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GREENWICH STREET SERIES FUND SEMI-ANNUAL REPORT
INTERMEDIATE HIGH GRADE PORTFOLIO
APPRECIATION PORTFOLIO
TOTAL RETURN PORTFOLIO
JUNE 30, 2000
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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
("Portfolio(s)") for the period ended June 30, 2000. This letter briefly
discusses general economic and market conditions and the investment strategy of
each Portfolio. The information provided represents the opinion of the manager
and is not intended to be a forecast of future results. Further, there is no
assurance that certain securities will remain in or out of the Portfolios.
In addition, a detailed comparison showing the growth of a hypothetical $10,000
invested in each Portfolio since inception can be found in this report. Past
performance is not indicative of future results. We hope you find this report
useful and informative.
The Performance of the Portfolios for the six months ended June 30, 2000(1):
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Intermediate High Grade Portfolio........................... 2.61%
Appreciation Portfolio...................................... (0.41)
Total Return Portfolio...................................... 5.72
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MARKET AND ECONOMIC OVERVIEW
Stocks declined in the second quarter of 2000, leaving many of the major indexes
down for the first half of the year as investors debated potential rate
increases by the Federal Reserve Board ("Fed"). Volatility continued to be a
major theme with both the Dow Jones Industrial Average ("DJIA")(2) and the
Nasdaq Composite Index ("Nasdaq")(3) registering record one-day point losses.
The breadth of the declines affected a wide range of stocks including many
small- and large- capitalization company stocks, growth stocks and value stocks.
(Growth stocks are shares of companies with historically strong and relatively
predictable earnings growth rates. Value stocks are shares of companies that are
believed to be undervalued but have positive longer-term business prospects.)
Momentum investing and dot.com stocks were out of favor, replaced in many cases
by a renewed interest in companies that many investors believed may provide real
earnings and have strong financials.
Concerns about higher interest rates peaked in mid-May, when the Fed raised
interest rates 50 basis points(4). The specter of rising rates was a catalyst
for the weak performance of all of the major indexes for the six months ended
June 30, 2000. The DJIA declined 8.44% during the reporting period. (The Old
Economy represents more established, "blue-chip" companies.) The Standard &
Poor's 500 Index ("S&P 500")(5) of large-company stocks fell 0.43%, while the
Standard & Poor's MidCap 400 Index ("S&P MidCap 400")(6) of medium-size company
stocks and the Russell 2000 Index(7) of small-company stocks advanced 8.97% and
3.04%, respectively, for the six months ended June 30, 2000.
For the sixth consecutive time in the last year, the Fed acted to raise interest
rates in May to slow the U.S. economy, increasing the federal funds rate by 50
basis points to 6.5%. (The federal funds rate is the interest rate that banks
with excess reserves at a Fed district bank charge other banks that need
overnight loans. The fed funds rate, as it is called, often points to the
direction of U.S. interest rates.) The increase of the target overnight interest
rate marked its highest level in nine years and reflected Fed action intended to
address risks of an economy with higher inflationary pressures.
In the bond market, both short- and long-term U.S. Treasury bonds recorded gains
over the second quarter. Long-term U.S. Treasuries, while still the
best-performing bond sector this year, had a lackluster quarter compared to
short-term U.S. Treasuries. At the end of the second quarter, the U.S. yield
curve remained inverted; that is to say, the 5.89% yield on the 30-
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1 Please note that data represents past performance, which is not indicative of
future results. The investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
2 The DJIA is a price-weighted average of 30 actively traded blue-chip stocks.
An investor cannot invest directly in an index.
3 The Nasdaq is a market value-weighted index that measures all domestic and
non-U.S. based securities listed on the NASDAQ stock market. An investor
cannot invest directly in an index.
4 A basis point is 0.01% or one one-hundredth of a percent.
5 The S&P 500 is a market capitalization measure of 500 widely held common
stocks. An investor cannot invest directly in an index.
6 The S&P MidCap 400 is a market-value weighted index, consisting of 400
domestic stocks chosen for market size liquidating and industry group
representation. An investor cannot invest directly in an index.
7 The Russell 2000 Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index. An investor cannot invest directly in an
index.
1
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year Treasury Bond was lower than the 6.17% yield on the 5-year Treasury note.
(The yield curve is the graphical depiction of the relationship between the
yield on bonds of the same credit quality but different maturities.) Since the
beginning of the year, 30-year bond yields have declined almost 60 basis points
compared to the 17 basis point decline in the 5-year note yield.
Bonds have been affected not only by the year long six-move Fed tightening
cycle, but also by the U.S. Treasury's scaling back on debt issuance and buying
back old, high-interest bonds. This effort ended the 30-year bond's benchmark
status and driven 10-year rates lower. Over the long term, the combination of
successive interest rate hikes, a slowdown in the economy and less government
debt issuance is expected to apply downward pressure on interest rates.
INTERMEDIATE HIGH GRADE PORTFOLIO(8)
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, 2000, the Portfolio posted a return of 2.61%. In comparison, the Lehman
Brothers Government/Corporate Bond Index(9) and the Lehman Brothers Intermediate
Government/Corporate Bond Index(10) returned 4.18% and 3.22%, respectively, for
the same period.
During the first six months of 2000, the Fed continued to raise the federal
funds rate. The fed funds rate, as it is called, often points to the direction
of U.S. interest rates. This year it has been raised one hundred basis
points(11) including a fifty basis point move on May 16, 2000. The Fed has
raised interest rates by one hundred seventy five basis points since this
tightening cycle started on June 30, 1999.
The big question now facing the bond markets is whether the tightening cycle is
over. At the time of the fifty basis point move this past May, the bond markets
had another one hundred basis points of tightening priced into the market by
year-end. Recently, the bond markets have been unwinding their expectations for
continued tightening due to slower than expected economic growth during the
second quarter of 2000.
It appears the economy has slowed from the extremely fast pace of consumer
spending and real Gross Domestic Product ("GDP")(12) growth that was experienced
in the fourth quarter of 1999 and the first quarter of 2000. One sign of this
slower growth has been the slowdown in new job creation. The average monthly
increase in new job growth for the first quarter of 2000 was 266,000 ex-census
workers while the average monthly increase in the second quarter was only
118,000 ex-census workers.(13)
The second quarters of 1998 and 1999 also experienced slower growth followed by
a re-acceleration in the economy in the second half of the year. This year it
may be different because the effect of a tightening monetary policy always
happens with a lag. Therefore, the tighter Fed policy should start to impact the
economy going forward. The first sectors to feel the effect of rising rates will
be purchases of housing and automobiles. These sectors are showing tentative
signs of slower or at least stabilized growth.
The signs of slower growth have had a sharp impact on interest rates with the
yield on five-year treasury dropping seventy basis points in the last two
months. Even corporate bonds are finally showing signs of life as investors
reach for yield. Corporate spreads are an average of twenty basis points tighter
over the last one and a half months after having steadily widened over the
course the first four and a half months of the year. If this slowdown is for
real, it may lead to a favorable environment for the bond markets for the rest
of the summer.
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8 Please note the Portfolio's holdings are subject to change and any discussion
of the holdings is as of June 30, 2000. Please refer to pages 10 and 11 for a
complete list and percentage breakdown of the Portfolio's holdings.
9 The Lehman Brothers Government/Corporate Bond Index is a combination of
publicly issued intermediate- and long-term U.S. government bonds and
corporate bonds. An investor cannot invest directly in an index.
10 The Lehman Brothers intermediate Government/Corporate Bond Index is a
combination of publicly issued U.S. government bonds and corporate bonds that
mature in three to ten years. An investor cannot invest directly in an index.
11 A basis point is 0.01% or one one-hundredth of a percent.
12 GDP is the market value of the goods and services by labor and property in
the United States.
13 Source: Bureau of Labor Statistics
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APPRECIATION PORTFOLIO(14)
For the six months ended June 30, 2000, the Appreciation Portfolio ("Portfolio")
returned a negative 0.41%. In comparison, the S&P 500 posted a return of
negative 0.43% for the same period. (Past performance is not indicative of
future results.)
The Portfolio seeks long-term appreciation of shareholders' capital by investing
primarily in equity securities of U.S. companies. The Portfolio typically
invests in medium and large capitalization companies but may also invest in
small capitalization companies. In selecting individual companies for the
Portfolio, the manager looks for companies with strong or rapidly improving
balance sheets, recognized industry leadership and effective management teams
that exhibit a desire to earn consistent returns for shareholders.
According to the manager, if one looks just on the surface, not much happened in
the stock market in the first half of 2000. The popular averages finished with
only minor changes to the downside. But scratch the surface, or better yet, ask
any former day trader to describe the period, and a far more fascinating and
complex story becomes evident. During the first two months of the year,
speculative activity in the stock market rivaled the greatest manias in history.
After a blazing end to the last century, many technology stocks continued to
tear ahead, accompanied by, what the manager believed, a sense of entitlement by
people who were convinced that their time had come to get rich merely by
speculating in "New Economy" stocks regardless of valuation or risk. (The New
Economy represents those companies in the technology, telecommunications and
Internet sectors.)
Meanwhile, the vast majority of sound companies not perceived to be part of that
technology wave suffered from neglect, if not outright liquidation. With
business conditions good, executives were at a loss to explain the poor
performance of their stocks.
In fact, it was a flow-of-funds matter, as investors switched money out of
conservative investments into more "aggressive" vehicles. Simply put, the rapid
flow of money into the tech-laden NASDAQ(15) in search of fast, and ultimately
unrealistic gains, sucked the life out of the rest of the stock market.
But by mid-March 2000, the Fed raised interest rates enough to bite, and with
prices of many speculative stocks in the stratosphere, and market
capitalizations (i.e., the number of shares multiplied by the stock price) at
levels never seen before, there was not enough money to send stocks higher.
Prices weakened a bit, and recovered to within the heights seen in mid-March,
and then started slipping again. Like the aftermath of a wild party, people who
had known nothing but good times, woke up feeling a bit queasy. Selling began
slowly, but picked up steam as panic began to replace greed, and by mid-April,
only a month after setting new highs, the NASDAQ declined 40%. By any historic
standard that should be considered a crash. In comparison, the bear market of
1973-1974 took two years to decline roughly 40%.
According to the manager, the consequences for the overall market were dependent
on whether money would then flow into the previously neglected industrial and
financial stocks. For a brief moment in April, the picture appeared bright, as
so-called "Old Economy" stocks rallied. But in June, NASDAQ began to recover,
and most other stocks started slipping. On balance, then, the overall market
lost a bit of ground in the first six months, but the internal rotation was
intense and rapid, making it very difficult to achieve much progress. In fact,
the rapid rotation made it relatively easy to lose money, as many stocks simply
evaporated after momentum broke. There were some big declines in stocks with
household names and widespread ownership.
The manager believes it is important to view the stock market with some
historical perspective. After several years of significantly above-average
gains, a flat or even declining market should not be viewed as a disaster.
Earnings did not keep pace with gains in stock prices over the past few years.
Therefore, a period during which earnings and dividends play catch-
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14 Please note the Portfolio's holdings are subject to change and any discussion
of the holdings is as of June 30, 2000. Please refer to pages 13 through 16
for a complete list and percentage breakdown of the Portfolio's holdings.
15 The NASDAQ is a computerized system that provides brokers and dealers with
price quotations for securities traded over the counter as well as for many
New York Stock Exchange listed securities.
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up would be a reasonable scenario to expect. That would be preferable to a
general teeth-rattling decline that took the market to less excessive
valuations.
Interestingly, for the first time in recent memory, the strong U.S. economy,
coupled with investor neglect of so many stocks, has created what the manager
thinks are many outstanding values, particularly in the industrial sector. The
series of interest rate rises by the Fed has caused people to wonder if we will
have to suffer a "hard landing," otherwise known as a steep recession.
In the opinion of the manager, it is more likely that the Fed has engineered a
"soft landing" or slowdown, rather than sending the U.S. economy into a slump.
It seems possible that if that outcome becomes more widely accepted, money could
flow into some of the very inexpensive stocks that have become available. At any
rate, those areas of neglect now seem to have a much more favorable risk-reward
ratio than many of the overvalued stocks, which even having come down, still
sell at price-to-earnings ("P/E") or price-to-revenue ratios(16) that are way
too high for comfort.
Throughout the first six months of the year, the manager attempted to increase
the Portfolio's holdings in what he viewed as good companies when their stocks
were down and trim positions when he believed them to be particularly expensive.
The manager did use the extreme weakness in Microsoft after the antitrust ruling
to add to the Portfolio's position.
He also added to Berkshire Hathaway, which he felt extremely comfortable given
the company's management, assets and liquidity, and Bell Atlantic, which has now
merged with GTE to form a powerhouse telecommunications company, selling at an
attractive discount. The manager also added materially to Minnesota Mining &
Manufacturing, a chemical, electric and telecommunications conglomerate whose
stock has fallen since year-end, but where fundamentals (such as P/E, and
price-to-revenue) are better than ever. Their technology business is booming,
yet investors have yet to notice. A significant new position was taken in Delphi
Automotive, a spin-off from General Motors. Their in-car communications systems
give some impetus to a company selling at about one-third the P/E ratio of the
overall market. At the same time, the manager took profits in all of the General
Motors, as its restructuring moves led to an increase in the stock's value.
There has been a wonderful spread of prosperity in this country, and with more
and more people putting money into stocks, profit can no longer be viewed as a
dirty word. But as stock markets have risen, many investors have become careless
and taken on more and more risk. It is the goal of the manager to try and make
sure his shareholders participate in this prosperity in a manner calculated to
balance risk against potential returns.
TOTAL RETURN PORTFOLIO(17)
The Total Return Portfolio's ("Portfolio") investment objective is to provide
investors with total return, consisting of long-term capital appreciation and
income. In addition, the Portfolio may invest up to 35% of its assets in mid-
and small-capitalization stocks. For the six months ended June 30, 2000, the
Portfolio returned 5.72%. In comparison, the S&P 500 Index posted a total return
of negative 0.43% for the same period. (Past performance is not indicative of
future results.)
The Portfolio appreciated during the six-month period ended June 30, 2000 versus
the S&P 500. The manager believes that these results may reflect some of the
important changes taking place in the investment landscape. His investment style
focuses on selecting leading business franchises during periods in which their
share prices may be depressed for reasons thought to be temporary. It is always
possible to find cheap stocks. Some represent "broken eggs," stocks that the
manager believes to be cheap, but like the broken egg are likely to remain
"grounded." Others may be like "rubber balls," companies that face near term
business challenges but whose long-term prospects are likely to return them to
investor favor.
The U.S. economy has been growing at much higher rates than thought possible
because technology has improved productivity and held prices for many products
down, mitigating the threat of inflation. However, when growth accelerates above
4% for GDP and labor markets reach unemployment levels of approximately 4%, it
seems clear that some inflationary pressures may develop. The Fed, under Alan
Greenspan, has been raising interest rates in an attempt to cool the U.S.
economy. As a result, many investors have driven the prices of companies in
economically and interest sensitive areas to
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16 The P/E ratio is the price of a stock divided by its earnings per share.
Price-to-revenue ratio is the price of stock divided by the amount the
company earned, which generally denotes a gross figure.
17 Please note the Portfolio's holdings are subject to change and any discussion
of the holdings is as of June 30, 2000. Please refer to pages 17 through 19
for a complete list and percentage breakdown of the Portfolio's holdings.
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valuation levels consistent with the prospect of a significant recession. In the
early part of the year, many so-called "Old Economy" stocks reached price levels
that were very attractive in our opinion. (The Old Economy represents more
established, "blue-chip" companies.)
Conversely, the first part of this year saw the cresting of one of the great
investment bubbles of the last 50 years. Almost anything identified with
technology went to high valuations with speculation rampant in Internet and
biotechnology shares. Investment banking firms were bringing technology- based
companies public as fast as they could get them out the door. At least in some
segments, Wall Street has created an excess supply of intellectual property
companies which could affect future product and service pricing and, in some
cases, viability of the enterprises. There may not be enough room in the economy
to accommodate all of the growth business plans that have now been financed by
the public market.
The Portfolio reacted to the unusually wide valuations between New Economy and
Old Economy stocks by engaging in a "phased sale" of the former with the
proceeds used to invest in Old economy and other businesses that seemed to be
attractively priced. In the January through March period, technology was taken
from a weight of about 0.8X the S&P 500 weight to about 0.5X. Proceeds from
these sales were used to purchase companies in basic materials, healthcare, and
financial services primarily because values in these areas were compelling and
their risk and reward characteristics were outstanding.
The technology stocks were sold at prices that were near their highs for the
year and reinvested in companies whose share prices were near their lows. In
recent months, the new purchases, on balance, have performed well and the
manager's smaller weighting in technology has served him well given the
substantial correction that has occurred in this area of the market. Technology
helped the Portfolio's performance in the first few months of the year and the
manager's increased asset allocation to basic materials, healthcare, and
financial services, on balance, helped its performance in March through June.
According to the manager, who has read "Popular Delusions & The Madness of
Crowds" which chronicled, among other things, the passion for tulips in Holland
several centuries ago, it appeared that a modern version was happening as
technology stocks (tulips) and day trading became ever more popular in 1999 and
early 2000. The intensity of the speculative fever made it virtually impossible
for other many companies to get an "investment hearing" for their shares.
Periods of valuation extremes are ones of opportunity.
In the technology sector, the manager used the investment frenzy earlier in the
year to reduce positions in Adobe Systems (provider of graphic design,
publishing and image software), Texas Instruments (developer, manufacturer and
seller of a variety of products primarily for industrial and consumer markets)
and Motorola (global leader in providing integrated communications solutions).
