GREENWICH STREET SERIES FUND
SEMI-ANNUAL REPORT FOR
SYMPHONY
A Tax-Deferred Variable Annuity
[LOGO]
EQUITY INDEX PORTFOLIO
MONEY MARKET PORTFOLIO
EQUITY INCOME PORTFOLIO
EMERGING GROWTH PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
JUNE 30, 1998
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SEMI-ANNUAL REPORT FOR GREENWICH STREET SERIES FUND
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Dear Investor:
We are pleased to provide the semi-annual report for the Greenwich Street Series
Fund -- Money Market, Diversified Strategic Income, Equity Income, Equity Index,
Growth and Income, Emerging Growth and International Equity Portfolios
("Portfolios") for the period ended June 30, 1998. This letter will briefly
discuss general economic and market conditions. In addition, detailed
comparisons showing the growth of a hypothetical $10,000 investment in each
Portfolio since inception can be found in this report (except for the Money
Market Portfolio). A detailed summary of performance and current holdings for
each Portfolio can be found in the appropriate sections that follow.
MARKET AND ECONOMIC OVERVIEW
The U.S. stock market in particular got off to a surprisingly strong start in
the first quarter of 1998. Investors were expecting the worst on the earnings
front in early 1998 in the aftermath of the Asian crisis. The anxiously awaited
fourth quarter earnings season, however, turned out to be better than the "worst
case" scenario. As a result, investors let out a big sigh of relief and embarked
on a furious buying spree. In a broad-based market rally, the Standard & Poor's
("S&P") 500 Index gained 13.53% while the Russell 2000 Index advanced by about
10% in the first quarter of 1998. (The S&P 500 Index is a
capitalization-weighted measure of 500 widely held common stocks. The Russell
2000 Index is made up of 2,000 smaller-capitalized U.S.-based companies whose
common stocks trade on either the New York, American or NASDAQ stock exchanges.)
As a nation, we are more affluent than ever before, with much of that wealth
created in the last fifteen years. We are benefiting from a world that has been
largely at peace since the official end of the Cold War in 1989. We are reaping
the fruits of the restructuring of American businesses in the 70s and 80s, and
we are benefiting from growth in worldwide demand for our products.
This unparalleled U.S. prosperity today is now being followed closely by Europe.
Companies there are undergoing restructuring similar to the U.S. of the last two
decades. More and more, the inefficiencies of state-controlled institutions in
Europe are being replaced with the expansion of a free and more competitive
marketplace. As we approach the dawn of a new millennium, these positive
developments have enabled both the U.S. and most of Europe to experience the
greatest peace and prosperity in generations.
The rapid rise of global markets in recent years has been helped in no small
measure with the aid of sophisticated monetary policy. In the U.S.,
policy-making bodies, such as the Federal Reserve Board ("Fed"), coupled with
technology-led productivity gains, have controlled inflation to the extent that
it's not a significant factor in the U.S. economy today. U.S. bond yields have
stayed in a fairly narrow range as the U.S. economy has continued to grow
without any signs of accelerating inflation.
In Europe, the move to a common currency has forced both fiscal and monetary
policy to accomplish the same objective of bringing inflation and interest rates
down significantly in countries such as Italy and Spain. As interest rates have
come down, investment funds have flowed into stock markets, which, in turn, have
helped propel dramatic gains in the U.S. and European financial markets.
Now, the developing world is taking its cue from the U.S. and Europe. Perhaps
the most meaningful example is Latin America, where, after a very rocky period
in the last decade, monetary and fiscal policy reforms have stabilized economies
and established a base for solid and sustainable future growth.
Currently, parts of Asia are not enjoying growth and prosperity, particularly
Japan, Southeast Asia and Korea, where extraordinary economic growth and
expansion during the last several decades resulted in overheated and
overextended financial conditions that are currently in the painful process of
readjusting.
Stock market volatility increased significantly during the month of April. A
seesaw pattern in stock prices persisted through the month and the S&P 500 Index
rose slightly by 0.91% in April. Interest rates took center stage towards the
end of April as the Fed publicly discussed a shift to a tightening bias.
Long-term interest rates shot up above 6% while the S&P 500 Index fell 3.9% from
April 22, 1998 to April 27, 1998. Inflation, however, continued to remain low
and, despite a strong first quarter Gross Domestic Product ("GDP") report,
economic data still suggests a slowdown in the second half of 1998. Bond
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prices stabilized as a result of such evidence in late April and early May and
stock prices recovered to the levels established at the end of the first quarter
of 1998.
Renewed concerns over Asia and slowing earnings growth rocked the stock market
in May. The S&P 500 Index declined by almost 2%. Several companies provided
early guidance about lower second quarter earnings. However, fund investors who
had exposure to big company stocks in the second quarter of 1998 did well, as
the S&P 500 Index again outpaced most other types of funds and had a return of
roughly 3.17% in the second quarter of 1998 compared with the slight loss
experienced by the average U.S. stock funds. Despite the fact that the earnings
of the large companies that dominate the S&P 500 have come under pressure
lately, investors appeared to prefer the relative "safety" of
large-capitalization company stocks that can maintain their earnings in a
slowing economy during the reporting period.
MONEY MARKET PORTFOLIO
For the six months ended June 30, 1998, the Money Market Portfolio ("Portfolio")
generated a total return of 2.21%. As we enter the second half of 1998, the U.S.
economy's expansion remains intact. Strong consumer demand has fueled the U.S.
economy for six straight quarters with 3.0% or better GDP growth. (GDP measures
the total output of goods and services.) With little or no evidence of
inflation, the Fed has been able to keep the federal-funds rate steady at 5.50%
since March 1997. (The federal-funds rate is the interest banks charge each
other for overnight loans and is a closely watched indicator of the direction of
interest rates.) However, robust employment gains and the fear of higher wage
pressures have kept the Fed on alert.
Counteracting strong U.S. economic growth are pressing questions from abroad.
The Asian crisis (i.e., economic and currency problems in Indonesia, Thailand,
South Korea and other parts of the region) has finally started to negatively
affect the U.S. trade balance. Moreover, Japan's severe banking problems will
not go away and the Japanese economy continues to teeter on the brink of
depression. In addition, the future of Russia's economy remains cloudy at best.
Due primarily to the extraordinary strength of the U.S. economy, Fed Chairman
Alan Greenspan shifted monetary policy from a neutral stance to a tightening
bias at the March 31, 1998 Federal Open-Market Committee Meeting. (The Federal
Open-Market Committee, or FOMC, is the committee that sets interest rates and
credit policies for the Federal Reserve System.) However, the apparent lack of
inflation has given Chairman Greenspan the opportunity to take a "wait and see"
approach with respect to monetary policy. The major fear in the markets now is
that a pre-emptive strike versus inflation could cause serious ramifications in
the already unsettled Asian countries. Record inventory accumulation in the
first quarter of 1998 along with the problems abroad should help to moderate
U.S. economic growth and allow Greenspan to hold rates steady in the months
ahead. However, any sign of rising inflation could trigger a rate hike from the
Fed.
Effective July 1, 1998, the Securities and Exchange Commission ("SEC") has
adopted new rules that tighten risk exposure and necessitate additional
monitoring of bank and insurance guarantees and obligor concentrations with
respect to our asset-backed commercial paper. (Asset-backed commercial paper is
paper whose repayment is reliant upon the cash flows from various types of
receivables generally accompanied by a partial guarantee). All of the
Portfolio's guarantors are rated A1/P1 or better by Moody's Investors Services,
Inc. or Standard and Poor's Ratings Services, two major credit reporting and
bond rating agencies. Any concentrations or obligors within asset-backed
programs will meet the same stringent credit standards as the managers generally
employ before they make any purchase. They believe the new SEC rules will
further strengthen the overall quality of the money market fund industry.
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
For the six months ended June 30, 1998, the Diversified Strategic Income
Portfolio ("Portfolio") returned 3.77% compared to the Lehman Brothers Aggregate
Bond Index return of 3.93% for the same period. (The Lehman Brothers Aggregate
Bond Index is made up of U.S. Treasury bonds, government agency bonds,
mortgage-backed securities and corporate bonds.)
Please note that the target asset allocation for the Portfolio has changed. The
Portfolio's new allocation will be 20% global government bonds, 50% U.S.
government securities and 30% high-yield bonds. The reason for these Portfolio
changes are two-fold: 1) higher yields can be obtained domestically without
compromising the integrity of the Portfolio; and 2) the appearance of progress
toward economic reform does not suggest to the portfolio managers that all is
now well. The solutions to current global market turmoil may be painful and
difficult. Consequently, the managers believe that the impact on financial
markets will be unpredictable. They think the U.S. financial markets will remain
a safe haven until further notice. What
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follows are brief summaries of the economic and market conditions that affected
the Portfolio's three major sectors during the reporting period.
High-Yield Bonds
During the first half of 1998, the Portfolio continued to seek high current
income by investing in high-yield corporate bonds, debentures and notes. The
high-yield bond portion of the Portfolio remained cautiously positioned with
heavy weighting in the better-quality, intermediate-maturity B and BB rated
bonds. This more conservative posture caused the Portfolio's high-yield bond
component to outperform its peer group in the first half of 1998 as
higher-quality issues generated stronger performance as a result of the strong
rally in the U.S. Treasury markets. During times of greater economic
uncertainty, investors tend to invest more heavily in better-quality corporate
bonds and U.S. Treasurys, which are seen as a safer haven than lower-quality
high-yield bonds and common stocks. Given their more speculative features, the
lower-quality issues were more negatively affected by the increased uncertainty
and higher volatility in the U.S. stock markets during the first half of 1998.
U.S. Government Securities
During the reporting period, two distinct themes dominated bond markets: ongoing
economic turmoil in Asia and steady U.S. economic growth with low inflation.
Both of these developments have provided quite favorable conditions for bonds
and helped send U.S. interest rates to historical lows.
It has been more than a year after the first signs of trouble in Asia began to
surface and, so far, no clear resolution has emerged. The U.S. dollar has
strengthened considerably in response to weakening economies in the region, and
as the crisis drags on, fears of another round of currency devaluations has
heightened. Moreover, major Asian banks could soon find themselves enveloped in
a crisis of their own as they face mounting numbers of nonperforming loans.
One result of the Asian crisis has been a flight of capital to U.S. financial
markets as many investors sought out a "safe haven" from the tumult surrounding
many global markets. The portfolio managers believe that foreign investors,
whose holdings of U.S. Treasury securities have nearly doubled in the last three
years, have been attracted to Treasurys because of a strong U.S. dollar as well
as the competitive yields they currently offer.
In addition, a robust U.S. economy has dramatically increased tax receipts,
enabling government officials to project a federal budget surplus for the first
time in years and reducing the need for federal borrowing. Issuance of U.S.
Treasury securities in 1998 is expected to be substantially less than in 1997
and auctions of three-year U.S. Treasury notes have been eliminated all
together. This decreased supply combined with a burgeoning demand has helped
sustain a U.S. Treasury market rally, driving the yield on the benchmark 30-year
U.S. Treasury bond to new, historic lows.
The portfolio managers share the view of some FOMC members who have suggested
that continued weakness in most Asian economies should help to dampen
inflationary pressures in the U.S. economy. Clearly, the Asian crisis has had an
adverse effect on a number of U.S. industries. Moreover, conditions in Asian
financial markets have deteriorated even further since the crisis began. Of
special concern has been the floundering Japanese economy because of its status
as the economic linchpin for Asia and a key U.S. trading partner. Many
economists have projected U.S. economic growth to be substantially lower in the
second quarter of 1998, due in large part to softening Asian demand.
Global Government Bonds
The Portfolio's global government bond holdings have not been immune to the
recent extreme volatility of world bond markets and emerging markets in
particular. Early June's freefall of the Japanese yen has led to fears that a
further round of devaluations may occur in Asia, with particular fear that if
China devalues the yuan, market disruption of the order seen last fall may
recur. The Portfolio holds a small portion of its assets in better-quality,
high-yielding emerging market bonds (i.e., Bulgaria and Argentina). The
Portfolio's global government bond portion has recently benefited from the
weakness of the U.S. dollar. The Portfolio's managers have tactically unhedged
this part of the Portfolio on occasion during the second quarter of 1998 by 15%.
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The Portfolio's managers have reduced their holding of Japanese bonds to about
70% of the duration-weighted index, based on their view that this market is
likely to underperform going forward if the recent currency intervention on
behalf of the yen by the U.S. and Japan remains successful.
EQUITY INCOME PORTFOLIO
The Equity Income Portfolio ("Portfolio") seeks to provide investors with
current income and, as a secondary goal, long-term capital appreciation. The
Portfolio will seek to achieve its goals principally through investment in
dividend-paying common stocks of companies whose prospects for dividend growth
and capital appreciation are considered by the Portfolio's managers to be
favorable. The Portfolio will normally invest at least 65% of its assets in
stocks. Under normal circumstances, the Portfolio will concentrate at least 25%
of its assets in the stocks and bonds of companies in the utility industry.
For the six-month period ended June 30, 1998, the Portfolio had a total return
of 8.41% compared to the S&P 500 Index total return of roughly 17.7%. The
Portfolio focuses on the utility sector that is viewed as a defensive,
income-oriented group and is more sensitive to changes in the level of interest
rates than to the broad-based stock market.
During the first half of 1998, the utilities industry continued to go up with
several of the major indices reaching all-time highs. This positive performance
was a result of favorable interest rates, attractive relative valuations of
electric utilities when compared to the overall stock market and a continuation
of improving regulatory reforms within the utility industry. The transition to a
more competitive electric industry structure continued to evolve with several
additional companies creating long-range plans to focus on one industry sector
(generation or distribution) instead of the traditional fully integrated
structure. The Portfolio's managers think that this creates additional
opportunities for investors as they expect a less homogeneous group and more
varied performance of individual companies. The managers believe that the
utility sector should become less focused on income and more on total investment
return potential.
The Portfolio managers remain positive on utilities, especially as a balance to
diversified portfolios. They expect overall economic growth to slow in the
second half of 1998, and that should provide a positive environment for utility
bonds. An increase in stock market volatility could shift investment capital to
more defensive sectors such as utilities. The Portfolio emphasizes quality
companies with financial position and special situations where management has
begun to implement a strategic plan for future growth.
As of June 30, 1998, the Portfolio's asset allocation was 82% stocks, 15% bonds
and 3% cash. The Portfolio's common stock sector is made up of 62% utilities,
22% gas and 16% telecommunications. New additions in the Portfolio include MDU
Resources, Montana Power, Peco Energy, Public Service Enterprises and National
Fuel Gas. The Portfolio's managers have sold our holdings of Central and
Southwest Corporation, Long Island Lighting and French Telecom.
EQUITY INDEX PORTFOLIO
The Equity Index Portfolio ("Portfolio") is managed to provide investment
results that, before the deduction of operating expenses, match the price and
yield performance of U.S. publicly traded common stocks, as measured by the S&P
500 Index. For the six-month period ended June 30, 1998, the Portfolio posted a
total return of 17.41% compared to the total return of the S&P 500 Index of
17.7% for the same period.
During the reporting period, large-cap stocks continued to dominate as investors
moved money into the perceived safer haven of well-diversified, larger company
stocks. Growth stocks generally performed well in the first quarter of 1998.
The U.S. stock market got off to a surprisingly strong start in the first
quarter. Investors were expecting the worst on the earnings front in early 1998
in the aftermath of the Asian crisis. The action in the U.S. stock market was
even more remarkable in light of the slight increase in interest rates at the
end of the first quarter of 1998. According to internal research, about 46% of
all companies exceeded earnings expectations while 31% reported earnings below
consensus.
The anxiously awaited fourth-quarter earnings, however, turned out to be better
than the worst-case scenario. As a result, investors heaved a big sigh of relief
and embarked on a furious buying spree. In a broad-based market rally, the S&P
500 Index gained 13.53% for the first quarter of 1998 versus the Fund's return
of 12.70% during the same period.
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GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio ("Portfolio") seeks long-term capital growth and
income. The Portfolio invests in income-producing equity securities including
companies with consistent dividend-paying histories, the capacity to raise
dividends in the future and the potential for capital appreciation. For the six
months ended June 30, 1998, the Growth and Income Portfolio had a return of
10.66% versus the total return of 11.90% for Lipper Analytical Services, Inc.
peer group average for the same period. (Lipper is a major independent
fund-tracking organization.)
The U.S. stock market rose handsomely during the first six months of the year.
Stock investors have enjoyed returns greater than the "average" year, but in
half the time! A benign interest rate environment and strong corporate earnings
reports supported this increase. Any musings by the Fed to raise interest rates
were quashed by Asian weakness. And although the rate of earnings growth has not
been overwhelming, most companies are coming in ahead of analysts' expectations
and, supporting stock prices.
The Portfolio is widely diversified, and the Portfolio's manager participates in
most of the major stock market sectors. Due to his investment strategy of
emphasizing stocks with rising dividends, the Portfolio is somewhat
underweighted in the technology sector. This underweight position penalized the
Portfolio's relative performance, however, as technology stocks performed
strongly during the last six months.
The largest position in the Portfolio at the end of June was Beneficial Corp.
The old Beneficial Corp. has now disappeared, following the company's merger
with Household International. The merger with Household proved quite profitable
for shareholders, as the company was up 85% during the last six months,
triggered by the merger news.
Portfolio purchases during the last six months included Dole Food Inc.,
Gulfstream Aerospace and Southwest Airlines. The Dole name has long been
synonymous with pineapple, but the company is broadening its distribution of
bananas and fresh vegetables. Gulfstream is a major manufacturer of business
jets. Its latest jet, the Gulfstream V, enjoys record backlogs. Southwest
Airlines is the short-haul champion that continues to expand its routes across
the United States.
During the reporting period, the Portfolio's manager sold in their entirety
shares of Union Pacific, Genuine Parts Company, Reuters Group and SL Green
Realty. The Union Pacific Railroad continues to have service problems following
its merger with Southern Pacific. Genuine Parts faces ongoing competition from
other auto parts retailer such as AutoZone. Reuters, a United Kingdom-based data
provider, was priced at levels considered expensive relative to the company's
growth rate. The Portfolio's managers sold S.L. Green Realty to trim this
exposure to the real estate sector.
Looking forward to the remaining months in 1998, the manager anticipates a
positive backdrop for stocks. Asian economic troubles should slow the U.S.
economy somewhat, allowing the Fed to forego any interest rate increases. And
since there is no sign that corporate managements have lost their bottom-line
focus, he anticipates decent earnings increases through the rest of the year as
well.
EMERGING GROWTH PORTFOLIO
The Emerging Growth Portfolio ("Portfolio") seeks capital appreciation by
investing at least 65% of its total assets in the common stocks of small- and
medium-sized foreign and domestic companies. The Portfolio focuses on companies
that are in the early stages of their life cycles and have the potential to
become major enterprises. The Emerging Growth Portfolio posted a total return of
22.05% for the six months ended June 30, 1998, compared to the Lipper peer group
average which had a negative total return of 19.61% for the same period.
Growth stocks have generally done better than value stocks, and
large-capitalization stocks have generally done better than small-capitalization
stocks. (Growth stock investing means investing in companies that are likely to
grow faster than the economy at large and investing with the expectation that
their faster growth will bring rising earnings. Value investing means investing
in stocks that are selling for less than their true intrinsic value, in the
belief that the market will eventually recognize their value.)
A strong growth stock market helped the Portfolio, and the strong large
capitalization company performance worked against the Portfolio. Emerging growth
relative valuations versus the larger stocks have remained near the bottom of
the typical range for the entire period. The best-performing groups were retail
and selected technology, while energy stocks were the worst
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performers. The breadth of the market has been narrow, meaning a select number
of stocks have been responsible for much of the appreciation. Fortunately, the
Portfolio's managers have identified many of these stocks.
The investment style being employed by the Portfolio's managers is a bottom-up
approach, which focuses on stock selection. (A bottom-up approach to investing
focuses on the potential outstanding performance of individual companies rather
than considering the impact of major economic trends.) In addition, the
Portfolio is broadly diversified to control risk. Usually the Portfolio remains
fully invested. The style remains consistent in any market condition. Stocks are
selected based on two key criteria: rising earnings expectations and improving
valuations. Stocks are sold immediately if earnings expectations fall, and very
quickly if the valuation declines. This approach attempts to identify the best
fundamentally high growth companies that the market is recognizing and rewarding
with a higher valuation. Among the best performers for the Portfolio during the
period were:
- Dell Computer
- Yahoo
- America Online
- Capital One Financial
- Lucent Technologies
- Best Buy
- Loews Companies
- Pacific Sunwear
With the earnings growth gap widening in favor of emerging growth companies,
along with relative valuations at the bottom of the historic range when compared
to larger companies, emerging growth stocks should be very attractive for
investors. However, companies with higher trading liquidity are currently more
highly valued than companies with higher growth rates. Enhanced market
volatility has seemingly made liquidity an even higher priority for many
investors. This liquidity preference seems unlikely to change in the near term.
Emerging growth stock fundamentals are at the point when the group traditionally
begins to lead the market, but that may not happen unless the perceived need for
trading liquidity subsides. Until then, emerging growth stocks should likely
remain volatile.
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio ("Portfolio") seeks total return from growth
of capital and income. The Portfolio seeks to achieve its objective by investing
at least 65% of its assets in a diversified blend of equity securities of
established non-U.S. issuers. For the six-month period ended June 30, 1998, the
Portfolio posted a total return of 18.84% compared to the MSCI EAFE Index which
posted 15.10% for the same period. (The MSCI EAFE Index consists of the equity
total returns for Europe, Australia, New Zealand and the Far East.)
European markets continue to provide global equity market leadership, as the
micro and macro trends appear favorable. Company managements are restructuring
and reengineering corporate structures, boosting return on capital employed and
paying more than lip service to the interests of minority shareholders. The
European economies are strengthening, at the margin, yet interest rates remain
extremely supportive. Low nominal yields have forced individual and
institutional investors to address their long-neglected home equity markets in
the search for adequate investment returns.
Investors globally have been concerned with the implications and opportunities
unfolding as a result of the Asian economic contraction. Other emerging markets
have been a source of anxiety -- most specifically Russia, where a budget and
payments crisis forced a sharp upward move of interest rates to stabilize the
currency, and South Africa, where a run on the currency has resulted also in a
substantial upward move of rates. Asian economic growth expectations for 1998
and 1999 have come down substantially and by now most observers concede Asia is
in recession or depression, depending on the economy. Significant capital must
be committed to the region to recapitalize wounded financial institutions.
The weakness of the Japanese yen raised concerns about another round of
pronounced regional currency weakness. The recent Fed intervention to stabilize
the yen/U.S. dollar relationship has worked temporarily to break the downward
trajectory
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of the yen. Yet the Portfolio's managers remain skeptical, given the weakness of
the Japanese economy and the liberalization of capital flows, about the
sustainability of the yen rally. Much more detail must be forthcoming from the
Japanese regarding their bank restructuring plans and their strategies for
long-term permanent tax reform before investors are likely to be sustainable
enthused about the Japanese equity markets.
During the past six months, several changes were made to the Portfolio.
Securities sold during the past six months include VA Technologies, Cheung Kong
Infrastructure, Gilat Satellite, Rohm, Sumitomo Realty, Sungei Way, Gruma,
Cerebos Pacific and Van der Horst. In every instance, the sale was based on
either deteriorating fundamentals or the need for resources to finance the
managers' new purchases. Those new positions include: Sidel, the global leader
in PET blow-moulding machinery; Iona, the Irish-based middleware software
engineer; INA, one of the prominent Italian insurance and asset management
groups; Sony, the clear high-end leader in global consumer electronics; Terumo,
the high-growth Japanese medical equipment manufacturer; and Banco Popular, the
prominent Spanish retail bank.
In closing, we thank you for your investment in the Greenwich Street Series
Fund -- Money Market, Diversified Strategic Income, Equity Income, Equity Index,
Growth and Income, Emerging Growth and International Equity Portfolios. We look
forward to helping you pursue your financial goals in the years ahead.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
July 17, 1998
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PERFORMANCE COMPARISON -- DIVERSIFIED STRATEGIC INCOME PORTFOLIO AS OF 6/30/98
(UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------------
<S> <C>
Six Months Ended 6/30/98+ 3.77%
Year Ended 6/30/98 9.24%
Five Years Ended 6/30/98 8.14%
10/16/91* through 6/30/98 7.56%
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------
<S> <C>
10/16/91* through 6/30/98 63.06%
</TABLE>
* Commencement of operations
+ Total return is not annualized, as it may not be representative of the total
return for the year.
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Diversified Strategic Income Portfolio on October 16, 1991
(commencement of operations) through June 30, 1998 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.
<TABLE>
<CAPTION>
Measurement Period Lehman Brothers Aggregate Bond
(Fiscal Year Covered) Diversified Strategic Portfolio Index
<S> <C> <C>
10/16/91 10000 10000
Dec-91 10140 10507
Dec-92 10284 11285
Dec-93 11576 12386
Dec-94 11251 12024
Dec-95 13071 14246
Dec-96 14530 14944
12/31/97 15713 16385
6/30/98 16306 17029
</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 -- EQUITY INCOME PORTFOLIO AS OF 6/30/98 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------------
<S> <C>
Six Months Ended 6/30/98+ 8.41%
Year Ended 6/30/98 28.77%
Five Years Ended 6/30/98 11.13%
10/16/91* through 6/30/98 11.90%
CUMULATIVE TOTAL RETURN
- ------------------------------------------
10/16/91* through 6/30/98 112.60%
</TABLE>
* Commencement of operations
+ Total return is not annualized, as it may not be representative of the total
return for the year.
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Equity Income Portfolio on October 16, 1991 (commencement of
operations) through June 30, 1998 with that of a similar investment in the
Variable Annuity Lipper Equity Income Funds Peer Group Average and Standard &
Poor's 500 Index. Index information is available at month-end only; therefore,
the closest month-end to inception date of the Portfolio has been used. The
Standard & Poor's 500 Index is an unmanaged index composed of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange and
over-the-counter market.
The Variable Annuity Lipper Equity Income Funds Peer Group Average is composed
of 331 equity income funds as of June 30, 1998 which underlie variable
annuities.
<TABLE>
<CAPTION>
Variable Annuity Lipper
Measurement Period Equity Income Funds Peer
(Fiscal Year Covered) Equity Income Portfolio Group S&P 500 Index
<S> <C> <C> <C>
6/30/98 21260 25278 31379
Dec-97 19610 23075 26656
Dec-96 15876 18034 19988
Dec-95 14979 16510 17998
Dec-94 11308 14094 13012
Dec-93 12583 13758 12844
Dec-92 11397 11782 11668
Dec-91 10200 10559 10838
10/16/91 10000 10000 10000
</TABLE>
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not a guarantee of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
8
<PG$PCN>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- EQUITY INDEX PORTFOLIO AS OF 6/30/98 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------------
<S> <C>
Six Months Ended 6/30/98+ 17.41%
Year Ended 6/30/98 29.31%
Five Years Ended 6/30/98 22.05%
10/16/91* through 6/30/98 18.84%
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------
<S> <C>
10/16/91* through 6/30/98 218.49%
</TABLE>
* Commencement of operations
+ Total return is not annualized, as it may not be representative of the total
return for the year.
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Equity Index Portfolio on October 16, 1991 (commencement of
operations) through June 30, 1998 with that of a similar investment in the
Standard & Poor's 500 Index. Index information is available at month-end only;
therefore, the closest month-end to inception date of the Portfolio has been
used. The Standard & Poor's 500 Index is an unmanaged index composed of 500
widely held common stocks listed on the New York Stock Exchange, American Stock
Exchange and over-the-counter market.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Equity Index Portfolio Standard & Poor's 500 Index
<S> <C> <C>
10/16/91 10000 10000
Dec-91 10620 10838
Dec-92 11335 11668
Dec-93 12316 12844
Dec-94 12421 13012
Dec-95 16870 17898
Dec-96 20526 22005
Dec-97 27127 29345
6/30/98 31849 34546
</TABLE>
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not a guarantee of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- GROWTH & INCOME PORTFOLIO AS OF 6/30/98 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------------
<S> <C>
Six Months Ended 6/30/98+ 10.66%
Year Ended 6/30/98 18.83%
Five Years Ended 6/30/98 16.90%
10/16/91* through 6/30/98 14.43%
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------
<S> <C>
10/16/91* through 6/30/98 147.01%
</TABLE>
* Commencement of operations
+ Total return is not annualized, as it may not be representative of the total
return for the year.
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Growth & Income Portfolio on October 16, 1991 (commencement of
operations) through June 30, 1998 with that of a similar investment in the
Variable Annuity Lipper Growth & Income Funds Peer Group Average and Standard &
Poor's 500 Index. Index information is available at month-end only; therefore,
the closest month-end to inception date of the Portfolio has been used. The
Standard & Poor's 500 Index is an unmanaged index composed of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange and
over-the-counter market.
The Variable Annuity Lipper Growth & Income Funds Peer Group Average is composed
of 799 growth and income funds as of June 30, 1998 which underlie variable
annuities.
<TABLE>
<CAPTION>
Variable Annuity Lipper
Measurement Period Growth & Income Growth & Income Funds
(Fiscal Year Covered) Portfolio Peer Group S&P 500 Index
<S> <C> <C> <C>
6/30/98 24527 25681 31379
Dec-97 22321 22950 26656
Dec-96 18157 18211 19988
Dec-95 15152 16514 17898
Dec-94 11611 12646 13012
Dec-93 11995 12802 12844
Dec-92 10996 11551 11668
Dec-91 10140 10746 10838
10/16/91 10000 10000 10000
</TABLE>
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not a guarantee of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
9
<PG$PCN>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- EMERGING GROWTH PORTFOLIO AS OF 6/30/98 (UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------------
<S> <C>
Six Months Ended 6/30/98+ 22.05%
Year Ended 6/30/98 36.89%
12/3/93* through 6/30/98 21.06%
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------
<S> <C>
12/3/93* through 6/30/98 139.78%
</TABLE>
* Commencement of operations
+ Total return is not annualized, as it may not be representative of the total
return for the year.
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Emerging Growth Portfolio on December 3, 1993 (commencement of
operations) through June 30, 1998 with that of a similar investment in the
NASDAQ Composite Index. Index information is available at month-end only;
therefore, the closest month-end to inception date of the Portfolio has been
used. The NASDAQ Composite Index is a market capitalization price-only index
that tracks the performance of domestic common stocks traded on the regular
NASDAQ market as well as foreign common stocks and ADRs traded on the National
Market System.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Emerging Growth Portfolio NASDAQ Composite Index
<S> <C> <C>
12/3/93 10000 10000
Dec-93 10410 10297
Dec-94 9631 9968
Dec-95 13762 13947
Dec-96 16215 17115
12/31/97 19646 20819
6/30/98 23978 25120
</TABLE>
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not a guarantee of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- INTERNATIONAL EQUITY PORTFOLIO AS OF 6/30/98
(UNAUDITED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------------
<S> <C>
Six Months Ended 6/30/98+ 18.84%
Year Ended 6/30/98 10.04%
12/3/93* through 6/30/98 7.86%
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------
<S> <C>
12/3/93* through 6/30/98 41.38%
</TABLE>
* Commencement of operations
+ Total return is not annualized, as it may not be representative of the total
return for the year.
