............................
7% 5% 1% 1% 8%
- ------------------------------------------------------------
- ------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (2)..........................
$0.04 $0.05 -- -- --
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
(1) 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, 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 $0.10 0.15 1.17% 1.53% 1.88% 2.89
</TABLE>
(2) As of September 1995, the SEC instituted new guidelines
requiring the
disclosure of average commissions per share.
62
<PG$PCN>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO
1996 1995 1994 1993 1992
- ------------------------------------------------------------
- ------------------------------------------------
<S> <C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR....................
$13.73 $10.75 $11.37 $10.68 $10.15
- ------------------------------------------------------------
- ------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (1)...........................
0.27 0.26 0.27 0.30 0.27
Net realized and unrealized gain (loss).............
2.45 2.99 (0.63) 0.67 0.55
- ------------------------------------------------------------
- ------------------------------------------------
Total Income (Loss) From Operations...................
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 YEAR..........................
$16.43 $13.73 $10.75 $11.37 $10.68
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL RETURN..........................................
19.83% 30.49% (3.20)% 9.09% 8.44%
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS, END OF YEAR (000'S).......................
$38,502 $35,158 $29,625 $25,549 $10,951
- ------------------------------------------------------------
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (1)........................................
0.83% 0.98% 0.93% 1.00% 1.00%
Net investment income...............................
1.67 2.09 2.52 2.68 3.06
- ------------------------------------------------------------
- ------------------------------------------------
PORTFOLIO TURNOVER RATE...............................
22% 17% 77% 78% 78%
- ------------------------------------------------------------
- ------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (2)..........................
$0.06 $0.06 -- -- --
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EMERGING GROWTH PORTFOLIO
1996 1995 1994 1993(3)
<S>
<C> <C> <C> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR.....................
$13.76 $ 9.63 $10.41 $10.00
- ------------------------------------------------------------
- ------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (loss) (1).....................
(0.10) (0.03) 0.00* 0.01
Net realized and unrealized gain (loss)..............
2.55 4.16 (0.78) 0.40
- ------------------------------------------------------------
- ------------------------------------------------
Total Income (Loss) From Operations....................
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 YEAR...........................
$15.83 $13.76 $ 9.63 $10.41
- ------------------------------------------------------------
- ------------------------------------------------
TOTAL RETURN...........................................
17.83% 42.89% (7.48)% 4.10%++
- ------------------------------------------------------------
- ------------------------------------------------
NET ASSETS, END OF YEAR (000'S)........................
$18,901 $17,463 $11,539 $2,257
- ------------------------------------------------------------
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (1).........................................
1.27% 1.20% 1.20% 1.05%+
Net investment income (loss).........................
(0.64) (0.24) (0.17) 1.37+
- ------------------------------------------------------------
- ------------------------------------------------
PORTFOLIO TURNOVER RATE................................
84% 121% 66% --
- ------------------------------------------------------------
- ------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (2)...........................
$0.05 $0.06 -- --
- ------------------------------------------------------------
- ------------------------------------------------
</TABLE>
(1) 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>
EXPENSE RATIOS WITHOUT
PER SHARE DECREASES TO
NET INVESTMENT INCOME WAIVERS 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>
(2) As of September 1995, the SEC instituted new guidelines
requiring the
disclosure of average commissions per share.
(3) For the period from December 3, 1993 (commencement of
operations) to
December 31, 1993.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
63
<PG$PCN>
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
1996 1995 1994 1993(1)
- ------------------------------------------------------------
- -----------------------------------------------
<S>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR............................... $ 9.98 $9.21
$10.05 $10.00
- ------------------------------------------------------------
- -----------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (loss)
(2)(3)............................ (0.02) 0.03
0.00* 0.00*
Net realized and unrealized gain
(loss)........................ 2.15 0.78
(0.84) 0.05
- ------------------------------------------------------------
- -----------------------------------------------
Total Income (Loss) From
Operations.............................. 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
YEAR..................................... $12.07
$9.98 $ 9.21 $10.05
- ------------------------------------------------------------
- -----------------------------------------------
TOTAL
RETURN.....................................................
21.38% 8.80% (8.36)% 0.50%++
- ------------------------------------------------------------
- -----------------------------------------------
NET ASSETS, END OF YEAR
(000'S).................................. $33,337
$28,979 $28,413 $5,867
- ------------------------------------------------------------
- -----------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses
(2)(4)................................................
1.35% 1.43% 1.30% 1.08%+
Net investment income
(loss)................................... (0.20)
0.35 0.31 (0.51)+
- ------------------------------------------------------------
- -----------------------------------------------
PORTFOLIO TURNOVER
RATE.......................................... 33%
34% 12% --
- ------------------------------------------------------------
- -----------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID ON EQUITY TRANSACTIONS
(5).... $0.03 $0.01 -- --
- ------------------------------------------------------------
- -----------------------------------------------
</TABLE>
(1) For the period from December 3, 1993 (commencement of
operations) to
December 31, 1993.
(2) 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>
(3) Includes realized gains and losses from foreign currency
transactions for
the two years ended December 31, 1995 and the period
ended December 31,
1993.
(4) 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.
(5) 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.
- ------------------------------------------------------------
- --------------------
TAX INFORMATION (UNAUDITED)
The Emerging Growth and Equity Index Portfolio paid
distributions from
long-term capital gains of $445,756 and $274,308,
respectively, which are
taxable as such.
64
<PG$PCN>
- ------------------------------------------------------------
- --------------------
INDEPENDENT AUDITORS' REPORT
THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
SMITH BARNEY SERIES FUND:
We have audited the accompanying statements of assets and
liabilities, including
the schedules of investments, of the Money Market,
Diversified Strategic Income,
Equity Income, Equity Index, Growth and Income, Emerging
Growth, and
International Equity Portfolios ("Portfolios") of the Smith
Barney Series Fund
("Fund") as of December 31, 1996, the related statements of
operations for the
year then ended, and the statements of changes in net assets
and financial
highlights for each of the years in the two-year period then
ended. These
financial statements and financial highlights are the
responsibility of the
Fund's management. Our responsibility is to express an
opinion on these
financial statements and financial highlights based on our
audits. The financial
highlights for each of the years in the three-year period
ended December 31,
1994 with respect to the Money Market, Diversified Strategic
Income, Equity
Income, Equity Index, and Growth and Income Portfolios, and
for the year ended
December 31, 1994 and the period from December 3, 1993
(commencement of
operations) to December 31, 1993 with respect to the
Emerging Growth and
International Equity Portfolios were audited by other
auditors whose report
thereon, dated February 10, 1995, expressed an unqualified
opinion on those
financial highlights.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of
December 31, 1996, by correspondence with the custodian. As
to securities
purchased and sold but not received or delivered, we
performed other appropriate
auditing procedures. An audit also includes assessing the
accounting principles
used and significant estimates made by management, as well
as evaluating the
overall financial statement presentation. We believe that
our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to
above present fairly, in all material respects, the
financial positions of the
Portfolios as of December 31, 1996, the results of their
operations for the year
then ended, and the changes in their net assets and their
financial highlights
for each of the years in the two-year period then ended, in
conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick
LLP
York, New York
February 24, 1997
65
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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
S6223 F (2/97)
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