He continues to believe that these companies have bright futures but their share
prices reached levels that suggested it would be prudent to realize some profits
in the first quarter of the year. In a technology-related area, he also reduced
his position in Enron, which benefited from marketing increasingly scarce energy
and communications spectrum (broadband) resources. Even after significant sales,
Enron remains one of the Portfolio's largest positions.
In financial services, the manager did extensive selling of his real estate
investment trust ("REIT")(18) holdings and used these funds and those generated
elsewhere, to add to or initiate positions in companies he believed had better
upside potential. REITs have performed well this year and the manager regarded
the group as having good upside and limited downside. However, we believed that
MGIC Investment (a holding company, through its subsidiaries, provider of
mortgage insurance coverage), Countrywide Credit (engaged primarily in the
mortgage banking business), MBIA (provides financial guarantees for municipal
bonds, asset-backed & mortgage-backed securities, corporate debt & debt of
selected financial institutions), and CIT Group (diversified finance company)
had substantially more upside compared to the REITs that were sold.
Since March of this year, MGIC, Countrywide Credit MBIA and CIT Group have
appreciated 40% since the manager's purchases. Among his original REIT holdings,
Spieker Partners (specializes in the acquisition, development, management and
leasing of office and industrial properties) was the only one he retained and
its shares have appreciated approximately
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18 REIT is company, usually traded publicly, that manages a portfolio of real
estate to earn profits for shareholders.
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25% since March as well. Financial services account for 24% of assets with Bank
of New York (which offers securities and cash processing, trust, investment
management, private & corporate banking and other services) Spieker Partners,
and MGIC Investment being the manager's largest holdings in this area of the
market.
Healthcare now makes up about 19% of the Portfolio. Late in 1999, the manager
took major positions in McKesson (health care supply management company), United
Healthcare (provides comprehensive management and consulting services to managed
care organizations), Amerisource Health (wholesale distributor of pharmaceutical
products and related healthcare services), Health Management Associates
(furnishes property information management, data processing and software
services to healthcare providers) and Foundation Health Systems (managed health
care organization which administers the delivery of managed healthcare). These
stocks have been excellent performers this year.
To these positions, the manager added Bristol-Myers & Squibb (worldwide health
and personal care company), Johnson & Johnson (engaged in the manufacture and
sale of broad range of products in the healthcare field), and a biotechnology
company, Enzo Biochem, earlier this year when their share prices were depressed.
In basic materials, he added Georgia Pacific (manufacturer and distributor of
building products as well as producer of pulp and paper products), Dow Chemical
(global science and technology based company that develops and manufacturers a
portfolio of chemicals, plastics and agricultural products), Weyerhaeuser
(engaged in the growing and harvesting of timber and the manufacture,
distribution and sale of forest products) and Mead (manufactures and sells
paper, pulp, paperboard, lumber and other wood products). It is the manager's
belief that pricing power may return to many companies in basic materials
because there has been very little new capacity added in recent years. As the
world economy grows, it seems likely that prices and earning power will rise
significantly for many of these companies in the period ahead. In other words,
the manager sees earnings growth, over the next two to three years, being far
greater than that for the S&P 500. (Of course, no guarantees can be made that
his expectations will be met.)
Other leading franchises available at depressed prices that were added to the
Portfolio in the last six months include Anadarko Petroleum (engaged in the
exploration, development and production of natural gas, crude oil and natural
gas liquids), Costco Wholesale (operates a chain of membership warehouses),
Cable & Wireless (international provider of telecommunications and multimedia
communication services), Carnival (world's largest multiple-night cruise
company), and Mattel (designs, manufactures and markets a broad variety of
family products).
The manager believes the stock market is in the early stages of broadening out.
This would compare with recent years in which only a handful of stocks have
driven the market averages higher. It is probable that market returns, in the
future, may be less than those experienced during the last 10 years. The last
decade and the 1948 to 1957 period represent the high water mark for 10-year
returns since 1925. The S&P 500 P/E ratio doubled in the last five years with
the largest 25 to 30 companies contributing disproportionately to this trend.
The manager thinks that a further doubling of the S&P 500 P/E ratio is unlikely
in the next five years. In fact, the manager believes many of the largest
companies within the S&P 500 may actually see their P/E ratios decline in the
next few years. Companies farther down the list may not be subject to this "loss
of P/E altitude." Therefore the "not so nifty 450" within the S&P 500 may be a
very interesting place to invest should the market broaden as we expect. (Of
course, no assurance can be made that this will occur.)
The manager also believes that small and mid-cap stocks may do better than the
S&P 500 in the next few years. Many of these companies are growing at above
average rates and many are buying back their shares in record amounts. Finally,
it is probable that there will be tremendous merger and acquisition activity
centered on the small and mid-cap universe of stocks. The Total Return Portfolio
can and does include small and mid-cap companies in its portfolio.
Unfortunately, inflation is not dead and there will be shortages and price
increases for many things now taken for granted. Electricity prices are on the
rise because our computer and Internet world consumes power in increasing
amounts. Starting five years ago, most utilities were being told that building
new power plants destroyed shareholder wealth and the message stuck which means
we may be facing a power crisis in the next few years. Similar comments could be
made with regard to
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paper, natural gas, motor gasoline, landfills and many other things, which are
important to our daily life. Having a few natural resources in the portfolio
should enhance returns in the coming years.
The investment landscape is changing and the "rear view mirror" for the stock
market may not be too helpful. Having been in the investment business 31 years,
the manager has seen similar transitions before. He believes that the Portfolio
may be positioned to provide competitive absolute and relative returns in the
coming years.
Thank you for your investment in the Greenwich Street Series Fund. We look
forward to helping you pursue your financial needs in the new century.
Sincerely,
/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman
July 25, 2000
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PERFORMANCE COMPARISON -- INTERMEDIATE HIGH GRADE PORTFOLIO AS OF 6/30/00
(UNAUDITED)
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AVERAGE ANNUAL TOTAL RETURNS
----------------------------
Six Months Ended 6/30/00 2.61%+
Year Ended 6/30/00 1.36%
Five Years Ended 6/30/00 4.49%
10/16/91* through 6/30/00 5.16%
CUMULATIVE TOTAL RETURN
-----------------------
10/16/91* through 6/30/00 55.04%
+ 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, 2000 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.
[INTERMEDIATE HIGH GRADE PORTFOLIO LINE GRAPH]
<TABLE>
<CAPTION>
LEHMAN BROTHERS
INTERMEDIATE HIGH GRADE PORTFOLIO GOVERNMENT/CORPORATE BOND INDEX
--------------------------------- -------------------------------
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10/16/91 10,000 10,000
12/91 10,240 10,440
12/92 10,781 11,231
12/93 11,643 12,470
12/94 11,287 12,032
12/95 13,292 14,348
12/96 13,518 14,764
12/97 14,690 15,772
12/98 15,687 16,575
12/99 15,109 16,218
6/30/00 15,504 16,896
</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.
PERFORMANCE COMPARISON -- APPRECIATION PORTFOLIO AS OF 6/30/00 (UNAUDITED)
<TABLE>
<S> <C>
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AVERAGE ANNUAL TOTAL RETURNS
-----------------------------------------------------
Six Months Ended 6/30/00 (0.41)%+
Year Ended 6/30/00 2.75%
Five Years Ended 6/30/00 17.44%
10/16/91* through 6/30/00 13.81%
CUMULATIVE TOTAL RETURN
-----------------------------------------------------
10/16/91* through 6/30/00 208.70%
+ 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, 2000 with that of a similar investment in the
Standard & Poor's 500 Stock 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 Stock 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.
[APPRECIATION PORTFOLIO LINE GRAPH]
<TABLE>
<CAPTION>
APPRECIATION PORTFOLIO STANDARD & POOR'S 500 STOCK INDEX
---------------------- ---------------------------------
<S> <C> <C>
10/16/91 10,000 10,000
12/91 10,490 10,838
12/92 11,133 11,668
12/93 11,926 12,844
12/94 11,792 13,012
12/95 15,193 17,898
12/96 18,197 22,005
12/97 22,999 29,345
12/98 27,402 37,738
12/99 30,998 45,675
6/30/00 30,870 45,479
</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
<PAGE> 10
PERFORMANCE COMPARISON -- TOTAL RETURN PORTFOLIO AS OF 6/30/00 (UNAUDITED)
<TABLE>
<S> <C>
---------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------------
Six Months Ended 6/30/00 5.72%+
Year Ended 6/30/00 9.87%
Five Years Ended 6/30/00 16.22%
12/3/93* through 6/30/00 16.58%
CUMULATIVE TOTAL RETURN
---------------------------------------------------
12/3/93* through 6/30/00 174.27%
+ 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, 2000 with that of a similar investment in the
Standard & Poor's 500 Stock 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 Stock 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.
[TOTAL RETURN PORTFOLIO LINE GRAPH]
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO STANDARD & POOR'S 500 STOCK INDEX
---------------------- ---------------------------------
<S> <C> <C>
12/3/93 10,000 10,000
12/93 10,300 10,121
12/94 11,062 10,253
12/95 13,832 14,103
12/96 17,335 17,340
12/97 20,255 21,109
12/98 21,260 27,146
12/99 25,943 32,855
6/30/00 27,427 32,714
</TABLE>
--------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF
FUTURE RESULTS. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
9
<PAGE> 11
SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 2000
INTERMEDIATE HIGH GRADE PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 36.7%
U.S. Treasury Notes:
$ 250,000 6.250% due 4/30/01........................................ $ 249,530
400,000 6.625% due 3/31/02........................................ 400,872
1,750,000 6.250% due 2/15/03........................................ 1,745,065
200,000 6.500% due 10/15/06....................................... 202,104
------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost -- $2,648,713)........................................ 2,597,571
------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES -- 26.1%
AEROSPACE AND DEFENSE -- 1.4%
100,000 AA- Rockwell International, Notes, 6.750% due 9/15/02........... 99,625
------------------------------------------------------------------------------------------------------------
BANKS/SAVINGS AND LOANS -- 7.3%
300,000 AAA Bayerische Landesbank, N.Y., Sub. Notes, 5.875% due
12/1/08................................................... 267,375
250,000 AA- Morgan Guaranty Trust Co., Sub. Notes, 7.375% due 2/1/02.... 249,688
------------------------------------------------------------------------------------------------------------
517,063
------------------------------------------------------------------------------------------------------------
COSMETICS AND TOILETRIES -- 3.5%
250,000 AA Kimberly-Clark Corp., Debentures, 7.875% due 2/1/23......... 244,062
------------------------------------------------------------------------------------------------------------
FINANCE COMPANIES/CONSUMER CREDIT -- 11.0%
250,000 A Ford Motor Credit Co., Notes, 7.500% due 3/15/05............ 248,750
275,000 AAA Freddie Mac, Debentures, 5.000% due 1/15/04................. 257,655
250,000 AA Pitney Bowes Credit Corp., Debentures, 8.550% due 9/15/09... 268,750
------------------------------------------------------------------------------------------------------------
775,155
------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT -- 1.5%
100,000 AAA Quebec Province, Notes, 8.625% due 1/19/05.................. 104,875
------------------------------------------------------------------------------------------------------------
SOVEREIGN DEBT -- 1.4%
100,000 AA+ Republic of Ireland, Notes, 7.125% due 7/15/02.............. 100,000
------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -- $1,947,637)........ 1,840,780
------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- 31.8%
Federal National Mortgage Association (FNMA):
1,000,000 5.250% due 1/15/09........................................ 877,540
440,525 7.000% due 1/1/13......................................... 432,124
190,024 7.000% due 2/1/13......................................... 186,400
799,055 6.000% due 6/1/13......................................... 755,850
------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (Cost -- $2,355,962)....... 2,251,914
------------------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $6,952,312).................. 6,690,265
------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 12
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
INTERMEDIATE HIGH GRADE PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT -- 5.4%
$ 382,000 Goldman, Sachs & Co., 6.450% due 7/3/00; Proceeds at
maturity -- $382,205; (Fully collateralized by U.S.
Treasury Bills, Notes and Bonds, 0.000% to 12.000% due
8/15/00 to 11/15/28; Market value -- $389,640)
(Cost -- $382,000)...................................... $ 382,000
------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $7,334,312*)............. $7,072,265
------------------------------------------------------------------------------------------------------------
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service.
* Aggregate cost for Federal income tax purposes is substantially the same.
See page 12 for definition of ratings.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 13
BOND RATINGS (UNAUDITED)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"C" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
<TABLE>
<S> <C> <C>
AAA -- Bonds rated "AAA" have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest
and repay principal and differ from the highest rated issue
only in a small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than bonds in higher rated categories.
BB, B, -- Bonds rated BB, B, CCC and C are regarded, on balance, as
CCC, predominantly speculative with respect to the issuer's
CC and C capacity to pay interest and repay principal in accordance
with the terms of the obligation. BB indicates the lowest
degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality
and protective characteristics, these are outweighted by
large uncertainties or major risk exposures to adverse
conditions.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
</TABLE>
12
<PAGE> 14
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 86.1%
BASIC MATERIALS -- 5.7%
115,000 Alcoa Inc. ................................................. $ 3,335,000
124,600 Barrick Gold Corp. ......................................... 2,266,163
206,900 The Dow Chemical Co. ....................................... 6,245,794
58,400 E.I. du Pont de Nemours and Co. ............................ 2,555,000
56,900 Florida East Coast Industries, Inc. ........................ 2,276,000
55,900 Forest City Enterprises, Inc., Class A Shares............... 1,865,663
79,700 Great Lakes Chemical Corp. ................................. 2,510,550
91,900 International Paper Co. .................................... 2,739,769
112,900 Placer Dome Inc. ........................................... 1,079,606
111,400 PPG Industries, Inc. ....................................... 4,936,413
135,000 Solutia Inc. ............................................... 1,856,250
113,800 The St. Joe Co. ............................................ 3,414,000
---------------------------------------------------------------------------------------
35,080,208
---------------------------------------------------------------------------------------
BROADCASTING -- 7.9%
80,000 Cablevision Systems Corp.*.................................. 5,430,000
68,900 Dow Jones & Company, Inc. .................................. 5,046,925
137,200 Meredith Corp. ............................................. 4,630,500
76,500 SBS Broadcasting SA*........................................ 4,169,250
68,700 Time Warner Inc. ........................................... 5,221,200
200,300 USA Networks, Inc.*......................................... 4,331,487
171,557 Viacom Inc., Class B Shares*................................ 11,698,043
195,100 The Walt Disney Co. ........................................ 7,572,319
---------------------------------------------------------------------------------------
48,099,724
---------------------------------------------------------------------------------------
CAPITAL GOODS -- 2.3%
125,700 Emerson Electric Co. ....................................... 7,589,138
57,400 Honeywell International Inc. ............................... 1,933,662
39,400 Johnson Controls, Inc. ..................................... 2,021,713
135,500 Waste Management, Inc. ..................................... 2,574,500
---------------------------------------------------------------------------------------
14,119,013
---------------------------------------------------------------------------------------
CONSUMER DURABLES -- 1.2%
282,353 Delphi Automotive Systems Corp. ............................ 4,111,765
79,000 Ford Motor Co. ............................................. 3,397,000
10,344 Visteon Corp.*.............................................. 125,417
---------------------------------------------------------------------------------------
7,634,182
---------------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 3.9%
172,400 The Gillette Co. ........................................... 6,023,225
22,600 H.J. Heinz Co. ............................................. 988,750
160,900 Kimberly-Clark Corp. ....................................... 9,231,638
22,200 The Procter & Gamble Co. ................................... 1,270,950
55,000 Ralston-Ralston Purina Group................................ 1,096,562
62,100 Wm. Wrigley Jr. Co. ........................................ 4,979,644
---------------------------------------------------------------------------------------
23,590,769
---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 15
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER SERVICES -- 8.1%
40,000 Costco Wholesale Corp. ..................................... $ 1,320,000
34,500 CVS Corp. .................................................. 1,380,000
145,000 Dal-Tile International Inc.*................................ 1,196,250
165,000 First Data Corp. ........................................... 8,188,125
77,200 Gannett Co., Inc. .......................................... 4,617,525
137,150 The Home Depot, Inc. ....................................... 6,848,928
113,200 Masco Corp. ................................................ 2,044,675
227,900 McDonald's Corp. ........................................... 7,506,456
161,700 PepsiCo, Inc. .............................................. 7,185,544
48,600 United Parcel Service, Inc., Class B Shares................. 2,867,400
108,700 Wal-Mart Stores, Inc. ...................................... 6,263,838
---------------------------------------------------------------------------------------
49,418,741
---------------------------------------------------------------------------------------
DIVERSIFIED CONGLOMERATE -- 10.5%
466 Berkshire Hathaway Inc., Class A Shares*.................... 25,070,800
169,000 Canadian Pacific Ltd. ...................................... 4,425,687
308,600 General Electric Co. ....................................... 16,355,800
137,900 Minnesota Mining and Manufacturing Co. ..................... 11,376,750
148,800 Tyco International Ltd. .................................... 7,049,400
---------------------------------------------------------------------------------------
64,278,437
---------------------------------------------------------------------------------------
ENERGY -- 7.7%
69,000 Allegheny Energy, Inc. ..................................... 1,888,875
51,500 American Power Conversion Corp.*............................ 2,101,844
67,800 BP Amoco PLC................................................ 3,834,939
25,500 CH Energy Group, Inc. ...................................... 865,406
174,800 Conoco Inc., Class A Shares................................. 3,845,600
45,500 Duke Energy Corp. .......................................... 2,565,062
183,809 Exxon Mobil Corp. .......................................... 14,429,006
46,000 NRG Energy, Inc.*........................................... 839,500
93,600 Royal Dutch Petroleum Co. .................................. 5,762,250
74,500 Schlumberger Ltd. .......................................... 5,559,563
67,700 TXU Corp. .................................................. 1,997,150
81,000 The Williams Companies, Inc. ............................... 3,376,688
---------------------------------------------------------------------------------------
47,065,883
---------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 8.9%
102,900 The Allstate Corp. ......................................... 2,289,525
97,250 American International Group, Inc. ......................... 11,426,875
138,000 Bank One Corp. ............................................. 3,665,625
68,300 The Chubb Corp. ............................................ 4,200,450
15,000 EChapman.com, Inc.*......................................... 106,875
102,900 Fannie Mae.................................................. 5,370,094
21,600 First Virginia Banks, Inc. ................................. 751,950
94,000 Horace Mann Educators Corp. ................................ 1,410,000
161,400 Household International, Inc. .............................. 6,708,188
92,100 Merrill Lynch & Co., Inc. .................................. 10,591,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 16
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES -- 8.9% (CONTINUED)
114,000 Washington Mutual, Inc. .................................... $ 3,291,750
114,400 Wells Fargo & Co. .......................................... 4,433,000
---------------------------------------------------------------------------------------
54,245,832
---------------------------------------------------------------------------------------
HEALTH CARE -- 10.4%
5,000 Abgenix, Inc.*.............................................. 599,297
51,700 ALZA Corp.*................................................. 3,056,762
76,200 American Home Products Corp. ............................... 4,476,750
68,300 Amgen Inc.*................................................. 4,798,075
108,500 Bristol-Myers Squibb Co. ................................... 6,320,125
5,500 Celera Genomics*............................................ 514,250
80,000 Chiron Corp.*............................................... 3,800,000
63,300 Eli Lilly and Co. .......................................... 6,322,087
57,300 Johnson & Johnson........................................... 5,837,437
16,500 Medical Manager Corp.*...................................... 562,031
79,400 Merck & Co., Inc. .......................................... 6,084,025
398,925 Pfizer Inc. ................................................ 19,148,400
45,200 Pharmacia Corp. ............................................ 2,336,275
---------------------------------------------------------------------------------------
63,855,514
---------------------------------------------------------------------------------------
TECHNOLOGY -- 16.3%
37,462 Agilent Technologies, Inc.*................................. 2,762,823
34,100 Amazon.com, Inc.*........................................... 1,238,256
148,000 America Online, Inc.*....................................... 7,807,000
172,500 Cisco Systems, Inc.*........................................ 10,964,531
775 Exfo Electro-Optical Engineering Inc.*...................... 34,003
11,000 Gemstar International Group Ltd.*........................... 675,984
11,700 Hewlett-Packard Co. ........................................ 1,461,037
109,200 Intel Corp. ................................................ 14,598,675
51,400 International Business Machines Corp. ...................... 5,631,513
160,900 Lucent Technologies Inc. ................................... 9,533,325
37,400 Metromedia Fiber Network, Inc.*............................. 1,484,312
84,700 Mettler-Toledo International Inc.*.......................... 3,388,000
241,400 Microsoft Corp.*............................................ 19,312,000
195,200 Motorola, Inc. ............................................. 5,673,000
77,300 Pall Corp. ................................................. 1,430,050
2,200 QUALCOMM Inc.*.............................................. 132,000
45,675 Safeguard Scientifics, Inc.*................................ 1,464,455
39,500 Solectron Corp.*............................................ 1,654,062
18,000 Tanning Technology Corp.*................................... 346,500
114,600 Texas Instruments Inc. ..................................... 7,871,588
29,000 Xilinx, Inc.*............................................... 2,394,313
---------------------------------------------------------------------------------------
99,857,427
---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 17
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS -- 3.2%
45,200 AT&T Corp. ................................................. $ 1,429,450
79,700 Bell Atlantic Corp.+ ....................................... 4,049,756
113,800 GTE Corp.+ ................................................. 7,084,050
160,076 SBC Communications Inc. .................................... 6,923,287
---------------------------------------------------------------------------------------
19,486,543
---------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $427,038,190)................... 526,732,273
---------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
---------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT -- 13.9%
$85,054,000 Goldman, Sachs & Co., 6.450% due 7/3/00; Proceeds at
maturity -- $85,099,717; (Fully collateralized by U.S.