The chart to the right compares the growth in value of a hypothetical $10,000
investment in International Equity Portfolio on December 3, 1993 (commencement
of operations) through June 30, 1998 with that of a similar investment in the
Morgan Stanley EAFE Index. Index information is available at month-end only;
therefore, the closest month-end to inception date of the Portfolio has been
used. The Morgan Stanley EAFE Index is a composite index consisting of equity
total returns for the countries of Europe, Australia, New Zealand and countries
in the Far East, weighted based on each country's gross domestic product.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) International Equity Portfolio Morgan Stanley EAFE Index
<S> <C> <C>
12/3/93 10000 10000
Dec-93 10050 10724
Dec-94 9210 10850
Dec-95 10020 12103
Dec-96 12163 12873
12/31/97 11897 13120
6/30/98 14138 15210
</TABLE>
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not a guarantee of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
10
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 1998
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. AGENCIES AND INSTRUMENTALITIES -- 7.9%
$250,000 Federal Home Loan Bank mature 7/6/98 to 10/30/98............ 5.53% to 5.61% $ 248,037
100,000 Federal Home Loan Mortgage Corp. matures 7/31/98............ 5.63 99,533
- ----------------------------------------------------------------------------------------------------------------
TOTAL U.S. AGENCIES AND INSTRUMENTALITIES (Cost --
$347,570)................................................... 347,570
- ----------------------------------------------------------------------------------------------------------------
BANK NOTES -- 5.7%
100,000 Bank America National Trust & Savings Association matures
7/23/98..................................................... 5.50 100,000
150,000 Harris Bank matures 7/10/98................................. 5.55 150,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL BANK NOTES (Cost -- $250,000)......................... 250,000
- ----------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 76.8%
100,000 Abbey National PLC matures 7/17/98.......................... 5.59 99,755
100,000 Alliance & Leicester Building Society matures 7/8/98........ 5.55 99,894
100,000 Bank Brussels Lambert matures 9/9/98........................ 5.58 98,929
100,000 Banque National De Paris matures 7/27/98.................... 5.53 100,000
100,000 BCI Funding Corp. matures 12/14/98.......................... 5.61 97,482
150,000 Bell Atlantic Financial Services matures 7/14/98............ 5.53 149,701
100,000 Cades matures 8/3/98........................................ 5.56 99,495
100,000 Canadian Imperial Bank matures 8/24/98...................... 5.58 99,175
100,000 Cariplo Finance Inc. matures 9/17/98........................ 5.60 98,804
150,000 Chase Manhattan Bank Corp. matures 7/23/98.................. 5.60 149,495
150,000 Credit Agricole Indosuez matures 7/20/98.................... 5.60 149,566
100,000 Credito Italiano matures 8/4/98............................. 5.61 99,478
125,000 Cregem North America matures 8/6/98......................... 5.58 124,313
100,000 Daimler-Benz North America Co. matures 9/22/98.............. 5.59 98,732
150,000 Deutsche Bank Financial Inc. matures 7/13/98................ 5.55 149,724
150,000 Dresdner Bank matures 7/2/98................................ 5.53 149,977
100,000 E.I. du Pont De Nemours matures 7/21/98..................... 5.54 99,695
150,000 Ford Motor Credit Co. matures 8/13/98....................... 5.57 149,011
100,000 Goldman, Sachs & Co. matures 11/12/98....................... 5.65 97,954
100,000 International Nederlanden US Funding Corp. matures 9/9/98... 5.58 98,931
180,000 Lucent Technologies matures 7/1/98.......................... 6.00 180,000
100,000 Merrill Lynch & Co. matures 10/15/98........................ 5.64 98,380
150,000 National Australia Bank matures 7/6/98...................... 5.56 149,884
100,000 Province of British Columbia matures 10/23/98............... 5.64 98,258
100,000 San Paolo US Finance Inc. matures 12/21/98.................. 5.64 97,367
180,000 Sara Lee Corp. matures 7/1/98............................... 6.05 180,000
125,000 Svenska Handelsbanken matures 7/14/98....................... 5.56 124,752
150,000 Union Bank of Switzerland matures 8/5/98.................... 5.59 149,191
- ----------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (Cost -- $3,387,943)................. 3,387,943
- ----------------------------------------------------------------------------------------------------------------
FOREIGN CERTIFICATE OF DEPOSIT -- 2.2%
100,000 Bank of Montreal matures 7/20/98 (Cost -- $99,709).......... 5.56 99,709
- ----------------------------------------------------------------------------------------------------------------
TIME DEPOSITS -- 4.1%
180,000 First National Bank Chicago matures 7/1/98
(Cost -- $180,000).......................................... 6.25 180,000
- ----------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.3%
145,000 Morgan Stanley Dean Witter Discover, Inc., 5.69% due 7/1/98;
Proceeds at maturity -- $145,023; (Fully collateralized by
U.S. Treasury Notes, 6.125% due 7/31/00; Market
value -- $147,984) (Cost -- $145,000)....................... 145,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $4,410,222*)............. $4,410,222
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT SECTOR -- 43.8%
$ 490,630 Federal Home Loan Mortgage Corp., 9.000% due 1/1/20 through
5/1/21...................................................... $ 518,684
20,000,000 Federal Home Loan Mortgage Corp. zero coupon due 3/16/23.... 3,368,800
24,500,000 Federal National Mortgage Association Principal Strips, due
8/15/17..................................................... 8,956,030
4,942,404 Government National Mortgage Association, 6.500% due 3/15/28
through 4/15/28............................................. 4,934,649
1,553,503 Government National Mortgage Association, 7.000% due 9/15/23
through 5/15/24............................................. 1,579,230
302,481 Government National Mortgage Association, 7.500% due
2/15/24..................................................... 310,987
931,431 Government National Mortgage Association, 8.000% due 5/15/17
through 12/15/21............................................ 965,780
10,090,048 Government National Mortgage Association, 9.000% due
11/15/16 through 9/15/24.................................... 10,849,871
- --------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECTOR (Cost -- $30,747,828).......... 31,484,031
- --------------------------------------------------------------------------------------------
HIGH YIELD SECTOR -- 27.1%
- --------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES -- 25.9%
- --------------------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.7%
450,000 Airplanes Pass Through Trust, Trust Certificates, 10.875%
due 3/15/19................................................. 508,293
- --------------------------------------------------------------------------------------------
BANKS/SAVINGS AND LOANS -- 0.2%
100,000 First Nationwide Holdings, Sr. Sub. Notes, 10.625% due
10/1/03..................................................... 113,500
- --------------------------------------------------------------------------------------------
BROADCASTING-TV, CABLE AND RADIO -- 3.8%
Century Communications:
50,000 Sr. Discount Notes, zero coupon due 3/15/03................. 34,000
200,000 Sr. Notes, 8.750% due 10/1/07............................... 212,000
150,000 Comcast UK Cable, Sr. Discount Debentures, step bond to
yield 11.200% due 11/15/07.................................. 125,250
CSC, Sr. Sub. Debentures:
275,000 9.875% due 2/15/13.......................................... 305,250
200,000 10.500% due 5/15/16......................................... 234,750
100,000 9.875% due 4/1/23........................................... 111,250
250,000 Le Groupe Videotron Ltd., Sr. Notes, 10.625% due 2/15/05.... 280,000
Rogers Cablesystems Ltd.:
100,000 Debenture, 10.000% due 3/15/05.............................. 111,000
325,000 Sr. Secured Debentures, 10.000% due 12/1/07................. 361,563
275,000 Sr. Sub. Debentures, 11.000% due 12/1/15.................... 322,438
100,000 Rogers Communications Inc., Sr. Notes, 8.875% due 7/15/07... 100,500
TV Azteca S.A., Sr. Notes:
100,000 Series A, Debentures, 10.125% due 2/15/04................... 100,250
100,000 Series B, 10.500% due 2/15/07............................... 100,500
525,000 UIH Australia/Pacific Communications Inc., Sr. Discount
Notes, step bond to yield
10.750% due 2/15/08......................................... 324,188
- --------------------------------------------------------------------------------------------
2,722,939
- --------------------------------------------------------------------------------------------
CELLULAR AND OTHER WIRELESS -- 2.3%
300,000 Clearnet Communications Inc., Sr. Discount Notes, step bond
to yield 14.750% due 12/15/05............................. 251,625
75,000 Dolphin Telecom PLC, Sr. Discount Notes, step bond to yield
11.500% due 6/1/08 (a)...................................... 42,750
300,000 Iridium LLC/Capital Corp., Sr. Notes, 14.000% due 7/15/05... 334,500
375,000 Millicom International Cellular, Sr. Discount Notes, step
bond to yield 13.500% due 6/1/06............................ 286,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
CELLULAR AND OTHER WIRELESS -- 2.3% (CONTINUED)
$ 200,000 Nextel Communications Inc., Sr. Discount Notes, step bond to
yield 9.750% due 8/15/04.................................... $ 195,000
Telesystem International Inc., Sr. Discount Notes:
500,000 Step bond to yield 13.250% due 6/30/07 (b).................. 336,250
300,000 Step bond to yield 10.500% due 11/1/07 (b).................. 180,750
- --------------------------------------------------------------------------------------------
1,627,750
- --------------------------------------------------------------------------------------------
CHEMICALS -- 0.3%
100,000 Buckeye Technology Inc., Sr. Sub. Notes, 8.000% due 10/15/10
(b)......................................................... 101,000
100,000 Unifrax Investment Corp., Sr. Notes, 10.500% due 11/1/03.... 104,750
- --------------------------------------------------------------------------------------------
205,750
- --------------------------------------------------------------------------------------------
CONSUMER DURABLE GOODS/HOME FURNISHINGS -- 0.3%
225,000 Outboard Marine Corp., Sr. Notes, 10.750% due 6/1/08........ 232,313
- --------------------------------------------------------------------------------------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING -- 0.7%
150,000 Alvey Systems, Sr. Sub. Notes, 11.375% due 1/31/03.......... 156,750
100,000 Eagle-Picher Industries, Sr. Sub. Notes, 9.375% due
3/1/08...................................................... 101,875
100,000 Interlake Corp., Sr. Sub. Debentures, 12.125% due 3/1/02
(a)......................................................... 103,000
150,000 Park-Ohio Industries, Sr. Sub. Notes, 9.250% due 12/1/07
(b)......................................................... 153,375
- --------------------------------------------------------------------------------------------
515,000
- --------------------------------------------------------------------------------------------
DIVERSIFIED/CONGLOMERATE SERVICES -- 0.5%
100,000 Axiohm Transaction Solutions, Sr. Sub. Notes, 9.750% due
10/1/07 (b)................................................. 101,000
250,000 Outsourcing Solutions Inc., Sr. Sub. Notes, 11.000% due
11/1/06..................................................... 271,875
- --------------------------------------------------------------------------------------------
372,875
- --------------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.4%
AES Corp., Senior Sub. Notes:
100,000 10.250% due 7/15/06......................................... 109,000
300,000 8.500% due 11/1/07 (b)...................................... 304,876
200,000 Calpine Corp., Sr. Notes, 10.500% due 5/15/06............... 219,500
45,971 Midland COG Venture, Debentures, 10.330% due 7/23/02........ 49,420
Niagara Mohawk Power:
350,000 Series H, Sr. Discount Notes, step bond to yield 8.500% due
7/1/10...................................................... 243,250
50,000 Sr. Notes, 7.750% due 10/1/08............................... 51,375
- --------------------------------------------------------------------------------------------
977,421
- --------------------------------------------------------------------------------------------
ELECTRONICS/COMPUTERS -- 1.8%
175,000 Fairchild Semiconductor Inc., Sr. Sub. Notes, 10.125% due
3/15/07..................................................... 180,688
250,000 Graphic Controls Corp., Sr. Sub. Notes, 12.000% due
9/15/05..................................................... 280,313
Unisys Corp., Sr. Notes:
300,000 12.000% due 4/15/03......................................... 340,875
200,000 11.750% due 10/15/04........................................ 232,000
200,000 Viasystems Inc., Sr. Sub. Notes, 9.750% due 6/1/07.......... 196,500
75,000 WAM!NET Inc., Units, step bond to yield 13.250% due 3/1/05
(c)......................................................... 47,344
- --------------------------------------------------------------------------------------------
1,277,720
- --------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCE CO. -- 0.3%
$ 125,000 Amresco Inc., Sr. Sub. Notes, 10.000% due 3/15/04 (a)....... $ 129,844
100,000 Ocwen Capital Trust I, Company Guaranteed, 10.875% due
8/1/27...................................................... 109,250
- --------------------------------------------------------------------------------------------
239,094
- --------------------------------------------------------------------------------------------
FINANCIAL SERVICES-BROKERAGE/SYNDICATION/LEASING -- 0.2%
100,000 Morgan Stanley Aircraft Finance, Sr. Sub. Notes, 8.700% due
3/15/23..................................................... 100,500
- --------------------------------------------------------------------------------------------
FOOD -- 1.2%
100,000 B&G Foods Inc., Sr. Sub. Notes, 9.625% due 8/1/07 (b)....... 101,750
125,000 ICN Pharmaceuticals Inc., Sr. Notes, 9.250% due 8/15/05..... 132,813
200,000 Imperial Holly, Sr. Sub. Notes, 9.750% due 12/15/07 (b)..... 202,000
400,000 Van de Kamp, Inc., Sr. Sub. Notes, 12.000% due 9/15/05...... 447,500
- --------------------------------------------------------------------------------------------
884,063
- --------------------------------------------------------------------------------------------
HEALTH CARE/DRUGS/HOSPITAL SUPPLIES -- 1.4%
Integrated Health Services, Sr. Sub. Notes:
125,000 9.500% due 9/15/07.......................................... 131,250
100,000 9.250% due 1/15/08.......................................... 103,875
250,000 Magellan Health Services, Sr. Sub. Notes, 9.000% due
2/15/08..................................................... 248,125
200,000 Paragon Health Networks, Sr. Sub. Notes, 9.500% due
11/1/07..................................................... 204,000
100,000 Pharmaceutical Fine Chemicals, Sr. Sub. Notes, 9.750% due
11/15/07 (b)................................................ 113,250
Sun Healthcare Group Inc., Sr. Sub. Notes:
100,000 9.500% due 7/1/07........................................... 101,500
100,000 9.375% due 5/1/08........................................... 101,000
- --------------------------------------------------------------------------------------------
1,003,000
- --------------------------------------------------------------------------------------------
HOTEL/GAMING -- 0.8%
300,000 Courtyard By Marriott, Sr. Secured Notes, 10.750% due
2/1/08...................................................... 330,750
200,000 Mohegan Tribal Gaming Authority, Sr. Secured Notes, 13.500%
due 11/15/02................................................ 258,250
- --------------------------------------------------------------------------------------------
589,000
- --------------------------------------------------------------------------------------------
INSURANCE -- 0.5%
125,000 Sig Capital Trust I, Notes, 9.500% due 8/15/27.............. 128,438
200,000 Veritas Capital Trust, Trust Certificates, 10.000% due
1/1/28...................................................... 210,000
- --------------------------------------------------------------------------------------------
338,438
- --------------------------------------------------------------------------------------------
LEISURE/AMUSEMENT/MOTION PICTURES -- 0.1%
100,000 SFX Entertainment Inc., Sr. Sub. Notes, 9.125% due 2/1/08
(b)......................................................... 98,500
- --------------------------------------------------------------------------------------------
METALS/MINING -- 0.3%
100,000 Koppers Industry Inc., Sr. Sub. Notes, 9.875% due 12/1/07
(b)......................................................... 104,000
100,000 WHX Corp., Sr. Notes, 10.500% due 4/15/05 (a)............... 102,000
- --------------------------------------------------------------------------------------------
206,000
- --------------------------------------------------------------------------------------------
OIL SERVICES -- 0.5%
150,000 DeepTech International Inc., Sr. Notes, 12.000% due
12/15/00.................................................... 166,313
100,000 ICO Inc., Sr. Notes, 10.375% due 6/1/07..................... 102,250
100,000 J. Ray McDermott S.A., Sr. Sub. Notes, 9.375% due 7/15/06... 108,000
- --------------------------------------------------------------------------------------------
376,563
- --------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
OIL/NATURAL GAS -- 1.8%
$ 100,000 Canadian Forest Oil, Sr. Sub. Notes, 8.750% due 9/15/07
(a)......................................................... $ 98,500
200,000 Clark USA, Sr. Notes, 10.875% due 12/1/05................... 218,250
150,000 Gulf Canada Resources Ltd, Sub. Debentures, 9.625% due
7/1/05...................................................... 161,250
225,500 Ocean Energy Inc., Sr. Sub. Notes, 10.375% due 10/15/05..... 249,188
100,000 Parker Drilling Corp., Debentures, 9.750% due 11/15/06
(b)......................................................... 102,500
300,000 Santa Fe Energy Resources Inc., Sr. Sub. Debentures, 11.000%
due 5/15/04................................................. 325,500
150,000 Stone Energy Corp., Sr. Sub. Notes, 8.750% due 9/15/07...... 150,375
- --------------------------------------------------------------------------------------------
1,305,563
- --------------------------------------------------------------------------------------------
PACKAGING/CONTAINERS -- 0.2%
50,000 Huntsman Packaging, Sr. Sub. Notes, 9.125% due 10/1/07
(b)......................................................... 49,875
50,000 Tekni-Plex Inc., Sr. Sub. Notes, 9.250% due 3/1/08.......... 49,875
- --------------------------------------------------------------------------------------------
99,750
- --------------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS/PRINTING -- 0.4%
275,000 SD Warren Holdings Co., Sr. Sub. Notes, 12.000% due
12/15/04.................................................... 305,594
- --------------------------------------------------------------------------------------------
POLLUTION CONTROL/WASTE REMOVAL -- 0.1%
100,000 CIA Latino Americana, Sr. Notes, 11.625% due 6/1/04 (b)..... 99,750
- --------------------------------------------------------------------------------------------
RAIL/TRUCKING/OVERNIGHT DELIVERY -- 0.1%
75,000 American Commercial Lines LLC/ACL, Sr. Notes, 10.250% due
6/30/08..................................................... 76,313
- --------------------------------------------------------------------------------------------
REAL ESTATE DEVELOPMENT/REITS -- 0.3%
125,000 BF Saul REIT, Sr. Notes, 9.750% due 4/1/08.................. 123,750
101,000 Trizec Finance Ltd., Sr. Notes, 10.875% due 10/15/05........ 114,256
- --------------------------------------------------------------------------------------------
238,006
- --------------------------------------------------------------------------------------------
RETAIL -- 0.3%
100,000 Advance Stores Co., Sr. Sub. Notes, 10.250% due 4/15/08
(b)......................................................... 103,875
100,000 US Office Product Co., Sr. Sub. Notes, 9.750% due 6/15/08
(b)......................................................... 100,250
- --------------------------------------------------------------------------------------------
204,125
- --------------------------------------------------------------------------------------------
TELEPHONE/COMMUNICATIONS -- 4.3%
400,000 Allegiance Telecom Inc., Sr. Discount Notes, step bond to
yield 11.750% due 2/15/08 (b)............................... 212,375
400,000 Colt Telecom Group PLC, Sr. Sub. Notes, step bond to yield
12.000% due 12/15/06 (c).................................... 316,000
Espirit Telecom Group PLC, Sr. Notes:
100,000 11.500% due 12/15/07 (a).................................... 103,250
100,000 10.875% due 6/15/08......................................... 100,750
175,000 Facilcom International, Sr. Notes, 10.500% due 1/15/08...... 174,563
125,000 Firstworld Communication, Sr. Discount Notes, step bond to
yield 13.000%
due 4/15/08 (b)(c).......................................... 56,250
100,000 Hermes Europe Railtel BV, Sr. Notes, 11.500% due 8/15/07
(b)......................................................... 113,125
50,000 Impsat Corp., Sr. Discount Notes, 12.375% due 6/15/08....... 50,750
225,000 Intermedia Communications of Florida, Sr. Discount Notes,
step bond to yield 12.500% due 5/15/06...................... 185,063
200,000 McLeod Inc., Sr. Discount Notes, step bond to yield 10.500%
due 3/1/07 (a).............................................. 149,000
Metronet Communications:
400,000 Sr. Discount Notes, step bond to yield 9.950% due 6/15/08... 247,000
200,000 Sr. Notes, 12.000% due 8/15/07 (c).......................... 232,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PG$PCN>
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SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
TELEPHONE/COMMUNICATIONS -- 4.3% (CONTINUED)
$ 250,000 Pagemart Wireless Inc., Sr. Discount Notes, step bond to
yield 11.250% due 2/1/08.................................... $ 156,563
100,000 Primus Telecom Group, Sr. Notes, 11.750% due 8/1/04......... 106,250
100,000 PSINet Inc., Sr. Notes, 10.000% due 2/15/05................. 102,500
Qwest Communications International:
175,000 Sr. Discount Notes, step bond to yield 9.470% due
10/15/07.................................................... 131,688
150,000 Sr. Notes, 10.875% due 4/1/07............................... 174,000
RCN Corp.:
200,000 Sr. Discount Notes, step bond to yield 11.125% due 10/15/07
(b)......................................................... 128,000
100,000 Sr. Notes, 10.000% due 10/15/07 (b)......................... 103,000
105,000 RSL Communications Ltd., Sr. Notes, 12.250% due 11/15/06.... 119,306
100,000 Thermadyne Holdings, Debentures, step bond to yield 12.500%
due 6/1/08 (b).............................................. 55,500
100,000 Versatel Telecom, Sr. Notes, 13.250% due 5/15/08 (b)........ 105,500
- --------------------------------------------------------------------------------------------
3,122,433
- --------------------------------------------------------------------------------------------
TRANSPORTATION -- 1.1%
100,000 American Reefer Co. Ltd., First Mortgage, 10.250% due
3/1/08...................................................... 100,125
100,000 GS Superhighway Holdings, Sr. Notes, 10.250% due 8/15/07
(b)......................................................... 68,375
Sea Containers Ltd.:
270,000 Series A, Sr. Sub. Debentures, 12.500% due 12/1/04.......... 304,763
100,000 Sr. Notes, 7.875% due 2/15/08............................... 98,750
100,000 Stena Line AB, Sr. Notes, 10.625% due 6/1/08................ 101,625
100,000 TBS Shipping International Ltd., First Mortgage, 10.000% due
5/1/05...................................................... 91,500
- --------------------------------------------------------------------------------------------
765,138
- --------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -- $17,918,350)....... 18,605,391
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCK -- 1.1%
- --------------------------------------------------------------------------------------------
BANKING -- 0.1%
2,400 California Federal Preferred Capital Corp., Series A,
Exchangeable................................................ 65,400
- --------------------------------------------------------------------------------------------
BROADCASTING-TV, CABLE AND RADIO -- 1.0%
662 Time Warner, Inc., Series M................................. 736,475
- --------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost -- $797,810).................... 801,875
- --------------------------------------------------------------------------------------------
WARRANTS -- 0.1%
- --------------------------------------------------------------------------------------------
BROADCASTING-TV, CABLE AND RADIO -- 0.0%
150 Australis Holdings, Expire 10/30/01 (b)(d).................. 0
450 UIH Australia, Expire 5/15/06 (d)........................... 5,400
750 Wireless One Inc., Expire 10/19/00 (d)...................... 188
- --------------------------------------------------------------------------------------------
5,588
- --------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PG$PCN>
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SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
CELLULAR AND OTHER WIRELESS -- 0.00%
1,650 Clearnet Communications Inc., Expire 9/15/05 (d)............ $ 9,900
- --------------------------------------------------------------------------------------------
TELEPHONE/COMMUNICATIONS -- 0.1%
300 Allegiance Telecom Inc., Expire 2/3/08 (d).................. 750
400 Colt Telecom Group PLC, Expire 12/31/06 (d)................. 78,000
100 Iridium World Communications, Expire 7/15/05 (d)............ 1,400
200 Metronet Communications, Expire 8/15/07 (d)................. 8,000
600 Nextel Communications Inc., Expire 5/23/99 (d).............. 1,440
100 Primus Telecom Group, Expire 8/1/04 (d)..................... 3,800
150 RSL Communications Ltd., Expire 11/15/06 (d)................ 6,000
- --------------------------------------------------------------------------------------------
99,390
- --------------------------------------------------------------------------------------------
TOTAL WARRANTS (Cost -- $23,939)............................ 114,878
- --------------------------------------------------------------------------------------------
TOTAL HIGH YIELD SECTOR (Cost -- $18,740,099)............... 19,522,144
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT+ SECURITY VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
INTERNATIONAL SECTOR -- 23.5%
- --------------------------------------------------------------------------------------------
BONDS -- 23.5%
- --------------------------------------------------------------------------------------------
ARGENTINA -- 0.3%
300,000 Argentina Discount Series L, 6.875% due 3/31/23 (e)......... 244,689
- --------------------------------------------------------------------------------------------
AUSTRALIA -- 1.1%
400,000 New South Wales Treasury Corp., 12.000% due 12/1/01......... 297,798
700,000 Queensland Treasury Corp., 8.000% due 5/14/03............... 478,169
- --------------------------------------------------------------------------------------------
775,967
- --------------------------------------------------------------------------------------------
CANADA -- 1.2%
650,000 Government of Canada, 11.750% due 2/1/03.................... 555,572
100,000 International Finance Corp., 7.750% due 8/18/98............. 68,203
300,000 KFW International Finance, 9.500% due 5/13/02............... 230,865
- --------------------------------------------------------------------------------------------
854,640
- --------------------------------------------------------------------------------------------
DENMARK -- 2.0%
10,000,000 Kingdom of Denmark, 4.000% due 2/15/01...................... 1,444,671
- --------------------------------------------------------------------------------------------
FINLAND -- 0.5%
2,000,000 Finnish Export, 6.000% due 1/15/99.......................... 368,739
- --------------------------------------------------------------------------------------------
GERMANY -- 4.9%
6,000,000 Bundesobligation, 5.000% due 5/21/01........................ 3,399,557
175,000 Esprit Telecom Group PLC, 11.500% due 12/15/07.............. 99,861
- --------------------------------------------------------------------------------------------
3,499,418
- --------------------------------------------------------------------------------------------
IRELAND -- 1.2%
600,000 Republic of Ireland, 8.000% due 10/18/00.................... 896,443
- --------------------------------------------------------------------------------------------
ITALY -- 0.5%
600,000,000 Cert Di Credito Del Tes, 7.400% due 8/1/99 (e).............. 339,130
- --------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT+ SECURITY VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C>
MEXICO -- 0.6%
United Mexican States:
500,000 Series B, 6.250% due 12/31/19 (f)........................... 414,065
- --------------------------------------------------------------------------------------------
NEW ZEALAND -- 0.9%
New Zealand Government:
750,000 6.500% due 2/15/00.......................................... 385,502
500,000 10.000% due 3/15/02......................................... 285,183
- --------------------------------------------------------------------------------------------
670,685
- --------------------------------------------------------------------------------------------
SPAIN -- 2.1%
200,000,000 Kingdom of Spain, 10.100% due 2/28/01....................... 1,491,998
- --------------------------------------------------------------------------------------------
SWEDEN -- 1.8%
10,000,000 Kingdom of Sweden, 5.500% due 4/12/02 (a)................... 1,297,036
- --------------------------------------------------------------------------------------------
UNITED KINGDOM -- 6.4%
225,000 Dolphin Telecom PLC, step bond to yield 11.625% due
6/1/03...................................................... 138,965
75,000 Middleweb PLC, 10.500% due 5/30/08.......................... 125,450
100,000 Texon International PLC, 10.000% due 2/1/08................. 55,402
2,500,000 United Kingdom Treasury, 8.000% due 12/7/00................. 4,270,392
- --------------------------------------------------------------------------------------------
4,590,209
- --------------------------------------------------------------------------------------------
TOTAL INTERNATIONAL SECTOR (Cost -- $17,318,864)............ 16,887,690
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 5.6%
$ 4,050,000 CIBC Wood Gundy Securities Corp., 5.550% due 7/1/98;
Proceeds at maturity -- $4,050,624; (Fully collateralized by
U.S. Treasury Notes, 6.875% due 7/31/99; Market
value -- $4,131,927) (Cost -- $4,050,000)................... 4,050,000
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $70,856,791*)............ $71,943,865
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Security is on loan (See Note 16).
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(c) Security issued with attached warrants.
(d) Non-income producing security.
(e) Variable rate security.
(f) Security is traded with value recovery rights.