Treasury Bills, Notes and Bonds, 0.000% to 12.000% due
8/15/00 to 11/15/28; Market value -- $86,755,147)
(Cost -- $85,054,000)....................................... 85,054,000
---------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $512,092,190**).......... $611,786,273
---------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
+ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon Communications.
** Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 18
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
--------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 97.8%
BASIC MATERIALS -- 15.1%
324,000 Alcoa Inc. ................................................. $ 9,396,000
600,000 Archer-Daniels-Midland Co. ................................. 5,887,500
245,000 Asia Pulp & Paper Co. Ltd.*+................................ 1,240,313
375,000 Brush Engineered Materials Inc. ............................ 5,859,375
300,000 Cameco Corp.+............................................... 3,675,000
175,500 The Dow Chemical Co.+....................................... 5,297,906
225,000 Georgia-Pacific Group....................................... 5,906,250
753,900 Kaiser Aluminum Corp.*...................................... 3,015,600
63,000 The Mead Corp. ............................................. 1,590,750
175,100 Oregon Steel Mills, Inc. ................................... 339,256
180,000 RTI International Metals, Inc.*............................. 2,047,500
49,500 USX-U. S. Steel Group....................................... 918,844
40,500 Weyerhaeuser Co. ........................................... 1,741,500
135,000 Wolverine Tube, Inc.*....................................... 2,295,000
--------------------------------------------------------------------------------------------------
49,210,794
--------------------------------------------------------------------------------------------------
CAPITAL GOODS -- 1.3%
150,000 Crown Cork & Seal Co., Inc. ................................ 2,250,000
50,000 Deere & Co. ................................................ 1,850,000
--------------------------------------------------------------------------------------------------
4,100,000
--------------------------------------------------------------------------------------------------
COMMUNICATION SERVICES -- 6.1%
165,000 AT&T Corp. ................................................. 5,218,125
75,000 GTE Corp.++ ................................................ 4,668,750
136,750 Rostelecom+................................................. 1,863,219
95,000 US WEST, Inc. .............................................. 8,146,250
--------------------------------------------------------------------------------------------------
19,896,344
--------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 1.7%
150,000 Mattel, Inc. ............................................... 1,978,125
250,000 Toys "R" Us, Inc.*.......................................... 3,640,625
--------------------------------------------------------------------------------------------------
5,618,750
--------------------------------------------------------------------------------------------------
CONSUMER STAPLES -- 5.6%
30,000 Costco Wholesale Corp.*..................................... 990,000
160,500 Fleming Cos., Inc. ......................................... 2,096,531
225,000 Fox Entertainment Group, Inc.*.............................. 6,834,375
190,000 PepsiCo, Inc. .............................................. 8,443,125
--------------------------------------------------------------------------------------------------
18,364,031
--------------------------------------------------------------------------------------------------
ENERGY -- 12.7%
65,000 Anadarko Petroleum Corp.+................................... 3,205,312
55,000 Baker Hughes Inc. .......................................... 1,760,000
100,000 Chevron Corp. .............................................. 8,481,250
200,000 Enron Corp. ................................................ 12,900,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 19
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
--------------------------------------------------------------------------------------------------
<C> <S> <C>
ENERGY -- 12.7% (CONTINUED)
150,000 Halliburton Co. ............................................ $ 7,078,125
340,000 R&B Falcon Corp.*+.......................................... 8,011,250
--------------------------------------------------------------------------------------------------
41,435,937
--------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 19.7%
190,000 The Allstate Corp. ......................................... 4,227,500
60,000 Ambac Financial Group, Inc. ................................ 3,288,750
155,000 American Express Co. ....................................... 8,079,375
45,000 Bank of America Corp. ...................................... 1,935,000
235,000 The Bank of New York Co., Inc. ............................. 10,927,500
82,500 The Chase Manhattan Corp. .................................. 3,800,156
210,000 The CIT Group, Inc. ........................................ 3,412,500
235,000 Countrywide Credit Industries, Inc. ........................ 7,123,437
105,000 MBIA, Inc.+................................................. 5,059,687
215,000 Mellon Financial Corp. ..................................... 7,834,063
190,000 MGIC Investment Corp. ...................................... 8,645,000
--------------------------------------------------------------------------------------------------
64,332,968
--------------------------------------------------------------------------------------------------
HEALTH CARE -- 18.6%
269,400 AmeriSource Health Corp.*................................... 8,351,400
80,000 Aphton Corp.*............................................... 2,060,000
100,000 Bristol-Myers Squibb Co. ................................... 5,825,000
16,100 Enzo Biochem, Inc.*+........................................ 1,110,900
500,000 Foundation Health Systems, Inc.*............................ 6,500,000
515,000 Health Management Associates, Inc.*......................... 6,727,188
25,000 Johnson & Johnson........................................... 2,546,875
600,000 McKesson HBOC, Inc. ........................................ 12,562,500
175,000 UnitedHealth Group Inc.+.................................... 15,006,250
--------------------------------------------------------------------------------------------------
60,690,113
--------------------------------------------------------------------------------------------------
REAL ESTATE -- 3.8%
145,000 Carnival Corp. ............................................. 2,827,500
210,000 Spieker Properties, Inc. ................................... 9,660,000
--------------------------------------------------------------------------------------------------
12,487,500
--------------------------------------------------------------------------------------------------
TECHNOLOGY -- 13.2%
135,000 Adobe Systems Inc. ......................................... 17,550,000
100,000 IKOS Systems, Inc.*......................................... 1,081,250
335,000 Inprise Corp.*.............................................. 2,051,875
270,000 Motorola, Inc.+............................................. 7,846,875
80,000 Raytheon Co., Class B Shares................................ 1,540,000
180,000 Texas Instruments Inc.+..................................... 12,363,750
25,000 Xerox Corp. ................................................ 518,750
--------------------------------------------------------------------------------------------------
42,952,500
--------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $236,814,878)................... 319,088,937
--------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 20
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
--------------------------------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCK -- 1.2%
34,700 Kmart Financing Corp., Exchangeable 7.750%.................. $ 1,264,381
180,000 Merrill Lynch Corp., Exchangeable 6.250%.................... 2,733,750
--------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost -- $5,489,211).................. 3,998,131
--------------------------------------------------------------------------------------------------
FOREIGN STOCK -- 0.5%
100,000 Cable & Wireless PLC (Cost -- $1,619,741)................... 1,698,585
--------------------------------------------------------------------------------------------------
PURCHASED PUT OPTIONS -- 0.2%
Adobe Systems Inc.:
12,000 Put @ 105, Expire 7/22/00................................... 10,500
123,000 Put @ 110, Expire 7/22/00................................... 199,875
12,200 S&P 500 Index, Put @ 140, Expire 12/14/00................... 555,100
--------------------------------------------------------------------------------------------------
TOTAL PURCHASED PUT OPTIONS (Cost -- $1,632,566)............ 765,475
--------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $245,556,396)................ 325,551,128
--------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
--------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT -- 0.3%
$1,071,000 Goldman, Sachs & Co., 6.450% due 7/3/00; Proceeds at
maturity -- $1,071,576; (Fully collateralized by U.S.
Treasury Bills, Notes and Bonds, 0.000% to 12.000% due
1/4/01 to 11/15/28; Market value -- $1,092,420)
(Cost -- $1,071,000)...................................... 1,071,000
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $246,627,396**).......... $326,622,128
--------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
+ All or a portion of this security is on loan (See Note 12).
++ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon Communications.
** Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 21
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 2000
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at cost...................................... $6,952,312 $427,038,190 $245,556,396
Repurchase agreements, at cost............................ 382,000 85,054,000 1,071,000
--------------------------------------------------------------------------------------------------------
Investments, at value..................................... $6,690,265 $526,732,273 $325,551,128
Repurchase agreements, at value........................... 382,000 85,054,000 1,071,000
Cash...................................................... 749 77 946
Collateral for securities on loan (Note 12)............... -- -- 37,403,756
Dividends and interest receivable......................... 131,829 516,114 592,968
--------------------------------------------------------------------------------------------------------
TOTAL ASSETS.............................................. 7,204,843 612,302,464 364,619,798
--------------------------------------------------------------------------------------------------------
LIABILITIES:
Investment advisory fees payable.......................... 10,993 277,793 144,753
Administration fees payable............................... 5,308 100,974 55,118
Payable for securities purchased.......................... -- 20,150 --
Payable for securities on loan (Note 12).................. -- -- 37,403,756
Payable for options written (Premiums
received -- $946,517) (Note 6)......................... -- -- 496,125
Accrued expenses.......................................... 22,005 79,776 47,290
--------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES......................................... 38,306 478,693 38,147,042
--------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $7,166,537 $611,823,771 $326,472,756
--------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest................ $ 787 $ 26,822 $ 16,498
Capital paid in excess of par value....................... 7,970,118 510,812,504 234,905,199
Undistributed net investment income....................... 211,952 3,419,156 3,010,622
Accumulated net realized gain (loss) from security
transactions, futures contracts and options............ (754,273) (2,128,794) 8,095,313
Net unrealized appreciation (depreciation) of investments
and options............................................ (262,047) 99,694,083 80,445,124
--------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $7,166,537 $611,823,771 $326,472,756
--------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING.......................................... 787,497 26,821,865 16,498,244
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE.................................. $9.10 $22.81 $19.79
--------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 22
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................................. $ 264,775 $ 2,670,425 $ 89,811
Dividends................................................ -- 3,015,457 3,012,107
Less: Foreign withholding tax............................ -- (28,559) (15,720)
----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME.................................. 264,775 5,657,323 3,086,198
----------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3)........................ 15,699 1,568,178 899,547
Audit and legal.......................................... 8,377 19,121 11,236
Administration fees (Note 3)............................. 7,850 570,246 327,108
Pricing service fees..................................... 6,318 -- --
Shareholder and system servicing fees.................... 6,234 7,740 6,778
Shareholder communications............................... 2,244 33,341 18,007
Trustees' fees........................................... 1,396 8,290 6,540
Custody.................................................. 777 12,444 6,376
Other.................................................... 2,311 15,721 6,664
----------------------------------------------------------------------------------------------------------
TOTAL EXPENSES........................................... 51,206 2,235,081 1,282,256
----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME...................................... 213,569 3,422,242 1,803,942
----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND OPTIONS (NOTES 4, 5 AND 6):
Realized Gain (Loss) From:
Security transactions (excluding short-term
securities)......................................... (119,895) (448,107) 7,302,427
Futures contracts..................................... -- 575,245 --
Options written....................................... -- -- 793,189
----------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)................................. (119,895) 127,138 8,095,616
----------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of
Investments and Options:
Beginning of period................................... (355,964) 103,656,257 72,235,531
End of period......................................... (262,047) 99,694,083 80,445,124
----------------------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION)..... 93,917 (3,962,174) 8,209,593
----------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND
OPTIONS.................................................. (25,978) (3,835,036) 16,305,209
----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.......... $ 187,591 $ (412,794) $18,109,151
----------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 23
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2000
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income..................................... $ 213,569 $ 3,422,242 $ 1,803,942
Net realized gain (loss).................................. (119,895) 127,138 8,095,616
Changes in net unrealized appreciation (depreciation)..... 93,917 (3,962,174) 8,209,593
--------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... 187,591 (412,794) 18,109,151
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income..................................... (607,266) (4,419,958) (6,045,349)
Net realized gains........................................ -- (8,238,507) (17,355,208)
--------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS........................................... (607,266) (12,658,465) (23,400,557)
--------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 13):
Net proceeds from sale of shares.......................... 62,756 104,100,405 2,808,413
Net asset value of shares issued for reinvestment of
dividends.............................................. 607,266 12,658,465 23,400,557
Cost of shares reacquired................................. (1,904,341) (21,282,913) (24,741,645)
--------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS........................................... (1,234,319) 95,475,957 1,467,325
--------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS........................... (1,653,994) 82,404,698 (3,824,081)
NET ASSETS:
Beginning of period....................................... 8,820,531 529,419,073 330,296,837
--------------------------------------------------------------------------------------------------------
END OF PERIOD*............................................ $ 7,166,537 $611,823,771 $326,472,756
--------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of:.......... $211,952 $3,419,156 $3,010,622
--------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 24
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1999
INTERMEDIATE TOTAL
HIGH GRADE APPRECIATION RETURN
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income..................................... $ 604,905 $ 4,419,389 $ 6,480,405
Net realized gain (loss).................................. (231,097) 7,651,687 17,194,406
Changes in net unrealized appreciation (depreciation)..... (789,895) 33,823,318 38,738,360
--------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... (416,087) 45,894,394 62,413,171
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income..................................... (857,354) (2,558,655) (7,694,332)
Net realized gains........................................ -- (5,751,430) (11,613,887)
--------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS........................................... (857,354) (8,310,085) (19,308,219)
--------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 13):
Net proceeds from sale of shares.......................... 177,720 281,938,611 11,969,720
Net asset value of shares issued for reinvestment of
dividends.............................................. 857,354 8,310,085 19,308,219
Cost of shares reacquired................................. (4,183,371) (44,094,187) (42,301,478)
--------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS........................................... (3,148,297) 246,154,509 (11,023,539)
--------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS........................... (4,421,738) 283,738,818 32,081,413
NET ASSETS:
Beginning of year......................................... 13,242,269 245,680,255 298,215,424
--------------------------------------------------------------------------------------------------------
END OF YEAR*.............................................. $ 8,820,531 $529,419,073 $330,296,837
--------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of:.......... $605,649 $4,416,872 $7,252,029
--------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 25
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
shareholder 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) interest income, adjusted for
amortization of premium and accretion of discount, 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
Fund determines 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 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, 1999, reclassifications were made to the capital
accounts of the Intermediate High Grade 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 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.