+ Represents local currency.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 82.0%
- --------------------------------------------------------------------------------------
GAS -- 18.1%
14,000 Coastal Corp. .............................................. $ 977,375
20,000 Duke Energy Corp. .......................................... 1,185,000
30,000 El Paso Natural Gas Co. .................................... 1,147,500
15,000 Enron Corp. ................................................ 810,937
15,000 Equitable Resources Inc. ................................... 457,500
25,000 MCN Corp. .................................................. 621,875
15,000 National Fuel Gas Co. ...................................... 653,437
37,595 Sempra Energy............................................... 1,043,261
15,000 Southwest Gas Corp. ........................................ 366,563
20,000 Williams Cos. Inc. ......................................... 675,000
- --------------------------------------------------------------------------------------
7,938,448
- --------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 12.8%
20,000 Endesa -- Sponsored ADR..................................... 432,500
10,000 General Motors Corp., Class H Shares........................ 471,250
25,000 Mediaone Group, Inc......................................... 1,098,438
12,000 Nextlink Communications Inc., Class A Shares................ 454,500
15,000 SBC Communications Inc. .................................... 600,000
20,000 Teleport Communications Group, Inc. (a)..................... 1,085,000
682 U.S. West Media Group (a)................................... 32,054
30,000 Worldcom Inc. (a) .......................................... 1,453,125
- --------------------------------------------------------------------------------------
5,626,867
- --------------------------------------------------------------------------------------
UTILITIES -- 51.1%
20,000 American Electric Power Inc. ............................... 907,500
25,000 BEC Energy.................................................. 1,037,500
25,000 Cinergy Corp. .............................................. 875,000
25,300 Citizens Utilities Co. ..................................... 243,512
15,000 CMS Energy Corp. ........................................... 660,000
10,000 Consolidated Edison Co. of New York, Inc. .................. 460,625
15,000 Consolidated Natural Gas Co. ............................... 883,125
25,000 DQE Inc. ................................................... 900,000
35,000 Edison International........................................ 1,034,687
24,000 Energen Corp. .............................................. 483,000
25,000 Florida Progress Corp. ..................................... 1,028,125
25,000 FPL Group Inc. ............................................. 1,575,000
15,000 Illinova Corp. ............................................. 450,000
20,000 LG & E Energy Corp. ........................................ 541,250
25,000 MDU Resources Group Inc. ................................... 892,188
25,000 Montana Power Co. .......................................... 868,750
20,000 New Century Energies Inc. .................................. 908,750
40,000 Niagara Mohawk Power Co. ................................... 597,500
40,000 NIPSCO Industries, Inc. .................................... 1,120,000
34,000 Northern States Power Co. .................................. 973,250
15,000 Pacificorp. ................................................ 339,375
30,000 Peco Energy Co. ............................................ 875,625
14,500 Pinnacle West Capital Corp. ................................ 652,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES -- 51.1% (CONTINUED)
15,000 Public Service Enterprises Groups, Inc. .................... $ 516,562
25,000 SCANA Corp. ................................................ 745,312
25,000 Sierra Pacific Resources.................................... 907,812
25,000 Southern Co. ............................................... 692,188
30,000 Texas Utilities Co. ........................................ 1,248,750
- --------------------------------------------------------------------------------------
22,417,886
- --------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $25,934,690).................... 35,983,201
- --------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 15.4%
$ 200,000 Arizona Public Service Co., First Mortgage, 8.000% due
2/1/25...................................................... 214,000
255,000 Central Illinois Public Service Co., 8.500% due 5/15/22..... 269,981
250,000 Dayton Power & Light Co., First Mortgage, 8.150% due
1/15/26..................................................... 272,188
Duquesne Light Co., First Collateral Trust:
200,000 8.375% due 5/15/24........................................ 210,000
250,000 7.550% due 6/15/25........................................ 262,188
200,000 Idaho Power Co., First Mortgage, 8.750% due 3/15/27......... 224,250
500,000 Illinois Power Co., 8.000% due 2/15/23...................... 263,125
300,000 Kentucky Utilities Co., First Mortgage, 8.550% due
5/15/27..................................................... 345,375
Madison Gas & Electric Co., First Mortgage:
200,000 8.500% due 4/15/22........................................ 228,250
500,000 7.700% due 2/15/28........................................ 540,625
250,000 Midwest Power Systems Inc., 8.125% due 2/1/23............... 263,125
New York State Electric & Gas Corp., First Mortgage:
250,000 8.300% due 12/15/22....................................... 272,500
250,000 7.450% due 7/15/23........................................ 255,938
250,000 Pacific Gas & Electric Co., 6.750% due 10/1/23.............. 248,750
500,000 Pennsylvania Power & Light Co., First Mortgage, 8.500% due
5/1/22...................................................... 558,750
300,000 Public Service Co., Oklahoma, First Mortgage, 7.375% due
4/1/23...................................................... 313,500
500,000 Texas Utilities Co., First Mortgage, 7.625% due 7/1/25...... 522,500
250,000 Virginia Electric & Power Co., First Mortgage, 7.500% due
6/1/23...................................................... 261,875
400,000 Wisconsin Electric Power Co., First Mortgage, 7.050% due
8/1/24...................................................... 415,000
300,000 Wisconsin Power & Light Co., Notes, 8.600% due 3/15/27...... 349,125
425,000 Wisconsin Public Service Corp., First Mortgage, 7.125% due
7/1/23...................................................... 439,344
- --------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -- $6,287,649)........ 6,730,389
- --------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.6%
1,141,000 Goldman, Sachs & Co., 5.650% due 7/1/98; Proceeds at
maturity -- $1,141,179; (Fully collateralized by U.S.
Treasury Notes, 5.375% due 6/30/00; Market
value -- $1,164,363) (Cost -- $1,141,000)................... 1,141,000
- --------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $33,363,339*)............ $43,854,590
- --------------------------------------------------------------------------------------
</TABLE>
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 95.3%
- ------------------------------------------------------------------------------------------------------
BASIC INDUSTRIES -- 4.7%
273 Aeroquip-Vickers, Inc. ..................................... $ 15,936
2,251 Air Products & Chemicals, Inc. ............................. 90,040
2,168 Alcan Aluminum Ltd. ........................................ 59,891
1,863 Allegheny Teledyne, Inc. ................................... 42,616
5,418 Allied Signal, Inc. ........................................ 240,423
1,654 Aluminum Co. of America..................................... 109,060
3,527 Applied Materials, Inc. (a)................................. 104,046
1,098 Armco Inc. (a).............................................. 6,999
382 ASARCO, Inc. ............................................... 8,499
991 Avery Dennison Corp. ....................................... 53,266
3,595 Barrick Gold Corp. ......................................... 68,979
2,143 Battle Mountain Gold Corp. ................................. 12,724
505 Bemis, Inc. ................................................ 20,641
1,247 Bethlehem Steel Corp. (a) .................................. 15,509
696 The B.F. Goodrich Co. ...................................... 34,539
533 Boise Cascade Corp. ........................................ 17,455
915 Champion International Corp. ............................... 45,006
871 Cyprus Amax Minerals Corp. ................................. 11,540
2,173 Dow Chemical Co. ........................................... 210,101
10,859 E.I. duPont de Nemours & Co. ............................... 810,352
1,406 Engelhard Corp. ............................................ 28,471
337 FMC Corp. (a)............................................... 22,979
2,002 Fort James Corp. ........................................... 89,089
1,856 Freeport-McMoRan Copper & Gold, Inc., Class B Shares........ 28,188
421 General Signal Corp. ....................................... 15,156
883 Georgia Pacific Corp. ...................................... 52,041
580 Great Lakes Chemical Corp. ................................. 22,873
471 Harnischfeger Industries, Inc. ............................. 13,335
927 Hercules, Inc. ............................................. 38,122
2,002 Homestake Mining Co. ....................................... 20,770
1,296 Ikon Office Solutions, Inc. ................................ 18,873
1,588 Inco Ltd. .................................................. 21,636
468 Inland Steel Industries, Inc. .............................. 13,191
2,895 International Paper Co. .................................... 124,485
1,128 ITT Industries, Inc. ....................................... 42,159
5,335 Kimberly-Clark Corp. ....................................... 244,743
1,053 Louisiana Pacific Corp. .................................... 19,217
1,002 Mead Corp. ................................................. 31,813
5,696 Monsanto Co. ............................................... 318,264
1,252 Morton International, Inc. ................................. 31,300
81 Nacco Industries, Inc. ..................................... 10,469
641 Nalco Chemical Co. ......................................... 22,515
1,500 Newmont Mining Corp. ....................................... 35,437
837 Nucor Corp. ................................................ 38,502
565 Phelps Dodge Corp. ......................................... 32,310
2,394 Placer Dome, Inc. .......................................... 28,129
279 Potlatch Corp. ............................................. 11,718
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
BASIC INDUSTRIES -- 4.7% (CONTINUED)
1,716 PPG Industries, Inc. ....................................... $ 119,369
1,518 Praxair, Inc. .............................................. 71,061
702 Reynolds Metals Co. ........................................ 39,268
587 Rohm & Hass Co. ............................................ 61,011
799 Sealed Air Corp. (a) ....................................... 29,363
971 Sigma-Aldrich Corp. ........................................ 34,106
959 Stone Container Corp. (a)................................... 14,984
536 Temple-Inland, Inc. ........................................ 28,877
673 Union Camp Corp. ........................................... 33,397
1,176 Union Carbide Corp. ........................................ 62,769
826 USX-U.S. Steel Group, Inc. ................................. 27,258
726 W.R. Grace & Co. (a) ....................................... 12,387
4,364 Waste Management, Inc. ..................................... 152,740
983 Westvaco Corp. ............................................. 27,769
1,910 Weyerhaeuser Co. ........................................... 88,218
1,059 Willamette Industries, Inc. ................................ 33,888
932 Worthington Industries, Inc. ............................... 14,038
- ------------------------------------------------------------------------------------------------------
4,203,910
- ------------------------------------------------------------------------------------------------------
CAPITAL GOODS -- 7.2%
390 Armstrong World Industries, Inc. ........................... 26,276
9,596 Boeing Co. ................................................. 427,621
237 Briggs & Stratton Corp. .................................... 8,872
1,766 Browning Ferris Industries, Inc. ........................... 61,368
3,580 Caterpillar Inc. ........................................... 189,292
6,827 CBS Corp. .................................................. 216,757
558 Centex Corp. ............................................... 21,064
381 Cincinnati Milacron, Inc. .................................. 9,263
1,159 Cooper Industries, Inc. .................................... 63,672
439 Crane Co. .................................................. 21,318
360 Cummins Engine, Inc. ....................................... 18,450
1,006 Dana Corp. ................................................. 53,821
2,398 Deere & Co. ................................................ 126,794
2,139 Dover Corp. ................................................ 73,260
685 Eaton Corp. ................................................ 53,258
606 Echlin, Inc. ............................................... 29,731
4,258 Emerson Electric Co. ....................................... 257,076
810 Fluor Corp. ................................................ 41,310
374 Foster Wheeler Corp. ....................................... 8,017
1,214 General Dynamics Corp. ..................................... 56,451
31,411 General Electric Co. (b).................................... 2,858,401
2,391 Illinois Tool Works, Inc. .................................. 159,449
1,580 Ingersoll-Rand Co. ......................................... 69,618
803 Johnson Controls, Inc. ..................................... 45,921
379 Kaufman & Broad Home Corp. ................................. 12,033
1,869 Lockheed Martin Corp. ...................................... 197,880
828 Moore Corp. Ltd. ........................................... 10,971
688 Navistar International Corp. (a)............................ 19,866
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
CAPITAL GOODS -- 7.2% (CONTINUED)
641 Northrop Grumman Corp. ..................................... $ 66,103
520 Owens-Corning Fiberglass Corp. ............................. 21,222
754 Paccar, Inc. ............................................... 39,396
1,063 Parker-Hannifin Corp. ...................................... 40,526
809 Raychem Corp. .............................................. 23,916
3,249 Raytheon Co. ............................................... 192,097
1,925 Rockwell International Corp. ............................... 92,520
854 Stanley Works............................................... 35,494
1,576 Textron, Inc. .............................................. 112,979
535 Thomas & Betts Corp. ....................................... 26,348
605 Timken Co. ................................................. 18,641
1,178 TRW, Inc. .................................................. 64,348
5,485 Tyco International Ltd. .................................... 345,555
2,236 United Technologies Corp. .................................. 206,830
948 W.W. Grainger, Inc. ........................................ 47,222
- ------------------------------------------------------------------------------------------------------
6,471,007
- ------------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- 2.3%
919 Black & Decker Corp. ....................................... 56,059
6,216 Chrysler Corp. ............................................. 350,427
738 Cooper Tire & Rubber Co. ................................... 15,221
2,224 Corning, Inc. .............................................. 77,284
342 Fleetwood Enterprises, Inc. ................................ 13,680
11,520 Ford Motor Co. ............................................. 679,680
6,783 General Motors Corp. ....................................... 453,189
1,706 Genuine Parts Co. .......................................... 58,963
1,505 Goodyear Tire & Rubber Co. ................................. 96,978
1,587 Masco Corp. ................................................ 96,013
916 Maytag Corp. ............................................... 45,227
1,536 Newell Co. ................................................. 76,512
406 Pulte Corp. ................................................ 12,129
589 Snap-On, Inc. .............................................. 21,351
722 Whirlpool Corp. ............................................ 49,637
- ------------------------------------------------------------------------------------------------------
2,102,350
- ------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 11.1%
354 Adolph Coors Co., Class B Shares............................ 12,036
4,698 Anheuser-Busch Cos., Inc. .................................. 221,686
5,498 Archer-Daniels-Midland Co. ................................. 106,523
1,269 Avon Products, Inc. ........................................ 98,347
291 Ball Corp. ................................................. 11,694
666 Brown-Forman Corp., Class B Shares.......................... 42,790
4,383 Campbell Soup Co. .......................................... 232,846
726 Case Corp. ................................................. 35,029
990 Clorox Co. ................................................. 94,421
23,737 Coca-Cola Co. (b)........................................... 2,029,513
2,842 Colgate Palmolive Co. ...................................... 250,096
4,570 Conagra, Inc. .............................................. 144,811
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
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CONSUMER NON-DURABLES -- 11.1% (CONTINUED)
1,234 Crown Cork & Seal Co., Inc. ................................ $ 58,615
756 Eastman Chemical Co. ....................................... 47,061
3,113 Eastman Kodak Co. .......................................... 227,443
1,645 Fortune Brands, Inc. ....................................... 63,229
710 Fruit of The Loom, Inc. (a)................................. 23,563
1,519 General Mills, Inc. ........................................ 103,861
10,749 Gillette Co. ............................................... 609,333
1,279 Hasbro, Inc. ............................................... 50,280
1,370 Hershey Foods Corp. ........................................ 94,530
3,514 H.J. Heinz & Co. ........................................... 197,223
1,043 International Flavors & Fragrances, Inc. ................... 45,305
3,940 Kellogg Co. ................................................ 147,996
634 Liz Claiborne, Inc. ........................................ 33,126
2,789 Mattel, Inc. ............................................... 118,009
6,616 McDonald's Corp. ........................................... 456,504
2,783 Nike, Inc., Class B Shares.................................. 135,497
14,554 PepsiCo, Inc. .............................................. 599,442
23,259 Philip Morris Cos., Inc. (b)................................ 915,823
2,345 Pioneer Hi-Bred International, Inc. ........................ 97,024
436 Polaroid Corp. ............................................. 15,505
12,885 Procter & Gamble Corp. ..................................... 1,173,528
1,333 Quaker Oats Co. ............................................ 73,231
1,027 Ralston-Purina Group........................................ 119,966
547 Reebok International Ltd. (a)............................... 15,145
1,432 Rubbermaid, Inc. ........................................... 47,524
346 Russell Corp. .............................................. 10,444
4,541 Sara Lee Corp. ............................................. 254,012
1,655 Sherwin Williams Co. ....................................... 54,821
3,420 Seagram Company Ltd. ....................................... 140,006
1,468 Tricon Global Restaurants, Inc. (a)......................... 46,517
585 Tupperware Corp. ........................................... 16,453
6,146 Unilever NV................................................. 485,149
1,765 UST, Inc. .................................................. 47,655
1,169 VF Corp. ................................................... 60,203
1,113 William Wrigley Jr. Co. .................................... 109,074
- ------------------------------------------------------------------------------------------------------
9,972,889
- ------------------------------------------------------------------------------------------------------
CONSUMER SERVICES -- 9.5%
1 Abercrombie & Fitch Co., Class A Shares..................... 44
548 Alberto-Culver Co., Class B Shares.......................... 15,892
2,354 Albertsons, Inc. ........................................... 121,966
691 American Greetings Corp., Class A Shares.................... 35,197
2,636 American Stores Co. ........................................ 63,758
1,466 Autozone, Inc. ............................................. 46,820
2,767 Bestfoods................................................... 160,658
941 Brunswick Corp. ............................................ 23,289
7,773 Cendant Corp. (a)........................................... 162,261
942 Circuit City Group.......................................... 44,156
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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EQUITY INDEX PORTFOLIO
<TABLE>
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<C> <S> <C>
CONSUMER SERVICES -- 9.5% (CONTINUED)
1,552 Cognizant Corp. ............................................ $ 97,776
3,356 Comcast Corp., Class A Shares (Special)..................... 136,232
1,032 Consolidated Stores Corp. (a)............................... 37,410
2,058 Costco Cos., Inc. (a)....................................... 129,782
3,670 CVS Corp. .................................................. 142,900
1,429 Darden Restaurants, Inc. ................................... 22,685
4,202 Dayton-Hudson Corp. ........................................ 203,797
776 Deluxe Corp. ............................................... 27,790
1,075 Dillards Department Stores, Inc., Class A Shares............ 44,545
924 Dow Jones & Co., Inc. ...................................... 51,513
1,632 Dun & Bradstreet Corp. ..................................... 58,956
1,238 Ecolab, Inc. ............................................... 38,378
1,441 Equifax, Inc. .............................................. 52,326
2,017 Federated Department Stores, Inc. (a)....................... 108,539
2,722 Gannett, Inc. .............................................. 193,432
3,797 Gap, Inc. .................................................. 233,990
580 Giant Foods, Inc., Class A Shares........................... 24,976
357 Great Atlantic & Pacific Tea Co., Inc. ..................... 11,803
686 Harcourt General, Inc. ..................................... 40,817
962 Harrah's Entertainment, Inc. (a)............................ 22,366
2,397 Hilton Hotels Corp. ........................................ 68,314
7,024 Home Depot, Inc. ........................................... 583,431
1,216 Interpublic Group of Cos., Inc. ............................ 73,796
2,394 J.C. Penney Co. ............................................ 173,116
366 Jostens, Inc. .............................................. 8,829
722 King World Productions, Inc. (a) ........................... 18,411
4,664 KMart Corp. (a)............................................. 89,782
765 Knight-Ridder, Inc. ........................................ 42,122
2,445 Kroger Co. (a).............................................. 104,829
3,151 Laidlaw, Inc. .............................................. 38,402
2,156 Limited, Inc. .............................................. 71,417
1,103 Loews Corp. ................................................ 96,098
372 Longs Drug Stores Corp. .................................... 10,741
2,483 Marriott International, Inc. ............................... 80,387
2,215 May Department Stores Co. .................................. 145,082
945 McGraw Hill Cos., Inc. ..................................... 77,076
349 Mercantile Stores Co., Inc. ................................ 27,549
509 Meredith Corp. ............................................. 23,891
1,724 Mirage Resorts, Inc. (a).................................... 36,742
418 National Service Industries, Inc. .......................... 21,265
924 New York Times Co., Class A Shares.......................... 73,227
743 Nordstrom, Inc. ............................................ 57,396
1,554 Omnicom Group Inc. ......................................... 77,505
1,480 Owen-Illinois, Inc. (a)..................................... 66,230
628 The Pep Boys - Manny, Moe & Jack............................ 11,892
2,477 Rite Aid Corp. ............................................. 93,042
1,402 R.R. Donnelley & Sons Co. .................................. 64,141
3,768 Sears, Roebuck & Co. ....................................... 230,083
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
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<C> <S> <C>
CONSUMER SERVICES -- 9.5% (CONTINUED)
2,422 Service Corp. International................................. $ 103,843
191 Springs Industries, Inc. ................................... 8,809
577 Supervalu, Inc. ............................................ 25,604
3,264 Sysco Corp. ................................................ 83,640
1,000 Tandy Corp. ................................................ 53,062
4,878 Tele-Communications, Inc., Class A Shares (a)............... 187,498
5,549 Time Warner, Inc. .......................................... 474,092
855 Times Mirror Co., Class A Shares............................ 53,758
3,086 TJX Cos., Inc. ............................................. 74,449
2,728 Toys 'R' Us, Inc. (a)....................................... 64,278
1,182 Tribune Co. ................................................ 81,336
1,263 Venator Group, Inc. (a)..................................... 24,154
3,393 Viacom, Inc., Class B Shares (a)............................ 197,642
21,560 Wal-Mart Stores, Inc. ...................................... 1,309,770
4,746 Walgreen Co. ............................................... 196,069
6,477 Walt Disney Co. ............................................ 680,489
1,262 Wendy's International, Inc. ................................ 29,657
1,435 Winn Dixie Stores, Inc. .................................... 73,454
- ------------------------------------------------------------------------------------------------------
8,540,454
- ------------------------------------------------------------------------------------------------------
ENERGY -- 7.4%
885 Amerada Hess Corp. ......................................... 48,066
9,341 Amoco Corp. ................................................ 388,819
579 Anadarko Petroleum Corp. ................................... 38,901
928 Apache Corp. ............................................... 29,232
719 Ashland, Inc. .............................................. 37,118
3,082 Atlantic Richfield Co. ..................................... 240,781
1,628 Baker Hughes, Inc. ......................................... 56,267
1,686 Burlington Resources, Inc. ................................. 72,603
6,306 Chevron Corp. .............................................. 523,792
1,506 Cinergy Corp. .............................................. 52,710
1,017 Coastal Corp. .............................................. 70,999
1,687 Dresser Industries, Inc. ................................... 74,333
189 Eastern Enterprises......................................... 8,103
23,667 Exxon Corp. (b)............................................. 1,687,752
2,507 Halliburton Co. ............................................ 111,718
495 Helmerich & Payne, Inc. .................................... 11,013
463 Kerr McGee Corp. ........................................... 26,796
1,346 LSI Logic Corp. (a)......................................... 31,042
582 McDermott International, Inc. .............................. 20,042
7,531 Mobil Corp. ................................................ 577,062
3,258 Occidental Petroleum Corp. ................................. 87,966
1,027 Oryx Energy Co. (a)......................................... 22,722
453 Pennzoil Co. ............................................... 22,933
2,525 Phillips Petroleum Co. ..................................... 121,673
825 Rowan Cos., Inc. (a)........................................ 16,035
20,580 Royal Dutch Petroleum Co. (b)............................... 1,128,041
4,775 Schlumberger Ltd. .......................................... 326,192
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
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SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INDEX PORTFOLIO
<TABLE>
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SHARES SECURITY VALUE
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<C> <S> <C>
ENERGY -- 7.4% (CONTINUED)
1,049 Sonat Inc. ................................................. $ 40,517
916 Sun Company, Inc. .......................................... 35,552
1,643 Tenneco, Inc. .............................................. 62,536
5,257 Texaco, Inc. ............................................... 313,777
2,413 Union Pacific Resources Group, Inc. ........................ 42,378
2,363 Unocal Corp. ............................................... 84,477
2,778 USX Marathon Group, Inc. ................................... 95,320
526 Western Atlas, Inc. (a)..................................... 44,644
3,941 Williams Cos., Inc. ........................................ 133,008
- ------------------------------------------------------------------------------------------------------
6,684,920
- ------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 17.2%
1,424 Aetna, Inc. ................................................ 108,402
4,113 Allstate Corp. ............................................. 376,596
4,463 American Express Co. ....................................... 508,782
2,435 American General Corp. ..................................... 173,341
6,733 American International Group, Inc. ......................... 983,018
1,607 Aon Corp. .................................................. 112,891
3,324 Associated First Capital Corp. ............................. 255,532
6,732 Banc One Corp. ............................................. 375,729
2,782 Bank of Boston Corp. ....................................... 154,748
3,616 Bank of New York Co., Inc. ................................. 219,446
6,659 BankAmerica Corp. .......................................... 575,587
937 Bankers Trust New York Corp. ............................... 108,750
1,375 BB&T Corp. ................................................. 92,984
510 Beneficial Corp. ........................................... 78,125
2,555 Charles Schwab Corp. ....................................... 83,037
8,090 Chase Manhattan Corp. ...................................... 610,795
1,637 Chubb Corp. ................................................ 131,573
2,127 CIGNA Corp. ................................................ 146,763
1,591 Cincinnati Financial Corp. ................................. 61,054
4,382 Citicorp.................................................... 654,013
1,507 Comerica, Inc. ............................................. 99,838
1,802 Conseco, Inc. .............................................. 84,243
1,044 Countrywide Credit Industries, Inc. ........................ 52,983
6,678 Federal Home Loan Mortgage Corp. ........................... 314,283
10,190 Federal National Mortgage Association....................... 619,042
2,229 Fifth Third Bancorp......................................... 140,427
2,792 First Chicago NBD Corp. .................................... 247,441
4,096 First Data Corp. ........................................... 136,448
9,277 First Union Corp. .......................................... 540,385
2,613 Fleet Financial Group, Inc. ................................ 218,185
2,432 Franklin Resources, Inc. ................................... 131,328
752 General Re Corp. ........................................... 190,632
542 Golden West Financial Corp. ................................ 57,621
1,313 Green Tree Financial Corp. ................................. 56,212
1,002 H&R Block, Inc. ............................................ 42,209
1,055 H.F. Ahmanson & Co. ........................................ 74,905
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
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SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INDEX PORTFOLIO
<TABLE>
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SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES -- 17.2% (CONTINUED)
1,136 Hartford Financial Services Group, Inc. .................... $ 129,930
3,083 Household International, Inc. .............................. 153,379
1,846 Huntington Bancshares....................................... 61,841
1,025 Jefferson Pilot............................................. 59,385
1,703 J.P. Morgan & Co., Inc. .................................... 199,463
4,226 Keycorp..................................................... 150,551
973 Lehman Brothers Holding Inc. ............................... 75,468
985 Lincoln National Corp. ..................................... 90,004
3,362 Lowes Corp. ................................................ 136,371
2,441 Marsh & McLennan Cos., Inc. ................................ 147,497
940 MBIA Inc. .................................................. 70,382
4,812 MBNA Corp. ................................................. 158,796
2,441 Mellon Bank Corp. .......................................... 169,954
1,261 Mercantile Bancorp., Inc. .................................. 63,522
3,198 Merrill Lynch, Inc. ........................................ 295,015
1,098 MGIC Investment Corp. ...................................... 62,654
5,682 Morgan Stanley, Dean Witter, Discover & Co. ................ 519,192
3,149 National City Corp. ........................................ 223,579
9,025 NationsBank Corp. .......................................... 690,412
1,066 Northern Trust Corp. ....................................... 81,282
7,258 Norwest Corp. .............................................. 271,267
2,924 PNC Bank Corp. ............................................. 157,347
695 Progressive Corp. .......................................... 97,995
909 Providian Financial Corp. .................................. 71,413
1,049 Republic of New York Corp. ................................. 66,021
1,351 SAFECO Corp. ............................................... 61,386
2,210 St. Paul Cos., Inc. ........................................ 92,958
1,544 State Street Boston Corp. .................................. 107,308
1,692 Summit Bancorp.............................................. 80,370
1,875 SunAmerica, Inc. ........................................... 107,695
2,021 Suntrust Bank, Inc. ........................................ 164,332
2,532 Synovus Financial Corp. .................................... 60,135
1,346 Torchmark Corp. ............................................ 61,579
601 Transamerica Corp. ......................................... 69,190
11,011 Travelers Group, Inc. ...................................... 667,541
7,060 U.S. Bancorp................................................ 303,580
1,333 UNUM Corp. ................................................. 73,981
1,980 Wachovia Corp. ............................................. 167,310
3,711 Washington Mutual, Inc. .................................... 161,196
832 Wells Fargo & Co. .......................................... 307,008
- ------------------------------------------------------------------------------------------------------
15,505,637
- ------------------------------------------------------------------------------------------------------
HEALTH CARE -- 11.3%
14,692 Abbott Laboratories, Inc. .................................. 600,535
630 Allergan, Inc. ............................................. 29,216
824 ALZA Corp. (a).............................................. 35,638
12,472 American Home Products Corp. ............................... 645,426
2,528 Amgen, Inc. (a)............................................. 165,268
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
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SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INDEX PORTFOLIO
<TABLE>
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SHARES SECURITY VALUE
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<C> <S> <C>
HEALTH CARE -- 11.3% (CONTINUED)
535 Bausch & Lomb, Inc. ........................................ $ 26,816
2,692 Baxter International, Inc. ................................. 144,863
1,171 Becton Dickinson & Co. ..................................... 90,898
1,080 Biomet, Inc. ............................................... 35,707
1,868 Boston Scientific Corp. (a)................................. 133,795
9,544 Bristol-Myers Squibb Co. ................................... 1,096,963
546 C.R. Bard, Inc. ............................................ 20,782
1,050 Cardinal Health, Inc. ...................................... 98,437
6,215 Columbia/HCA Healthcare Corp. .............................. 181,011
10,642 Eli Lilly & Co. ............................................ 703,037
1,442 Guidant Corp. .............................................. 102,832
3,792 Health South Corp. (a)...................................... 101,199
1,583 Humana, Inc. (a)............................................ 49,369
12,911 Johnson & Johnson........................................... 952,186
711 Mallinckrodt, Inc. ......................................... 21,107
617 Manor Care, Inc. ........................................... 23,715
4,501 Medtronic, Inc. ............................................ 286,938
11,501 Merck & Co., Inc. .......................................... 1,538,258
426 Millipore Corp. ............................................ 11,608
1,211 Pall Corp. ................................................. 24,825
12,415 Pfizer, Inc. ............................................... 1,349,355
4,861 Pharmacia & Upjohn, Inc. ................................... 224,213
7,030 Schering-Plough Corp. ...................................... 644,123
809 St. Jude Medical, Inc. (a).................................. 29,781
2,926 Tenet Healthcare Corp. (a).................................. 91,437
1,813 United Healthcare Corp. .................................... 115,125
731 U.S. Surgical Corp. ........................................ 33,351
7,842 Warner Lambert Co. ......................................... 544,038
- ------------------------------------------------------------------------------------------------------
10,151,852
- ------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 13.7%
3,400 3Com Corp. (a).............................................. 104,337
654 Adobe Systems, Inc. ........................................ 27,754
1,379 Advanced Micro Devices, Inc. (a)............................ 23,529
2,474 ALLTEL Corp. ............................................... 115,041
2,114 AMP, Inc. .................................................. 72,668
827 Andrew Corp. (a)............................................ 14,937
1,261 Apple Computer Inc. (a)..................................... 36,174
443 Autodesk, Inc. ............................................. 17,110
2,864 Automatic Data Processing, Inc. ............................ 208,714
2,113 Bay Networks, Inc. (a)...................................... 68,144
1,493 Cabletron Systems, Inc. (a)................................. 20,062
692 Ceridian Corp. (a).......................................... 40,655
9,764 Cisco Systems, Inc. (a)..................................... 898,898
15,861 Compaq Computer Corp. ...................................... 450,047
5,243 Computer Associates International, Inc. .................... 291,314
1,489 Computer Sciences Corp. (a)................................. 95,296
446 Data General Corp. (a)...................................... 6,662
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PG$PCN>
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SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- 13.7% (CONTINUED)
6,266 Dell Computer Corp. (a)..................................... $ 581,563
1,123 DSC Communications Corp. (a)................................ 33,690
1,391 DTE Energy Corp. ........................................... 56,161
437 EG&G Inc. .................................................. 13,110
4,751 EMC Corp. (a)............................................... 212,904
3,158 Enron Corp. ................................................ 170,729
1,577 Frontier Corp. ............................................. 49,675
1,478 Gateway 2000, Inc. ......................................... 74,823
1,406 General Instrument Corp. (a)................................ 38,225
767 Harris Corp. ............................................... 34,275
4,041 HBO & Co. .................................................. 142,445
9,978 Hewlett-Packard Co. ........................................ 597,432
1,222 Honeywell, Inc. ............................................ 102,113
15,697 Intel Corp. ................................................ 1,163,540
9,334 International Business Machines Corp. ...................... 1,071,659
815 KLA-Tencor Corp. (a)........................................ 22,565
5,613 MediaOne Group, Inc. (a).................................... 246,621
2,030 Micron Technology, Inc. (a)................................. 50,369
23,367 Microsoft Corp. (a)......................................... 2,532,398
3,918 Minnesota Mining & Manufacturing Co. ....................... 322,010
5,722 Motorola, Inc. ............................................. 300,762
1,586 National Semiconductor Corp. (a)............................ 20,915
2,535 Nextel Communications, Inc. (a)............................. 63,058
5,000 Northern Telecom Ltd. ...................................... 283,750
3,395 Novell, Inc. (a)............................................ 43,286
9,440 Oracle Systems Corp. (a).................................... 231,870
2,463 Parametric Technology, Inc. (a)............................. 66,808
471 Perkin-Elmer Corp. ......................................... 29,290
2,625 Pitney Bowes, Inc. ......................................... 126,328
765 Scientific-Atlanta, Inc. ................................... 19,411
2,314 Seagate Technology, Inc. (a)................................ 55,102
252 Shared Medical Systems Corp. ............................... 18,506
1,804 Silicon Graphics, Inc. (a).................................. 21,873
3,618 Sun Microsystems, Inc. (a).................................. 157,156
492 Tektronix, Inc. ............................................ 17,404
1,743 Tellabs, Inc. (a)........................................... 124,842
3,748 Texas Instruments, Inc. .................................... 218,555
1,515 Thermo Electron Corp. (a)................................... 51,794
2,085 Unicom Corp. ............................................... 73,105
2,392 Unisys Corp. (a)............................................ 67,574
3,127 Xerox Corp. ................................................ 317,781
- ------------------------------------------------------------------------------------------------------
12,316,819
- ------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 1.0%
1,749 AMR Corp. (a)............................................... 145,604
1,502 Burlington Northern Santa Fe................................ 147,477
2,096 CSX Corp. .................................................. 95,368
714 Delta Air Lines, Inc. ...................................... 92,284
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PG$PCN>
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SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION -- 1.0% (CONTINUED)
1,408 FDX Corp. .................................................. $ 88,352
3,630 Norfolk Southern Corp. ..................................... 108,219
744 Ryder Systems, Inc. ........................................ 23,482
2,132 Southwest Airlines Co. ..................................... 63,160
2,378 Union Pacific Corp. ........................................ 104,929
872 U.S. Airways Group, Inc. (a)................................ 69,106
- ------------------------------------------------------------------------------------------------------
937,981
- ------------------------------------------------------------------------------------------------------
UTILITIES -- 9.9%
5,416 AirTouch Communications, Inc. (a)........................... 316,497
1,321 Ameren Corp. ............................................... 52,509
1,811 American Electric Power, Inc. .............................. 82,174
10,509 Ameritech Corp. ............................................ 471,591
1,850 Ascend Communications, Inc. (a)............................. 91,690
15,589 AT&T Corp. (b).............................................. 890,521
1,409 Baltimore Gas & Electric Co. ............................... 43,767
14,906 Bell Atlantic Corp. ........................................ 680,086
9,518 Bellsouth Corp. ............................................ 638,895
1,441 Carolina Power & Light Co. ................................. 62,503
2,042 Central & Southwestern Corp. ............................... 54,878
1,180 Clear Channel Communications, Inc. (a)...................... 128,767
798 Columbia Gas System, Inc. .................................. 44,388
2,257 Consolidated Edison Co. New York, Inc. ..................... 103,963
921 Consolidated Natural Gas Co. ............................... 54,223
1,850 Dominion Resources, Inc. ................................... 75,387
3,452 Duke Energy Corp. .......................................... 204,531
3,670 Edison International........................................ 108,494
2,350 Entergy Corp. .............................................. 67,562
2,215 FirstEnergy Corp. .......................................... 68,111
1,742 FPL Group, Inc. ............................................ 109,746
1,221 GPU, Inc. .................................................. 46,169
9,190 GTE Corp. .................................................. 511,193
2,708 Houston Industries, Inc. ................................... 83,609
12,489 Lucent Technology, Inc. .................................... 1,038,928
6,689 MCI Communications Corp. ................................... 388,798
1,402 Niagra Mohawk Power Corp. (a)............................... 20,942
470 Nicor, Inc. ................................................ 18,858
1,422 Northern States Power Co. of Minnesota...................... 40,704
290 Oneok, Inc. ................................................ 11,563
2,865 Pacificorp.................................................. 64,820
2,134 PECO Energy Co. ............................................ 62,286
1,580 Pennsylvania Power & Light.................................. 35,846
341 Peoples Energy Corp. ....................................... 13,171
3,663 PG&E Corp. ................................................. 115,613
2,236 Public Services Enterprise Group, Inc. ..................... 77,002
17,585 SBC Communications, Inc. ................................... 703,400
1,205 Sempra Energy............................................... 33,426
6,614 Southern Co. ............................................... 183,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES -- 9.9% (CONTINUED)
4,120 Sprint Corp. ............................................... $ 290,460
2,363 Texas Utilities Co. ........................................ 98,359
4,623 U.S. West, Inc. (a)......................................... 217,281
9,728 Worldcom, Inc. (a).......................................... 471,200
- ------------------------------------------------------------------------------------------------------
8,877,036
- ------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $66,435,920).................... 85,764,855
- ------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 4.7%
$3,982,000 Repurchase Agreement -- Goldman, Sachs & Co., 5.645% due
7/1/98; Proceeds at maturity -- $3,982,624; (Fully
collateralized by U.S. Treasury Notes, 5.375% due 6/30/00;
Market value -- $4,063,534)................................. 3,982,000
285,000 U.S. Treasury Bills, 5.030% due 9/17/98 (b)................. 281,894
- ------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost -- $4,263,894)........... 4,263,894
- ------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $70,699,814*)............ $90,028,749
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Non-income producing security.