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 SSB Citi Fund Management LLC
("SSBC"). SSBC is a wholly-owned subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), which, in turn, is a wholly-owned subsidiary of Citigroup Inc.
("Citigroup"). 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.
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Fund, on behalf of the Portfolios, has entered into an administration
agreement with SSBC. 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.
For the six months ended June 30, 2000, Salomon Smith Barney Inc. ("SSB"),
another subsidiary of SSBH, received brokerage commissions of $26,588.
Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney
Private Trust Company, another subsidiary of Citigroup, acts as the Portfolios'
transfer agent. CFTC receives account fees and asset-based fees that vary
according to the account size and type of account. For the six months ended June
30, 2000, the Intermediate High Grade, Appreciation and Total Return Portfolios
paid transfer agent fees of $7,500 to CFTC.
No officer, Director or employee of SSB 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, 2000, 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..................................... $ 1,271,326 $ 2,928,267
Appreciation................................................ 219,506,698 122,668,345
Total Return................................................ 47,172,892 64,480,644
-----------------------------------------------------------------------------------------
</TABLE>
At June 30, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
PORTFOLIO APPRECIATION DEPRECIATION (DEPRECIATION)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Intermediate High Grade.................................... $ 634 $ (262,681) $ (262,047)
Appreciation............................................... 118,035,239 (18,341,156) 99,694,083
Total Return............................................... 100,377,318 (20,382,586) 79,994,732
---------------------------------------------------------------------------------------------------------
</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, 2000, there were no open futures contracts in the Portfolios.
25
<PAGE> 27
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, 2000, the Total Return Portfolio held purchased put options
with a total cost of $1,632,566.
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 written call options transactions occurred in the
Total Return Portfolio during the six months ended June 30, 2000:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
------------------------------------------------------------------------------------
<S> <C> <C>
Options written, outstanding at December 31, 1999........... 1,000 $ 271,990
Options written during the six months ended June 30, 2000... 6,350 2,272,534
Options cancelled in closing purchase transactions.......... (3,200) (706,438)
Options expired............................................. (2,800) (891,569)
------------------------------------------------------------------------------------
Options written, outstanding at June 30, 2000............... 1,350 $ 946,517
------------------------------------------------------------------------------------
</TABLE>
The following table represents the covered written call option contracts
open at June 30, 2000:
<TABLE>
<CAPTION>
NUMBER OF STRIKE
CONTRACTS EXPIRATION PRICE VALUE
--------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1,230 Adobe Systems Inc. ...................................... 7/22/00 $140 $(476,625)
120 Adobe Systems Inc. ...................................... 7/22/00 150 (19,500)
--------------------------------------------------------------------------------------------------------
Total Options Written (Premiums received -- $946,517).... $(496,125)
--------------------------------------------------------------------------------------------------------
</TABLE>
7. REPURCHASE AGREEMENTS
The Portfolios purchase (and their 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.
26
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. REVERSE REPURCHASE AGREEMENTS
The Intermediate High Grade Portfolio may enter into reverse repurchase
agreements.
A reverse repurchase agreement involves a sale by the Portfolio of
securities that it holds with an agreement by the Portfolio to repurchase the
same securities at an agreed upon price and date. A reverse repurchase agreement
involves risk that the market value of the securities sold by the Portfolio may
decline below the repurchase price of the securities. The Portfolio will
establish a segregated account with its custodian, in which the Portfolio will
maintain cash, U.S. government securities or other liquid high grade obligations
equal in value to its obligations with respect to the reverse repurchase
agreements.
During the six months ended June 30, 2000, the Portfolio did not enter into
any reverse repurchase agreements.
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, 2000, there were no when-issued or TBA securities held in the
Portfolios.
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, in securities
exceeding the yield on the securities sold.
At June 30, 2000, 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 stock 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, 2000, 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
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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, 2000, the Total Return Portfolio loaned common stocks having a
value of $35,993,347 and holds the following collateral for loaned securities:
<TABLE>
<CAPTION>
SECURITY DESCRIPTION VALUE
-------------------------------------------------------------------------
<S> <C>
TIME DEPOSITS:
Banco Bilboa Vizcaya S.A., 7.130% due 7/3/00.............. $ 8,342,805
Bank Brussels Lambert, 7.130% due 7/3/00.................. 436,028
Caisse Des Depots et Consignations, 7.060% due 7/3/00..... 4,141,562
Caisse Des Depots et Consignations, 6.940% due 7/3/00..... 8,342,805
Credit Suisse First Boston, 7.130% due 7/3/00............. 114,307
Credit Suisse First Boston, 7.160% due 7/3/00............. 2,169,129
San Paolo IMI, S.p.A., 7.000% due 7/3/00.................. 4,171,403
FLOATING RATE NOTES:
Bank One Corp., 6.680% due 7/2/01......................... 1,609,552
First Union National Bank, 6.510% due 5/21/01............. 1,491,203
Goldman, Sachs & Co., 5.280% due 8/23/00.................. 5,655,290
Sigma Finance Corp., 6.480% due 11/6/00................... 929,672
-------------------------------------------------------------------------
TOTAL....................................................... $37,403,756
-------------------------------------------------------------------------
</TABLE>
Income earned by the Total Return Portfolio from securities loaned for the
six months ended June 30, 2000 was $33,647.
13. SHARES OF BENEFICIAL INTEREST
At June 30, 2000, 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, 2000 DECEMBER 31, 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
INTERMEDIATE HIGH GRADE PORTFOLIO
Shares sold................................................. 6,459 17,222
Shares issued on reinvestment............................... 66,806 88,387
Shares reacquired........................................... (196,019) (410,417)
--------------------------------------------------------------------------------------------------
Net Decrease................................................ (122,754) (304,808)
--------------------------------------------------------------------------------------------------
APPRECIATION PORTFOLIO
Shares sold................................................. 4,555,913 12,629,480
Shares issued on reinvestment............................... 556,172 378,247
Shares reacquired........................................... (926,811) (1,983,060)
--------------------------------------------------------------------------------------------------
Net Increase................................................ 4,185,274 11,024,667
--------------------------------------------------------------------------------------------------
TOTAL RETURN PORTFOLIO
Shares sold................................................. 138,089 642,754
Shares issued on reinvestment............................... 1,167,110 1,018,903
Shares reacquired........................................... (1,203,899) (2,259,949)
--------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... 101,300 (598,292)
--------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
14. CAPITAL LOSS CARRYFORWARDS
At December 31, 1999, 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 2006 2007 TOTAL
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Intermediate High Grade
Portfolio $288,000 $5,000 $24,000 $84,000 $110,000 $511,000
---------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 31
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
INTERMEDIATE HIGH GRADE PORTFOLIO 2000(1)(2) 1999 1998(2) 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $9.69 $10.90 $10.89 $10.70 $10.60 $9.66
-----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(3)............. 0.26 0.77 0.65 0.72 0.71 0.66
Net realized and unrealized gain
(loss)............................ (0.01) (1.17) 0.07 0.21 (0.53) 1.00
-----------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations.... 0.25 (0.40) 0.72 0.93 0.18 1.66
-----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income................ (0.84) (0.81) (0.71) (0.74) (0.08) (0.72)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions.................... (0.84) (0.81) (0.71) (0.74) (0.08) (0.72)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......... $9.10 $9.69 $10.90 $10.89 $10.70 $10.60
-----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN........................... 2.61%++ (3.69)% 6.79% 8.67% 1.69% 17.76%
-----------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)...... $7,167 $8,821 $13,242 $15,100 $14,736 $16,152
-----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3).......................... 1.31%+ 1.22% 0.93% 0.95% 0.90% 0.86%
Net investment income................ 5.46+ 5.46 5.82 6.28 6.35 6.63
-----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................ 17% 71% 60% 66% 116% 121%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPRECIATION PORTFOLIO 2000(1)(2) 1999 1998(2) 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $23.39 $21.16 $18.73 $15.86 $14.39 $11.54
----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income.............. 0.14 0.13 0.27 0.24 0.27 0.23
Net realized and unrealized gain
(loss).......................... (0.24) 2.62 3.24 3.90 2.60 3.04
----------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From
Operations......................... (0.10) 2.75 3.51 4.14 2.87 3.27
----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.............. (0.17) (0.16) (0.22) (0.21) (0.25) (0.21)
Net realized gains................. (0.31) (0.36) (0.86) (1.06) (1.15) (0.21)
----------------------------------------------------------------------------------------------------------------------------
Total Distributions.................. (0.48) (0.52) (1.08) (1.27) (1.40) (0.42)
----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD....... $22.81 $23.39 $21.16 $18.73 $15.86 $14.39
----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN......................... (0.41)%++ 13.12% 19.15% 26.39% 19.77% 28.84%
----------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S).... $611,824 $529,419 $245,680 $144,134 $101,232 $94,492
----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 0.79%+ 0.79% 0.80% 0.80% 0.85% 0.97%
Net investment income.............. 1.20+ 1.18 1.36 1.68 1.59 1.65
----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.............. 25% 53% 22% 34% 39% 43%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the Intermediate High Grade Portfolio, the Investment Adviser waived all
or part of its fees for the two-year period ended December 31, 1996. In
addition, IDS Life reimbursed expenses of $3,006 for the year 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>
1996 1995
----- -----
<S> <C> <C>
Per Share Decreases to Net Investment Income................ $0.02 $0.01
Expense Ratios Without Fee Waivers and Reimbursements....... 1.07% 0.94%
</TABLE>
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
30
<PAGE> 32
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO 2000(1) 1999 1998(2) 1997 1996 1995
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $20.14 $17.55 $17.62 $15.73 $12.75 $10.78
------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income............. 0.13 0.42 0.49 0.37 0.26 0.43
Net realized and unrealized
gain........................... 1.04 3.37 0.38 2.26 2.97 2.19
------------------------------------------------------------------------------------------------------------
Total Income From Operations........ 1.17 3.79 0.87 2.63 3.23 2.62
------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income............. (0.39) (0.48) (0.43) (0.21) (0.07) (0.41)
Net realized gains................ (1.13) (0.72) (0.51) (0.53) (0.18) (0.24)
------------------------------------------------------------------------------------------------------------
Total Distributions................. (1.52) (1.20) (0.94) (0.74) (0.25) (0.65)
------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD...... $19.79 $20.14 $17.55 $17.62 $15.73 $12.75
------------------------------------------------------------------------------------------------------------
TOTAL RETURN........................ 5.72%++ 22.02% 4.97% 16.84% 25.33% 25.04%
------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)... $326,473 $330,297 $298,215 $274,006 $171,503 $78,042
------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................... 0.78%+ 0.79% 0.79% 0.79% 0.83% 1.00%
Net investment income............. 1.10+ 2.07 2.79 3.24 3.06 3.80
------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE............. 14% 41% 72% 75% 82% 81%
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
31
<PAGE> 33
(This page intentionally left blank)
<PAGE> 34
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 E (8/00)
<PAGE> 35
GREENWICH STREET SERIES FUND
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, 2000
<PAGE> 36
SEMI-ANNUAL REPORT FOR GREENWICH STREET SERIES FUNDS
--------------------------------------------------------------------------------
DEAR INVESTOR:
We are pleased to provide you with the semi-annual report for Greenwich Street
Series Fund -- Money Market, Diversified Strategic Income, Equity Income, Equity
Index, Growth and Income, Emerging Growth and International Equity Portfolios
("Portfolio(s)") for the period ended June 30, 2000. This letter briefly
discusses general economic and market conditions.(1)
In addition, a detailed comparison showing the growth of a hypothetical $10,000
invested in each Portfolio since inception can be found in this report. All
total return figures given in this report, both cumulative and average
annualized, exclude the effect of expenses associated with the subaccount. Past
performance is not indicative of future results. We hope you find this report
useful and informative.
<TABLE>
<CAPTION>
The Performance of the Greenwich Street Series Fund* (12/31/99-6/30/00)
------------------------------------------------------------------------
<S> <C>
Money Market................................................ 2.50%
Diversified Strategic Income................................ 1.32
Equity Income............................................... 4.20
Equity Index -- Class I Shares.............................. (0.48)
Growth and Income........................................... (1.95)
Emerging Growth............................................. 28.32
International Equity........................................ (11.29)
</TABLE>
---------------
* Please note that the data represents past performance, which is not indicative
of future results. The investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
MARKET AND ECONOMIC OVERVIEW
Stocks declined in the second quarter of 2000, leaving many of the major indexes
down for the first half of the year as investors debated potential rate
increases by the Federal Reserve Board ("Fed"). Volatility continued to be a
major theme with both the Dow Jones Industrial Average ("DJIA")(2) and the
Nasdaq Composite Index ("Nasdaq")(3) registering record one-day point losses.
The breadth of the declines affected a wide range of stocks including many
small- and large-capitalization company stocks, growth stocks and value stocks.
(Growth stocks are shares of companies with historically strong and relatively
predictable earnings growth rates. Value stocks are shares of companies that are
believed to be undervalued but have positive longer-term business prospects.)
Momentum investing and dot.com stocks were out of favor, replaced in many cases
by a renewed interest in companies that many investors believed may provide real
earnings and strong financials.
Concerns about higher interest rates peaked in mid-May, when the Fed raised
interest rates an additional 50 basis points.(4) The specter of rising rates was
a catalyst for the weak performance of all of the major indexes for the quarter
ending June 30, 2000. The DJIA, which is made up of Old Economy companies,
declined 8.44% during the reporting period. (The Old Economy represents more
established, "blue-chip" companies.) The Standard & Poor's 500 Index ("S&P
500")(5) of large-company stocks fell 0.43%, while the Standard and Poor's
MidCap 400 Index(6) ("S&P MidCap 400") of medium-size company stocks and the
Russell 2000 Index(7) of small-company stocks advanced 8.97% and 3.04%,
respectively, for the six months ended June 30, 2000.
---------------
1 The information provided represents the opinion of the managers and is not
intended to be a forecast of future events, a guarantee of future results nor
investment advice. Further, there is no assurance that certain securities will
remain in or out of the Portfolios.
2 DJIA is a price-weighted average of 30 actively traded blue-chip stocks. An
investor cannot invest directly in an index.
3 The Nasdaq is a market value-weighted index that measures all domestic and
non-U.S. based securities listed on the NASDAQ stock market. An investor
cannot invest directly in an index.
4 A basis point is 0.01% or one one-hundredth of a percent.
5 The S&P 500 is a market capitalization measure of 500 widely held common
stocks. An investor cannot invest directly in an index.
6 S&P MidCap 400 is a market-value weighted index, consisting of 400 domestic
stocks chosen for market size liquidating and industry group representation.
An investor cannot invest directly in an index.
7 Russell 2000 Index measures the performance of the 2,000 smallest companies in
the Russell 3000 Index. An investor cannot invest directly in an index.
1
<PAGE> 37
For the sixth consecutive time in the last year, the Fed acted to raise interest
rates in May to slow the U.S. economy, increasing the federal funds rate by 50
basis points to 6.5%. (The federal funds rate is the interest rate that banks
with excess reserves at a Fed district bank charge other banks that need
overnight loans. The fed funds rate, as it is called, often points to the
direction of U.S. interest rates.) The increase of the target overnight interest
rate marked its highest level in nine years and reflected Fed action intended to
address risks of an economy with higher inflationary pressures.
The Fed continued to stress its concern that there is a disparity in the growth
of demand and potential supply, which may foster inflation and jeopardize the
economy's performance. In theory, higher rates may potentially hurt stocks,
because slower growth often hinders profits at the same time that alternative
investments become more attractive. Accordingly, many interest-rate sensitive
stocks experienced price declines after the recent Fed decision.
In June, many investors were relieved after the Fed left interest rates
unchanged during its latest policy meeting. Although the central bank noted that
inflation risks persist, the decision was to maintain current interest rate
levels for the time being. Generally, monetary policy takes time to filter
through the economy and the full effect of higher interest rates may not be felt
for months.
MONEY MARKET PORTFOLIO
The primary investment objective of the Money Market Portfolio ("Portfolio") is
to obtain maximum current income with the preservation of capital and
maintenance of liquidity. Please note that an investment in the Portfolio is not
insured or guaranteed by the Federal Deposit Insurance Corporation ("FDIC") or
any other government agency. Although the Portfolio seeks to preserve the value
of your investment at $1.00 per share, it is possible to lose money by investing
in the Portfolio.
During the period, the Portfolio's average maturity was kept short at 15 days
and the target over the next few months will be between 20 to 25 days. The
manager believes that a peak in short-term interest rates may occur later on
this year or early in 2001 and may extend the Portfolio accordingly.
Three quarters of above 5.0% Gross Domestic Product ("GDP")(8) growth with
rising inflation, an over-exuberant stock market and tight labor markets
prompted the Fed to step up its pace of monetary tightening. Since the beginning
of the year the Fed implemented three interest rate increases totaling 100 basis
points, with its latest rate hike of 50 basis points (a basis point is 0.01% or
one one-hundredth of a percent) at its May 16th Federal Open-Market Committee
("FOMC")(9) meeting. The federal funds rate is now targeted at 6.50%.
The second quarter is anticipated to temporarily slow in response to weaker
consumption data, but it is also expected that GDP growth may remain at an
annual rate of about 4.5%. It seems that higher labor costs have already
imbedded themselves into the cost structure of firms and into the economy which
concerns Fed policymakers. The Fed, as well as market participants, will watch
future economic numbers to discern how many more interest rate increases are
required to slow growth further. At this point, various Wall Street economists
and portfolio managers are suggesting another 50 basis point increase over the
remainder of the year.
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
The investment objective of the Diversified Strategic Income Portfolio
("Portfolio") is to provide investors with high current income. The managers
follow a flexible investment approach that emphasizes both diversification and
balance. Based on their analysis of current economic and market conditions, the
managers allocate assets across three classes of bonds: U.S. government and
mortgage securities, high-yield corporate bonds and foreign government
securities.
For the six months ended June 30, 2000, the Diversified Strategic Income
Portfolio returned 1.32% compared to the Lehman Brothers Aggregate Bond
Index(10) return of 3.99% for the same period. (Past performance is not
indicative of future results.)
High Yield Bonds
The high-yield bond market rallied impressively in June as positive mutual fund
flows and more stable interest rates improved overall market sentiment. Most of
the major high-yield bond indices were up 2.00% for the month of June, the
highest
---------------
8 GDP is the market value of the goods and services produced by labor and
property in the U.S.
9 The FOMC is a policy-making body of the Federal Reserve System, the U.S.
central bank, that is responsible for the formulation of policy design to
promote economic growth, full employment, stable prices and a sustainable
pattern of international trade and payments.
10 The Lehman Brothers Aggregate Bond Index is made up of U.S. Treasury bonds,
government agency bonds, mortgage-backed securities and corporate bonds. An
investor cannot invest directly in an index.
2
<PAGE> 38
monthly return since late 1998. However, since the other sectors of the bond
market also rallied in June, spreads on high-yield bonds remained relatively
wide against U.S. Treasuries at over 650 basis points. Not surprisingly, the
highest-quality, most liquid issues generated the strongest results while the
lower-quality end of the market continued to labor under continued high default
rates in the 5.00% range on an annualized basis.
The best-performing segment of the high-yield bond market during the period were
the highest-quality BB rated bonds. One of the most important aspects of the
high-yield bond market, B rated issues, generated a negative 1.60% total return
for the same period. By far, the worst-performing credit segment of the
high-yield bond market were the lower quality CCC rated issues which delivered
negative total returns in the 4.50% to 5.00% range.
The best-performing sectors of the high-yield bond market during the period were
energy (oil and natural gas), technology, telecommunications, cable, media and
operating utilities, which usually fare better in an economic slowdown. The
worst performing sectors included basic materials, capital goods manufacturing,
consumer related industries and transportation.
From a technical standpoint, the high-yield bond market witnessed much smaller
new issuance as most companies either postponed new issues or elected to seek
alternative forms of financing such as convertible bond offerings or bank loans.
For the first six months of 2000, new issues totaled $25 billion, down from $58
billion last year. At the same time, a total of $6 billion was withdrawn from
open-end high-yield bond mutual funds.
Despite this, the managers remain confident that the high-yield bond market has
discounted most of the negative sentiment concerning bond investing. They
continue to believe that investing in high-yield bonds may represent a
compelling opportunity for many long-term investors seeking income and total
return.
Government Securities
According to the managers, during the period, the issues that significantly
impacted the performance of the bond market during the period were:
- The increase in interest rates by the Fed;
- The U.S. Treasury's buyback program;
- Reduced inflows; and
- Investor concerns regarding credit quality, the extreme levels of
market volatility and illiquidity.
In addition to the Fed raising interest rates during the period, the plan by the
U.S. Treasury to buyback more than $30 billion of its long-term debt obligations
has led to reduced supply in the market. As such, the price of longer-term bonds
increased in relation to their shorter-term counterparts, as reflected by an
inverted yield curve. (An inverted yield curve is an unusual situation where
short-term rates are higher than long-term rates.) Instead of a "normal" yield
curve, with yields rising steadily along with the maturity of U.S. Treasury
bonds, the highest yields were for shorter-term bonds.
During the reporting period, the Portfolio's U.S. government and mortgage-backed
securities portion maintained an emphasis on mortgage-backed securities and U.S.
Treasuries in an attempt to mimic the characteristics of the five to ten-year
benchmark. Although no guarantees can be made; looking forward, the managers
believe this investment strategy may continue to be effective throughout the
year.
Global Government Bonds
The managers viewed the start of 2000 as a time that the U.S. and European bond
markets would recover from last year's decline and offer potentially better
returns in 2000. In addition, they believe that the performance of the global
bond markets may improve because they expect that short-term interest rates may
continue to increase and the threat of inflation should remain low.
Indeed, given the technical nature of the recent rally in U.S. Treasuries, the
managers believe that the performance of non-U.S. Treasury bonds may provide a
better indication as to the future direction of the U.S. economy. Presently,
U.S. Treasuries comprise approximately 25% of the total U.S. bond market. The
remainder of the U.S. bond market includes agency, mortgage-backed securities
and corporate bonds.
Spreads on agency, mortgage and corporate bonds have widened past historical
levels, indicating that the interest rate burden on the private economy is
higher than would be suggested by U.S. Treasury levels. In particular, at the
lower end of the income scale, debt repayments as a percent of disposable income
are rising fast. The managers further anticipate that economic growth should
slow towards the 3% range in the second half of 2000, with inflation also
falling from close to 3%
3
<PAGE> 39
presently to 2.5% as the recent drop in oil prices winds its way through the
economy. (Of course, no guarantees can be given that this in fact will occur.)
In common with the U.S., bond markets throughout Euroland (as represented by the
countries of Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the
Netherlands, Austria, Portugal and Finland) have improved this year. One measure
of relative performance is the difference between U.S. and Euroland ten-year
bond yields. This difference has narrowed from 120 basis points in January 2000
to the low 60s by mid-April.
The Japanese economy continues to demonstrate signs of recovery. However,
recessionary signs have also become apparent periodically. Strong growth in the
first half of last year was followed by a decline in output in the final two
quarters, resulting in net real Japanese growth for 1999 of just 0.3%. By common
definition, two successive quarters of negative output growth qualifies as a
recession. Despite these anemic results, the managers believe that Japan's
economy may be different. The managers remain confident that the continued
growth of the U.S. economy and many economies overseas should allow bonds to
trade in a range around fair value for some time to come.
EQUITY INCOME PORTFOLIO(11)
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 investments in
dividend-paying common stocks and other equity securities of U.S. companies
whose prospects for dividend growth and capital appreciation are considered by
the 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. The Portfolio presently has approximately 52% of its assets invested
in electric utilities, 14% in natural gas companies and 15% in
telecommunications companies.
For the six months ended June 30, 2000, the Portfolio returned 4.20%. In
comparison, the S&P 500 return of negative 0.43% for the same period. (Past
performance is not indicative of future results.)
The first half of the year produced two tales for the Portfolio. The Portfolio
recorded modestly strong absolute investment returns in an otherwise negatively
biased stock market, but the Portfolio's broad diversification across all
aspects of the utility sector negatively impacted the relative performance of
the Portfolio. In the long run, the manager believes investors may have a strong
representation in the telecommunications sector, for instance, but more
recently, those stocks hurt the results of the Portfolio. At or near the bottom
of the performance roster were stocks of telecommunication companies, such as
Verizon, AT&T, SBC Communications and WorldCom. (On July 3, 2000, Bell Atlantic
Corp. and GTE Corp. merged. The surviving company was renamed Verizon
Communications.) The top performers were companies in the natural gas and
restructuring electric sectors.
The manager's individual trading activities were dominated by the need to meet a
steady outflow of funds from the Portfolio. In the long-term, the manager is a
firm proponent of diversification, especially in today's world where fiber
optics is intruding into the gas pipeline universe. Moreover, traditional
electric companies are transforming themselves into energy movers and shakers.
EQUITY INDEX PORTFOLIO
The Equity Index Portfolio ("Portfolio") is managed to provide investment
results that, before expenses, match the price and yield performance of the S&P
500. For the six months ended June 30, 2000, the Portfolio's Class I shares
returned a negative 0.48% and in comparison, the S&P 500 returned a negative
0.43% for the same period. (Past performance is not indicative of future
results.)
The Portfolio is designed to provide reliable exposure to the large
capitalization segment of the U.S. market through a broadly diversified
portfolio structure. The Portfolio matches the composition of the S&P 500 and
owns the constituent index stocks at the appropriate index weight. The
Portfolio, therefore, remains neutral relative to the benchmark in terms of
economic sectors, market capitalization and the growth and value styles of
investing.
Shares of many U.S. companies declined during the period, with many of the major
indices down for the first half of the year as investors reacted to potential
rate increases by the Fed. The breadth of the declines affected a wide range of
stocks including many small- and large-capitalization company stocks, growth
stocks and value stocks. Momentum investing and technology stocks were largely
out of favor with investors during the period, replaced in many cases by a
renewed interest in companies that many investors believed could provide real
earnings and had strong financials.
---------------
11 Please note that any discussion of holdings is as of June 30, 2000. Please
refer to pages 22 and 23 for a complete list and percentage breakdown of the
Portfolio's holdings.
4
<PAGE> 40
Concerns about higher interest rates peaked in mid-May, when the Fed raised
interest rates by an additional 50 basis points. The ongoing trend of rising
interest rates was a catalyst for the weak performance of all of the major
indexes in the quarter ending June 30, 2000. The DJIA, followed a negative first
quarter performance with a decline of 4.34% in the second quarter of 2000.
In the first six months of the year, the Fed raised interest rates three times
in an effort to cool the robust U.S. economy. Even with the possibility of
future rate hikes this year, the manager is cautiously optimistic in a slower
domestic economic future. While consumer confidence slipped somewhat so far this
year, consumer spending continues to increase as evidenced by recent economic
data. Unemployment remains near its 30-year low. Despite the possibility of
future rate hikes this year by the Fed, the manager remains optimistic that the
growth of the U.S. economy should continue for the near term.
GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio ("Portfolio") seeks income and long-term capital
growth. 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, 2000, the Portfolio posted a return of negative 1.95%
versus negative 0.43% return for the S&P 500. (Past performance is not
indicative of future results.)
The manager takes a long-term approach in selecting the investments of the
Portfolio. The Portfolio, in the view of the manager, is well diversified and
invests in a wide range of industries generally representative of U.S. large
capitalization stocks. When buying stocks, the manager believes the critical
investment decision is judging the growth prospects of a company compared to its
current valuations represented by price to earnings, price to cash flow and
price to book ratios.(12) This two-step selection process is commonly known as
"growth at a reasonable price."
The manager manages the Portfolio's sector allocations with the objective of
maintaining weightings that closely reflect the overall market. First, in
selecting investments, the manager measures each stock versus its weighting in
the overall market, which results in what the mangers deem to be a
well-diversified portfolio.
The U.S. economy remains strong, with high employment, business investment and
consumer spending. Economic growth continues throughout most of Europe and Asia
and the manager believes this growth may continue throughout the year. The
positive side of this economic strength is evident in corporate earnings
reports. Most U.S. companies have continued to report earnings above many
investment professionals' expectations, a trend that has been in place for the
last couple of years.
EMERGING GROWTH PORTFOLIO(13)
The Emerging Growth Portfolio ("Portfolio") seeks capital appreciation by
investing primarily in common stocks of emerging growth companies, without
regard to market capitalization. The Portfolio focuses on domestic and foreign
companies that the manager believes are in the early stages of their life cycles
and have the potential to become major enterprises. The Portfolio posted a total
return of 28.32% for the six months ended June 30, 2000, compared to the
negative 2.54% return of NASDAQ. (Past performance is not indicative of future
results.)
On January 31, 2000, the Board of Trustees of the Greenwich Street Series Fund
approved the termination of Van Kampen Asset Management ("VKAM") which commenced
on February 10, 2000 and appointed SSB Citi Fund Management LLC ("SSB Citi")
investment advisor to the Portfolio on an interim basis. The interim investment
advisory agreement between the Portfolio and SSB Citi is substantially identical
to the agreement with VKAM.
On June 16, 2000, the shareholders of the Portfolio approved an Investment
Advisory Agreement ("Agreement"), with SSB Citi. The Agreement will be in effect
for an initial two-year period ending June 16, 2002, and may continue thereafter
from year to year only if specifically approved at least annually by the Board
of Trustees or by the vote of a majority of the outstanding voting securities of
the Portfolio, and in either event, the vote of the majority of the
non-interested Trustees.
Since SSB Citi took over as the Portfolio's investment advisor, Richard Freeman,
investment officer of SSB Citi and managing director of Salomon Smith Barney
Inc., has been responsible for the day-to-day management of the Portfolio.
Richard has 16 years of experience with SSB Citi or its predecessors.
---------------
12 The price-to-earnings ratio is the price of a stock divided by its earnings
per share. The price-to-cash flow is the current share price divided by cash
flow per share for the past twelve months. Cash flow is a measure of a
company's financial health. It equals cash receipts minus cash payments over
a given period of time. Price-to-book ratio is the price of a stock compared
to the difference between a company's assets plus liabilities minus net asset
value.
13 Please note that any discussion of holdings is as of June 30, 2000. Please
refer to pages 40 through 42 for a complete list and percentage breakdown of
the Portfolio's holdings.
5
<PAGE> 41
The manager employs a bottom up, stock specific approach rather than choosing
stocks based on forecasts of strength of the economy, direction of interest
rates and inflation or other factors that are beyond the control of the
individual companies in the Portfolio. The manager's fundamental view is that if
you design a growth portfolio properly, you should be able to find companies to
buy and hold not just for one or two quarters (which the manager believes to be
short term trading) but rather for many years. The manager prefers to own
companies where quality managements work to build dynamic, financially strong
companies and who own meaningful equity stakes themselves.
Volatility in the market for emerging growth stocks increased dramatically in
the first six months of 2000. In fact one can break down market performance this
year into three separate periods; a strong first quarter followed by one of the
most severe declines on record in the Nasdaq, over 40%, followed by a recovery
which began towards the end of May. Coming into the year, valuations on many
emerging growth stocks, particularly technology companies which had yet to
achieve profitability were quite high and many market participants continued to
purchase such shares using borrowed funds. When the market began to decline in
March, a pattern of margin calls developed which began to feed upon itself and
led to more selling by leveraged participants. The subsequent recovery of the
market was a reflection of the more attractive level of the market following the
severe correction and a belief that the Fed was nearing the end of its series of
interest rate increases.
The manager is quite optimistic about companies in the healthcare industry,
particularly those using the new tools of biotechnology and genomics. Such
companies as Chiron, IDEC Pharmaceuticals, and Genzyme for example, are not
sensitive to changes in the economy therefore should the economy slow because of
the recent interest rate increases, it may not have an impact on the expected
earnings of these companies.
The manager believes in investing in great concepts, but overall the companies
in the Portfolio must demonstrate strong current earnings and/or cash flow or
the potential to achieve earnings and/or cash flow within a reasonably short
period of time.
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio ("Portfolio") seeks total return on its
assets from growth of capital and income. The Portfolio seeks to achieve its
objective by investing primarily in equity securities of foreign companies. For
the six months ended June 30, 2000, the Portfolio posted a total return of
negative 11.29%. In comparison, the Morgan Stanley Capital International Europe
Australasia Far East Free Index ("MSCI EAFE")(14) returned a negative 4.06% for
the same period. (Past performance is not indicative of future results.)
International growth stocks significantly underperformed international value
stocks(15) by almost ten percentage points during the second quarter of 2000.
Rising U.S. interest rates raised investors' concerns, especially about
telecommunications and technology stocks, which commanded what the manager
viewed as high valuations. The highly visible retrenchment of the Internet
stocks exacerbated technology stock selling.
Further weakness was contributed to the decline of several major currencies
versus the U.S. dollar. Growth stocks, especially in Asia, suffered significant
selling pressure as investors switched to defensive stocks, such as health care,
consumer nondurable, financial services and utility equities.
In the manager's opinion, Europe continues to have strengthening fundamentals
despite lackluster returns for the first half of the year. Many company
managements are restructuring and reengineering corporate structures, creating
economies of scale and potentially boosting return on capital employed. The fall
of the euro(16) reduced returns, but that currency may have reached its bottom
and has started to recover versus the U.S. dollar. Merger and acquisition
activity continues to be vibrant throughout the region.
---------------
14 MSCI EAFE consists of the equity total returns for Europe, Australasia, New
Zealand and the Far East. An investor cannot invest directly in an index.
15 As measured by the returns of MSCI EAFE Growth and MSCI EAFE Value indices.
16 The euro is the single currency of the European Monetary Union that was
adopted by Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the
Netherlands, Austria, Portugal and Finland on January 1, 1999.
6
<PAGE> 42
Our outlook in Asia has become a bit more guarded, as continued Asian recovery
to some extent depends on export volumes to the U.S. Efforts to slow the growth
of the U.S. economy negatively impacted Asia's more interest rate sensitive
stock markets, most notably in Hong Kong and Singapore, which were also affected
by investment portfolio rebalancing due to international benchmark revisions.
Japan continues to be problematic, with efforts to restructure the financial and
corporate sectors resulting in a slowdown in domestic demand.
In closing, 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 future.
Sincerely,
/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman
July 25, 2000
7
<PAGE> 43
PERFORMANCE COMPARISON -- DIVERSIFIED STRATEGIC INCOME PORTFOLIO AS OF 6/30/00
(UNAUDITED)
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
Six Months Ended 6/30/00+ 1.32%
Year Ended 6/30/00 2.60%
Five Years Ended 6/30/00 7.17%
10/16/91* through 6/30/00 6.45%
CUMULATIVE TOTAL RETURN
-----------------------
10/16/91* through 6/30/00 72.32%
* Commencement of operations
+ Total return is not annualized, as it
may not be representative of the total
return for the year.