(b) A portion of this security is segregated by the custodian for futures
contract commitments.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 94.7%
- ----------------------------------------------------------------------------------------------------
AEROSPACE -- 1.0%
9,000 Gulfstream Aerospace Corp. (a).............................. $ 418,500
- ----------------------------------------------------------------------------------------------------
AIRLINES -- 0.8%
12,000 Southwest Airlines Co....................................... 355,500
- ----------------------------------------------------------------------------------------------------
BANKS -- 1.5%
9,000 State Street Boston Corp. .................................. 625,500
- ----------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 1.7%
14,000 W.W. Grainger, Inc. ........................................ 697,375
- ----------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- 1.2%
20,000 Leggett & Platt, Inc. ...................................... 500,000
- ----------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 7.6%
9,000 Coca-Cola Corp. ............................................ 769,500
10,000 Colgate Palmolive Co. (b)................................... 880,000
14,000 Kimberly-Clark Corp. ....................................... 642,250
10,000 Procter & Gamble Co. ....................................... 910,625
- ----------------------------------------------------------------------------------------------------
3,202,375
- ----------------------------------------------------------------------------------------------------
CONSUMER SERVICES -- 2.7%
8,000 McDonald's Corp. ........................................... 552,000
10,000 TCA Cable TV, Inc. ......................................... 600,000
- ----------------------------------------------------------------------------------------------------
1,152,000
- ----------------------------------------------------------------------------------------------------
ELECTRONIC TECHNOLOGY -- 6.5%
7,000 AMP, Inc. (b)............................................... 240,625
19,000 Electronic Data Systems Corp. .............................. 760,000
19,000 Hewlett Packard Co. ........................................ 1,137,625
11,000 Motorola, Inc. ............................................. 578,188
- ----------------------------------------------------------------------------------------------------
2,716,438
- ----------------------------------------------------------------------------------------------------
ENERGY -- 5.0%
10,000 Exxon Corp. ................................................ 713,125
9,000 Mobil Corp. ................................................ 689,625
14,000 Phillips Petroleum Co. ..................................... 674,625
- ----------------------------------------------------------------------------------------------------
2,077,375
- ----------------------------------------------------------------------------------------------------
ENTERTAINMENT -- 2.3%
9,000 Walt Disney Co. ............................................ 945,563
- ----------------------------------------------------------------------------------------------------
FINANCE -- 15.9%
8,000 Beneficial Corp. ........................................... 1,225,500
12,000 Chase Manhattan Corp. ...................................... 906,000
18,000 Greenpoint Financial Corp. ................................. 677,250
6,000 J.P. Morgan & Co., Inc. .................................... 702,750
26,000 KeyCorp..................................................... 926,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCE -- 15.9% (CONTINUED)
18,000 Mercury General Corp........................................ $ 1,157,625
14,000 NationsBank Corp. (b)....................................... 1,071,000
- ----------------------------------------------------------------------------------------------------
6,666,375
- ----------------------------------------------------------------------------------------------------
FOOD -- 1.1%
9,000 Dole Food Inc. ............................................. 447,188
- ----------------------------------------------------------------------------------------------------
HEALTH TECHNOLOGY -- 6.9%
15,000 Eli Lilly & Co. ............................................ 990,938
13,000 Johnson & Johnson Corp. .................................... 958,750
7,000 Merck & Co., Inc. .......................................... 936,250
- ----------------------------------------------------------------------------------------------------
2,885,938
- ----------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES -- 1.5%
12,000 Fluor Corp. (b)............................................. 612,000
- ----------------------------------------------------------------------------------------------------
MACHINERY -- 1.4%
28,000 Pall Corp. (b).............................................. 574,000
- ----------------------------------------------------------------------------------------------------
MINERALS -- 0.9%
25,000 Worthington Industries Inc. ................................ 376,563
- ----------------------------------------------------------------------------------------------------
PROCESS INDUSTRIES -- 3.3%
11,000 Bemis, Inc. ................................................ 449,625
15,000 M.A. Hanna Co. ............................................. 274,688
12,000 Temple-Inland, Inc. ........................................ 646,500
- ----------------------------------------------------------------------------------------------------
1,370,813
- ----------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURER -- 7.0%
14,000 Dana Corp. ................................................. 749,000
12,000 General Electric Co. ....................................... 1,092,000
9,000 Hubbell, Inc., Class B Shares............................... 374,625
9,000 Minnesota Mining & Manufacturing Co. (b).................... 739,688
- ----------------------------------------------------------------------------------------------------
2,955,313
- ----------------------------------------------------------------------------------------------------
REAL ESTATE -- 1.8%
15,000 Arden Realty Group, Inc..................................... 388,123
15,000 Kilroy Realty Corp. ........................................ 375,000
- ----------------------------------------------------------------------------------------------------
763,123
- ----------------------------------------------------------------------------------------------------
RESTAURANT & LODGING -- 1.3%
11,000 Starwood Hotels & Resorts Trust............................. 531,437
- ----------------------------------------------------------------------------------------------------
RETAIL -- 6.8%
13,000 May Department Stores Co. .................................. 851,500
13,000 Nordstrom Inc. ............................................. 1,004,250
26,000 Rite Aid Corp. (b).......................................... 976,624
- ----------------------------------------------------------------------------------------------------
2,832,374
- ----------------------------------------------------------------------------------------------------
TECHNOLOGY SERVICES -- 1.7%
10,000 Automatic Data Processing, Inc. (b)......................... 728,750
- ----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS -- 2.7%
40,000 LM Ericsson Telephone Co., ADR.............................. $ 1,145,000
- ----------------------------------------------------------------------------------------------------
TEXTILES -- APPAREL MANUFACTURING -- 1.7%
14,000 Liz Claiborne, Inc. (b)..................................... 731,500
- ----------------------------------------------------------------------------------------------------
TRANSPORTATION -- 1.1%
17,000 Knightsbridge Tankers Ltd. ................................. 454,750
- ----------------------------------------------------------------------------------------------------
UTILITIES -- 9.3%
10,000 American Telephone & Telegraph Co. (b)...................... 571,250
18,000 Ameritech Corp. ............................................ 807,750
15,000 Duke Energy Corp. .......................................... 888,750
14,000 GTE Corp. .................................................. 778,750
15,000 MCI Communications Corp. ................................... 871,875
- ----------------------------------------------------------------------------------------------------
3,918,375
- ----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $23,079,398).................... 39,684,125
- ----------------------------------------------------------------------------------------------------
FOREIGN COMMON STOCK -- 0.3%
AUSTRALIA -- 0.3%
13,526 Broken Hill Properties (Cost -- $183,973)................... 114,341
- ----------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 1.3%
ENERGY -- 1.3%
10,044 Unocal Corp., Convertible 7.000% (b)(c)
(Cost--$485,250).......................................... 546,143
- ----------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE DEBENTURES -- 3.7%
FINANCIAL SERVICES -- 2.5%
$500,000 Dean Witter Discover & Co., 6.875% due 3/01/03.............. 512,500
500,000 General Motors Acceptance Corp., 7.000% due 9/15/02......... 515,625
- ----------------------------------------------------------------------------------------------------
1,028,125
- ----------------------------------------------------------------------------------------------------
RETAIL TRADE -- 1.2%
500,000 Limited Inc., 7.800% due 5/15/02............................ 520,625
- ----------------------------------------------------------------------------------------------------
TOTAL CORPORATE DEBENTURES (Cost -- $1,559,315)............. 1,548,750
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $25,307,936*)............ $41,893,359
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Non-income producing security.
(b) Security is on loan (See Note 16).
(c) Security is exempt from registration under Rule 144A of Securities Act of
1933. This security may be resold normally to qualified and institutional
buyers.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 95.2%
- -------------------------------------------------------------------------------------
AVIATION COMPONENTS -- 0.4%
2,000 Gulfstream Aerospace Corp. (a).............................. $ 93,000
- -------------------------------------------------------------------------------------
BASIC INDUSTRIES -- 0.5%
1,000 Mueller Industries.......................................... 37,125
1,500 Veritas DGC, Inc. .......................................... 74,906
- -------------------------------------------------------------------------------------
112,031
- -------------------------------------------------------------------------------------
BROADCASTING & CABLE T.V. -- 1.8%
1,600 Cablevision Systems, Class A Shares......................... 133,600
2,500 Capstar Broadcasting Corp., Class A Shares (a).............. 62,813
4,225 Liberty Media Group, Class A Shares......................... 163,983
900 Univision Communications, Inc. ............................. 33,525
- -------------------------------------------------------------------------------------
393,921
- -------------------------------------------------------------------------------------
CAPITAL GOODS/PRODUCTION -- 0.6%
1,200 Allegiance Corp. ........................................... 61,500
1,800 Danaher Corp. .............................................. 66,038
- -------------------------------------------------------------------------------------
127,538
- -------------------------------------------------------------------------------------
CHEMICALS -- 0.1%
800 Solutia Inc. ............................................... 22,950
- -------------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 3.9%
3,100 Cambridge Technology Partners Inc. ......................... 169,338
3,100 Ciber, Inc. ................................................ 117,800
1,300 Consolidated Graphics, Inc. ................................ 76,700
3,000 Keane, Inc. (a)(b).......................................... 168,000
3,500 Outdoor Systems, Inc. ...................................... 98,000
1,950 Paychex Inc. ............................................... 79,341
2,000 Robert Half International, Inc. (b)......................... 111,750
1,100 Snyder Communications Inc. ................................. 48,400
- -------------------------------------------------------------------------------------
869,329
- -------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.4%
4,300 Lucent Technologies Inc. ................................... 357,706
1,500 Tellabs, Inc. (a)........................................... 107,438
2,100 Xylan Corp. (a)............................................. 62,606
- -------------------------------------------------------------------------------------
527,750
- -------------------------------------------------------------------------------------
COMMUNICATIONS SERVICES -- 0.2%
900 IDT Corp. .................................................. 27,056
1,100 Star Telecommunications Inc. ............................... 24,613
- -------------------------------------------------------------------------------------
51,669
- -------------------------------------------------------------------------------------
CONSTRUCTION -- 0.4%
700 Southdown, Inc. (a)......................................... 49,963
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
CONSTRUCTION -- 0.4% (CONTINUED)
1,000 Stolt Comex Seaway S.A...................................... $ 19,375
500 Stolt Comex Seaway S.A. ADR................................. 8,750
- -------------------------------------------------------------------------------------
78,088
- -------------------------------------------------------------------------------------
CONSUMER DISTRIBUTION -- 17.8%
2,600 Abercrombie & Fitch Co., Class A Shares..................... 114,400
2,000 Barnes & Noble, Inc. ....................................... 74,875
1,200 Bed, Bath & Beyond Inc. (a)(b).............................. 62,175
7,200 Best Buy Co., Inc. ......................................... 260,100
2,500 Borders Group, Inc. (a)(b).................................. 92,500
4,600 Costco Companies, Inc. (c).................................. 290,088
2,400 CVS Corp. .................................................. 93,450
4,800 Dayton Hudson Corp. ........................................ 232,800
2,625 Dollar General Corp. ....................................... 103,852
1,800 Dollar Tree Stores Inc. (c)................................. 73,125
7,200 Family Dollar Stores, Inc. ................................. 133,200
1,400 The Finish Line, Class A Shares............................. 39,375
3,600 Fred Meyer, Inc. ........................................... 153,000
2,250 Gap, Inc. .................................................. 138,656
2,200 General Nutrition Cos., Inc., Class A Shares (b)............ 68,475
900 Goody's Family Clothing Inc. (a)............................ 49,388
1,700 Home Depot Inc. (c)......................................... 141,206
1,700 Just For Feet Inc. ......................................... 48,450
3,000 KMart Corp. (b)............................................. 57,750
3,200 Kohl's Corp. (b)............................................ 166,000
4,300 Linens 'N Things Inc. ...................................... 131,419
6,600 Loews Cos. ................................................. 267,713
2,100 Pacific Sunwear of California (a)........................... 73,500
3,500 Proffitt's, Inc. (a)........................................ 141,313
1,500 Ross Stores, Inc. .......................................... 64,500
4,100 Safeway, Inc. .............................................. 166,819
1,400 Stage Stores, Inc. ......................................... 63,350
5,200 Staples Inc. (b)(c)......................................... 150,475
8,200 TJX Cos., Inc. ............................................. 197,825
1,000 Tommy Hilfiger Corp. (b).................................... 62,500
500 Warnaco Group Inc. ......................................... 21,219
2,700 Whole Foods Market, Inc. ................................... 163,350
2,400 Williams-Sonoma, Inc. ...................................... 76,350
- -------------------------------------------------------------------------------------
3,973,198
- -------------------------------------------------------------------------------------
CONSUMER DURABLES -- 2.2%
1,100 Federal Mogul Corp. (a)..................................... 74,250
750 Gemstar International Group Ltd. ........................... 28,078
1,000 General Instrument Corp. (b)................................ 27,188
2,600 Gentex Corp. ............................................... 47,125
3,000 Herman Miller, Inc. ........................................ 72,938
3,100 Interface Inc., Class A Shares.............................. 62,581
1,000 Mail-Well, Inc.............................................. 21,688
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER DURABLES -- 2.2% (CONTINUED)
2,100 Maytag Corp................................................. $ 103,688
1,300 Twinlab Corp................................................ 56,794
- -------------------------------------------------------------------------------------
494,330
- -------------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 1.2%
900 Canadaigua Brands, Inc., Class A Shares..................... 44,269
3,000 Jones Apparel Group, Inc.................................... 109,688
1,900 Westpoint Stevens, Inc...................................... 62,700
2,200 Wolverine World Wide, Inc................................... 47,713
- -------------------------------------------------------------------------------------
264,370
- -------------------------------------------------------------------------------------
CONSUMER SERVICES -- 3.3%
1,100 American Disposal Services.................................. 51,563
2,400 Apollo Group, Inc., Class A Shares (c)...................... 79,350
9,500 Chancellor Media Corp. ..................................... 471,734
900 Concord EFS, Inc. .......................................... 23,513
2,000 Jacor Communications, Inc. (a).............................. 118,000
- -------------------------------------------------------------------------------------
744,160
- -------------------------------------------------------------------------------------
ELECTRONICS -- 1.1%
500 Kuhlam Corp................................................. 19,781
2,100 Lernout & Hauspie Speech (a)................................ 125,344
3,100 Vitesse Semiconductors Corp. (b)............................ 95,713
- -------------------------------------------------------------------------------------
240,838
- -------------------------------------------------------------------------------------
ENERGY -- 1.9%
1,000 Coflexip SA ADR............................................. 61,125
1,500 Cooper Cameron Corp......................................... 76,500
1,500 Global Industries Ltd....................................... 25,313
3,600 Marine Drilling Co., Inc.................................... 57,600
1,500 National Oilwell Inc........................................ 40,219
1,800 Rowan Cos., Inc............................................. 34,988
6,200 Varco International, Inc. (b)............................... 122,838
- -------------------------------------------------------------------------------------
418,583
- -------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 8.2%
800 AmeriCredit Corp............................................ 28,550
1,200 AmSouth Bancorporation (a).................................. 47,175
800 Associates First Captial Corp............................... 61,500
500 Bank United Corp., Class A Shares........................... 23,938
2,200 Capital One Financial Corp.................................. 273,213
1,900 Comdisco, Inc............................................... 36,100
2,050 Dime Bancorp, Inc........................................... 61,372
1,350 Federal Home Loan Mortgage Corp............................. 63,534
750 Fifth Third Bancorp......................................... 47,250
3,200 Finova Group, Inc........................................... 181,200
1,200 Fleet Financial Group, Inc.................................. 100,200
1,550 Lehman Brothers Holdings Inc................................ 120,222
400 National Commerce Bancorp................................... 16,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES -- 8.2% (CONTINUED)
2,400 North Fork Bancorporation, Inc. ............................ $ 58,650
1,600 Northern Trust Corp. (a).................................... 122,000
3,000 Providian Financial Corp. .................................. 235,688
500 Silicon Valley Bancshares................................... 17,797
1,050 SouthTrust Corp. ........................................... 45,675
1,100 Star Banc Corp. ............................................ 70,263
1,100 State Street Boston Corp. .................................. 76,450
1,400 SunAmerica Inc. (c)......................................... 80,413
1,000 Zions BanCorp. ............................................. 53,125
- -------------------------------------------------------------------------------------
1,821,065
- -------------------------------------------------------------------------------------
HEALTH CARE -- 10.9%
1,000 Arterial Vascular Engineering, Inc. ........................ 35,750
700 Boston Scientific Corp. .................................... 50,138
1,900 ESC Medical Systems, Ltd. .................................. 64,125
600 Guidant Corp. .............................................. 42,788
22,300 HBO & Co. .................................................. 786,075
4,500 Health Management Associates, Inc., Class A Shares.......... 150,469
1,300 Healthcare Financial Partners............................... 79,706
1,500 McKesson Corp. (c).......................................... 121,875
1,000 MiniMed, Inc. .............................................. 52,375
4,100 Omnicare, Inc. (a).......................................... 156,313
2,900 Quintiles Transnational Corp. (a)........................... 142,644
3,000 Rexall Sundown, Inc. (a).................................... 105,750
5,100 Safeskin Corp. (a).......................................... 209,738
1,400 Steris Corp. ............................................... 89,031
1,800 Sybron International Corp. (a).............................. 45,450
3,300 Total Renal Care Holdings, Inc. (b)......................... 113,850
1,100 Universal Health Services, Class B Shares................... 64,213
1,700 Warner-Lambert Co. ......................................... 117,938
- -------------------------------------------------------------------------------------
2,428,228
- -------------------------------------------------------------------------------------
INSURANCE -- 1.8%
300 Annuity & Life Re Holdings, Ltd. ........................... 6,638
800 CMAC Investment Corp. ...................................... 49,200
500 Equitable Cos., Inc. ....................................... 37,469
800 Everest Reinsurance Holdings, Inc. (a)...................... 30,750
1,987 Marsh & McLennan Cos., Inc. ................................ 120,120
1,050 Mercury General Corp. ...................................... 67,528
1,500 Protective Life Corp. ...................................... 55,031
300 Transatlantic Holdings, Inc. ............................... 23,194
- -------------------------------------------------------------------------------------
389,930
- -------------------------------------------------------------------------------------
MEDIA -- 3.5%
2,600 Clear Channel Communications, Inc. (c)...................... 283,725
1,900 Interpublic Group of Cos., Inc. (a)......................... 115,306
2,800 Meredith Corp. ............................................. 131,425
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
MEDIA -- 3.5% (CONTINUED)
1,400 New York Times Co., Class A Shares (a)...................... $ 110,950
3,000 Omnicom Group............................................... 149,625
- -------------------------------------------------------------------------------------
791,031
- -------------------------------------------------------------------------------------
MOTION PICTURES -- 0.5%
1,800 Viacom Inc., Class B Shares (a)............................. 104,850
- -------------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.3%
700 Medicis Pharmaceutical Corp. ............................... 25,550
3,000 Mylan Laboratories (c)...................................... 90,188
5,000 NBTY Inc. .................................................. 91,875
1,700 Watson Pharmaceuticals, Inc. (b)............................ 79,369
- -------------------------------------------------------------------------------------
286,982
- -------------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- 2.1%
4,500 Allied Waste Industries, Inc. (a)........................... 108,000
2,700 Newpark Resources, Inc. .................................... 30,038
4,000 Tyco International Ltd. (a)................................. 252,000
1,800 U.S.A. Waste Service Inc. (a)(b)............................ 88,875
- -------------------------------------------------------------------------------------
478,913
- -------------------------------------------------------------------------------------
RECREATIONAL ACTIVITIES -- 1.1%
2,000 Carnival Corp., Class A Shares.............................. 79,250
1,600 Royal Caribbean Cruises Ltd. ............................... 127,200
1,000 SFX Entertainment Inc., Class A Shares...................... 45,875
- -------------------------------------------------------------------------------------
252,325
- -------------------------------------------------------------------------------------
TECHNOLOGY -- 25.0%
2,700 Advanced Fibre Communications, Inc. (a)(b).................. 108,169
1,300 Affiliated Computer Services, Class A Shares (a)............ 50,050
4,300 AirTouch Communications, Inc., Series A..................... 251,281
5,500 America Online, Inc. (b)(c)................................. 583,000
500 Aspect Development, Inc. ................................... 37,813
800 Aspen Technology Inc. ...................................... 40,400
8,600 BMC Software Inc. (b)(c).................................... 446,663
4,700 CBT Group PLC ADR........................................... 251,450
1,500 Cisco Systems Inc. ......................................... 138,094
2,000 Citrix Systems, Inc. ....................................... 136,750
10,300 Compuware Corp. (b)......................................... 526,588
10,450 Dell Computer Corp. ........................................ 969,891
500 Documentum Inc. ............................................ 24,000
7,000 EMC Corp. .................................................. 313,688
750 Engineering Animation Inc. ................................. 45,750
1,600 Envoy Corp. (a)............................................. 75,800
2,500 Information Management Resources, Inc. ..................... 84,531
400 JDA Software Group, Inc. ................................... 17,500
3,500 Legato Systems, Inc. (a).................................... 136,500
1,500 Lexmark International Group, Inc., Class A Shares........... 91,500
1,600 Mastech Corp. .............................................. 45,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- 25.0% (CONTINUED)
800 Mercury Interactive Corp. .................................. $ 35,700
2,500 PeopleSoft, Inc. (b)........................................ 117,500
2,100 Saville Systems Ireland PLC ADR............................. 105,263
2,500 Siebel Systems Inc. ........................................ 80,625
2,400 Sterling Software, Inc. (b)................................. 70,950
3,100 SunGard Data Systems, Inc. (a)(b)........................... 118,963
1,200 Sunstrand Corp. ............................................ 68,700
1,300 Synopsys, Inc. (b)(c)....................................... 59,475
1,400 Tekelec..................................................... 62,650
1,500 Uniphase Corp. ............................................. 94,172
2,700 Veritas Software Corp. ..................................... 111,713
2,000 Visio Corp. ................................................ 95,500
1,100 Yahoo, Inc. ................................................ 173,250
- -------------------------------------------------------------------------------------
5,568,879
- -------------------------------------------------------------------------------------
TRANSPORTATION -- 2.4%
2,000 Alaska Air Group Inc. ...................................... 109,125
2,100 America West Holdings Corp. ................................ 59,983
1,000 ASA Holdings Inc. .......................................... 49,625
1,050 Comair Holdings Inc. ....................................... 32,419
2,000 Continental Airlines, Inc., Class B Shares (b).............. 121,750
2,100 USAIR Group, Inc. (a)....................................... 166,400
- -------------------------------------------------------------------------------------
539,302
- -------------------------------------------------------------------------------------
UTILITIES -- 0.6%
2,500 AES Corp. (a)............................................... 131,406
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $13,900,528).................... 21,204,666
- -------------------------------------------------------------------------------------
WARRANTS -- 0.1%
ENERGY -- 0.1%
900 BJ Services Co. (Cost -- $4,275)............................ 28,238
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 4.7%
$150,000 U.S. Treasury Bills, 4.70% due 7/9/98 (d)................... 149,843
150,000 U.S. Treasury Bills, 4.81% due 8/27/98 (d).................. 148,845
400,000 U.S. Treasury Bills, 4.90% due 9/10/98 (d).................. 396,148
100,000 U.S. Treasury Bills, 4.88% due 9/17/98 (d).................. 98,942
150,000 U.S. Treasury Bills, 4.77% due 9/24/98 (d).................. 148,285
100,000 U.S. Treasury Bills, 4.80% due 9/24/98 (d).................. 98,858
- -------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost -- $1,040,956)........................................ 1,040,921
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $14,945,759*)............ $22,273,825
- -------------------------------------------------------------------------------------
</TABLE>
(a) Security is on loan (See Note 16).
(b) Non-income producing security.
(c) A portion of the security is on loan (See Note 16).
(d) Rate represents annualized yield to maturity.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 100.0%
- -------------------------------------------------------------------------------------------------
AUSTRALIA -- 2.1%
87,723 Coca Cola Amatil Ltd. (b)................................... $ 586,728
- -------------------------------------------------------------------------------------------------
AUSTRIA -- 1.3%
6,000 Wolford AG.................................................. 380,344
- -------------------------------------------------------------------------------------------------
CAYMAN ISLANDS -- 1.6%
15,000 Santa Fe International Corp. ............................... 453,767
- -------------------------------------------------------------------------------------------------
DENMARK -- 3.5%
10,000 Coloplast A/S, Class B Shares............................... 981,532
- -------------------------------------------------------------------------------------------------
FINLAND -- 3.9%
15,000 Nokia OYJ, Class A Shares................................... 1,088,437
- -------------------------------------------------------------------------------------------------
FRANCE -- 1.0%
4,000 Sidel S.A. ................................................. 291,101
- -------------------------------------------------------------------------------------------------
GERMANY -- 2.5%
6,000 SGL Carbon AG............................................... 701,385
- -------------------------------------------------------------------------------------------------
HONG KONG -- 3.3%
348,491 Hong Kong & China Gas Co. Ltd. ............................. 395,777
Hong Kong & China Gas Co. Ltd. Warrants, Expires 9/30/99
15,840 (a)......................................................... 1,083
100,000 Hutchison Whampoa Ltd. ..................................... 527,837
- -------------------------------------------------------------------------------------------------
924,697
- -------------------------------------------------------------------------------------------------
IRELAND -- 12.1%
60,000 Bank of Ireland............................................. 1,226,112
202,389 Independent Newspapers PLC.................................. 1,086,898
20,000 Iona Technology (b)......................................... 710,000
25,581 Irish Continental Group PLC................................. 410,352
- -------------------------------------------------------------------------------------------------
3,433,362
- -------------------------------------------------------------------------------------------------
ITALY -- 5.8%
250,000 Istituto Nazionale delle Assicurazioni (b).................. 712,075
150,000 Telecom Italia Mobile S.p.A. ............................... 915,248
- -------------------------------------------------------------------------------------------------
1,627,323
- -------------------------------------------------------------------------------------------------
JAPAN -- 7.7%
11,000 Murata Manufacturing Co., Ltd. ............................. 356,666
3,000 Noritsu Koki Co. Ltd. ...................................... 67,010
3,000 Shohkoh Fund & Co., Ltd. ................................... 737,111
6,500 Sony Corp. ................................................. 559,678
28,000 Terumo Corp. (b)............................................ 443,852
- -------------------------------------------------------------------------------------------------
2,164,317
- -------------------------------------------------------------------------------------------------
NETHERLANDS -- 9.9%
25,000 Getronics N.V. ............................................. 1,296,578
10,158 IHC Caland N.V. ............................................ 571,768
50,000 ING Groep N.V. Warrants, Expire 3/15/01..................... 921,738
- -------------------------------------------------------------------------------------------------
2,790,084
- -------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------------------------
<C> <S> <C>
NORWAY -- 4.2%
40,000 Tomra Systems ASA........................................... $ 1,198,931
- -------------------------------------------------------------------------------------------------
PANAMA -- 2.2%
20,000 Panamerican Beverages Inc., Class A Shares (b).............. 628,750
- -------------------------------------------------------------------------------------------------
SPAIN -- 2.1%
7,000 Banco Popular Espanol SA.................................... 598,079
- -------------------------------------------------------------------------------------------------
SWEDEN -- 10.8%
21,333 Astra AB, Class A Shares.................................... 436,034
5,333 Astra AB, Class B Shares.................................... 106,333
25,000 Autoliv Inc. ............................................... 790,625
5,000 Munters AB.................................................. 54,546
34,000 Nobel Biocare AB............................................ 507,341
40,000 Telefonaktiebolaget LM Ericsson, Class B Shares............. 1,168,666
- -------------------------------------------------------------------------------------------------
3,063,545
- -------------------------------------------------------------------------------------------------
SWITZERLAND -- 2.9%
500 Novartis AG, Registered Shares.............................. 832,014
- -------------------------------------------------------------------------------------------------
UNITED KINGDOM -- 23.1%
125,000 Boxmore International PLC................................... 539,134
150,000 Capita Group PLC............................................ 1,290,169
20,000 Eidos PLC (a)............................................... 276,971
50,000 Hays PLC.................................................... 839,256
20,068 Misys PLC................................................... 1,141,452
5,200 Reuters Group PLC........................................... 356,200
80,000 SEMA Group PLC.............................................. 951,046
50,000 Serco Group PLC............................................. 1,151,266
- -------------------------------------------------------------------------------------------------
6,545,494
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $16,570,725*)............ $28,289,890
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) Non-income producing security.
(b) A portion of this security is on loan (See Note 16).
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PG$PCN>
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at cost...................................... $4,410,222 $70,856,791
Foreign currency, at cost................................. -- --
- ---------------------------------------------------------------------------------------------
Investments, at value..................................... $4,410,222 $71,943,865
Foreign currency, at value................................ -- --
Cash...................................................... 520 489,557
Collateral for securities on loan (Note 16)............... -- 2,150,850
Receivable for securities sold............................ -- 2,424,549
Receivable from manager................................... 6,828 --
Dividends and interest receivable......................... 6,068 849,579
Receivable for open forward foreign currency contracts
(Note 7)............................................... -- 125,622
Deferred organization costs............................... -- --
Other assets.............................................. -- --
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS.............................................. 4,423,638 77,984,022
- ---------------------------------------------------------------------------------------------
LIABILITIES:
Investment advisory fees payable.......................... -- 29,028
Dividends payable......................................... 8,669 --
Administration fees payable............................... 4,232 12,901
Payable for securities purchased.......................... -- --
Payable to bank........................................... -- --
Payable for securities on loan (Note 16).................. -- 2,150,850
Payable for open forward foreign currency contracts (Note
7)..................................................... -- 158,550
Accrued expenses.......................................... 2,938 44,775
Other liabilities......................................... -- 622
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES......................................... 15,839 2,396,726
- ---------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $4,407,799 $75,587,296
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares............................... $ 4,408 $ 7,112
Capital paid in excess of par value....................... 4,403,391 71,683,394
Undistributed (overdistributed) net investment income..... -- 2,104,237
Accumulated net realized gain (loss) on security
transactions and futures contracts..................... -- 753,718
Net unrealized appreciation of investments, futures
contracts and foreign currencies....................... -- 1,038,835
- ---------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $4,407,799 $75,587,296
- ---------------------------------------------------------------------------------------------
SHARES OUTSTANDING.......................................... 4,407,799 7,112,422
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE............................................. $1.00 $10.63
- ---------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PG$PCN>
- ---------------------------------------------------------
JUNE 30, 1998
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH EMERGING INTERNATIONAL
INCOME INDEX & INCOME GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$33,363,339 $70,699,814 $25,307,936 $14,945,759 $16,570,725
-- -- -- -- 59,955
- ---------------------------------------------------------------------------------
$43,854,590 $90,028,749 $41,893,359 $22,273,825 $28,289,890
-- -- -- -- 60,439
650 189 -- 69,352 466,786
-- -- 7,616,063 5,769,851 2,078,382
-- -- 508,795 107,837 59,469
-- -- -- -- --
226,242 87,663 83,799 5,536 44,535
-- -- -- -- 4
-- -- -- 1,422 1,324
-- 43,151 -- -- --
- ---------------------------------------------------------------------------------
44,081,482 90,159,752 50,102,016 28,227,823 31,000,829
- ---------------------------------------------------------------------------------
17,603 20,492 16,563 12,654 21,190
-- -- -- -- --
7,868 8,066 7,362 4,653 4,987
-- 31,394 177,954 77,050 --
-- -- 162,571 -- --
-- -- 7,616,063 5,769,851 2,078,382
-- -- -- -- 1,841
16,890 -- 58,711 14,160 80,978
-- -- -- -- --
- ---------------------------------------------------------------------------------
42,361 59,952 8,039,224 5,878,368 2,187,378
- ---------------------------------------------------------------------------------
$44,039,121 $90,099,800 $42,062,792 $22,349,455 $28,813,451
- ---------------------------------------------------------------------------------
$ 2,902 $ 3,287 $ 2,303 $ 1,279 $ 2,066
29,962,973 70,080,134 22,543,039 12,702,959 17,967,604
784,559 421,682 299,829 (82,974) (416,005)
2,797,436 264,791 2,632,198 2,400,125 (455,943)
10,491,251 19,329,906 16,585,423 7,328,066 11,715,729
- ---------------------------------------------------------------------------------
$44,039,121 $90,099,800 $42,062,792 $22,349,455 $28,813,451
- ---------------------------------------------------------------------------------
2,901,749 3,286,608 2,302,867 1,279,055 2,066,434
- ---------------------------------------------------------------------------------
$15.18 $27.41 $18.27 $17.47 $13.94
- ---------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PG$PCN>
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest.................................................. $119,644 $2,478,291
Dividends................................................. -- 43,393
Less: Foreign withholding tax............................. -- --
- -----------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................... 119,644 2,521,684
- -----------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3)......................... 6,347 155,378
Audit and legal........................................... 5,550 8,965
Custody................................................... 4,350 8,329
Shareholder and system servicing fees..................... 4,335 7,889
Administration fees (Note 3).............................. 4,232 69,057
Shareholder communications................................ 781 8,806
Trustees' fees............................................ 650 3,137
Amortization of deferred organization costs............... -- --
Pricing service fees...................................... -- 6,613
Other..................................................... -- 5,628
- -----------------------------------------------------------------------------------------------
TOTAL EXPENSES............................................ 26,245 273,802
Less: Investment advisory and administration fee waiver
(Note 3)............................................... -- --
- -----------------------------------------------------------------------------------------------
NET EXPENSES.............................................. 26,245 273,802
- -----------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS)................................ 93,399 2,247,882
- -----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES
CONTRACTS, AND FOREIGN CURRENCIES (NOTES 4, 5 AND 7):
Realized Gain (Loss) From:
Security transactions (excluding short-term
securities*).......................................... 8 855,940
Futures contracts...................................... -- --
Foreign currency transactions.......................... -- (135,673)
- -----------------------------------------------------------------------------------------------
NET REALIZED GAIN......................................... 8 720,267
- -----------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments,
Futures Contracts and Foreign Currencies:
Beginning of period.................................... -- 1,460,585
End of period.......................................... -- 1,038,835
- -----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET UNREALIZED APPRECIATION........ -- (421,750)
- -----------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN
CURRENCIES................................................ 8 298,517
- -----------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS...................... $ 93,407 $2,546,399
- -----------------------------------------------------------------------------------------------
</TABLE>
* Represents net realized gains only from short-term securities for the Money
Market Portfolio.
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PG$PCN>
- ---------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH EMERGING INTERNATIONAL
INCOME INDEX & INCOME GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 327,002 $ 77,162 $ 62,029 $ 21,383 $ 32,647
628,937 432,931 406,116 23,658 211,731
-- -- (1,901) -- (22,293)
- -------------------------------------------------------------------------------------------
955,939 510,093 466,244 45,041 222,085
- -------------------------------------------------------------------------------------------
100,344 44,494 96,579 77,595 122,882
7,340 9,800 8,902 7,039 8,621
1,289 50,000 1,730 8,902 25,693
5,933 6,100 2,472 5,439 7,137
44,597 17,798 42,924 20,692 28,914
4,945 8,000 5,933 3,968 5,709
4,047 2,300 3,117 1,633 2,684
-- -- -- 1,423 1,600
1,484 -- -- -- 3,996
-- 3,000 3,462 147 1,143
- -------------------------------------------------------------------------------------------
169,979 141,492 165,119 126,838 208,379
-- (54,252) -- -- --
- -------------------------------------------------------------------------------------------
169,979 87,240 165,119 126,838 208,379
- -------------------------------------------------------------------------------------------
785,960 422,853 301,125 (81,797) 13,706
- -------------------------------------------------------------------------------------------
2,797,449 189,267 2,632,249 2,400,098 2,672,065
-- 96,317 -- -- --
-- -- -- -- (1,631)
- -------------------------------------------------------------------------------------------
2,797,449 285,584 2,632,249 2,400,098 2,670,434
- -------------------------------------------------------------------------------------------
10,461,775 11,389,699 15,032,970 5,450,266 9,345,681
10,491,251 19,329,906 16,585,423 7,328,066 11,715,729
- -------------------------------------------------------------------------------------------
29,476 7,940,207 1,552,453 1,877,800 2,370,048
- -------------------------------------------------------------------------------------------
2,826,925 8,225,791 4,184,702 4,277,898 5,040,482
- -------------------------------------------------------------------------------------------
$ 3,612,885 $ 8,648,644 $4,485,827 $4,196,101 $5,054,188
- -------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PG$PCN>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ 93,399 $ 2,247,882
Net realized gain......................................... 8 720,267
Increase (decrease) in net unrealized appreciation........ -- (421,750)
- ----------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS.................... 93,407 2,546,399
- ----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income..................................... (93,400) (4,468,175)
Net realized gains........................................ -- --
- ----------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS........................................... (93,400) (4,468,175)
- ----------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 17):
Net proceeds from sale of shares.......................... 3,243,802 17,749,427
Net asset value of shares issued for reinvestment of
dividends.............................................. 95,049 4,468,175
Cost of shares reacquired................................. (3,683,595) (7,266,071)
- ----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS........................................... (344,744) 14,951,531
- ----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS........................... (344,737) 13,029,755
NET ASSETS:
Beginning of period....................................... 4,752,536 62,557,541
- ----------------------------------------------------------------------------------------------
END OF PERIOD*............................................ $ 4,407,799 $75,587,296
- ----------------------------------------------------------------------------------------------
* Includes undistributed (overdistributed) net investment
income of: -- $2,104,237
- ----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PG$PCN>
- ---------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH EMERGING INTERNATIONAL
INCOME INDEX & INCOME GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 785,960 $ 422,853 $ 301,125 $ (81,797) $ 13,706
2,797,449 285,584 2,632,249 2,400,098 2,670,434
29,476 7,940,207 1,552,453 1,877,800 2,370,048
- -------------------------------------------------------------------------------------
3,612,885 8,648,644 4,485,827 4,196,101 5,054,188
- -------------------------------------------------------------------------------------
(1,898,808) (249,653) (672,149) -- (121,294)
(1,821,198) (658,235) (3,971,344) (3,312,304) --
- -------------------------------------------------------------------------------------
(3,720,006) (907,888) (4,643,493) (3,312,304) (121,294)
- -------------------------------------------------------------------------------------
444,572 51,915,795 882,319 603,425 1,176,659
3,720,006 907,888 4,643,494 3,312,304 121,294
(6,092,370) (5,815,943) (6,519,297) (2,454,514) (5,764,776)
- -------------------------------------------------------------------------------------
(1,927,792) 47,007,740 (993,484) 1,461,215 (4,466,823)
- -------------------------------------------------------------------------------------
(2,034,913) 54,748,496 (1,151,150) 2,345,012 466,071
46,074,034 35,351,304 43,213,942 20,004,443 28,347,380
- -------------------------------------------------------------------------------------
$44,039,121 $90,099,800 $42,062,792 $22,349,455 $28,813,451
- -------------------------------------------------------------------------------------
$784,559 $421,682 $299,829 $(82,974) $(416,005)
- -------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PG$PCN>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ 234,039 $ 4,264,433
Net realized gain......................................... -- 950,640
Increase (decrease) in net unrealized appreciation........ -- (659,501)
- -------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... 234,039 4,555,572
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income..................................... (234,046) (5,165,625)
Net realized gain......................................... -- --
- -------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS........................................... (234,046) (5,165,625)
- -------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 17):
Net proceeds from sale of shares.......................... 4,068,547 8,577,774
Net asset value of shares issued for reinvestment of
dividends.............................................. 236,528 5,165,625
Cost of shares reacquired................................. (5,440,440) (10,090,660)
- -------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS........................................... (1,135,365) 3,652,739
- -------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS........................... (1,135,372) 3,042,686
NET ASSETS:
Beginning of year......................................... 5,887,908 59,514,855
- -------------------------------------------------------------------------------------------------
END OF YEAR*.............................................. $ 4,752,536 $62,557,541
- -------------------------------------------------------------------------------------------------
* Includes undistributed (overdistributed) net investment
income of: -- $4,460,203
- -------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PG$PCN>
- -----------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH EMERGING INTERNATIONAL
INCOME INDEX & INCOME GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,909,868 $ 249,662 $ 676,309 $ (140,288) $ (73,674)
1,831,459 654,539 3,975,853 3,311,992 66,797
5,391,585 5,289,554 3,880,199 499,956 (547,647)
- ---------------------------------------------------------------------
9,132,912 6,193,755 8,532,361 3,671,660 (554,524)
- ---------------------------------------------------------------------
(2,166,350) (234,763) (618,594) -- (62,462)
-- (647,602) (2,845,466) (2,276,771) --
- ---------------------------------------------------------------------
(2,166,350) (882,365) (3,464,060) (2,276,771) (62,462)
- ---------------------------------------------------------------------
898,736 13,341,026 2,532,681 1,483,760 1,308,196
2,166,350 882,365 3,464,060 2,276,771 62,462
(9,573,459) (3,441,285) (6,353,227) (4,052,109) (5,743,348)
- ---------------------------------------------------------------------
(6,508,373) 10,782,106 (356,486) (291,578) (4,372,690)
- ---------------------------------------------------------------------
458,189 16,093,496 4,711,815 1,103,311 (4,989,676)
45,615,845 19,257,808 38,502,127 18,901,132 33,337,056
- ---------------------------------------------------------------------
$46,074,034 $35,351,304 $43,213,942 $20,004,443 $28,347,380
- ---------------------------------------------------------------------
$1,897,407 $248,482 $670,853 $(1,177) $(306,786)
- ---------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Money Market, Diversified Strategic Income, Equity Income, Equity
Index, Growth & Income, Emerging Growth and International Equity Portfolios
("Portfolios") are separate investment portfolios of the Greenwich Street Series
Fund ("Fund"), formerly known as the Smith Barney Series Fund. The Fund, a
Massachusetts business trust, is registered under the Investment Company Act of
1940, as amended, as a diversified, open-ended management investment company.
Shares of the Fund can be acquired through investing in an individual flexible
premium deferred combination fixed and variable annuity contract or a
certificate evidencing interest in a master group flexible premium deferred
annuity offered by certain insurance companies. The Fund offers three other
portfolios: Appreciation, Intermediate High Grade and Total Return Portfolios.
The financial statements and financial highlights for the other portfolios are
presented in a separate semi-annual report.
The significant accounting policies consistently followed by the Portfolios
are: (a) security transactions are accounted for on trade date; (b) securities
traded on national securities markets are valued at the closing prices on such
markets or, if there were no sales during the day, at current quoted bid price;
securities primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except that when a significant occurrence subsequent to the time a value was so
established is likely to have significantly changed the value then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees or its delegates;
over-the-counter securities are valued on the basis of the bid price at the
close of business on each day; U.S. government and agency obligations are valued
at the average between bid and ask prices; (c) securities maturing within 60
days are valued at cost plus accreted discount, or minus amortized premium,
which approximates value; (d) interest income is recorded on the accrual basis;
(e) dividend income is recorded on the ex-dividend date; foreign dividend income
is recorded on the ex-dividend date or as soon as practical after the Portfolios
determine the existence of a dividend declaration after exercising reasonable
due diligence; (f) gains or losses on the sale of securities are calculated by
using the specific identification method; (g) dividends and distributions to
shareholders are recorded by the Portfolios on the ex-dividend date; (h) the
accounting records of the Portfolios are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars based on the rate of exchange of such currencies against U.S. dollars on
the date of valuation. Purchases and sales of securities, and income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank; (i) each Portfolio intends to comply with the requirements of
the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all federal income and excise tax; (j) the
character of income and gains distributed are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. At December 31, 1997, reclassifications were made to the Fund's
capital accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Accordingly, for the
Emerging Growth Portfolio a portion of net investment loss and accumulated net
realized gains amounting to $140,244 and $49, respectively, was reclassified to
paid-in capital. Net investment income, net realized gains and net assets were
not affected by this change; and (k) estimates and assumptions are required to
be made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
In addition, for the Emerging Growth and International Equity Portfolios,
organization costs are currently being amortized on a straight-line basis over a
five-year period, which began with the Portfolio's commencement of operations in
December 1993.
In addition, certain Portfolios may enter into forward exchange contracts
in order to hedge against foreign currency risk. These contracts are
marked-to-market daily, by recognizing the difference between the contract
exchange rate and the current market rate as an unrealized gain or loss.
Realized gains or losses are recognized when contracts are settled.
2. DIVIDENDS
The Money Market Portfolio declares dividends daily from net investment
income and distributes such dividends monthly. Net realized capital gains, if
any, are declared and distributed annually.
52
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION AGREEMENT AND OTHER
TRANSACTIONS
The Fund, on behalf of the Money Market, Diversified Strategic Income,
Equity Income, Growth & Income and International Equity Portfolios, has entered
into an investment advisory agreement ("Advisory Agreement") with Mutual
Management Corp. ("MMC"). MMC is a wholly-owned subsidiary of Salomon Smith
Barney Holdings Inc. ("SSBH"), which is in turn a wholly-owned subsidiary of
Travelers Group Inc. ("Travelers"). Under each respective investment advisory
agreement, the Portfolios pay an investment advisory fee calculated at an annual
rate of their respective average daily net assets. These fees are calculated
daily and paid monthly.
The respective advisers and annual rates are as follows:
<TABLE>
<CAPTION>
PORTFOLIO ADVISOR RATE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Mutual Management Corp. 0.30%
Diversified Strategic Income Mutual Management Corp. 0.45
Equity Income Mutual Management Corp. 0.45
Equity Index Travelers Investment Management Co. 0.15
Growth & Income Mutual Management Corp. 0.45
Emerging Growth Van Kampen American Capital Asset Management, Inc. 0.75
International Equity Mutual Management Corp. 0.85
- ---------------------------------------------------------------------------------------------------------
</TABLE>
As of June 30, 1998, the investment advisory fee, for the Equity Index
Portfolio, amounting to $44,494 was waived.
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 MMC calculated at an annual rate of 0.15% of the Portfolio's
average daily net assets. The Diversified Strategic Income Portfolio does not
make any direct payments to SBGCM.
The Fund, on behalf of the Portfolios, has also entered into an
administration agreement with MMC. Under the agreement, each Portfolio pays an
administration fee calculated at an annual rate of 0.20% of the average daily
net assets; except for the Equity Index Portfolio which pays an administration
fee of 0.06%. These fees are calculated daily and paid monthly. As of June 30,
1998, a portion of the administration fee, for the Equity Index Portfolio,
amounting to $9,758 was waived.
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, MMC will, as
appropriate, reduce its fees by one half the excess expenses in the proportion
that its respective fees bear to the aggregate of such fees paid by the
Portfolio. IDS Life Insurance Company ("IDS Life"), one of the insurance
companies offering variable annuities through which investments can be made in
the Fund, will bear the remaining half of such excess expenses.
For the six months ended June 30, 1998, the Equity Income, Growth & Income,
Emerging Growth and International Equity Portfolios paid Smith Barney brokerage
commissions of $600, $180, $93 and $1,393, respectively.
No officer, Director or employee of Smith Barney or its affiliates receives
any compensation from the Fund for serving as a Trustee or officer of the Fund.
4. INVESTMENTS
During the six months ended June 30, 1998, 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................................ $39,210,833 $27,046,089
Equity Income............................................... 12,160,738 17,645,156
Equity Index................................................ 43,876,469 719,401
Growth & Income............................................. 1,215,734 6,513,555
Emerging Growth............................................. 9,586,028 11,890,633
International Equity........................................ 3,968,308 8,091,564
- ---------------------------------------------------------------------------------------
</TABLE>
53
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
At June 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
PORTFOLIO APPRECIATION DEPRECIATION APPRECIATION
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Diversified Strategic Income................................ $ 1,803,044 $(715,970) $ 1,087,074
Equity Income............................................... 10,623,348 (132,097) 10,491,251
Equity Index................................................ 19,897,578 (568,643) 19,328,935
Growth & Income............................................. 17,031,938 (446,515) 16,585,423
Emerging Growth............................................. 7,474,756 (146,690) 7,328,066
International Equity........................................ 12,464,007 (744,842) 11,719,165
- --------------------------------------------------------------------------------------------------------
</TABLE>
5. FUTURES CONTRACTS
The Diversified Strategic Income, Equity Income, Equity Index, Growth &
Income, Emerging Growth and International Equity Portfolios may from time to
time enter into futures contracts.
Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian as is
noted in the schedule of investments. During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Portfolio records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction and
the Portfolio's basis in the contract. The Portfolio enters into such contracts
to hedge a portion of its portfolio. The Portfolio bears the market risk that
arises from changes in the value of the financial instruments and securities
indices (futures contracts) and the credit risk should a counterparty fail to
perform under such contracts.
At June 30, 1998, the Equity Index Portfolio had the following open futures
contracts:
<TABLE>
<CAPTION>
EXPIRATION # OF BASIS MARKET UNREALIZED
FUTURES CONTRACTS SOLD MONTH/YEAR CONTRACTS VALUE VALUE GAIN
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P 500 Stock Index.......................... 9/98 52 $2,970,829 $2,971,800 $971
- ------------------------------------------------------------------------------------------------------------
</TABLE>
6. OPTION CONTRACTS
The Diversified Strategic Income, Equity Income, Equity Index, Growth &
Income, Emerging Growth and International Equity Portfolios may from time to
time enter into option contracts.
Upon the purchase of a put option or a call option by the Portfolio, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the Portfolio will
realize a loss in the amount of the cost of the option. When the Portfolio
enters into a closing sales transaction, the Portfolio will realize a gain or
loss depending on whether the sales proceeds from the closing sales transaction
are greater or less than the cost of the option. When the Portfolio exercises a
put option, it will realize a gain or loss from the sale of the underlying
security and the proceeds from such sale will be decreased by the premium
originally paid. When the Portfolio exercises a call option, the cost of the
security which the Portfolio purchases upon exercise will be increased by the
premium originally paid.
At June 30, 1998, 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
54
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 six months ended June 30, 1998, the Portfolios did not write any
call or put options.
7. FORWARD FOREIGN CURRENCY CONTRACTS
The Diversified Strategic Income, Emerging Growth and International Equity
Portfolios have the ability to enter into forward foreign currency contracts.
At June 30, 1998, the Diversified Strategic Income and International Equity
Portfolios 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>
UNREALIZED
LOCAL MARKET SETTLEMENT GAIN
FOREIGN CURRENCY CURRENCY VALUE DATE (LOSS)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
TO SELL:
Australian Dollar................................ 1,300,000 $ 805,278 7/15/98 $(29,958)
British Pound.................................... 2,600,000 4,334,460 7/15/98 (94,055)
Danish Krone..................................... 10,000,000 1,455,027 7/15/98 24,920
ECU.............................................. 86,063 94,821 11/30/98 1,655
ECU.............................................. 49,000 53,987 11/30/98 320
German Mark...................................... 850,000 471,362 7/15/98 5,363
German Mark...................................... 102,111 56,792 9/2/98 648
German Mark...................................... 189,805 105,565 9/2/98 1,204
Irish Punt....................................... 670,000 934,280 7/15/98 15,780
Italian Lira..................................... 4,100,000,000 2,307,100 7/15/98 37,096
New Zealand Dollar............................... 1,300,000 674,137 7/15/98 (34,537)
Spanish Peseta................................... 236,000,000 1,542,428 7/15/98 24,014
Swedish Krona.................................... 6,300,000 790,469 7/15/98 14,622
- ------------------------------------------------------------------------------------------------------------
TOTAL UNREALIZED LOSS ON OPEN FORWARD FOREIGN
CURRENCY CONTRACTS............................... $(32,928)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
UNREALIZED
LOCAL MARKET SETTLEMENT GAIN
FOREIGN CURRENCY CURRENCY VALUE DATE (LOSS)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
TO SELL:
Japanese Yen...................................... 12,163,027 $ 87,666 7/2/98 $ (1,816)
Swedish Krona..................................... 59,930 7,515 7/1/98 4
Swedish Krona..................................... 60,982 7,647 7/2/98 (25)
- ------------------------------------------------------------------------------------------------------------
TOTAL UNREALIZED LOSS ON OPEN FORWARD FOREIGN
CURRENCY CONTRACTS................................ $ (1,837)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
8. REPURCHASE AGREEMENTS
The Portfolios purchase (and its custodian takes possession of) U.S.
government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
9. REVERSE REPURCHASE AGREEMENTS
The Diversified Strategic Income, Equity Income and International Equity
Portfolios may enter into reverse repurchase agreements for leveraging purposes.
A reverse repurchase agreement involves a sale by the Portfolio of
securities that it holds with an agreement by the Portfolio to repurchase the
same securities at an agreed upon price and date. A reverse repurchase agreement
involves risk that the market value of the securities sold by the Fund may
decline below the repurchase price of the securities. The Portfolio will
establish a segregated account with its custodian, in which the Portfolio will
maintain cash, U.S. government securities or other liquid high grade debt
obligations equal in value to its obligations with respect to the reverse
repurchase agreements.
At June 30, 1998, the Portfolios had no open reverse repurchase agreements.
10. 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.
11. 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.
56
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
12. CAPITAL LOSS CARRYFORWARD
At December 31, 1997, 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 2003 2004 TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Diversified Strategic Income................................ $ 45,000 $ -- $ 45,000
International Equity........................................ 2,422,000 706,000 3,128,000
- ------------------------------------------------------------------------------------------------
</TABLE>
13. SECURITIES TRADED ON A WHEN-ISSUED OR TO-BE-ANNOUNCED BASIS
The Diversified Strategic Income, Equity Income, Growth & Income, Emerging
Growth and International Equity Portfolios may from time to time purchase
securities on a when-issued or to-be-announced ("TBA") basis.
In a TBA transaction, the Portfolio commits to purchasing or selling
securities for which specific information is not yet known at the time of the
trade, particularly the face amount and maturity date in GNMA transactions.
Securities purchased on a TBA basis are not settled until they are delivered to
the Fund, normally 15 to 45 days later. Beginning on the date the Portfolio
enters into the TBA transaction, the custodian maintains cash, U.S. Government
securities or other liquid high grade debt obligations in a segregated account
equal in value to the purchase price of the TBA security. These transactions are
subject to market fluctuations and their current value is determined in the same
manner as for other securities.
At June 30, 1998, there were no when-issued or TBA securities held by the
Portfolios.
14. 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.
At June 30, 1998, there were no open mortgage roll transactions in the
Portfolio.
15. SHORT SALES AGAINST THE BOX
The Equity Income, Emerging Growth and International Equity Portfolios each
have the ability to engage in short sales against the box.
A short sale against the box is a short sale of common stock such that,
when the short position is open, the Portfolio involved owns an equal amount of
the stock or preferred stocks or debt securities, convertible or exchangeable,
without payment of further consideration, into an equal number of shares of
common stock sold short. The proceeds of the sale will be held by the broker
until the settlement date, when the Portfolio delivers the stock or the
convertible or exchangeable securities to close out its short position. Although
prior to delivery a Portfolio will have to pay an amount equal to any dividends
paid on the common stock sold short, the Portfolio will receive the dividends
from the stock or the preferred stock or the interest from the stock or
convertible or exchangeable debt securities plus a portion of the interest
earned from the proceeds of the short sale. The Portfolio will deposit in a
segregated account with the Fund's custodian, the common stock or convertible
preferred stock or debt securities in connection with short sales against the
box.
At June 30, 1998, the Portfolios had no open short sales against the box.
57
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
16. LENDING OF SECURITIES
The Diversified Strategic Income, Equity Income, Equity Index, Growth &
Income, Emerging Growth and International Equity Portfolios each have the
ability to lend its securities to brokers, dealers and other financial
organizations.