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Diversified Strategic Income Portfolio on October 16, 1991
(commencement of operations) through June 30, 2000, 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 Brothers Intermediate
Government/Corporate Bond Index and the Mortgage-Backed Securities Index and
includes treasury issues, agency issues, corporate bond issues and
mortgage-backed securities.
[DIVERSIFIED STRATEGIC INCOME PORTFOLIO GRAPH]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED STRATEGIC INCOME LEHMAN BROTHERS AGGREGATE BOND
PORTFOLIO INDEX
---------------------------- ------------------------------
<S> <C> <C>
10/16/91 $ 10,000 $ 10,000
12/91 10,140 10,507
12/92 10,284 11,285
12/93 11,576 12,386
12/94 11,251 12,024
12/95 13,071 14,246
12/96 14,530 14,944
12/97 15,713 16,385
12/98 16,720 17,809
12/99 17,008 17,663
6/30/00 17,232 18,368
</TABLE>
--------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF
FUTURE RESULTS. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
PERFORMANCE COMPARISON -- EQUITY INCOME PORTFOLIO AS OF 6/30/00 (UNAUDITED)
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
Six Months Ended 6/30/00+ 4.20%
Year Ended 6/30/00 (3.41)%
Five Years Ended 6/30/00 12.06%
10/16/91* through 6/30/00 9.90%
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------
10/16/91* through 6/30/00 127.69%
* Commencement of operations
+ Total return is not annualized, as it
may not be representative of the total
return for the year.
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Equity Income Portfolio on October 16, 1991 (commencement of
operations) through June 30, 2000, with that of a similar investment in the
Variable Annuity Lipper Equity Income Funds Peer Group Average and Standard &
Poor's 500 Index ("S&P 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 S&P 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 43 equity income funds as of June 30, 2000, which underlie variable
annuities.
[EQUITY INCOME PORTFOLIO GRAPH]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE ANNUITY LIPPER
EQUITY INCOME FUNDS PEER STANDARD & POOR'S 500
EQUITY INCOME PORTFOLIO GROUP AVERAGE INDEX
----------------------- ------------------------ ---------------------
<S> <C> <C> <C>
10/16/91 $ 10,000 $ 10,000 $ 10,000
12/91 10,200 10,559 10,838
12/92 11,397 11,782 11,668
12/93 12,583 13,758 12,844
12/94 11,308 14,094 13,012
12/95 14,979 16,510 17,898
12/96 15,876 18,034 19,988
12/97 19,610 23,075 26,656
12/98 22,941 25,781 34,279
12/99 21,850 27,204 41,489
6/30/00 22,769 26,600 41,310
</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
<PAGE> 44
PERFORMANCE COMPARISON -- EQUITY INDEX PORTFOLIO (CLASS I SHARES) AS OF 6/30/00
(UNAUDITED)
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
Six Months Ended 6/30/00+ (0.48)%
Year Ended 6/30/00 7.11%
Five Years Ended 6/30/00 23.09%
10/16/91* through 6/30/00 17.86%
CUMULATIVE TOTAL RETURN
-----------------------
10/16/91* through 6/30/00 318.49%
* Commencement of operations
+ Total return is not annualized, as it
may not be representative of the total
return for the year.
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Equity Index Portfolio (Class I shares) on October 16, 1991
(commencement of operations) through June 30, 2000, with that of a similar
investment in the Standard & Poor's 500 Index ("S&P 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 S&P 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.
[EQUITY INCOME PORTFOLIO GRAPH]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INDEX PORTFOLIO (CLASS I
SHARES) STANDARD & POOR'S 500 INDEX
------------------------------- ---------------------------
<S> <C> <C>
10/16/91 $ 10,000 $ 10,000
12/91 10,620 10,838
12/92 11,335 11,668
12/93 12,316 12,844
12/94 12,421 13,012
12/95 16,870 17,898
12/96 20,526 19,988
12/97 27,127 26,656
12/98 34,823 34,279
12/99 42,052 41,489
6/30/00 41,849 41,310
</TABLE>
--------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF
FUTURE RESULTS. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
--------------------------------------------------------------------------------
PERFORMANCE COMPARISON -- GROWTH AND INCOME PORTFOLIO AS OF 6/30/00 (UNAUDITED)
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
Six Months Ended 6/30/00+ (1.95)%
Year Ended 6/30/00 (0.81)%
Five Years Ended 6/30/00 15.22%
10/16/91* through 6/30/00 12.12%
CUMULATIVE TOTAL RETURN
-----------------------
10/16/91* through 6/30/00 170.95%
* Commencement of operations
+ Total return is not annualized, as it
may not be representative of the total
return for the year.
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Growth and Income Portfolio on October 16, 1991 (commencement of
operations) through June 30, 2000, with that of a similar investment in the
Variable Annuity Lipper Growth & Income Funds Peer Group Average and Standard &
Poor's 500 Index ("S&P 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 S&P 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 200 growth and income funds as of June 30, 2000, which underlie variable
annuities.
[GROWTH AND INCOME PORTFOLIO GRAPH]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE ANNUITY LIPPER
GROWTH AND INCOME GROWTH & INCOME FUNDS STANDARD & POOR'S 500
PORTFOLIO PEER GROUP INDEX
----------------- ----------------------- ---------------------
<S> <C> <C> <C>
10/16/91 $ 10,000 $ 10,000 $ 10,000
12/91 10,140 10,746 10,838
12/92 10,996 11,551 11,668
12/93 11,995 12,802 12,844
12/94 11,611 12,646 13,012
12/95 15,152 16,514 17,898
12/96 18,157 18,211 19,988
12/97 22,321 22,950 26,656
12/98 24,972 26,590 34,279
12/99 27,633 29,973 41,489
6/30/00 27,095 29,640 41,310
</TABLE>
--------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF
FUTURE RESULTS. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends. The returns do not reflect expenses associated with the subaccount
such as administrative fees, account charges and surrender charges which, if
reflected, would reduce the performance shown.
9
<PAGE> 45
PERFORMANCE COMPARISON -- EMERGING GROWTH PORTFOLIO AS OF 6/30/00 (UNAUDITED)
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
Six Months Ended 6/30/00+ 28.32%
Year Ended 6/30/00 119.45%
Five Years Ended 6/30/00 43.79%
12/3/93* through 6/30/00 34.89%
CUMULATIVE TOTAL RETURN
-----------------------
12/3/93* through 6/30/00 616.15%
* Commencement of operations
+ Total return is not annualized, as it
may not be representative of the total
return for the year.
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Emerging Growth Portfolio on December 3, 1993 (commencement of
operations) through June 30, 2000, with that of a similar investment in the
Nasdaq Composite Index ("Nasdaq"). Index information is available at month-end
only; therefore, the closest month-end to inception date of the Portfolio has
been used. The Nasdaq 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.
[EMERGING GROWTH PORTFOLIO GRAPH]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING GROWTH PORTFOLIO NASDAQ COMPOSITE INDEX
------------------------- ----------------------
<S> <C> <C>
12/3/93 $ 10,000 $ 10,000
12/93 10,410 10,297
12/94 9,631 9,968
12/95 13,762 13,947
12/96 16,215 17,115
12/97 19,646 20,819
12/98 26,943 29,071
12/99 55,810 53,949
6/30/00 71,615 52,579
</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 6/30/00
(UNAUDITED)
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
Six Months Ended 6/30/00+ (11.29)%
Year Ended 6/30/00 35.12%
Five Years Ended 6/30/00 16.41%
12/3/93* through 6/30/00 11.81%
CUMULATIVE TOTAL RETURN
-----------------------
12/3/93* through 6/30/00 108.45%
* Commencement of operations
+ Total return is not annualized, as it
may not be representative of the total
return for the year.
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in International Equity Portfolio on December 3, 1993 (commencement
of operations) through June 30, 2000, 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.
[INTERNATIONAL EQUITY PORTFOLIO GRAPH]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO MORGAN STANLEY EAFE INDEX
------------------------------ -------------------------
<S> <C> <C>
12/3/93 $ 10,000 $ 10,000
12/93 10,050 10,724
12/94 9,210 10,850
12/95 10,020 12,103
12/96 12,163 12,873
12/97 11,897 13,120
12/98 14,138 15,744
12/99 23,498 19,989
6/30/00 20,845 19,178
</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
<PAGE> 46
SCHEDULES OF INVESTMENTS (UNAUDITED) JUNE 30, 2000
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE ANNUALIZED
AMOUNT SECURITY YIELD VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 75.6%
$100,000 American Express Credit Co. matures 8/1/00.................. 6.63 % $ 99,472
125,000 AT&T Corp. matures 8/14/00.................................. 6.60 124,045
100,000 Bank America Corp. matures 10/27/00......................... 6.70 97,912
100,000 Bank of Nova Scotia matures 8/7/00.......................... 6.65 99,361
125,000 Barclays U.S. Funding matures 7/20/00....................... 6.57 124,614
130,000 BCI Funding Corp. matures 7/5/00............................ 6.55 129,952
100,000 Bell Atlantic Financial Services matures 7/5/00............. 6.52 99,964
125,000 Coca-Cola Co. matures 9/1/00................................ 6.63 123,638
100,000 Cregem North America matures 7/3/00......................... 6.59 100,000
125,000 Dresdner US Finance Inc. matures 7/14/00.................... 6.68 124,746
125,000 E.I. du Pont de Nemours & Co. matures 8/30/00............... 6.58 124,296
100,000 Goldman Sachs & Co. matures 7/5/00.......................... 6.59 99,964
125,000 Halifax PLC matures 7/3/00.................................. 6.55 125,000
125,000 IBM Corp. matures 7/5/00.................................... 6.54 124,955
100,000 Lucent Technologies Inc. matures 8/21/00.................... 6.61 99,108
100,000 Merrill Lynch & Co. matures 7/17/00......................... 6.72 99,739
100,000 Nationwide Building Society matures 8/8/00.................. 6.63 99,344
125,000 Nestle Capital Corp. matures 7/14/00........................ 6.62 124,748
100,000 Procter & Gamble Co. matures 7/6/00......................... 6.54 99,946
125,000 Prudential Funding Corp. matures 7/6/00..................... 6.56 124,932
100,000 Union Bank of Switzerland matures 7/3/00.................... 6.75 100,000
100,000 Walt Disney Co. matures 7/10/00............................. 6.76 99,869
-------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (Cost -- $2,445,605)................. 2,445,605
-------------------------------------------------------------------------------------------------------
TIME DEPOSITS -- 10.9%
125,000 Bank Austriaengellschaft matures 7/3/00..................... 7.00 125,000
125,000 Bank of Montreal matures 7/3/00............................. 6.88 125,000
102,000 Bank One Corp. matures 7/3/00............................... 6.60 102,000
-------------------------------------------------------------------------------------------------------
TOTAL TIME DEPOSITS (Cost -- $352,000)...................... 352,000
-------------------------------------------------------------------------------------------------------
FEDERAL AGENCY DISCOUNT NOTES -- 3.4%
110,000 Federal Farm Credit Bank matures 7/6/00 6.50 109,941
(Cost -- $109,941)..........................................
-------------------------------------------------------------------------------------------------------
DOMESTIC CERTIFICATES OF DEPOSIT -- 7.0%
100,000 Chase Manhattan Bank matures 9/5/00......................... 6.70 100,000
125,000 Harris Bank matures 7/24/00................................. 6.57 125,000
-------------------------------------------------------------------------------------------------------
TOTAL DOMESTIC CERTIFICATES OF DEPOSIT
(Cost -- $225,000).......................................... 225,000
-------------------------------------------------------------------------------------------------------
YANKEE CERTIFICATES OF DEPOSIT -- 3.1%
100,000 Bayerische-Hypo-und Vereinsbank matures 8/21/00 6.65 99,996
(Cost -- $99,996)...........................................
-------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $3,232,542*)............. $3,232,542
-------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 47
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT SECTOR -- 51.3%
$2,500,000 U.S. Treasury Principal Strip, zero coupon bond to yield
6.668% due 11/15/09 (a)................................................ $ 1,381,925
4,200,000 U.S. Treasury Principal Strip, zero coupon bond to yield
6.199% due 2/15/19 (a)................................................. 1,333,038
10,094,289 Federal National Mortgage Association (FNMA), 7.500% due
9/1/29................................................................. 9,952,263
Government National Mortgage Association (GNMA):
2,259,856 7.500% due 12/15/28.................................................... 2,245,009
4,300,142 7.000% due 7/15/27 through 7/15/29..................................... 4,184,555
1,992,155 8.000% due 11/15/29 through 12/15/29................................... 2,014,568
12,660,056 8.500% due 12/15/29 through 5/15/30.................................... 12,980,522
--------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECTOR (Cost -- $34,240,450)....................... 34,091,880
--------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(b) SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
HIGH YIELD SECTOR -- 27.7%
--------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES -- 27.1%
--------------------------------------------------------------------------------------------------------
AEROSPACE -- 0.3%
30,000 B BE Aerospace, 8.000% due 3/1/08 (a)........................... 25,500
200,000 B- Dunlop Standard Aero Holdings, 11.875% due 5/15/09............ 197,500
--------------------------------------------------------------------------------------------------------
223,000
--------------------------------------------------------------------------------------------------------
ALUMINUM -- 0.1%
Kaiser Aluminum & Chemical:
15,000 B3* 12.750% due 2/1/03.......................................... 13,725
10,000 B1* Series B, 10.875% due 10/15/06.............................. 9,550
75,000 B1* Series D, 10.875% due 10/15/06.............................. 71,625
--------------------------------------------------------------------------------------------------------
94,900
--------------------------------------------------------------------------------------------------------
APPAREL -- 0.3%
90,000 NR Levi Strauss & Co., 7.000% due 11/1/06 (c).................... 68,850
50,000 BBB- Tommy Hilfiger USA Inc., 6.850% due 6/1/08.................... 32,250
75,000 B- Tropical Sportswear International Corp., 11.000% due
6/15/08..................................................... 72,375
--------------------------------------------------------------------------------------------------------
173,475
--------------------------------------------------------------------------------------------------------
AUTO PARTS: OEM -- 0.3%
135,000 B Dura Operating Corp., 9.000% due 5/1/09....................... 118,125
Hayes Lemmerz International, Inc.:
40,000 B 11.000% due 7/15/06......................................... 39,500
70,000 B 8.250% due 12/15/08......................................... 59,500
--------------------------------------------------------------------------------------------------------
217,125
--------------------------------------------------------------------------------------------------------
BROADCASTING -- 0.2%
90,000 B Capstar Broadcasting, step bond to yield 11.002% due
2/1/09...................................................... 83,250
20,000 B Young Broadcasting Corp., 11.750% due 11/15/04 (a).......... 20,450
--------------------------------------------------------------------------------------------------------
103,700
--------------------------------------------------------------------------------------------------------
BUILDING MATERIALS -- 0.0%
35,000 B- Nortek Inc., 9.875% due 3/1/04 (a).......................... 33,425
--------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 48
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(b) SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
BUILDING PRODUCTS -- 0.7%
$ 190,000 B Amatek Industries, 12.000% due 2/15/08...................... $ 174,800
200,000 B- Atrium Cos. Inc., 10.500% due 5/1/09 (c).................... 169,500
135,000 B+ Nortek Inc., 9.125% due 9/1/07.............................. 125,550
--------------------------------------------------------------------------------------------------------
469,850
--------------------------------------------------------------------------------------------------------
CABLE TELEVISION -- 2.7%
Adelphia Communications Corp. (Century Communications
Corp.):
35,000 B+ 8.375% due 2/1/08......................................... 31,106
70,000 BB- Zero coupon bond to yield 10.113% due 1/15/08............... 29,050
295,000 B+ Charter Communications Holdings LLC, step bond to yield
11.714% due 1/15/10....................................... 169,256
70,000 BB- CSC Holdings, 10.500% due 5/15/16........................... 74,725
50,000 B Echostar DBS Corp., 9.375% due 2/1/09....................... 48,250
270,000 B- NTL Communications Corp., 11.500% due 10/1/08............... 270,000
165,000 BB- Rogers Cablesystems Ltd., 11.000% due 12/1/15............... 179,025
225,000 B+ Telewest Communications PLC, 11.250% due 11/1/08............ 226,125
565,000 B- United International Holdings, step bond to yield 11.869%
due 2/15/08............................................... 398,325
720,000 B United Pan-Europe Communications N.V., step bond to yield
12.500% due 8/1/09........................................ 365,400
--------------------------------------------------------------------------------------------------------
1,791,262
--------------------------------------------------------------------------------------------------------
CASINO AND GAMBLING -- 0.6%
120,000 B Hollywood Casino Corp., 11.250% due 5/1/07.................. 123,300
1,945 NR Jazz Casino Co. LLC, Payment-in-kind, 5.987% due 11/15/09... 341
60,000 B+ Station Casinos Inc., 9.875% due 7/1/10 (c)................. 60,450
Sun International Hotels Limited:
80,000 Ba3* 9.000% due 3/15/07........................................ 74,400
70,000 Ba3* 8.625% due 12/15/07....................................... 63,700
Venetian Casino Resort LLC:
30,000 B- 12.250% due 11/15/04 (a).................................. 30,450
25,000 CCC+ 14.250% due 11/15/05...................................... 23,750
--------------------------------------------------------------------------------------------------------
376,391
--------------------------------------------------------------------------------------------------------
CHEMICALS - MAJOR -- 0.4%
Huntsman ICI Chemicals:
65,000 B+ 10.125% due 7/1/09........................................ 65,813
575,000 B+ Zero coupon bond to yield 13.067% due 12/31/09............ 192,625
--------------------------------------------------------------------------------------------------------
258,438
--------------------------------------------------------------------------------------------------------
CHEMICALS - SPECIALTY -- 0.0%
35,000 B+ Lyondell Chemical, 10.875% due 5/1/09 (a)................... 34,912
--------------------------------------------------------------------------------------------------------
COAL MINING -- 0.1%
390,000 Caa2* AEI Resources Inc., 10.500% due 12/15/05 (c)................ 79,950
--------------------------------------------------------------------------------------------------------
CONSTRUCTION/AG EQUIPMENT/TRUCKS -- 0.2%
150,000 B Columbus McKinnon Corp., 8.500% due 4/1/08.................. 129,750
--------------------------------------------------------------------------------------------------------
CONSUMER SPECIALTIES -- 0.1%
50,000 B Jostens Inc., 12.750% due 5/1/10 (c)(d)..................... 49,500
--------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 49
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(b) SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONTAINERS/PACKAGING -- 0.4%
$ 135,000 B Stone Container, 11.500% due 8/15/06 (c).................... $ 140,400
50,000 B- Sweetheart Cup Corp., Inc., 10.500% due 9/1/03.............. 45,750
75,000 B- Tekni-Plex Inc., 12.750% due 6/15/10........................ 75,375
--------------------------------------------------------------------------------------------------------
261,525