The Portfolio has an agreement with its custodian whereby the custodian may
lend securities owned by the Portfolio to brokers, dealers and other financial
organizations. Fees earned by the Portfolio on securities lending are recorded
in interest income. Loans of securities by the Portfolio are collateralized by
cash, U.S. Government securities or high quality money market instruments that
are maintained at all times in an amount at least equal to the current market
value of the loaned securities, plus a margin which may vary depending on the
type of securities loaned. The custodian establishes and maintains the
collateral in a segregated account. The Fund maintains exposure for the risk of
any losses in the investment of amounts received as collateral.
At June 30, 1998, the Portfolios listed below have loaned common stock. The
market value for the securities on loan were as follows:
<TABLE>
<CAPTION>
PORTFOLIO VALUE
- ------------------------------------------------------------------------
<S> <C>
Diversified Strategic Income................................ $2,058,973
Growth & Income............................................. 7,329,662
Emerging Growth............................................. 5,638,178
International Equity........................................ 1,977,936
- ------------------------------------------------------------------------
</TABLE>
At June 30, 1998, the collateral held for the securities on loan was as
follows:
<TABLE>
<CAPTION>
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
SECURITY DESCRIPTION VALUE
- ------------------------------------------------------------------------
<S> <C>
TIME DEPOSITS:
Abbey National London, 6.625% due 7/1/98.................. $ 90,050
Banco Exterior De Espano Brussels, 6.750% due 7/1/98...... 90,050
Banque Bruxelles Lambert London, 6.500% due 7/1/98........ 90,050
Creditanstalt-Bankverein, 6.750% due 7/1/98............... 90,050
Generale Bank Milan, 6.750% due 7/1/98.................... 90,050
Nordeutsche Landesbank G.C., 6.750% due 7/1/98............ 90,050
Rabobank, London, 6.625% due 7/1/98....................... 90,050
Sudwestdeutsche Stuttgart, 6.625% due 7/1/98.............. 90,050
Westdeutsche Landesbank Singapore, 6.500% due 7/1/98...... 90,050
REPURCHASE AGREEMENTS:
CS First Boston, 6.580% due 7/1/98........................ 36,020
Merrill Lynch Securities/MLPFS, 6.350% due 7/1/98......... 360,199
NationsBanc Montgomery Securities Inc., 6.550% due
7/1/98................................................. 432,239
COMMERCIAL PAPER:
Corporate Asset Funding Co., Inc., 6.251% due 7/1/98...... 108,041
General Electric Credit, 6.751% due 7/1/98................ 7,753
Koch Industries, Inc., 6.301% due 7/1/98.................. 108,041
Sheffield Receivable Corp., 6.501% due 7/1/98............. 72,027
Variable Funding Capital Corp., 6.451% due 7/1/98......... 108,040
Windmill Funding, 6.501% due 7/1/98....................... 108,040
- ------------------------------------------------------------------------
Total....................................................... $2,150,850
- ------------------------------------------------------------------------
</TABLE>
58
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO
SECURITY DESCRIPTION VALUE
- ------------------------------------------------------------------------
<S> <C>
TIME DEPOSITS:
Banque Paribas, 6.500% due 7/1/98......................... $1,528,986
Deutsche Bank, 7.000% due 7/1/98.......................... 1,243,078
Svenska Handelbank Euro, 6.500% due 7/1/98................ 1,243,078
Toronto Dominion Euro, 6.500% due 7/1/98.................. 1,243,078
UBS Bank of Switzerland Euro, 6.000% due 7/1/98........... 13,939
REPURCHASE AGREEMENTS:
Goldman, Sachs & Co., 6.250% due 7/1/98................... 779,842
Morgan Stanley, 6.250% due 7/1/98......................... 808,001
COMMERCIAL PAPER:
Den Norske Bank, 5.553% due 7/13/98....................... 576,508
FLOATING RATE NOTE:
PHH Corp., 5.627% due 3/5/99.............................. 179,553
- ------------------------------------------------------------------------
Total....................................................... $7,616,063
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EMERGING GROWTH PORTFOLIO
SECURITY DESCRIPTION VALUE
- ------------------------------------------------------------------------
<S> <C>
TIME DEPOSITS:
Banque Paribas, 6.500% due 7/1/98......................... $1,288,627
Deutsche Bank, 7.000% due 7/1/98.......................... 1,047,664
Svenska Handelbank Euro, 6.500% due 7/1/98................ 1,047,664
Toronto Dominion Euro, 6.500% due 7/1/98.................. 1,047,664
REPURCHASE AGREEMENTS:
Goldman, Sachs & Co., 6.250% due 7/1/98................... 657,250
Morgan Stanley, 6.250% due 7/1/98......................... 680,982
- ------------------------------------------------------------------------
Total....................................................... $5,769,851
- ------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
SECURITY DESCRIPTION VALUE
- ------------------------------------------------------------------------
TIME DEPOSITS:
Abbey National London, 6.625% due 7/1/98.................. $ 87,016
Banco Exterior De Espano Brussels, 6.750% due 7/1/98...... 87,016
Banque Bruxelles Lambert London, 6.500% due 7/1/98........ 87,016
Creditanstalt-Bankverein, 6.750% due 7/1/98............... 87,016
Generale Bank Milan, 6.750% due 7/1/98.................... 87,016
Nordeutsche Landesbank G.C., 6.750% due 7/1/98............ 87,016
Rabobank, London, 6.625% due 7/1/98....................... 87,016
Sudwestdeutsche Stuttgart, 6.625% due 7/1/98.............. 87,016
Westdeutsche Landesbank Singapore, 6.500% due 7/1/98...... 87,016
REPURCHASE AGREEMENTS:
CS First Boston, 6.580% due 7/1/98........................ 34,806
Merrill Lynch Securities/MLPFS, 6.350% due 7/1/98......... 348,063
NationsBanc Montgomery Securities Inc., 6.550% due
7/1/98................................................. 417,676
COMMERCIAL PAPER:
Corporate Asset Funding Co., Inc., 6.251% due 7/1/98...... 104,400
General Electric Credit, 6.751% due 7/1/98................ 7,493
Koch Industries Inc., 6.301% due 7/1/98................... 104,400
Sheffield Receivable Corp., 6.501% due 7/1/98............. 69,600
Variable Funding Capital Corp., 6.451% due 7/1/98......... 104,400
Windmill Funding, 6.501% due 7/1/98....................... 104,400
- ------------------------------------------------------------------------
Total....................................................... $2,078,382
- ------------------------------------------------------------------------
</TABLE>
59
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
17. SHARES OF BENEFICIAL INTEREST
At June 30, 1998, the Fund had an unlimited number of shares of beneficial
interest authorized with a par value of $0.001 per share. Transactions in shares
for each portfolio were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
MONEY MARKET PORTFOLIO
Shares sold................................................. 3,243,802 4,068,547
Shares issued on reinvestment............................... 95,049 236,528
Shares redeemed............................................. (3,683,595) (5,440,440)
- --------------------------------------------------------------------------------------------------
Net Decrease................................................ (344,744) (1,135,365)
- --------------------------------------------------------------------------------------------------
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
Shares sold................................................. 1,605,690 742,785
Shares issued on reinvestment............................... 420,732 474,346
Shares redeemed............................................. (657,025) (892,937)
- --------------------------------------------------------------------------------------------------
Net Increase................................................ 1,369,397 324,194
- --------------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
Shares sold................................................. 27,603 64,996
Shares issued on reinvestment............................... 248,332 143,372
Shares redeemed............................................. (383,829) (705,308)
- --------------------------------------------------------------------------------------------------
Net Decrease................................................ (107,894) (496,940)
- --------------------------------------------------------------------------------------------------
EQUITY INDEX PORTFOLIO
Shares sold................................................. 1,978,609 571,732
Shares issued on reinvestment............................... 33,135 38,819
Shares redeemed............................................. (223,597) (161,000)
- --------------------------------------------------------------------------------------------------
Net Increase................................................ 1,788,147 449,551
- --------------------------------------------------------------------------------------------------
GROWTH & INCOME PORTFOLIO
Shares sold................................................. 44,468 138,981
Shares issued on reinvestment............................... 254,437 192,448
Shares redeemed............................................. (326,621) (344,165)
- --------------------------------------------------------------------------------------------------
Net Decrease................................................ (27,716) (12,736)
- --------------------------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
Shares sold................................................. 33,356 85,297
Shares issued on reinvestment............................... 192,912 144,282
Shares redeemed............................................. (133,259) (237,235)
- --------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... 93,009 (7,656)
- --------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Shares sold................................................. 83,197 105,543
Shares issued on reinvestment............................... 8,751 5,408
Shares redeemed............................................. (431,946) (466,755)
- --------------------------------------------------------------------------------------------------
Net Decrease................................................ (339,998) (355,804)
- --------------------------------------------------------------------------------------------------
</TABLE>
60
<PG$PCN>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each period:
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO 1998(1) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (2)............... 0.020 0.044 0.047 0.052 0.035 0.023
Dividends from net investment income.... (0.020) (0.044) (0.047) (0.052) (0.035) (0.023)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN.............................. 2.21%++ 4.47% 4.80% 5.31% 3.56% 2.37%
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)......... $4,408 $4,753 $5,888 $5,653 $7,141 $3,703
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2)............................ 1.24%+ 1.20% 0.75% 0.75% 0.75% 0.75%
Net investment income................... 4.41+ 4.38 4.70 5.19 3.65 2.34
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED STRATEGIC INCOME PORTFOLIO 1998(1) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $10.89 $10.98 $10.01 $ 9.18 $10.07 $ 9.61
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (2)(3)............ 0.21 0.77 0.88 0.74 0.58 0.70
Net realized and unrealized gain
(loss)............................... 0.20 0.12 0.24 0.70 (0.86) 0.47
- ---------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations....... 0.41 0.89 1.12 1.44 (0.28) 1.17
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income................... (0.67) (0.98) (0.15) (0.61) (0.58) (0.61)
Net realized gains...................... -- -- -- -- -- (0.09)
Capital................................. -- -- -- -- (0.03) (0.01)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions....................... (0.67) (0.98) (0.15) (0.61) (0.61) (0.71)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............ $10.63 $10.89 $10.98 $10.01 $ 9.18 $10.07
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN.............................. 3.77%++ 8.14% 11.16% 16.18% (2.81)% 12.56%
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)......... $75,587 $62,558 $59,515 $59,316 $55,260 $43,244
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2)............................ 0.79%+ 0.78% 0.84% 0.90% 0.95% 1.00%
Net investment income................... 6.45+ 7.29 7.94 7.73 7.31 7.14
- ---------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................... 41% 47% 106% 46% 54% 94%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 1998 (unaudited).
(2) For the Money Market Portfolio, the Investment adviser waived all or part of
its fees for the four-year period ended December 31, 1996. In addition, for
the Diversified Strategic Income Portfolio, the Investment adviser waived
all or part of its fees for the year ended December 31, 1993. For the Money
Market Portfolio, the Investment adviser also reimbursed expenses of $16,616
and $17,889 for the two-year period ended December 31, 1994. In addition,
for the Diversified Strategic Income Portfolio, IDS Life reimbursed expenses
of $2,816 for the year ended December 31, 1993. If such fees were not waived
and expenses not reimbursed, the per share effect on net investment income
and the expense ratios would have been as follows:
<TABLE>
<CAPTION>
PER SHARE DECREASES TO
NET INVESTMENT INCOME
--------------------------------------------------
PORTFOLIO 1996 1995 1994 1993
--------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Money Market....................... $0.005 $0.005 $0.005 $0.014
Diversified Strategic Income....... N/A N/A N/A 0.00*
<CAPTION>
EXPENSE RATIOS WITHOUT
WAIVERS AND REIMBURSEMENTS
-----------------------------------------------------
PORTFOLIO 1996 1995 1994 1993
--------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Money Market..................... 1.25% 1.21% 1.26% 2.15%
Diversified Strategic Income..... N/A N/A N/A 1.02
</TABLE>
(3) Includes realized gains and losses from foreign currency transactions for
the three years ended December 31, 1995.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
61
<PG$PCN>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each period:
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO 1998(1) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD...... $15.31 $13.01 $12.35 $ 9.87 $11.55 $10.90
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income................... 0.35 0.77 0.63 0.54 0.58 0.53
Net realized and unrealized gain
(loss)............................... 0.92 2.28 0.11 2.56 (1.75) 0.60
- ---------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations....... 1.27 3.05 0.74 3.10 (1.17) 1.13
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income................... (0.71) (0.75) (0.08) (0.62) (0.49) (0.47)
Net realized gains...................... (0.69) -- -- -- (0.02) (0.01)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions....................... (1.40) (0.75) (0.08) (0.62) (0.51) (0.48)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............ $15.18 $15.31 $13.01 $12.35 $ 9.87 $11.55
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN.............................. 8.41%++ 23.52% 5.99% 32.47% (10.20)% 10.41%
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)......... $44,039 $46,074 $45,616 $52,444 $44,417 $60,160
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 0.76%+ 0.77% 0.77% 0.95% 0.84% 0.87%
Net investment income................... 3.53+ 4.42 4.53 4.95 5.51 4.54
- ---------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................... 28% 42% 28% 33% 21% 4%
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (2).............. $0.06 $0.06 $0.06 $0.06 -- --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX PORTFOLIO 1998(1) 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $23.59 $18.36 $15.58 $11.69 $11.90 $11.27
- ----------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (3)................ 0.04 0.12 0.22 0.25 0.23 0.20
Net realized and unrealized gain
(loss)................................ 4.07 5.76 3.17 3.88 (0.14) 0.71
- ----------------------------------------------------------------------------------------------------------------------
Total Income From Operations............... 4.11 5.88 3.39 4.13 0.09 0.91
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.................... (0.08) (0.17) (0.23) (0.23) (0.15) (0.16)
Net realized gains....................... (0.21) (0.48) (0.38) (0.01) (0.15) (0.12)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions........................ (0.29) (0.65) (0.61) (0.24) (0.30) (0.28)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............. $27.41 $23.59 $18.36 $15.58 $11.69 $11.90
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN............................... 17.41%++ 32.16% 21.68% 35.81% 0.85% 8.66%
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S).......... $90,100 $35,351 $19,258 $15,230 $10,225 $8,842
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3)............................. 0.29%+ 0.76% 1.06% 1.00% 1.00% 1.00%
Net investment income.................... 1.42+ 1.08 1.37 1.84 2.10 1.77
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.................... 1% 6% 7% 5% 1% 1%
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (2)............... $0.03 $0.03 $0.04 $0.05 -- --
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 1998 (unaudited).
(2) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(3) For the Equity Index Portfolio, the Investment adviser waived all or part
of its fees for the six months ended June 30, 1998 and the three-year
period ended December 31, 1995. In addition, for Equity Index Portfolio,
IDS Life reimbursed expenses of $6,842, $25,496 and $28,169 for the
three-year period ended December 31, 1995. If such fees were not waived and
expenses not reimbursed, the per share effect on net investment income and
the expense ratios would have been as follows:
<TABLE>
<CAPTION>
PER SHARE DECREASES TO
NET INVESTMENT INCOME
----------------------------------------------------------
PORTFOLIO 1998 1997 1996 1995 1994 1993
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Equity Index................... $0.01+ N/A N/A $0.02 $0.06 $0.10
<CAPTION>
EXPENSE RATIOS WITHOUT
WAIVERS AND REIMBURSEMENTS
------------------------------------------------------
PORTFOLIO 1998 1997 1996 1995 1994 1993
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Equity Index................... 0.47%+ N/A N/A 1.17% 1.53% 1.88%
</TABLE>
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
62
<PG$PCN>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each period:
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO 1998(1) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 18.54 $16.43 $13.73 $10.75 $11.37 $10.68
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (2)............... 0.17 0.31 0.27 0.26 0.27 0.30
Net realized and unrealized gain
(loss)............................... 1.83 3.41 2.45 2.99 (0.63) 0.67
- ---------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations....... 2.00 3.72 2.72 3.25 (0.36) 0.97
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income................... (0.33) (0.29) (0.02) (0.27) (0.26) (0.26)
Net realized gains...................... (1.94) (1.32) -- -- -- (0.02)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions....................... (2.27) (1.61) (0.02) (0.27) (0.26) (0.28)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............ $18.27 $18.54 $16.43 $13.73 $10.75 $11.37
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN.............................. 10.66%++ 22.94% 19.83% 30.49% (3.20)% 9.09%
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)......... $42,063 $43,214 $38,502 $35,158 $29,625 $25,549
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2)............................ 0.78%+ 0.77% 0.83% 0.98% 0.93% 1.00%
Net investment income................... 1.40+ 1.62 1.67 2.09 2.52 2.68
- ---------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................... 3% 17% 22% 17% 77% 78%
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (3).............. $0.06 $0.06 $0.06 $0.06 -- --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EMERGING GROWTH PORTFOLIO 1998(1) 1997 1996 1995 1994 1993(3)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $16.87 $15.83 $13.76 $ 9.63 $10.41 $10.00
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (loss) (2)......... (0.07) (0.12) (0.10) (0.03) 0.00* 0.01
Net realized and unrealized gain
(loss)................................ 3.74 3.32 2.55 4.16 (0.78) 0.40
- ----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations........ 3.67 3.20 2.45 4.13 (0.78) 0.41
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.................... -- -- -- -- (0.00)* --
Net realized gains....................... (3.07) (2.16) (0.38) -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions........................ (3.07) (2.16) (0.38) -- (0.00)* --
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............. $17.47 $16.87 $15.83 $13.76 $ 9.63 $10.41
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN............................... 22.05%++ 21.16% 17.83% 42.89% (7.48)% 4.10%++
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S).......... $22,351 $20,004 $18,901 $17,463 $11,539 $2,257
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2)............................. 1.24%+ 1.26% 1.27% 1.20% 1.20% 1.05%+
Net investment income (loss)............. (0.80)+ (0.72) (0.64) (0.24) (0.17) 1.37+
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.................... 47% 102% 84% 121% 66% --
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (3)............... $0.05 $0.05 $0.05 $0.06 -- --
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 1998 (unaudited).
(2) For the Growth & Income Portfolio, the Investment adviser waived all or
part of its fees for the 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 for the 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 not reimbursed, the per share effect on net
investment income and the expense ratios would have been as follows:
<TABLE>
<CAPTION>
EXPENSE RATIOS
PER SHARE DECREASES TO WITHOUT WAIVERS
NET INVESTMENT INCOME AND REIMBURSEMENTS
------------------------ ------------------
PORTFOLIO 1995 1994 1993 1996 1995 1994
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Growth & Income............................................. N/A N/A $0.01 N/A N/A 1.01%
Emerging Growth............................................. $0.02 $0.01 0.06 1.39% 1.59% 9.99+
</TABLE>
(3) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(4) For the period from December 3, 1993 (commencement of operations) to
December 31, 1993.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
63
<PG$PCN>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each period:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO 1998(1) 1997 1996 1995 1994 1993(2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $11.78 $12.07 $ 9.98 $ 9.21 $10.05 $10.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (loss) (3)(4)........ 0.01 (0.02) (0.02) 0.03 0.00* 0.00*
Net realized and unrealized gain (loss).... 2.21 (0.24) 2.15 0.78 (0.84) 0.05
- -----------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations.......... 2.22 (0.26) 2.13 0.81 (0.84) 0.05
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income...................... (0.06) (0.03) (0.04) (0.04) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions.......................... (0.06) (0.03) (0.04) (0.04) -- --
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $13.94 $11.78 $12.07 $ 9.98 $ 9.21 $10.05
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN................................. 18.84%++ (2.18)% 21.38% 8.80% (8.36)% 0.50%++
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)............ $28,813 $28,347 $33,337 $28,979 $28,413 $5,867
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3)(5)............................ 1.43%+ 1.31% 1.35% 1.43% 1.30% 1.08%+
Net investment income (loss)............... 0.09+ (0.23) (0.20) 0.35 0.31 (0.51)+
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE...................... 14% 21% 33% 34% 12% --
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (6)................. $0.02 $0.01 $0.03 $0.01 -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 1998 (unaudited).
(2) For the period from December 3, 1993 (commencement of operations) to
December 31, 1993.
(3) 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 not reimbursed, the per share effect on net investment income
and the expense would have been as follows:
<TABLE>
<CAPTION>
PER SHARE EXPENSE RATIOS
DECREASES TO WITHOUT
NET INVESTMENT WAIVERS AND
INCOME REIMBURSEMENTS
----------------------- -------------------------
PORTFOLIO 1994 1993 1994 1993
--------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
International Equity........................................ $0.00* $0.02 1.51% 2.96%+
</TABLE>
(4) Includes realized gains and losses from foreign currency transactions for
the two years ended December 31, 1995 and the period ended December 31,
1993.
(5) During the year ended December 31, 1996 and the year ended December 31,
1995, the International Equity Portfolio has earned credits from the
custodian which reduce service fees incurred. If the credits are taken into
consideration, the ratios of expenses to average net assets would be 1.33%
and 1.37%, respectively.
(6) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
64
<PG$PCN>
- --------------------------------------------------------------------------------
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED)
On February 6, 1998, a special meeting of shareholders of the Trust was
held for the purpose of voting on the following matters:
1. To elect Trustees of the Trust; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
SHARES VOTED PERCENTAGE OF SHARES VOTED PERCENTAGE OF
NAME OF TRUSTEES FOR SHARES VOTED AGAINST SHARES VOTED
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Herbert Barg................................... 41,457,550.573 97.176% 1,204,698.617 2.824%
Alfred J. Bianchetti........................... 41,443,251.652 97.143 1,218,997.538 2.857
Martin Brody................................... 41,448,794.038 97.156 1,213,455.152 2.844
Dwight B. Crane................................ 41,476,634.180 97.221 1,185,615.010 2.779
Burt N. Dorsett................................ 41,484,718.121 97.240 1,177,531.069 2.760
Elliot S. Jaffee............................... 41,463,169.203 97.189 1,199,079.987 2.811
Stephen E. Kaufman............................. 41,468,535.534 97.202 1,193,713.656 2.798
Joseph J. McCann............................... 41,476,403.003 97.220 1,185,846.187 2.780
Heath B. McLendon.............................. 41,476,953.962 97.222 1,185,295.228 2.778
Cornelius C. Rose, Jr.......................... 41,487,746.207 97.247 1,174,602.983 2.753
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Portfolios. The chart on the following page
demonstrates that all proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy, "E" indicates
the elimination of the policy; and "R" indicates the reclassification of the
policy from fundamental (which would require shareholder approval to change) to
non-fundamental (which can be changed by a vote of the Board of Trustees).
65
<PG$PCN>
- --------------------------------------------------------------------------------
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
MONEY MARKET DIVERSIFIED STRATEGIC
PORTFOLIO INCOME PORTFOLIO
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
M Diversification............................................. X X
- -------------------------------------------------------------------------------------------------------
M Senior Securities........................................... X X
- -------------------------------------------------------------------------------------------------------
M Industry Concentration...................................... N/A X
- -------------------------------------------------------------------------------------------------------
M Borrowing................................................... X X
- -------------------------------------------------------------------------------------------------------
E Ability to Pledge Assets.................................... X X
- -------------------------------------------------------------------------------------------------------
M Lending..................................................... X X
- -------------------------------------------------------------------------------------------------------
M Underwriting of Securities.................................. X X
- -------------------------------------------------------------------------------------------------------
R Margin and Short-Sales...................................... X X
- -------------------------------------------------------------------------------------------------------
M Real Estate................................................. X X
- -------------------------------------------------------------------------------------------------------
R Purchases of Securities of Other Investment Companies....... X X
- -------------------------------------------------------------------------------------------------------
R Investments in Oil, Gas and Mineral Exploration............. X X
- -------------------------------------------------------------------------------------------------------
R Puts, Calls and Combinations Thereof........................ X X
- -------------------------------------------------------------------------------------------------------
N/A Not Applicable; X Approved
</TABLE>
The information below reports the lowest percentage of shares voting for
the proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all proposals.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4,451,325.425 97.800% 806.377 0.018% 99,316.708 2.182%
- --------------------------------------------------------------------------------
</TABLE>
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4,901,141.307 94.214% 26,957.821 0.518% 274,051.761 5.268%
- --------------------------------------------------------------------------------
</TABLE>
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2,728,404.550 94.038% 29,250.133 1.008% 143,727.993 4.954%
- --------------------------------------------------------------------------------
</TABLE>
66
<PG$PCN>
- --------------------------------------------------------------------------------
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
EQUITY INCOME EQUITY INDEX GROWTH & INCOME EMERGING GROWTH INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
X X X X X
- ---------------------------------------------------------------------------------------
X X X X X
- ---------------------------------------------------------------------------------------
N/A X X X X
- ---------------------------------------------------------------------------------------
X X X X X
- ---------------------------------------------------------------------------------------
X X X X X
- ---------------------------------------------------------------------------------------
X X X X X
- ---------------------------------------------------------------------------------------
X X X X X
- ---------------------------------------------------------------------------------------
X X X X X
- ---------------------------------------------------------------------------------------
X X X X X
- ---------------------------------------------------------------------------------------
X X X X X
- ---------------------------------------------------------------------------------------
X X X X X
- ---------------------------------------------------------------------------------------
X X X X X
- ---------------------------------------------------------------------------------------
</TABLE>
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,028,617.856 82.893% 13,059.286 1.053% 199,194.297 16.054%
- --------------------------------------------------------------------------------
</TABLE>
GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,986,855.037 92.098% 21,517.641 0.997% 148,965.887 6.905%
- --------------------------------------------------------------------------------
</TABLE>
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
980,675.945 92.111% 18,098.615 1.700% 65,892.870 6.189%
- --------------------------------------------------------------------------------
</TABLE>
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2,269,693.106 93.160% 33,939.337 1.393% 132,702.689 5.447%
- --------------------------------------------------------------------------------
</TABLE>
67
<PG$PCN>
[This page intentionally left blank.]
<PG$PCN>
This report is submitted for the general
information of the owners of the
Greenwich Street Series Fund. It is not
authorized for distribution to
prospective investors unless accompanied
or preceded by a current Prospectus for
the Fund, which contains information
concerning the Fund's investment
policies, fees and expenses, as well as
other pertinent information.
S6225 H (8/98)
<PG$PCN>
This report is submitted for the general
information of the owners of the
Greenwich Street Series Fund. It is not
authorized for distribution to
prospective investors unless accompanied
or preceded by a current Prospectus for
the Fund, which contains information
concerning the Fund's investment
policies, fees and expenses, as well as
other pertinent information.
SYMPHONY
investments are sponsored and managed
by:
Smith Barney Inc.
and subsidiaries
SYMPHONY
is underwritten, issued and serviced by:
IDS Life Insurance Company and
IDS Life Insurance Company of New York
S6225 H (8/98)
<PG$PCN>
GREENWICH STREET SERIES FUND
SEMI-ANNUAL REPORT
EQUITY INDEX PORTFOLIO
MONEY MARKET PORTFOLIO
EQUITY INCOME PORTFOLIO
EMERGING GROWTH PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
JUNE 30, 1998
<PG$PCN>
GREENWICH STREET SERIES FUND
SEMI-ANNUAL REPORT FOR
SYMPHONY
A Tax-Deferred Variable Annuity
[GRAPHIC]
INTERMEDIATE HIGH GRADE PORTFOLIO
APPRECIATION PORTFOLIO
TOTAL RETURN PORTFOLIO
JUNE 30, 1998
<PG$PCN>
SEMI-ANNUAL REPORT FOR GREENWICH STREET SERIES FUND
- --------------------------------------------------------------------------------
Dear Investor:
We are pleased to provide you with the semi-annual report for Greenwich Street
Series Fund -- Intermediate High Grade, Appreciation and Total Return Portfolios
("Portfolios") for the period ended June 30, 1998. This letter will briefly
discuss general economic and market conditions. In addition, detailed
comparisons showing the growth of a hypothetical $10,000 investment 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.
MARKET AND ECONOMIC OVERVIEW
The U.S. stock market in particular got off to a surprisingly strong start in
the first quarter of 1998. Investors were expecting the worst on the earnings
front in early 1998 in the aftermath of the Asian crisis. The anxiously awaited
fourth quarter earnings season, however, turned out to be better than the worst
case scenario. As a result, investors let out a big sigh of relief and embarked
on a furious buying spree. In a broad-based market rally, the Standard and
Poor's 500 Index ("S&P 500") gained 14% while the Russell 2000 Index advanced by
about 10% in the first quarter of 1998. (The S&P 500 is a
capitalization-weighted measure of 500 widely held common stocks.)
As a nation, we are more affluent than ever before, with much of that wealth
created in the last 15 years. We are benefiting from a world that has been
largely at peace since the official end of the Cold War in 1989. We are reaping
the fruits of the restructuring of American businesses in the 70's and 80's, and
we are benefiting from growth in worldwide demand for our products.
This unparalleled U.S. prosperity today is now being followed closely by Europe.
Companies there are undergoing restructuring similar to the U.S. of the last two
decades. More and more, the inefficiencies of state-controlled institutions in
Europe are being replaced with the expansion of a free and more competitive
marketplace. As we approach the dawn of a new millennium, these positive
developments have enabled both the U.S. and most of Europe to experience the
greatest peace and prosperity in generations.
The rapid rise of global markets in recent years has been helped in no small
measure with the aid of sophisticated monetary policy. In the U.S.,
policy-making bodies, such as the Federal Reserve Board ("Fed"), coupled with
technology-led productivity gains, have controlled inflation to the extent that
it's not a significant factor in the U.S. economy today. U.S. bond yields have
stayed in a fairly narrow range as the U.S. economy has continued to grow
without any signs of accelerating inflation.
In Europe, the move to a common currency has forced both fiscal and monetary
policy to accomplish the same objective of bringing inflation and interest rates
down significantly in countries such as Italy and Spain. And as interest rates
have come down, investment funds have flowed into stock markets, which in turn
have helped propel dramatic gains in the U.S. and European financial markets.
Now, the developing world is taking its cue from the U.S. and Europe. Perhaps
the most meaningful example is Latin America, where after a very rocky period in
the last decade, monetary and fiscal policy reforms have stabilized its
economies and established a base for solid and sustainable future growth.
Currently, parts of Asia are not enjoying growth and prosperity, particularly
Japan, Southeast Asia and Korea, where extraordinary economic growth and
expansion during the last several decades resulted in overheated and
overextended financial conditions that are currently in the painful process of
readjusting.
Stock market volatility increased significantly during the month of April. A
seesaw pattern in stock prices persisted through the month and the S&P 500 rose
slightly by 0.91% in April. Interest rates took center stage toward the end of
April as the Fed publicly discussed a shift to a tightening bias. Long-term
interest rates shot up above 6% while the S&P 500 fell 3.9% from April 22, 1998
to April 27, 1998. Inflation, however, continued to remain low and, despite a
strong first quarter Gross Domestic Product report, economic data still suggests
a slowdown in the second half of 1998. Bond prices stabilized as a result of
such evidence in late April and early May and stock prices recovered to the
levels established at the end of the first quarter of 1998.