--------------------------------------------------------------------------------------------------------
CONTRACT DRILLING -- 0.9%
140,000 B+ Parker Drilling Co., 9.750% due 11/15/06.................... 136,150
190,000 BB Pride International Inc., 10.000% due 6/1/09................ 196,650
40,000 Ba3* R&B Falcon Corp., 12.250% due 3/15/06....................... 43,800
220,000 BB- RBF Finance Co., 11.375% due 3/15/09........................ 239,800
--------------------------------------------------------------------------------------------------------
616,400
--------------------------------------------------------------------------------------------------------
DISCOUNT STORES -- 0.3%
155,000 BB+ Kmart Corp., 12.500% due 3/1/05............................. 169,725
--------------------------------------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES -- 0.3%
250,000 B- Outsourcing Solutions, 11.000% due 11/1/06.................. 218,750
--------------------------------------------------------------------------------------------------------
DIVERSIFIED ELECTRONIC PRODUCTS -- 0.0%
30,000 B SCG Holding & Semiconductor Co., 12.000% due 8/1/09......... 32,175
--------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 0.1%
Amresco Inc.:
50,000 CCC- 10.000% due 3/15/04....................................... 25,500
85,000 CCC- 9.875% due 3/15/05........................................ 43,350
--------------------------------------------------------------------------------------------------------
68,850
--------------------------------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING -- 0.3%
40,000 B- Blount International, Inc., 13.000% due 8/1/09 (a).......... 41,000
150,000 B+ Park-Ohio Industries, 9.250% due 12/1/07.................... 132,750
40,000 B Polymer Group Inc., 9.000% due 7/1/07....................... 34,200
--------------------------------------------------------------------------------------------------------
207,950
--------------------------------------------------------------------------------------------------------
DRUGS - GENERIC -- 0.1%
40,000 BB ICN Pharmaceuticals Inc., 9.250% due 8/15/05................ 39,800
--------------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS -- 0.2%
120,000 B+ Flextronics International Ltd., 9.875% due 7/1/10 (c)....... 121,500
--------------------------------------------------------------------------------------------------------
ENGINEERING AND CONSTRUCTION -- 0.3%
45,000 B- American Plumbing & Mechanical, 11.625% due 10/15/08........ 42,188
170,000 BB- Integrated Electrical Services, 9.375% due 2/1/09........... 138,550
--------------------------------------------------------------------------------------------------------
180,738
--------------------------------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.7%
Allied Waste Industries, Inc.:
25,000 BB- 7.875% due 1/1/09......................................... 21,437
225,000 B+ 10.000% due 8/1/09 (a).................................... 189,000
165,000 B+ IT Group Inc., 11.250% due 4/1/09........................... 148,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 50
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(b) SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENVIRONMENTAL SERVICES -- 0.7% (CONTINUED)
$ 15,000 CCC+ Metal Management Inc., 10.000% due 5/15/08.................. $ 8,325
90,000 B+ URS Corp., 12.250% due 5/1/09............................... 92,700
--------------------------------------------------------------------------------------------------------
459,962
--------------------------------------------------------------------------------------------------------
FINANCE COMPANIES -- 0.1%
65,000 CCC+ Madison River Capital, 13.250% due 3/1/10 (c)............... 58,825
--------------------------------------------------------------------------------------------------------
FOOD DISTRIBUTORS -- 1.2%
70,000 B- Agrilink Foods Inc., 11.875% due 11/1/08.................... 54,950
640,000 B- Carrols Corp., 9.500% due 12/1/08........................... 537,600
80,000 B International Home Foods, 10.375% due 11/1/06............... 86,000
60,000 B- Premier International Foods PLC, 12.000% due 9/1/09 (a)(c).. 54,000
40,000 B SC International Services, 9.250% due 9/1/07................ 38,200
--------------------------------------------------------------------------------------------------------
770,750
--------------------------------------------------------------------------------------------------------
FOODS - SPECIALTY/CANDY -- 0.1%
100,000 B- B&G Foods Inc., 9.625% due 8/1/07........................... 70,500
60,000 CCC+ Imperial Holly, 9.750% due 12/15/07......................... 11,775
--------------------------------------------------------------------------------------------------------
82,275
--------------------------------------------------------------------------------------------------------
FOREST PRODUCTS -- 0.5%
275,000 B Ainsworth Lumber, 12.500% due 7/15/07....................... 274,313
50,000 B+ Millar Western Forest Products, 9.875% due 5/15/08.......... 47,000
--------------------------------------------------------------------------------------------------------
321,313
--------------------------------------------------------------------------------------------------------
HEALTH INDUSTRY SERVICES -- 0.0%
40,000 BBB HEALTHSOUTH Corp., 6.875% due 6/15/05....................... 34,300
--------------------------------------------------------------------------------------------------------
HOME FURNISHINGS -- 0.1%
75,000 B Falcon Products Inc., 11.375% due 6/15/09................... 71,906
--------------------------------------------------------------------------------------------------------
HOMEBUILDING -- 0.3%
65,000 Ba1* D.R. Horton Inc., 8.000% due 2/1/09......................... 56,875
140,000 BB+ Lennar Corp., 9.950% due 5/1/10 (c)......................... 138,600
--------------------------------------------------------------------------------------------------------
195,475
--------------------------------------------------------------------------------------------------------
HOTELS/RESORTS -- 0.8%
270,000 B- Courtyard By Marriott, 10.750% due 2/1/08................... 265,275
50,000 BB HMH Properties Inc., 8.450% due 12/01/08.................... 46,563
Intrawest Corp.:
125,000 B+ 9.750% due 8/15/08........................................ 124,375
120,000 B+ 10.500% due 2/1/10........................................ 123,000
--------------------------------------------------------------------------------------------------------
559,213
--------------------------------------------------------------------------------------------------------
INTERNET SERVICES -- 1.4%
60,000 Caa2* Cybernet Internet Services International, Inc. 14.000% due
7/1/09 (d)................................................ 30,300
180,000 B Exodus Communications, Inc., 11.625% due 7/15/10 (c)........ 181,350
PSInet Inc.:
45,000 B- 11.500% due 11/1/08....................................... 42,525
145,000 B- 11.000% due 8/1/09........................................ 134,850
135,000 B3* Rhythms Netconnections, 14.000% due 2/15/10 (a)(c).......... 98,550
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 51
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(b) SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTERNET SERVICES -- 1.4% (CONTINUED)
Verio Inc.:
$ 115,000 B- 10.375% due 4/1/05........................................ $ 121,325
185,000 B- 11.250% due 12/1/08....................................... 208,587
125,000 B- 10.625% due 11/15/09...................................... 139,219
--------------------------------------------------------------------------------------------------------
956,706
--------------------------------------------------------------------------------------------------------
LEISURE/MOVIES/ENTERTAINMENT -- 0.1%
125,000 B- Premier Parks, Inc., step bond to yield 11.191% due
4/1/08.................................................... 85,469
--------------------------------------------------------------------------------------------------------
MEDICAL SPECIALTIES -- 0.2%
155,000 B- Hanger Orthopedic Group, 11.250% due 6/15/09 (a)............ 135,625
--------------------------------------------------------------------------------------------------------
MULTI-SECTOR COMPANIES -- 0.6%
425,000 B- Triarc Consumer & Beverage, 10.250% due 2/15/09............. 413,312
--------------------------------------------------------------------------------------------------------
NEWSPAPERS -- 0.1%
45,000 B+ Garden State Newspapers, 8.625% due 7/1/11.................. 39,375
--------------------------------------------------------------------------------------------------------
OIL AND GAS PRODUCTION -- 1.3%
Belco Oil & Gas Corp.:
200,000 B 10.500% due 4/1/06........................................ 202,250
105,000 B 8.875% due 9/15/07........................................ 97,650
125,000 B Canadian Forest Oil Corp., 10.500% due 1/15/06.............. 127,812
45,000 B Chesapeake Energy Corp., 9.625% due 5/1/05.................. 43,875
170,000 B+ Nuevo Energy Co., 9.500% due 6/1/08......................... 168,725
30,000 B- Range Resources Corp., 8.750% due 1/15/07................... 25,950
150,000 B Stone Energy Corp., 8.750% due 9/15/07...................... 143,250
35,000 BB- Vintage Petroleum, 9.750% due 6/30/09....................... 35,788
--------------------------------------------------------------------------------------------------------
845,300
--------------------------------------------------------------------------------------------------------
OIL/GAS TRANSMISSION -- 0.0%
20,000 BB- Leviathan Gas & Pipeline Corp., 10.375% due 6/1/09.......... 20,300
--------------------------------------------------------------------------------------------------------
OIL REFINING/MARKETING -- 0.1%
70,000 B Clark USA, 10.875% due 12/1/05.............................. 38,850
--------------------------------------------------------------------------------------------------------
PAPER -- 0.8%
40,000 B Doman Industries Limited, 8.750% due 3/15/04................ 31,200
360,000 CCC+ Repap New Brunswick, 10.625% due 4/15/05.................... 318,600
Riverwood International:
50,000 B- 10.625% due 8/1/07........................................ 48,750
155,000 CCC+ 10.875% due 4/1/08........................................ 137,175
--------------------------------------------------------------------------------------------------------
535,725
--------------------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.2%
110,000 B King Pharmaceuticals, Inc., 10.750% due 2/15/09............. 113,850
--------------------------------------------------------------------------------------------------------
PHOTOGRAPHIC PRODUCTS -- 0.6%
375,000 BB- Polaroid Corp., 11.500% due 2/15/06 (a)..................... 391,875
--------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
75,000 NR Ocwen Asset Investment, 11.500% due 7/1/05.................. 55,875
--------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 52
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(b) SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
RENTAL/LEASING COMPANIES -- 0.4%
$ 95,000 BB- Avis Rent A Car Inc., 11.000% due 5/1/09.................... $ 99,512
United Rentals:
100,000 BB- 9.250% due 1/15/09 (a).................................... 90,750
75,000 BB- 9.000% due 4/1/09 (a)..................................... 66,750
--------------------------------------------------------------------------------------------------------
257,012
--------------------------------------------------------------------------------------------------------
RETAIL - OTHER SPECIALTY STORES -- 0.0%
45,000 B- Advance Stores Co., Inc., 10.250% due 4/15/08 (c)........... 37,350
--------------------------------------------------------------------------------------------------------
SAVINGS AND LOANS ASSOCIATIONS -- 0.1%
100,000 CCC+ Ocwen Capital Trust I, 10.875% due 8/1/27................... 53,500
--------------------------------------------------------------------------------------------------------
SEMICONDUCTORS -- 0.1%
30,000 B1* Amkor Technologies Inc., 10.500% due 5/1/09 (a)............. 30,188
15,000 B Fairchild Semiconductor, 10.125% due 3/15/07................ 15,225
--------------------------------------------------------------------------------------------------------
45,413
--------------------------------------------------------------------------------------------------------
STEEL/IRON ORE -- 0.7%
65,000 BB- The LTV Corp., 11.750% due 11/15/09......................... 54,925
105,000 B+ Russel Metals Inc., 10.000% due 6/1/09...................... 100,406
125,000 B+ WCI Steel Inc., 10.000% due 12/1/04......................... 116,875
270,000 B- WHX Corp., 10.500% due 4/15/05 (a).......................... 211,950
--------------------------------------------------------------------------------------------------------
484,156
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 3.4%
85,000 B+ Call-Net Enterprises, Inc., 9.375% due 5/15/09.............. 52,700
Esprit Telecom:
100,000 B- 11.500% due 12/15/07 (a).................................. 71,500
100,000 B- 10.875% due 6/15/08....................................... 68,500
Focal Communications Corp.:
70,000 B 11.875% due 1/15/10 (c)................................... 70,700
80,000 B Step bond to yield 13.112% due 2/15/08.................... 54,400
35,000 BB Global Crossing Holding Ltd., 9.500% due 11/1/09............ 33,950
85,000 CCC+ GT Group Telecom, step bond to yield 13.250% due 2/1/10
(c)(d).................................................... 47,600
245,000 B Hermes Europe Rail, 10.375% due 1/15/09 (a)................. 200,900
95,000 CCC+ KMC Telecom Holdings Inc., step bond to yield 15.889% due
2/15/08................................................... 45,125
335,000 B Level 3 Communications, step bond to yield 12.875% due
3/15/10................................................... 185,088
30,000 B+ Mcleod USA Inc., 8.125% due 2/15/09......................... 27,150
220,000 B+ Metromedia Fiber Network, 10.000% due 11/15/08.............. 217,800
105,000 B- MGC Communications, Inc., 13.000% due 4/1/10 (c)............ 99,225
Nextlink Communications:
100,000 B 10.750% due 6/1/09........................................ 99,000
220,000 B Step bond to yield 12.066% due 6/1/09..................... 136,400
235,000 B Step bond to yield 12.401% due 12/1/09 (c)................ 136,300
30,000 B- Primus Telecom Group, 11.750% due 8/1/04.................... 24,150
160,000 B- Tele1 Europe BV, 13.000% due 5/15/09........................ 163,200
100,000 B- Versatel Telecom BV, 13.250% due 5/15/08 (d)................ 102,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 53
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(b) SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
TELECOMMUNICATIONS -- 3.4% (CONTINUED)
$ 175,000 B- Viatel Inc., 11.500% due 3/15/09............................ $ 136,500
300,000 B- World Access, Inc., 13.250% due 1/15/08..................... 270,000
--------------------------------------------------------------------------------------------------------
2,242,438
--------------------------------------------------------------------------------------------------------
TELEPHONE - CELLULAR -- 2.5%
125,000 Caa1* AirGate PCS, Inc., step bond to yield 13.267% due 1/10/09... 85,800
45,000 CCC+ Alamosa PCS Holdings Inc., step bond to yield 14.290% due
2/15/10 (a)............................................... 23,625
70,000 B- Centennial Cellular, 10.750% due 12/15/08................... 68,338
Crown Castle International Corp.:
50,000 B 10.750% due 8/1/11 (a).................................... 50,937
220,000 B Step bond to yield 11.287% due 5/15/11 (a)................ 135,575
55,000 NR Dobson/Sygnet Communications Corp., 12.250% due 12/15/08.... 58,850
190,000 B- Microcell Telecommunications, step bond to yield 11.734% due
6/1/09.................................................... 125,875
50,000 B- Millicom International Cellular, step bond to yield 15.950%
due 6/1/06................................................ 42,750
Nextel Communications:
80,000 B1* 9.375% due 11/15/09....................................... 76,800
80,000 B1* Step bond to yield 10.655% due 9/15/07.................... 63,200
290,000 B1* Step bond to yield 10.593% due 2/15/08.................... 213,875
360,000 B- Spectrasite Holdings Inc., step bond to yield 11.250% due
4/15/09................................................... 212,400
Telesystems International:
10,000 CCC+ Series B, step bond to yield 17.226% due 6/30/07.......... 7,000
215,000 CCC+ Series C, step bond to yield 11.952% due 11/1/07.......... 130,075
190,000 B3* Triton PCS Inc., step bond to yield 11.508% due 5/1/08...... 138,700
VoiceStream Wireless Corp.:
60,000 B2* 11.625% due 8/15/06....................................... 65,100
55,000 B2* Step bond to yield 11.875% due 11/15/09................... 37,263
Winstar Communications:
55,000 B- 12.750% due 4/15/10 (c)................................... 51,562
120,000 B- Step bond to yield 15.450% due 4/15/10 (c)................ 56,400
--------------------------------------------------------------------------------------------------------
1,644,125
--------------------------------------------------------------------------------------------------------
TEXTILES -- 0.1%
75,000 BB Westpoint Stevens Inc., 7.875% due 6/15/05.................. 63,000
--------------------------------------------------------------------------------------------------------
TRANSPORTATION - MARINE -- 0.3%
210,000 B- Oglebay Norton Co., 10.000% due 2/1/09...................... 192,150
--------------------------------------------------------------------------------------------------------
UNREGULATED POWER GENERATION -- 1.2%
AES Corp.:
310,000 B+ 10.250% due 7/15/06....................................... 310,775
285,000 BB 9.500% due 6/1/09......................................... 280,725
200,000 BB+ Calpine Corp., 10.500% due 5/15/06.......................... 209,000
--------------------------------------------------------------------------------------------------------
800,500
--------------------------------------------------------------------------------------------------------
WHOLESALE DISTRIBUTORS -- 0.1%
60,000 B Buhrman U.S. Inc., 12.250% due 11/1/09 (c).................. 63,300
--------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -- $19,218,772)....... 18,022,316
--------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 54
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(b) SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS AND NOTES -- 0.0%
--------------------------------------------------------------------------------------------------------
CONTRACT DRILLING -- 0.0%
$ 20,000 B- Parker Drilling Co., 5.500% due 8/1/04 (Cost -- $14,732).... $ 16,475
--------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (e) -- 0.1%
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - OTHER -- 0.1%
5,226 Tele1 Europe Holding AB, ADR................................ 63,040
942 World Access, Inc........................................... 10,428
--------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $23,590)........................ 73,468
--------------------------------------------------------------------------------------------------------
PREFERRED STOCK -- 0.3%
--------------------------------------------------------------------------------------------------------
HOSPITAL/NURSING MANAGEMENT -- 0.2%
175,000 Fresenius Medical Cap Trust, 9.000%......................... 166,687
--------------------------------------------------------------------------------------------------------
SAVINGS AND LOANS ASSOCIATIONS -- 0.1%
2,400 California Federal Preferred Capital Corp., Series A, 9.125%
Exchangeable.............................................. 50,850
--------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost -- $239,163).................... 217,537
--------------------------------------------------------------------------------------------------------
WARRANTS (e) -- 0.2%
--------------------------------------------------------------------------------------------------------
BROADCASTING -- 0.0%
150 Australis Holdings, Expire 10/30/01 (c)..................... 1
450 UIH Australia, Expire 5/15/06............................... 13,500
--------------------------------------------------------------------------------------------------------
13,501