1
<PG$PCN>
SEMI-ANNUAL REPORT FOR GREENWICH STREET SERIES FUND
- --------------------------------------------------------------------------------
Renewed concerns over Asia and slowing earnings growth rocked the stock market
in May. The S&P 500 declined by almost 2%. Several companies provided early
guidance about lower second quarter earnings. However, investors who had
exposure to big-company stocks in the second quarter of 1998 did well, as the
S&P 500 again outpaced most other types of funds and had a return of roughly
3.17% in the second quarter of 1998 compared with the slight loss experienced by
most average U.S. stock funds. Despite the fact that the earnings of large
companies that dominate the S&P 500 have come under pressure lately, investors
appeared to prefer the relative "safety" of large-capitalization company stocks
during the reporting period that can still maintain their earnings in a slowing
economy.
INTERMEDIATE HIGH GRADE PORTFOLIO
The investment objective of the Intermediate High Grade Portfolio ("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 Portfolio
will invest at least 65% of its assets in high-quality, intermediate-term U.S.
government securities and U.S. corporate bonds. For the six months ended June
30, 1998, the Portfolio had a total return of 3.56%, compared to the Lehman
Brothers Government/ Corporate Bond Index total return of 4.17%. (The Lehman
Brothers Government/Corporate Bond Index is a combination of publicly issued
intermediate- and long-term U.S. government bonds and corporate bonds.)
During the second quarter of 1998, 30-year bond yields fell to all-time lows.
Renewed turmoil in Asia helped pave the way for lower yields. Moreover, lower
yields were caused by a classic flight to quality and the expectation that the
problems in Asia would lead to a slowdown in the U.S. economy.
The Portfolio maintained a longer average maturity than the Lehman Brothers
Intermediate Government/Corporate Index during the reporting period. (Average
maturity is a dollar-weighted average maturity of bonds contained in the
portfolio.)
The Portfolio sold FNMA 30-year 6.5% mortgages and bought FNMA 15-year 6%
mortgages. This trade lowered the overall coupon of the mortgage holdings.
(Coupon is the interest rate on a debt security the issuer promises to pay to
the holder until maturity, expressed as an annual percentage of face value.) The
lower coupon on mortgage holdings should be less susceptible to prepayment fears
if interest rates continue to fall.
The managers' near-term outlook is for second quarter Gross Domestic Product
("GDP") growth to come in below consensus estimates due to a reduction in
inventory levels, the GM strike and Asia's ongoing problems. The big question
is, "Will the Asian situation continue to deteriorate and potentially spread to
Russia and Latin America or will Asia begin to stabilize and start on the road
to recovery?" Due to the uncertainty surrounding Asia, the near-term outlook is
that the Fed will keep monetary policy unchanged.
APPRECIATION PORTFOLIO
For the six months ended June 30, 1998, the Appreciation Portfolio ("Portfolio")
had a total return of 12.80%. In comparison, the S&P 500 posted a total return
of 17.72% for the same period. The Portfolio's investment objective is to
provide investors with long-term appreciation of capital.
The more defensive posture that the managers have assumed over the past six
months has cost them some upside, but is consistent with their historical
approach of trying to reduce volatility and risk when the stock market's
valuations seem particularly high, or when they cannot find enough good stocks
at prices they consider fair, let alone undervalued. They carried substantial
cash reserves during the first half of the year, and they were underrepresented
in a handful of big stocks that never seem to go down. For the most part,
however, the Portfolio had some excellent stocks that met their philosophy of
owning dominant companies with superior balance sheets, products that people
want or need and managements that work for shareholders interests.
The stock markets overall gains are all the more striking because one of the
cornerstones of stock appreciation is corporate earnings, and earnings have been
far weaker than anticipated by many analysts and companies alike. The rapid
deterioration in most Asian economies has been costly to many U.S. corporations
that depend on Asia for a good portion of their earnings. Additionally,
technology company earnings have suffered from excess inventories. Despite those
factors, the stock market has remained up. However, appearances in this case are
a bit deceiving, because while the popular market averages have stayed strong,
the number of stocks gaining ground has narrowed sharply. Many company stocks,
when informing investors of earnings shortfalls, have been decimated; but the
money, instead of leaving the market, migrates to a handful of already
2
<PG$PCN>
SEMI-ANNUAL REPORT FOR GREENWICH STREET SERIES FUND
- --------------------------------------------------------------------------------
strong stocks. The managers have always prided themselves on their ability to
pick great companies, and to own the stocks of those companies; but they also
try very hard to take care and not pay exorbitant prices for them.
Allstate Corp. remains the Portfolio's single-largest holding, although they
have slightly reduced their weighting, as the stock was becoming an outsized
position because of its appreciation. Ralston Purina, a company with leadership
positions in pet foods and batteries, has become a major holding. In their
opinion, the company is worth more than the sum of its parts, core volumes are
growing strongly and significant value-creating events are possible over the
long term. Pharmaceutical companies such as Bristol-Myers, Johnson & Johnson and
Merck, also remain major Portfolio holdings.
Finally, the managers have started to re-emphasize the energy sector with
sizable positions in Exxon and Mobil. Other major additions to the Portfolio
during the reporting period include PPG Industries and the Bank of New York. PPG
is a chemical company that is in the midst of changing its business mix away
from commodity chemicals to focus on its higher return, value-added coatings
business. The Bank of New York is an important residential bank in the New York
metro area with a significant presence in corporate fee-based services.
One of their most disappointing stocks has been Hewlett Packard, which is a good
example of both the risks and the rewards of investing in the technology sector.
While they substantially reduced their position at higher levels, the company
has been unable to reduce its costs to offset a slowdown in several of its
product areas. Another is Kimberly Clark, where the company continues to
struggle in the European tissue market. In our view, management is working hard
to fix the issue and the stock's valuation remains attractive. The Portfolio
remains broadly diversified among major market sectors. At the margin, the
managers are contemplating reducing their financial exposure due to the
overwhelming positive sentiment on the sector. Their belief that bond yields are
unlikely to fall significantly lower and valuations that already discount the
current favorable economic environment.
TOTAL RETURN PORTFOLIO
For the six months ended June 30, 1998, the Total Return Portfolio ("Portfolio")
had a total return of 5.03%. In comparison, the S&P 500 posted a total return of
17.72% for the same period. The Portfolio's investment objective is to provide
investors with total return, consisting of long-term capital appreciation and
income. To achieve its objective the Portfolio will primarily invest in a
diversified portfolio of dividend-paying common stocks.
Two of the most important factors affecting the Portfolio during the last few
quarters were the severe two-tier market in the United States and the affects of
the Asian crisis on certain sectors of the U.S. stock market.
In 1998, the largest 50 stocks within the S&P 500 have advanced about 35%
year-to-date whereas as the smallest 100 companies within this index actually
posted a fractional loss. It is the judgment of the managers that the largest
companies are substantially overvalued which means their holdings in this area
of the market are limited at this time. When companies begin to have P/E ratios
of 40 to 60 times earnings in many cases and these P/E ratios are three times or
more the underlying growth rate of earnings, we think the risks are unacceptably
high. (A P/E ratio shows the relationship between a stock's price and the
company's earnings for the last four quarters.) The managers believe overall
earnings will be slowing which further stretches current valuations for some of
the best-known U.S. companies.
Their investment discipline forces them to look for values, not necessarily what
is popular in the market. In addition, we maintain a long-term investment
horizon. We believe the best values (i.e., those sectors with the best
risk/reward profiles) in recent months were concentrated in real estate
investment trusts ("REITs"), energy, basic industries and selected technology
companies. They think these areas of the market have much better long-term
prospects and that downside risk, always an important concern for them, is
rather limited.
The value disparity between the top 50 names in the S&P 500 and most other
stocks is wider than at any time in the last 25 years. They will continue to
emphasize those companies and sectors that, in their judgement, offer investors
the best absolute and relative values.
Additions to the Portfolio in the last few months include positions in paper,
aluminum, energy and financial services. They have also added to their positions
in communications, technology and in the electric utility areas. Moreover, they
have added moderately to our 11% holdings in REITs. The managers also increased
their holdings in the consumer staples area by buying a company that they
believe represents a high potential turnaround story.
3
<PG$PCN>
SEMI-ANNUAL REPORT FOR GREENWICH STREET SERIES FUND
- --------------------------------------------------------------------------------
The P/E ratio and the price-to-sales ratio for the S&P 500 have doubled in the
last four years. These trends are unlikely to continue and in fact the managers
project some P/E compression for many of the largest names in the S&P 500 in the
coming five years. The overall return for the S&P 500 may be in the 6% to 8%
range annually, affected by slowing corporate earnings growth and P/E ratios
stop that expanding. In their opinion, the market will be broadening, and the
returns to the "average stock" will compare favorably to the S&P 500 in the time
period through 2003 (i.e., five years).
In closing, we would like to thank you for your investment in the Greenwich
Street Series Fund. We look forward to helping you pursue your financial needs
in the years to come.
Sincerely,
/s/ HEATH B. MCLENDON
- -----------------------
Heath B. McLendon
Chairman
July 17, 1998
4
<PG$PCN>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- INTERMEDIATE HIGH GRADE PORTFOLIO AS OF 6/30/98
(UNAUDITED)
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MEASUREMENT PERIOD INTERMEDIATE HIGH GRADE GOVERNMENT/CORPORATE
(FISCAL YEAR COVERED) PORTFOLIO BOND INDEX
<S> <C> <C>
10/16/91 10000 10000
DEC-91 10240 10440
DEC-92 10781 11231
DEC-93 11643 12470
DEC-94 11287 12032
DEC-95 13292 14348
DEC-96 13518 14764
DEC-97 14690 15772
6/30/98 15212 16430
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------------------
Six Months Ended 6/30/98+ 3.56%
Year Ended 6/30/98 9.67%
Five Years Ended 6/30/98 6.03%
10/16/91* through 6/30/98 6.45%
<S> <C> <C> <C>
CUMULATIVE TOTAL RETURN
- ---------------------------------------------------
10/16/91* through 6/30/98 52.12%
+ Total return is not annualized, as it may
not be representative of the total return for
the year.
* Commencement of operations
- -------------------------------------------------
</TABLE>
The chart to the right compares
the growth in value of a
hypothetical $10,000 investment
in Intermediate High Grade
Portfolio on October 16, 1991
(commencement of operations)
through June 30, 1998 with that
of a similar investment in the
Lehman Brothers
Government/Corporate Bond Index.
Index information is available at
month-end only; therefore, the
closest month-end to inception
date of the Portfolio has been
used. The Lehman Brothers
Government/Corporate Bond Index
is a weighted composite of the
Lehman Brothers Government Bond
Index, which is a broad-based
index of all public debt
obligations of the U.S.
Government and its agencies and
has an average maturity of nine
years and the Lehman Brothers
Corporate Bond Index, which is
comprised of all public
fixed-rate non-convertible
investment-grade domestic
corporate debt, excluding
collateralized mortgage
obligations.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not a guarantee of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- APPRECIATION PORTFOLIO AS OF 6/30/98 (UNAUDITED)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD STANDARD & POORS 500
(FISCAL YEAR COVERED) APPRECIATION PORTFOLIO INDEX
<S> <C> <C>
10/16/91 10000 10000
DEC-91 10490 10838
DEC-92 11133 11668
DEC-93 11926 12844
DEC-94 11792 13012
DEC-95 15193 17898
DEC-96 18197 22005
DEC-97 22999 29345
6/30/98 25943 34546
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------------------
Six Months Ended 6/30/98+ 12.80%
Year Ended 6/30/98 22.29%
Five Years Ended 6/30/98 18.02%
10/16/91* through 6/30/98 15.27%
<S> <C> <C> <C>
CUMULATIVE TOTAL RETURN
- ---------------------------------------------------
10/16/91* through 6/30/98 159.43%
+ Total return is not annualized, as it may
not be representative of the total return for
the year.
* Commencement of operations
- -------------------------------------------------
</TABLE>
The chart to the right compares
the growth in value of a
hypothetical $10,000 investment
in Appreciation Portfolio on
October 16, 1991 (commencement of
operations) through June 30, 1998
with that of a similar investment
in the Standard & Poor's 500
Index. Index information is
available at month-end only;
therefore, the closest month-end
to inception date of the
Portfolio has been used. The
Standard & Poor's 500 Index is an
unmanaged index composed of 500
widely held common stocks listed
on the New York Stock Exchange,
American Stock Exchange and
over-the-counter market.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not a guarantee of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
5
<PG$PCN>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- TOTAL RETURN PORTFOLIO AS OF 6/30/98 (UNAUDITED)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD STANDARD & POORS 500
(FISCAL YEAR COVERED) TOTAL RETURN PORTFOLIO INDEX
<S> <C> <C>
12/3/93 10000 10000
DEC-93 10300 10121
DEC-94 11062 10253
DEC-95 13832 14103
DEC-96 17335 17340
DEC-97 20255 21109
6/30/98 21273 24850
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------------------
Six Months Ended 6/30/98+ 5.03%
Year Ended 6/30/98 13.95%
12/3/93* through 6/30/98 17.94%
<S> <C> <C> <C>
CUMULATIVE TOTAL RETURN
- ---------------------------------------------------
12/3/93* through 6/30/98 112.73%
+ Total return is not annualized, as it may
not be representative of the total return for
the year.
* Commencement of operations
- -------------------------------------------------
</TABLE>
The chart to the right compares
the growth in value of a
hypothetical $10,000 investment
in Total Return Portfolio on
December 3, 1993 (commencement of
operations) through June 30, 1998
with that of a similar investment
in the Standard & Poor's 500
Index. Index information is
available at month-end only;
therefore, the closest month-end
to inception date of the
Portfolio has been used. The
Standard & Poor's 500 Index is an
unmanaged index composed of 500
widely held common stocks listed
on the New York Stock Exchange,
American Stock Exchange and
over-the-counter market.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not a guarantee of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
6
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 1998
INTERMEDIATE HIGH GRADE PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- -------------------------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 4.0%
$ 590,000 Standard Credit Card Master Trust, 5.900% due 2/7/01
(Cost -- $588,727).......................................... $ 590,637
- -------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- 13.5%
691,186 Federal National Mortgage Association, 7.000% due 1/1/13.... 704,360
285,027 Federal National Mortgage Association, 7.000% due 2/1/13.... 290,460
990,000 Federal National Mortgage Association, 6.000% due 6/1/13.... 980,101
- -------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (Cost -- $1,974,159)....... 1,974,921
- -------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES -- 61.1%
- -------------------------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 1.4%
Rockwell International:
100,000 Debentures, 8.875% due 9/15/99.............................. 103,625
100,000 Notes, 6.750% due 9/15/02................................... 103,125
- -------------------------------------------------------------------------------------------------
206,750
- -------------------------------------------------------------------------------------------------
DOMESTIC BANKS -- 14.5%
400,000 Banc One Corp., Sr. Notes, 6.700% due 3/24/00............... 405,000
180,000 Chase Manhattan Bank Corp., Sr. Notes, 5.875% due 8/4/99.... 180,000
500,000 Norwest Corp., Sr. Notes, 6.250% due 4/15/99................ 501,875
500,000 Rabo Bank Nederland, Deposit Notes, 5.950% due 10/6/99...... 500,000
500,000 Republic New York Corp., Debentures, 9.500% due 7/1/00...... 533,125
- -------------------------------------------------------------------------------------------------
2,120,000
- -------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.4%
200,000 Virginia Electric and Power Co., 8.875% due 6/1/99.......... 205,250
- -------------------------------------------------------------------------------------------------
ELECTRONICS / COMPUTERS -- 3.6%
500,000 Philips Electronics Corp., Notes, 7.200% due 6/1/26......... 532,500
- -------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 13.0%
500,000 Bankers Trust Institutional Capital Trust B, Company
Guaranteed Notes,
7.750% due 12/1/26 (a)...................................... 525,000
100,000 Caterpillar Financial Services Inc., Medium Term Notes,
6.100% due 7/15/99.......................................... 100,252
200,000 General Electric Capital Corp., Notes, 8.100% due 1/26/99... 202,574
250,000 J.P. Morgan & Co., Series A, Unsubordinated Sr. Notes,
6.125% due 10/2/00.......................................... 251,250
500,000 Pitney Bowes Credit Corp., Notes, 5.650% due 1/15/03........ 493,125
300,000 Xerox Capital Trust, Company Guaranteed Notes, 8.000% due
2/1/27...................................................... 327,750
- -------------------------------------------------------------------------------------------------
1,899,951
- -------------------------------------------------------------------------------------------------
FOREIGN BANKS -- 3.7%
500,000 National Westminster Bank-N.Y., Sub. Notes, 9.450% due
5/1/01...................................................... 544,375
- -------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT -- 0.8%
100,000 Quebec Province, Notes, 8.625% due 1/19/05.................. 113,750
- -------------------------------------------------------------------------------------------------
HEALTHCARE -- 5.4%
500,000 Service Corp. International, Notes, 7.000% due 6/1/15....... 518,125
250,000 Kimberly-Clark Corp., Debentures, 7.875% due 2/1/23......... 270,000
- -------------------------------------------------------------------------------------------------
788,125
- -------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
INTERMEDIATE HIGH GRADE PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- -------------------------------------------------------------------------------------------------
<C> <S> <C>
INSURANCE COMPANIES -- 3.6%
$ 500,000 St. Paul Cos., Inc., Notes, 7.180% due 5/5/04............... $ 523,125
- -------------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE -- 5.9%
245,000 BP America Inc., Debentures, 9.375% due 11/1/00............. 263,375
500,000 HNG Internorth, Debentures, 9.625% due 3/15/06.............. 601,875
- -------------------------------------------------------------------------------------------------
865,250
- -------------------------------------------------------------------------------------------------
OIL INTEGRATED - DOMESTIC -- 3.4%
500,000 Shell Oil Co., Debentures, 6.950% due 12/15/98.............. 501,765
- -------------------------------------------------------------------------------------------------
RETAIL -- 1.8%
250,000 Wal-Mart Stores Inc., Debentures, 9.100% due 7/15/00........ 265,312
- -------------------------------------------------------------------------------------------------
SOVEREIGN DEBT -- 2.6%
95,000 Asian Development Bank, Debentures, 9.125% due 6/1/00....... 100,819
180,000 Asian Development Bank, Debentures, 8.500% due 5/2/01....... 193,050
75,000 Republic of Ireland, Notes, 7.125% due 7/15/02.............. 78,375
- -------------------------------------------------------------------------------------------------
372,244
- -------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -- $8,808,412)........ 8,938,397
- -------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 21.4%
1,000,000 U.S. Treasury Bonds, 8.125% due 8/15/19..................... 1,289,650
250,000 U.S. Treasury Bonds, 6.000% due 2/15/26..................... 260,350
275,000 U.S. Treasury Notes, 6.375% due 1/15/99..................... 276,059
1,000,000 Federal Home Loan Bank, 6.450% due 10/29/07................. 1,042,560
250,000 Federal National Mortgage Association, Medium Term Notes,
6.220% due 3/13/06.......................................... 255,483
- -------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost -- $2,966,488)........................................ 3,124,102
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $14,337,786*)............ $14,628,057
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) Security is exempt from registration under rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 82.3%
- ---------------------------------------------------------------------------------------
BASIC INDUSTRIES -- 2.5%
1,700 Agribrands International Inc. (a)........................... $ 51,425
35,000 E.I. du Pont de Nemours & Co. .............................. 2,611,875
30,000 Olin Corp. ................................................. 1,250,625
33,000 St. Joe Paper Co. .......................................... 903,375
- ---------------------------------------------------------------------------------------
4,817,300
- ---------------------------------------------------------------------------------------
CAPITAL GOODS -- 8.7%
51,000 Allied Signal Inc. ......................................... 2,263,125
16,000 Emerson Electric Co. ....................................... 966,000
47,000 General Electric Co. ....................................... 4,277,000
16,000 Honeywell, Inc. ............................................ 1,337,000
19,000 Johnson Controls Inc. ...................................... 1,086,562
22,000 Lockheed Martin Corp. ...................................... 2,329,250
30,000 Minnesota Mining & Manufacturing Co. ....................... 2,465,625
34,000 Tyco International Ltd. .................................... 2,142,000
- ---------------------------------------------------------------------------------------
16,866,562
- ---------------------------------------------------------------------------------------
COMMUNICATIONS -- 1.3%
30,000 Lucent Technologies Inc. ................................... 2,495,625
- ---------------------------------------------------------------------------------------
CONSUMER DURABLES -- 2.4%
14,000 Chrysler Corp. ............................................. 789,250
26,000 General Motors Corp. ....................................... 1,737,125
13,000 Goodyear Tire & Rubber Co. ................................. 837,687
25,500 Newell Co. ................................................. 1,270,218
- ---------------------------------------------------------------------------------------
4,634,280
- ---------------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 11.7%
20,000 Bestfoods Co. .............................................. 1,161,250
33,000 Black & Decker Corp. ....................................... 2,013,000
22,000 Conagra Inc. ............................................... 697,125
33,000 Dow Chemical Co. ........................................... 3,190,687
16,000 Eastman Kodak Co. .......................................... 1,169,000
16,000 Gillette Co. ............................................... 907,000
50,000 Kimberly-Clark Corp. ....................................... 2,293,750
25,000 PepsiCo, Inc. .............................................. 1,029,687
37,000 PPG Industries Inc. ........................................ 2,573,812
16,000 Procter & Gamble Corp. ..................................... 1,457,000
25,000 Ralston-Ralston Purina Group................................ 2,920,312
8,000 Stanley Works............................................... 332,500
36,000 Unilever NV................................................. 2,841,750
- ---------------------------------------------------------------------------------------
22,586,873
- ---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER SERVICES -- 7.1%
36,000 Gannett Co. ................................................ $ 2,558,250
20,000 Hilton Hotels Corp. ........................................ 570,000
34,000 McDonald's Corp. ........................................... 2,346,000
38,000 Meredith Corp. ............................................. 1,783,625
12,000 Scandinavian Broadcasting System SA (a)..................... 362,250
19,000 The Walt Disney Co. ........................................ 1,996,187
15,000 Time Warner, Inc. .......................................... 1,281,562
45,000 Wal-Mart Stores, Inc........................................ 2,733,750
- ---------------------------------------------------------------------------------------
13,631,624
- ---------------------------------------------------------------------------------------
ENERGY -- 7.5%
50,000 Amoco Corp. ................................................ 2,081,260
22,000 Ashland Inc. ............................................... 1,135,750
14,000 EVI Weatherford Inc. (a).................................... 519,750
35,000 Exxon Corp. ................................................ 2,495,937
22,000 Halliburton Co. ............................................ 980,375
22,000 Mead Corp. ................................................. 698,500
40,000 Mobil Oil Corp. ............................................ 3,065,000
26,000 Royal Dutch Petroleum Co. .................................. 1,425,125
14,000 Schlumberger Ltd. .......................................... 956,375
15,000 Texaco Inc. ................................................ 895,312
10,000 Union Pacific Corp. ........................................ 175,625
- ---------------------------------------------------------------------------------------
14,429,009
- ---------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 18.7%
63,000 Allstate Corp. ............................................. 5,768,437
19,000 American Express Co......................................... 2,166,000
26,000 American International Group, Inc. ......................... 3,796,000
17,000 Associated First Captial Corp. ............................. 1,306,875
33,000 Bank of New York Co., Inc. ................................. 2,002,687
36,040 Chase Manhattan Corp. ...................................... 2,721,020
30,000 Chubb Corp. ................................................ 2,411,250
15,000 CNA Financial Corp. (a) .................................... 698,437
43,000 Federal National Mortgage Association....................... 2,612,250
15,000 First Virginia Banks, Inc. ................................. 766,875
10,000 General Re Corp. ........................................... 2,535,000
63,000 Household International, Inc. .............................. 3,134,250
27,000 Leucadia National Corp. (a)................................. 892,687
17,000 National City Corp. ........................................ 1,207,000
42,000 St. Paul Cos. .............................................. 1,766,625
6,000 Wells Fargo & Co. .......................................... 2,214,000
- ---------------------------------------------------------------------------------------
35,999,393
- ---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------
<C> <S> <C>
HEALTHCARE -- 9.0%
56,000 Abbott Labs, Inc. .......................................... $ 2,289,000
37,000 American Home Products Corp. ............................... 1,914,750
37,000 Bristol-Myers Squibb Co. ................................... 4,252,687
8,000 Eli Lilly & Co. ............................................ 528,500
49,000 Johnson & Johnson........................................... 3,613,750
24,000 Merck & Co., Inc. .......................................... 3,210,000
14,000 Pfizer Inc. ................................................ 1,521,625
- ---------------------------------------------------------------------------------------
17,330,312
- ---------------------------------------------------------------------------------------
TECHNOLOGY -- 9.0%
33,000 Chiron Corp. (a)............................................ 517,687
24,500 Cisco Systems Inc. (a)...................................... 2,255,531
24,000 Compaq Computer Corp. ...................................... 681,000
15,000 First Data Corp. ........................................... 499,687
27,000 Hewlett-Packard Co. ........................................ 1,616,625
24,000 Intel Corp. ................................................ 1,779,000
18,000 International Business Machines Corp. ...................... 2,066,625
12,000 Microsoft Corp. ............................................ 1,300,500
29,000 Texas Instruments, Inc. .................................... 1,691,062
50,000 Thermo Electron Corp. (a)................................... 1,709,375
15,000 Unitrode Corp. (a).......................................... 172,500
30,000 Xerox Corp. ................................................ 3,048,750
- ---------------------------------------------------------------------------------------
17,338,342
- ---------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 3.8%
50,000 Ameritech Corp. ............................................ 2,243,750
28,000 Bell Atlantic Corp. ........................................ 1,277,500
8,000 Bellsouth Corp. ............................................ 537,000
46,000 GTE Corp. .................................................. 2,558,750
3,000 SBC Communications, Inc. ................................... 120,000
14,000 US West Inc. ............................................... 658,000
- ---------------------------------------------------------------------------------------
7,395,000
- ---------------------------------------------------------------------------------------
TRANSPORTATION -- 0.6%
13,000 AMR Corp. (a)............................................... 1,082,250
- ---------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $102,011,403)................... 158,606,570
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT -- 17.7%
$34,142,000 Goldman, Sachs & Co., 5.645% due 7/1/98; Proceeds at
maturity -- $34,147,354; (Fully collateralized by U.S.
Treasury Note, 5.375% due 6/30/00; Market
value -- $34,841,075) (Cost -- $34,142,000)................. 34,142,000
- ---------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $136,153,403*)........... $192,748,570
- ---------------------------------------------------------------------------------------
</TABLE>
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 67.5%
- --------------------------------------------------------------------------------------------------
BANKS - MONEY CENTER -- 8.3%
75,000 American Express Co. (c).................................... $ 8,550,000
135,000 Bank of New York Co., Inc................................... 8,192,812
25,000 J.P. Morgan & Co., Inc. (c)................................. 2,928,125
85,000 Mellon Bank Corp. .......................................... 5,918,125
- --------------------------------------------------------------------------------------------------
25,589,062
- --------------------------------------------------------------------------------------------------
BASIC MATERIALS -- 5.2%
90,000 Aluminum Co. of America (b)................................. 5,934,375
299,500 Oregon Steel Mills Inc...................................... 5,578,187
200,000 RMI Titanium Co. (a)(b)..................................... 4,550,000
- --------------------------------------------------------------------------------------------------
16,062,562
- --------------------------------------------------------------------------------------------------
CHEMICALS -- 2.0%
65,000 Dow Chemical Co. (b)........................................ 6,284,687
- --------------------------------------------------------------------------------------------------
COMMUNICATIONS -- 9.3%
110,000 American Telephone & Telegraph Corp. (b).................... 6,283,750
200,000 Comsat Corp................................................. 5,662,500
150,000 Enron Corp.................................................. 8,109,375
75,000 GTE Corp. (c)............................................... 4,171,875
95,000 US West Inc. ............................................... 4,465,000
- --------------------------------------------------------------------------------------------------
28,692,500
- --------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 6.9%
90,000 Georgia Pacific Corp........................................ 5,304,375
225,000 Toys "R" Us, Inc. (a)....................................... 5,301,563
175,000 Wal-Mart Stores, Inc. (b)(c)................................ 10,631,250
- --------------------------------------------------------------------------------------------------
21,237,188
- --------------------------------------------------------------------------------------------------
CONSUMER STAPLES -- 2.7%
200,000 PepsiCo, Inc. .............................................. 8,237,500
- --------------------------------------------------------------------------------------------------
ENERGY -- 7.6%
100,000 Chevron Corp. .............................................. 8,306,250
70,000 Coastal Corp. .............................................. 4,886,875
50,000 Diamond Offshore Drilling Inc. (b)(c)....................... 2,000,000
100,000 Noble Drilling Corp. (b).................................... 2,406,250
300,000 Ocean Energy Inc. (a)....................................... 5,868,750
- --------------------------------------------------------------------------------------------------
23,468,125
- --------------------------------------------------------------------------------------------------
HEALTHCARE -- 1.9%
50,000 Bristol-Myers Squibb Co. (b)(c)............................. 5,746,875
- --------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C>
REAL ESTATE -- 12.0%
261,500 Merry Land & Investment Co., Inc............................ $ 5,507,844
180,000 Shurgard Storage Centers Inc. Class A Shares................ 4,995,000
135,000 Simon Debartolo Group, Inc. ................................ 4,387,500
135,000 Spieker Properties, Inc. ................................... 5,231,250
175,000 The Rouse Co. (b)........................................... 5,501,563
160,000 TriNet Corp. Realty Trust, Inc.............................. 5,440,000
34,800 Western Real Estate Investment Trust........................ 476,325
311,300 Westfield America Inc. ..................................... 5,720,138
- --------------------------------------------------------------------------------------------------
37,259,620
- --------------------------------------------------------------------------------------------------
TECHNOLOGY -- 3.5%
150,000 Adobe Systems Inc. (c)...................................... 6,365,625
218,500 Danka Business Systems Plc.................................. 2,581,031
150,000 Geoworks Corp. (a).......................................... 525,000
25,000 Motorola, Inc. (c).......................................... 1,314,063
- --------------------------------------------------------------------------------------------------
10,785,719
- --------------------------------------------------------------------------------------------------
TRANSPORTATION -- 2.1%
150,000 Union Pacific Corp. (b)..................................... 6,618,750
- --------------------------------------------------------------------------------------------------
UTILITIES -- 5.1%
125,000 Duke Energy Corp. .......................................... 7,406,250
300 Hong Kong Telecom. Ltd. .................................... 5,662
300,760 Sempra Energy (a)........................................... 8,346,090
- --------------------------------------------------------------------------------------------------
15,758,002
- --------------------------------------------------------------------------------------------------
WHOLESALE DISTRIBUTOR -- 0.9%
152,000 Fleming Cos. Inc............................................ 2,669,500
- --------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $178,379,225)................... 208,410,090
- --------------------------------------------------------------------------------------------------
OPTIONS PURCHASED -- 0.0%
BANKS - MONEY CENTER -- 0.0%
25,000 J.P. Morgan & Co., Inc. Put @ 100, Expire 1/15/99
(Cost -- $125,750).......................................... 75,000
- --------------------------------------------------------------------------------------------------
PREFERRED STOCK -- 5.4%
225,000 Greyhound Lines, Exchangeable 8.50% (d)..................... 7,959,375
125,000 KMart Financing Corp., Exchangeable 7.75%................... 8,750,000
- --------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost -- $12,273,548)................. 16,709,375
- --------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $190,778,523)................ 225,194,465
- --------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PG$PCN>
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 1998
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 27.1%
$42,513,000 Chase, 5.696% due 7/1/98; Proceeds at
maturity -- $42,519,726; (Fully collateralized by U.S.
Treasury Notes, 5.375% due 6/30/00;
Market value -- $43,373,333)................................ $42,513,000
41,210,000 Goldman, Sachs & Co., 5.645% due 7/1/98; Proceeds at
maturity -- $41,216,463; (Fully collateralized by U.S.
Treasury Notes, 5.375% due 6/30/00;
Market value -- $42,053,796)................................ 41,210,000
- --------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS (Cost -- $83,723,000)........... 83,723,000
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $274,501,523*)........... $308,917,465
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) Non-income producing security.
(b) A portion of this security is on loan (See Note 12).
(c) Security is segregated by Custodian to cover written call options.
(d) Security is exempt from registration under rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PG$PCN>
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 1998
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments -- Cost....................................... $14,337,786 $102,011,403 $190,778,523
Repurchase agreements -- Cost............................. -- 34,142,000 83,723,000
- --------------------------------------------------------------------------------------------------------
Investments, at Value..................................... $14,628,057 $158,606,570 $225,194,465
Repurchase agreements, at Value........................... -- 34,142,000 83,723,000
Collateral for securities on loan (Note 12)............... -- -- 42,948,612
Receivable for securities sold............................ -- -- 1,364,307
Dividends and interest receivable......................... 243,596 200,637 596,477
- --------------------------------------------------------------------------------------------------------
TOTAL ASSETS.............................................. 14,871,653 192,949,207 353,826,861
- --------------------------------------------------------------------------------------------------------
LIABILITIES:
Investment advisory fees payable.......................... 13,812 89,188 139,841
Payable to bank........................................... 9,719 -- --
Administration fees payable............................... 6,716 32,432 53,332
Payable for securities on loan (Note 12).................. -- -- 42,948,612
Payable for securities purchased.......................... -- -- 993,162
Payable for options written (Note 6)...................... -- -- 3,558,594
Accrued expenses.......................................... 20,763 5,209 18,944
- --------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES......................................... 51,010 126,829 47,712,485
- --------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $14,820,643 $192,822,378 $306,114,376
- --------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest................ $ 1,402 $ 9,588 $ 17,434
Capital paid in excess of par value....................... 14,376,076 129,810,497 251,539,860
Undistributed net investment income....................... 435,670 1,153,092 5,089,129
Accumulated net realized gain (loss) from security
transactions and options............................... (282,776) 5,254,034 15,951,444
Net unrealized appreciation of investments and options.... 290,271 56,595,167 33,516,509
- --------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $14,820,643 $192,822,378 $306,114,376
- --------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING.......................................... 1,401,845 9,588,452 17,433,895
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE.................................. $10.57 $20.11 $17.56
- --------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PG$PCN>
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest.................................................. $507,139 $ 796,726 $ 1,991,859
Dividends................................................. -- 1,057,303 3,418,514
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................... 507,139 1,854,029 5,410,373
- -----------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3)......................... 29,758 461,409 808,652
Administration fees (Note 3).............................. 14,879 167,785 294,055
Audit and legal........................................... 7,517 5,841 7,803
Shareholder communications................................ 6,923 11,150 15,353
Shareholder and system servicing fees..................... 5,439 3,472 5,862
Pricing service fees...................................... 2,076 -- --
Trustees' fees............................................ 1,533 5,455 10,171
Custody................................................... 534 2,976 5,340
Amortization of deferred organization costs............... -- -- 1,587
Other..................................................... 1,607 2,701 3,501
- -----------------------------------------------------------------------------------------------------------
TOTAL EXPENSES............................................ 70,266 660,789 1,152,324
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME....................................... 436,873 1,193,240 4,258,049
- -----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
OPTIONS (NOTES 4 AND 6):
Realized Gain From:
Security transactions (excluding short-term
securities).......................................... 34,300 5,215,768 15,686,797
Options written........................................ -- -- 424,558
- -----------------------------------------------------------------------------------------------------------
NET REALIZED GAIN......................................... 34,300 5,215,768 16,111,355
- -----------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period.................................... 235,253 43,212,947 39,948,496
End of period.......................................... 290,271 56,595,167 33,516,509
- -----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET UNREALIZED APPRECIATION........ 55,018 13,382,220 (6,431,987)
- -----------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND OPTIONS......................... 89,318 18,597,988 9,679,368
- -----------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS...................... $526,191 $19,791,228 $13,937,417
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PG$PCN>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE
30, 1998
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income..................................... $ 436,873 $ 1,193,240 $ 4,258,049
Net realized gain......................................... 34,300 5,215,768 16,111,355
Increase (decrease) in net unrealized appreciation........ 55,018 13,382,220 (6,431,987)
- --------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS.................... 526,191 19,791,228 13,937,417
- --------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income..................................... (935,810) (2,031,508) (7,062,382)
Net realized gains........................................ -- (7,186,525) (8,488,059)
- --------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS........................................... (935,810) (9,218,033) (15,550,441)
- --------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 13):
Net proceeds from sale of shares.......................... 889,940 45,297,413 25,179,194
Net asset value of shares issued for reinvestment of
dividends.............................................. 935,810 9,218,032 15,550,442
Cost of shares reacquired................................. (1,695,647) (16,400,286) (7,007,968)
- --------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS....... 130,103 38,115,159 33,721,668
- --------------------------------------------------------------------------------------------------------
INCREASE (DECEASE) IN NET ASSETS............................ (279,516) 48,688,354 32,108,644
NET ASSETS:
Beginning of period....................................... 15,100,159 144,134,024 274,005,732
- --------------------------------------------------------------------------------------------------------
END OF PERIOD*............................................ $14,820,643 $192,822,378 $306,114,376
- --------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of:.......... $435,670 $1,153,092 $5,089,129
- --------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PG$PCN>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER
31, 1997
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income.................................... $ 935,739 $ 2,031,193 $ 7,204,804
Net realized gain (loss)................................. (24,810) 7,187,150 8,306,846
Increase in net unrealized appreciation.................. 336,859 18,175,990 19,189,024
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS................... 1,247,788 27,394,333 34,700,674
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income.................................... (962,101) (1,537,746) (3,035,727)
Net realized gains....................................... -- (7,668,329) (7,940,255)
- ---------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS.......................................... (962,101) (9,206,075) (10,975,982)
- ---------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 13):
Net proceeds from sale of shares......................... 1,510,131 30,193,445 75,318,676
Net asset value of shares issued for reinvestment of
dividends............................................. 962,101 9,206,075 10,975,982
Cost of shares reacquired................................ (2,394,121) (14,685,582) (7,517,017)
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS...... 78,111 24,713,938 78,777,641
- ---------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS..................................... 363,798 42,902,196 102,502,333
NET ASSETS:
Beginning of year........................................ 14,736,361 101,231,828 171,503,399
- ---------------------------------------------------------------------------------------------------------
END OF YEAR*............................................. $15,100,159 $144,134,024 $274,005,732
- ---------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of:......... $934,607 $1,991,360 $7,893,462
- ---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Intermediate High Grade, Appreciation and Total Return Portfolios
("Portfolios") are separate investment portfolios of the Greenwich Street Series
Fund ("Fund"). The Fund, a Massachusetts business trust, is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. Shares of the Fund can be acquired through
investing in an individual flexible premium deferred combination fixed and
variable annuity contract or a certificate evidencing interest in a master group
flexible premium deferred annuity offered by certain insurance companies. The
Fund offers seven other managed investment portfolios: Money Market, Diversified
Strategic Income, Equity Income, Equity Index, Growth and Income, Emerging
Growth and International Equity Portfolios. The financial statements and
financial highlights for the other portfolios are presented in a separate
semi-annual report.
The significant accounting policies consistently followed by the Portfolios
are: (a) security transactions are accounted for on trade date; (b) securities
traded on national securities markets are valued at the closing prices on such
markets or, if there were no sales during the day, at current quoted bid price;
securities primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except that when a significant occurrence subsequent to the time a value was so
established is likely to have significantly changed the value then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees or its delegates;
over-the-counter securities are valued on the basis of the bid price at the
close of business on each day; U.S. government and agency obligations are valued
at the average between the bid and the ask prices; (c) securities maturing
within 60 days are valued at cost plus accreted discount, or minus amortized
premium, which approximates value; (d) dividend income is recorded on the
ex-dividend date; foreign dividend income is recorded on the ex-dividend date or
as soon as practical after the Fund determines the existence of a dividend
declaration after exercising reasonable due diligence; (e) interest income is
recorded on the accrual basis; (f) gains or losses on the sale of securities are
calculated by using the specific identification method; (g) dividends and
distributions to shareholders are recorded by the Fund on the ex-dividend date;
(h) the accounting records of the Fund are maintained in U.S. dollars. All
assets and liabilities denominated in foreign currencies are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, and income
and expenses are translated at the rate of exchange quoted on the respective
date that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank; (i) each Portfolio intends to comply with the requirements of
the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all federal income and excise tax; (j) the
character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. At December 31, 1997, reclassifications were made to the capital
accounts of the Appreciation and Total Return Portfolios, respectively, to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Net investment income, net realized
gains and net assets were not affected by these changes; 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 are
currently being amortized on a straight-line basis over a five year period,
which began with the commencement of operations in December 1993.
2. DIVIDENDS
The Portfolios declare and distribute dividends from net investment income
annually. Net realized capital gains, if any, are also declared and distributed
annually.
3. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION AGREEMENT AND OTHER
TRANSACTIONS
The Fund, on behalf of the Portfolios, has entered into an investment
advisory agreement ("Advisory Agreement") with Mutual Management Corp. ("MMC").
MMC is a wholly-owned subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"),
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.
19
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Fund, on behalf of the Portfolios, has entered into an administration
agreement with MMC. 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, MMC will, as
appropriate, reduce its fees by one half the excess expenses in the proportion
that its fees bear to the aggregate of such fees paid by the Portfolio. IDS Life
Insurance Company ("IDS Life"), one of the insurance companies offering variable
annuities through which investments can be made in the Fund, will bear the
remaining half of such excess expenses.
For the six months ended June 30, 1998, Smith Barney received brokerage
commissions of $44,260.
No officer, Director or employee of Smith Barney or its affiliates receives
any compensation from the Fund for serving as a Trustee or officer of the Fund.
4. INVESTMENTS
During the six months ended June 30, 1998, 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..................................... $ 5,081,204 $ 5,366,401
Appreciation................................................ 38,699,212 19,603,386
Total Return................................................ 109,023,426 95,792,045
- ----------------------------------------------------------------------------------------
</TABLE>
At June 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
PORTFOLIO APPRECIATION DEPRECIATION APPRECIATION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Intermediate High Grade.................................... $ 336,937 $ (46,666) $ 290,271
Appreciation............................................... 57,395,249 (800,082) 56,595,167
Total Return............................................... 43,522,494 (9,106,552) 34,415,942
- ---------------------------------------------------------------------------------------------------------
</TABLE>
5. FUTURES CONTRACTS
The Intermediate High Grade and Total Return Portfolios may from time to
time enter into futures contracts.
Initial margin deposits made upon entering into futures contracts are
recognized as assets. Securities equal to the initial margin amount are
segregated by the custodian in the name of the broker. Additional securities are
also segregated up to the current market value of the futures contracts. 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 received or made 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).
At June 30, 1998, there were no open futures contracts in the Portfolios.
20
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. OPTION CONTRACTS
The Intermediate High Grade and Total Return Portfolios may from time to
time enter into options contracts.
Premiums paid when put or call options are purchased by the Portfolio,
represent investments, which are "marked to market" daily. When a purchased
option expires, the Portfolio will realize a loss in the amount of the premium
paid. 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 premium paid for 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.
At June 30, 1998, 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 depending upon whether the cost of the closing transaction is greater or
less than the premium originally received, without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option is
eliminated. When a written call option is exercised, the Portfolio realizes a
gain or loss from the sale of the underlying security and the proceeds from such
sale are increased by the premium originally received. When a written put option
is exercised, the amount of the premium originally received will reduce the cost
of the security which the Portfolio purchased upon exercise. When written index
options are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium
originally paid. The Portfolio enters into options for hedging purposes. The
risk in writing a covered call option is that the Portfolio gives up the
opportunity to participate in any increase in the price of the underlying
security beyond the exercise price. The risk in writing a put option is that the
Fund is exposed to the risk of loss if the market price of the underlying
security declines.
The following covered call options transactions occurred in the Total
Return Portfolio during the six months ended June 30, 1998:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Options written, outstanding at December 31, 1997........... 5,310 $ 1,249,520
Options written during the six months ended June 30, 1998... 29,400 8,440,766
Options cancelled in closing purchase transactions.......... (22,900) (5,781,605)
Options expired............................................. (4,060) (998,591)
Options exercised........................................... (1,250) (250,929)
- -------------------------------------------------------------------------------------
Options written, outstanding at June 30, 1998............... 6,500 $ 2,659,161
- -------------------------------------------------------------------------------------
</TABLE>
21
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The following table represents the written call option contracts open at
June 30, 1998:
<TABLE>
<CAPTION>
NUMBER OF STRIKE
CONTRACTS EXPIRATION PRICE VALUE
- --------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1,500 Adobe Systems Inc. ......................................... 1/15/99 $ 55 $ 328,125
750 American Express Co. ....................................... 1/15/99 110 975,000
250 Bank of New York, Inc. ..................................... 10/16/98 65 43,750
500 Bristol-Myers Squibb Co. ................................... 9/18/98 115 306,250
500 Diamond Offshore Drilling Inc. ............................. 9/18/98 55 18,750
750 GTE Corp. .................................................. 1/15/99 65 98,438
250 J.P. Morgan & Co. .......................................... 1/15/99 130 165,625
250 Motorola, Inc. ............................................. 1/15/99 70 25,781
1,750 Wal-Mart Stores, Inc. ...................................... 1/15/99 55 1,596,875
- --------------------------------------------------------------------------------------------------------
(Premiums received -- $2,659,161)........................... $3,558,594
- --------------------------------------------------------------------------------------------------------
</TABLE>
7. REPURCHASE AGREEMENTS
The Portfolios purchase (and its custodian takes possession of) U.S.
government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed upon higher repurchase price. The Portfolio requires
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
8. REVERSE REPURCHASE AGREEMENTS
The Intermediate High Grade Portfolio may enter into reverse repurchase
agreements.
A reverse repurchase agreement involves a sale by the Portfolio of
securities that it holds with an agreement by the Portfolio to repurchase the
same securities at an agreed upon price and date. A reverse repurchase agreement
involves risk that the market value of the securities sold by the Portfolio may
decline below the repurchase price of the securities. The Portfolio will
establish a segregated account with its custodian, in which the Portfolio will
maintain cash, U.S. government securities or other liquid high grade obligations
equal in value to its obligations with respect to the reverse repurchase
agreements.
At June 30, 1998, there were no open reverse repurchase agreements in the
Portfolio.
9. SECURITIES TRADED ON A WHEN-ISSUED OR TO-BE-ANNOUNCED BASIS
The Intermediate High Grade and Total Return Portfolios may from time to
time purchase securities on a when-issued or to-be-announced ("TBA") basis.
In a TBA transaction, the Portfolio commits to purchasing or selling
securities for which specific information is not yet known at the time of the
trade, particularly the face amount and maturity date in GNMA transactions.
Securities purchased on a TBA basis are not settled until they are delivered to
the Portfolio, normally 15 to 45 days later. These transactions are subject to
market fluctuations and their current value is determined in the same manner as
for other securities.
At June 30, 1998, there were no when-issued or TBA securities held in the
Portfolios.
22
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
10. MORTGAGE ROLL TRANSACTIONS
The Intermediate High Grade Portfolio has the ability to participate in
mortgage roll transactions.
A mortgage roll transaction involves a sale by the Portfolio of securities
that it holds with an agreement by the Portfolio to repurchase similar
securities at an agreed upon price and date. The securities repurchased will
bear the same interest rate as those sold, but generally will be collateralized
by pools of mortgages with different prepayment histories than those securities
sold. Proceeds of the sale and the income from these investments will be
invested, together with any additional income from the Portfolio exceeding the
yield on the securities sold.
At June 30, 1998, there were no open mortgage roll transactions in the
Portfolio.
11. SHORT SALES AGAINST THE BOX
The Total Return Portfolio has the ability to engage in short sales against
the box.
A short sale against the box is a short sale of common stock such that,
when the short position is open, the Portfolio involved owns an equal amount of
the stock or preferred stocks or debt securities, convertible or exchangeable,
without payment of further consideration, into an equal number of shares of
common stock sold short. The proceeds of the sale will be held by the broker
until the settlement date, when the Portfolio delivers the stock or the
convertible or exchangeable securities to close out its short position. Although
prior to delivery a Portfolio will have to pay an amount equal to any dividends
paid on the common stock sold short, the Portfolio will receive the dividends
from the stock or, the preferred stock or the interest from the convertible or
exchangeable debt securities plus a portion of the interest earned from the
proceeds of the short sale. The Portfolio will deposit, in a segregated account
with the Fund's custodian, the common stock or convertible preferred stock or
debt securities in connection with short sales against the box.
At June 30, 1998, the Portfolio had no open short sales against the box.
12. LENDING OF SECURITIES
The Portfolios have an agreement with the custodian whereby the custodian
may lend securities owned by the Portfolios to brokers, dealers and other
financial organizations, and receive a lenders fee. 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 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.
At June 30, 1998, the Total Return Portfolio had loaned common stocks
having a value of $41,246,952 and holds the following collateral for loaned
securities:
<TABLE>
<CAPTION>
SECURITY DESCRIPTION VALUE
- -------------------------------------------------------------------------
<S> <C>
TIME DEPOSITS:
Toronto Dominion, 6.500% due 7/1/98....................... $ 7,798,419
Svenska Handelbank, 6.500% due 7/1/98..................... 7,798,419
Deutsche Bank, 7.000% due 7/1/98.......................... 7,798,419
Banque Paribee, 6.500% due 7/1/98......................... 9,592,056
REPURCHASE AGREEMENTS:
Goldman, Sachs, 6.250% due 7/1/98......................... 4,892,326
Morgan Stanley, 6.250% due 7/1/98......................... 5,068,973
- -------------------------------------------------------------------------
Total....................................................... $42,948,612
- -------------------------------------------------------------------------
</TABLE>
23
<PG$PCN>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
13. SHARES OF BENEFICIAL INTEREST
At June 30, 1998, the Fund had an unlimited number of shares of beneficial
interest authorized with a par value of $0.001 per share. Transactions in shares
for each portfolio were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INTERMEDIATE HIGH GRADE PORTFOLIO
Shares sold................................................. 80,128 139,239
Shares issued on reinvestment............................... 88,618 88,428
Shares redeemed............................................. (153,728) (218,271)
- --------------------------------------------------------------------------------------------------
Net Increase................................................ 15,018 9,396
- --------------------------------------------------------------------------------------------------
APPRECIATION PORTFOLIO
Shares sold................................................. 2,242,002 1,610,791
Shares issued on reinvestment............................... 459,295 505,828
Shares redeemed............................................. (806,168) (807,939)
- --------------------------------------------------------------------------------------------------
Net Increase................................................ 1,895,129 1,308,680
- --------------------------------------------------------------------------------------------------
TOTAL RETURN PORTFOLIO
Shares sold................................................. 1,371,898 4,458,481
Shares issued on reinvestment............................... 888,597 638,881
Shares redeemed............................................. (380,570) (443,057)
- --------------------------------------------------------------------------------------------------
Net Increase................................................ 1,879,925 4,654,305
- --------------------------------------------------------------------------------------------------
</TABLE>
14. CAPITAL LOSS CARRYFORWARDS
At December 31, 1997, 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 2005 TOTAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediate High Grade Portfolio............ $288,000 $4,000 $25,000 $317,000
- --------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PG$PCN>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each period:
<TABLE>
<CAPTION>
INTERMEDIATE HIGH GRADE PORTFOLIO 1998(1) 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $10.89 $10.70 $10.60 $9.66 $10.69 $10.29
- ------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (2).................. 0.35 0.72 0.71 0.66 0.61 0.55
Net realized and unrealized gain (loss).... 0.04 0.21 (0.53) 1.00 (0.94) 0.26
- ------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations.......... 0.39 0.93 0.18 1.66 (0.33) 0.81
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income...................... (0.71) (0.74) (0.08) (0.72) (0.61) (0.36)
Net realized gains......................... -- -- -- -- (0.09) (0.05)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.......................... (0.71) (0.74) (0.08) (0.72) (0.70) (0.41)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $10.57 $10.89 $10.70 $10.60 $9.66 $10.69
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN................................. 3.56%++ 8.67% 1.69% 17.76% (3.05)% 8.00%
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)............ $14,821 $15,100 $14,736 $16,152 $13,280 $9,859
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (2)............................... 0.94%+ 0.95% 0.90% 0.86% 0.85% 0.85%
Net investment income...................... 5.87+ 6.28 6.35 6.63 6.57 5.25
- ------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE...................... 35% 66% 116% 121% 90% 139%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 1998 (unaudited).
(2) For the Intermediate High Grade Portfolio, the Investment adviser waived all
or part of its fees for the four-year period ended December 31, 1996. In
addition, IDS Life reimbursed expenses of $3,006, $12,616 and $16,459 for
the three-year period ended December 31, 1995. If such fees were not waived
and expenses were not 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 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Intermediate High Grade.................................. $0.020 $0.009 $0.020 $0.050 1.07% 0.94% 1.05% 1.36%
</TABLE>
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
25
<PG$PCN>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each period:
<TABLE>
<CAPTION>
APPRECIATION PORTFOLIO 1998(1) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $18.73 $15.86 $14.39 $11.54 $11.80 $11.13
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income................ 0.09 0.24 0.27 0.23 0.20 0.15
Net realized and unrealized gain
(loss)............................ 2.30 3.90 2.60 3.04 (0.32) 0.63
- -------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations.... 2.39 4.14 2.87 3.27 (0.12) 0.78
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income................ (0.22) (0.21) (0.25) (0.21) (0.14) (0.11)
Net realized gains................... (0.79) (1.06) (1.15) (0.21) -- --
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions.................... (1.01) (1.27) (1.40) (0.42) (0.14) (0.11)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......... $20.11 $18.73 $15.86 $14.39 $11.54 $11.80
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN........................... 12.80%++ 26.39% 19.77% 28.84% (1.12)% 7.03%
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)...... $192,822 $144,134 $101,232 $94,492 $80,823 $77,843
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses............................. 0.79%+ 0.80% 0.85% 0.97% 0.88% 1.01%
Net investment income................ 1.42+ 1.68 1.59 1.65 1.75 1.35
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................ 14% 34% 39% 43% 61% 33%
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID ON
EQUITY TRANSACTIONS (2).............. $0.05 $0.06 $0.06 $0.06 -- --
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 1998 (unaudited).
(2) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
26
<PG$PCN>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each period:
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO 1998(1) 1997 1996 1995 1994 1993(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $17.62 $15.73 $12.75 $10.78 $10.30 $10.00
- -------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (3)............ 0.22 0.37 0.26 0.43 0.34 0.01
Net realized and unrealized gain..... 0.66 2.26 2.97 2.19 0.42* 0.29
- -------------------------------------------------------------------------------------------------------------
Total Income From Operations........... 0.88 2.63 3.23 2.62 0.76 0.30
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income................ (0.43) (0.21) (0.07) (0.41) (0.28) --
Net realized gains................... (0.51) (0.53) (0.18) (0.24) -- --
- -------------------------------------------------------------------------------------------------------------
Total Distributions.................... (0.94) (0.74) (0.25) (0.65) (0.28) --
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......... $17.56 $17.62 $15.73 $12.75 $10.78 $10.30
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN........................... 5.03%++ 16.84% 25.33% 25.04% 7.40% 3.00%++
- -------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)...... $306,114 $274,006 $171,503 $78,042 $23,196 $2,777
- -------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3)......................... 0.78%+ 0.79% 0.83% 1.00% 1.00% 0.85%+
Net investment income................ 2.89+ 3.24 3.06 3.80 3.84 1.93+
- -------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................ 42% 75% 82% 81% 118% --
- -------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE PAID
ON EQUITY TRANSACTIONS (4)........... $0.06 $0.06 $0.06 $0.06 -- --
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(1) For the six months ended June 30, 1998 (unaudited).
(2) For the period from December 3, 1993 (commencement of
operations) to December 31, 1993.
(3) For the Total Return Portfolio, the Investment adviser
waived all or part of its fees for the year ended December
31, 1994 and the period ended December 31, 1993. In
addition, IDS Life reimbursed expenses of $7,873 and $1,472
for the two-year period ended December 31, 1994. If such
fees were not waived and expenses were not 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 $0.02 1.11% 4.14%+
</TABLE>
<TABLE>
<C> <S>
(4) As of September 1995, the SEC instituted new guidelines
requiring the disclosure of average commissions per share.
* The amount shown in this caption for each share outstanding
throughout the period may not accord with the change in the
aggregate gains and losses in the portfolio securities for
the period because of the timing of purchases and
withdrawals of shares in relation to the fluctuating market
values of the portfolio.
++ Total return is not annualized, as it may not be
representative of the total return for the year.
+ Annualized.
</TABLE>
27
<PG$PCN>
- --------------------------------------------------------------------------------
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED)
On February 6, 1998, a special meeting of shareholders of the Trust was
held for the purpose of voting on the following matters:
1. To elect Trustees of the Trust; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
SHARES VOTED PERCENTAGE OF SHARES VOTED PERCENTAGE OF
NAME OF TRUSTEES FOR SHARES VOTED AGAINST SHARES VOTED
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Herbert Barg.................................. 41,457,550.573 97.176% 1,204,698.617 2.824%
Alfred J. Bianchetti.......................... 41,443,251.652 97.143 1,218,997.538 2.857
Martin Brody.................................. 41,448,794.038 97.156 1,213,455.152 2.844
Dwight B. Crane............................... 41,476,634.180 97.221 1,185,615.010 2.779
Burt N. Dorsett............................... 41,484,718.121 97.240 1,177,531.069 2.760
Elliot S. Jaffee.............................. 41,463,169.203 97.189 1,199,079.987 2.811
Stephen E. Kaufman............................ 41,468,535.534 97.202 1,193,713.656 2.798
Joseph J. McCann.............................. 41,476,403.003 97.220 1,185,846.187 2.780
Heath B. McLendon............................. 41,476,953.962 97.222 1,185,295.228 2.778
Cornelius C. Rose, Jr. ....................... 41,487,746.207 97.247 1,174,602.983 2.753
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Portfolios. The chart on the following page
demonstrates that all proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy, "E" indicates
the elimination of the policy; and "R" indicates the reclassification of the
policy from fundamental (which would require shareholder approval to change) to
non-fundamental (which can be changed by a vote of the Board of Trustees).
28
<PG$PCN>
- --------------------------------------------------------------------------------
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
INTERMEDIATE HIGH APPRECIATION TOTAL RETURN
GRADE PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
M Diversification............................... X X X
- -----------------------------------------------------------------------------------------------------------
M Senior Securities............................. X X X
- -----------------------------------------------------------------------------------------------------------
M Industry Concentration........................ X X X
- -----------------------------------------------------------------------------------------------------------
M Borrowing..................................... X X X
- -----------------------------------------------------------------------------------------------------------
E Ability to Pledge Assets...................... X X X
- -----------------------------------------------------------------------------------------------------------
M Lending....................................... X X X
- -----------------------------------------------------------------------------------------------------------
M Underwriting of Securities.................... X X X
- -----------------------------------------------------------------------------------------------------------
R Margin and Short-Sales........................ X X X
- -----------------------------------------------------------------------------------------------------------
M Real Estate................................... X X X
- -----------------------------------------------------------------------------------------------------------
R Purchases of Securities of Other Investment
Companies..................................... X X X
- -----------------------------------------------------------------------------------------------------------
R Investments in Oil, Gas and Mineral
Exploration................................... X X X
- -----------------------------------------------------------------------------------------------------------
R Puts, Calls and Combinations Thereof.......... X X X
- -----------------------------------------------------------------------------------------------------------
X-Approved
</TABLE>
The information below reports the lowest percentage of shares voting for
the proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all proposals.
INTERMEDIATE HIGH GRADE PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,247,633.554 94.835% 8,539.286 0.649% 59,415.808 4.516%
- --------------------------------------------------------------------------------
</TABLE>
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6,611,648.810 92.205% 78,829.747 1.099% 480,130.453 6.696%
- --------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
13,559,421.184 92.733% 162,122.220 1.109% 900,413.487 6.158%
- --------------------------------------------------------------------------------
</TABLE>
29
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(This page intentionally left blank.)
<PG$PCN>
This report is submitted for the general
information of the owners of the
Greenwich Street Series Fund. It is not
authorized for distribution to
prospective investors unless accompanied
or preceded by an effective Prospectus
for the Fund, which contains information
concerning the Fund's investment
policies, fees and expenses, as well as
other pertinent information.
SYMPHONY
investments are sponsored and managed
by:
Smith Barney Inc.
and subsidiaries
SYMPHONY
is underwritten, issued and serviced by:
IDS Life Insurance Company and
IDS Life Insurance Company of New York
S6225-1 A (8/98)
<PG$PCN>
GREENWICH STREET SERIES FUND
SEMI-ANNUAL REPORT
INTERMEDIATE HIGH GRADE PORTFOLIO
APPRECIATION PORTFOLIO
TOTAL RETURN PORTFOLIO
JUNE 30, 1998
<PG$PCN>
This report is submitted for the general
information of the owners of the
Greenwich Street 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.
S6225-1 A (8/98)
<PG$PCN>