--------------------------------------------------------------------------------------------------------
CABLE TELEVISION -- 0.0%
750 Wireless One Inc., Expire 10/19/00.......................... 8
--------------------------------------------------------------------------------------------------------
INTERNET SERVICES -- 0.1%
60 Cybernet Internet Services International, Inc., Expire
7/1/09 (c)................................................ 1,800
125 Splitrock Service, Expire 7/15/08........................... 23,312
225 WAM! Net Inc., Expire 3/1/05................................ 2,616
--------------------------------------------------------------------------------------------------------
27,728
--------------------------------------------------------------------------------------------------------
PRINTING/FORMS -- 0.0%
60 Merrill Corp., Expire 5/1/09................................ 6
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - OTHER -- 0.1%
150 RSL Communications Ltd., Expire 11/15/06.................... 6,881
100 Versatel Telecom, Expire 5/15/08 (c)........................ 52,500
--------------------------------------------------------------------------------------------------------
59,381
--------------------------------------------------------------------------------------------------------
TELEPHONE - CELLULAR -- 0.0%
100 Iridium World Communications, Expire 7/15/05 (c)............ 1
--------------------------------------------------------------------------------------------------------
TOTAL WARRANTS (Cost -- $10,502)............................ 100,625
--------------------------------------------------------------------------------------------------------
TOTAL HIGH YIELD SECTOR (Cost -- $19,506,759)............... 18,430,421
--------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 55
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT+ SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTERNATIONAL SECTOR -- 16.5%
--------------------------------------------------------------------------------------------------------
BONDS -- 16.5%
--------------------------------------------------------------------------------------------------------
BELGIUM -- 0.0%
40,000 EUR Flag Telecom Holdings Ltd., 11.625% due 3/30/10 (c)......... $ 35,085
--------------------------------------------------------------------------------------------------------
CANADA -- 0.3%
300,000 KFW International Finance, 9.500% due 5/13/02............... 213,322
--------------------------------------------------------------------------------------------------------
DENMARK -- 1.9%
10,000,000 Kingdom of Denmark, 4.000% due 3/15/02...................... 1,245,485
--------------------------------------------------------------------------------------------------------
EUROPE -- 3.1%
2,000,000 EUR Buoni Poliennali Del Tes, 3.250% due 4/15/04................ 1,786,060
300,000 EUR Republic of Italy, 6.000% due 4/2/04........................ 293,805
--------------------------------------------------------------------------------------------------------
2,079,865
--------------------------------------------------------------------------------------------------------
GERMANY -- 4.3%
1,000,000 EUR Bundesobligation, 3.500% due 11/11/03....................... 914,262
2,000,000 EUR Bundesobligation, 3.250% due 2/17/04 (a).................... 1,806,957
175,000 Esprit Telecom, 11.500% due 12/15/07........................ 64,755
100,000 Texon International, 10.000% due 2/1/08..................... 45,825
--------------------------------------------------------------------------------------------------------
2,831,799
--------------------------------------------------------------------------------------------------------
NETHERLANDS -- 0.1%
40,000 EUR Versatel Telecom, NV, 11.250% due 3/30/10 (c)............... 36,139
--------------------------------------------------------------------------------------------------------
SWEDEN -- 1.7%
10,000,000 Swedish Government, 5.500% due 4/12/02...................... 1,148,518
--------------------------------------------------------------------------------------------------------
UNITED KINGDOM -- 4.8%
500,000 European Investment Bank, 7.000% due 12/8/03................ 770,856
500,000 Interamer Development Bank, 7.125% due 11/26/04............. 775,073
75,000 EUR Jazztel PLC, 13.250% due 12/15/09 (c)....................... 65,065
50,000 EUR Jazztel PLC, 14.000% due 7/15/10 (c)........................ 48,410
1,000,000 United Kingdom Treasury, 6.500% due 12/7/03................. 1,542,200
--------------------------------------------------------------------------------------------------------
3,201,604
--------------------------------------------------------------------------------------------------------
UNITED STATES -- 0.3%
40,000 EUR Ineos Acrylics Finance, 10.250% due 5/15/10 (c)............. 39,495
175,000 EUR Level 3 Communications, 11.250% due 3/15/10 (c)............. 164,400
--------------------------------------------------------------------------------------------------------
203,895
--------------------------------------------------------------------------------------------------------
TOTAL INTERNATIONAL SECTOR (Cost -- $11,975,546)............ 10,995,712
--------------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $65,722,755)................. 63,518,013
--------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 56
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 4.5%
$ 2,982,000 CIBC Oppenheimer Corp., 6.450% due 7/3/00; Proceeds at
maturity -- $2,983,603; (Fully collateralized by U.S.
Treasury Bonds, 5.500% due 8/31/01; Market value --
$3,041,744) (Cost -- $2,982,000).......................... $ 2,982,000
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $68,704,755**)........... $66,500,013
--------------------------------------------------------------------------------------------------------
</TABLE>
(a) All or a portion of this security is on loan (See Note 16).
(b) All ratings are by Standard & Poor's Ratings Service, except those
identified by an asterisk (*), which are rated by Moody's Investors Service,
Inc.
(c) 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.
(d) Security issued with attached warrants.
(e) Non-income producing security.
+ Face amount represents local currency, unless otherwise indicated.
** Aggegate cost for Federal income tax purposes is substantially the same.
See page 45 for definition of ratings.
Currency abbreviation used in this schedule:
--------------------------------------------
EUR -- European Currency Unit
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 57
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 80.7%
-----------------------------------------------------------------------------------------
GAS -- 13.6%
12,000 The Coastal Corp............................................ $ 730,500
15,000 Southwest Gas Corp.......................................... 262,500
30,000 Williams Cos. Inc........................................... 1,250,625
-----------------------------------------------------------------------------------------
2,243,625
-----------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 14.8%
9,450 AT&T Corp. ................................................. 298,856
2,000 AT&T Wireless Group (a)..................................... 55,750
10,000 Bell Atlantic Corp.+........................................ 508,125
15,000 SBC Communications Inc...................................... 648,750
20,250 WorldCom, Inc. (a).......................................... 928,969
-----------------------------------------------------------------------------------------
2,440,450
-----------------------------------------------------------------------------------------
UTILITIES -- 52.3%
25,000 Cinergy Corp................................................ 635,938
13,159 Dominion Resources, Inc. ................................... 564,192
30,000 DQE Inc. ................................................... 1,185,000
15,000 Edison International........................................ 307,500
20,000 Energen Corp. .............................................. 436,250
10,000 Energy East Corp. .......................................... 190,625
15,000 FirstEnergy Corp. .......................................... 350,625
20,000 The Montana Power Co. ...................................... 706,250
15,000 National Fuel Gas Co. ...................................... 731,250
20,000 Niagara Mohawk Power Co. (a)................................ 278,750
18,457 NSTAR....................................................... 750,969
21,000 Peco Energy Co. ............................................ 846,562
14,500 Pinnacle West Capital Co. .................................. 491,188
30,000 Unicom Corp. ............................................... 1,160,625
-----------------------------------------------------------------------------------------
8,635,724
-----------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $10,144,583).................... 13,319,799
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(b) SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS AND NOTES -- 8.5%
-----------------------------------------------------------------------------------------------------
UTILITIES -- 8.5%
$250,000 A2* Dayton Power & Light Co., First Mortgage, 8.150% due
1/15/26................................................... 239,688
300,000 A1* Kentucky Utilities Co., First Mortgage, 8.550% due
5/15/27................................................... 306,000
New York State Electric & Gas Corp., First Mortgage:
250,000 A 8.300% due 12/15/22....................................... 245,000
250,000 A 7.450% due 7/15/23........................................ 227,813
425,000 AA+ Wisconsin Public Service Corp., First Mortgage, 7.125% due
7/1/23.................................................... 381,968
-----------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost -- $1,470,522)........ 1,400,469
-----------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $11,615,105)................. 14,720,268
-----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 58
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 10.8%
$1,777,000 Goldman, Sachs & Co., 6.450% due 7/3/00; Proceeds at
maturity -- $1,777,955; (Fully collateralized by U.S.
Treasury Bills, Notes, and Bonds, 0.000% to 12.000% due
8/15/00 to 11/15/28; Market value -- $1,812,541)
(Cost -- $1,777,000)...................................... $ 1,777,000
-------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $13,392,105**)........... $16,497,268
-------------------------------------------------------------------------------------------------------
</TABLE>
+ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon Communications.
(a) Non-income producing security.
(b) All ratings are by Standard & Poor's Ratings Service, except for those which
are identified by an asterisk (*), are rated by Moody's Investors Service,
Inc.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 45 for definition of ratings.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 59
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 99.8%
---------------------------------------------------------------------------------------------
BASIC INDUSTRIES -- 2.6%
15,749 Air Products & Chemicals, Inc. ............................. $ 485,266
15,164 Alcan Aluminum Ltd. ........................................ 470,084
59,566 Alcoa, Inc. ................................................ 1,727,414
5,927 Allegheny Technologies, Inc. ............................... 106,686
13,016 Allied Waste Industries, Inc. (a)........................... 130,160
7,745 Avery Dennison Corp. ....................................... 519,883
27,125 Barrick Gold Corp. ......................................... 493,336
3,587 Bemis, Inc. ................................................ 120,613
9,656 Bethlehem Steel Corp. (a)................................... 34,399
3,774 Boise Cascade Corp. ........................................ 97,652
46,519 Dow Chemical Co. ........................................... 1,404,293
72,138 E.I. du Pont de Nemours & Co. .............................. 3,156,037
8,761 Engelhard Corp. ............................................ 149,485
2,065 FMC Corp. (a)............................................... 119,770
10,722 Freeport-McMoRan Copper & Gold, Inc., Class B Shares........ 99,178
11,879 Georgia Pacific Corp. ...................................... 311,824
3,694 Great Lakes Chemical Corp. ................................. 116,361
7,516 Hercules, Inc. ............................................. 105,694
17,512 Homestake Mining Co. ....................................... 120,395
12,305 Inco Ltd. .................................................. 189,190
33,173 International Paper Co. .................................... 988,970
6,109 ITT Industries, Inc. ....................................... 185,561
38,239 Kimberly-Clark Corp. ....................................... 2,193,963
7,371 Louisiana Pacific Corp. .................................... 80,160
19,446 Maxim Integrated Products, Inc. (a)......................... 1,321,113
6,963 Mead Corp. ................................................. 175,816
13,588 Molex, Inc. ................................................ 653,922
11,736 Newmont Mining Corp. ....................................... 253,791
5,796 Nucor Corp. ................................................ 192,355
5,462 Phelps Dodge Corp. ......................................... 203,118
22,313 Placer Dome, Inc. .......................................... 213,368
2,065 Potlatch Corp. ............................................. 68,403
12,000 PPG Industries, Inc. ....................................... 531,750
10,820 Praxair, Inc. .............................................. 405,074
7,900 Quintiles Transnational Corp. (a)........................... 111,588
14,976 Rohm & Haas Co. ............................................ 516,672
5,921 Sigma-Aldrich Corp. ........................................ 173,189
9,197 Union Carbide Corp. ........................................ 455,252
32,402 United Technologies Corp. .................................. 1,907,668
6,194 USX-U.S. Steel Group........................................ 114,976
4,536 W.R. Grace & Co. (a)........................................ 54,999
42,906 Waste Management, Inc. ..................................... 815,214
6,880 Westvaco Corp. ............................................. 170,710
16,129 Weyerhaeuser Co. ........................................... 693,547
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE> 60
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 2.6% (CONTINUED)
7,610 Willamette Industries, Inc. ................................ $ 207,372
6,115 Worthington Industries, Inc. ............................... 64,208
---------------------------------------------------------------------------------------------
22,710,479
---------------------------------------------------------------------------------------------
BUILDING MATERIALS -- 0.0%
6,972 Vulcan Materials Co. ....................................... 297,617
---------------------------------------------------------------------------------------------
CAPITAL GOODS -- 6.1%
2,596 Armstrong World Industries, Inc. ........................... 39,751
7,465 The B.F. Goodrich Co. ...................................... 254,277
62,524 Boeing Co. ................................................. 2,614,285
1,486 Briggs & Stratton Corp. .................................... 50,895
23,962 Caterpillar, Inc. .......................................... 811,713
3,909 Centex Corp. ............................................... 91,861
6,425 Cooper Industries, Inc. .................................... 209,214
4,025 Crane Co. .................................................. 97,858
2,861 Cummins Engine, Inc. ....................................... 77,962
10,647 Dana Corp. ................................................. 225,583
9,675 Danaher Corp. .............................................. 478,308
16,053 Deere & Co. ................................................ 593,961
38,504 Delphi Automotive Systems Corp. ............................ 560,714
13,996 Dover Corp. ................................................ 567,713
4,945 Eaton Corp. ................................................ 331,315
29,418 Emerson Electric Co. ....................................... 1,776,112
5,126 Fluor Corp. ................................................ 162,110
13,823 General Dynamics Corp. ..................................... 722,252
681,094 General Electric Co......................................... 36,097,982
20,710 Illinois Tool Works, Inc. .................................. 1,180,470
11,042 Ingersoll Rand Co. ......................................... 444,440
5,890 Johnson Controls, Inc. ..................................... 302,231
3,189 Kaufman & Broad Home Corp. ................................. 63,182
27,727 Lockheed Martin Corp. ...................................... 687,976
4,368 Navistar International Corp. (a)............................ 135,681
4,848 Northrop Grumman Corp. ..................................... 321,180
3,822 Owens-Corning Fiberglass Corp. ............................. 35,353
9,879 Owens-Illinois.............................................. 115,461
5,188 PACCAR, Inc. ............................................... 205,899
7,658 Parker Hannifin Corp. ...................................... 262,287
5,055 Progressive Corp. .......................................... 374,070
23,454 Raytheon Corp., Class B Shares.............................. 451,490
12,835 Rockwell International Corp. ............................... 404,303
6,011 Stanley Works............................................... 142,761
9,861 Textron, Inc. .............................................. 535,576
10,940 Thermo Electron Corp. (a)................................... 230,424
3,907 Thomas & Betts Corp. ....................................... 74,722
4,212 Timken Co. ................................................. 78,449
8,552 TRW, Inc. .................................................. 370,943
---------------------------------------------------------------------------------------------
52,180,764
---------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 61
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DURABLES -- 1.9%
5,804 Black & Decker Corp. ....................................... $ 228,170
4,939 Cooper Tire & Rubber Co. ................................... 54,946
19,005 Corning, Inc. .............................................. 5,128,974
83,039 Ford Motor Co. ............................................. 3,570,677
36,854 General Motors Corp. ....................................... 2,139,836
12,285 Genuine Parts Co. .......................................... 245,700
10,643 Goodyear Tire & Rubber Co. ................................. 212,860
13,490 Leggett & Platt, Inc. ...................................... 222,585
30,947 Masco Corp. ................................................ 558,980
5,370 Maytag Corp. ............................................... 198,019
18,488 Newell Rubbermaid, Inc. .................................... 476,066
2,841 Pulte Corp. ................................................ 61,437
13,727 Siebel Systems, Inc. (a).................................... 2,245,222
4,056 Snap-On, Inc. .............................................. 107,991
3,341 Tektronix, Inc. ............................................ 247,234
4,924 Tiffany & Co. .............................................. 332,370
10,873 Visteon Corp. .............................................. 131,830
5,038 Whirlpool Corp. ............................................ 234,897
---------------------------------------------------------------------------------------------
16,397,794
---------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 7.0%
31,144 Anheuser-Busch Cos., Inc. .................................. 2,326,067
41,363 Archer-Daniels-Midland Co. ................................. 405,874
9,150 Autozone, Inc. (a).......................................... 201,300
16,395 Avon Products, Inc. ........................................ 729,577
2,180 Ball Corp. ................................................. 70,169
9,642 Bed Bath & Beyond Inc. (a).................................. 349,522
14,046 Best Buy Co., Inc. (a)...................................... 888,409
4,718 Brown-Forman Corp., Class B Shares.......................... 253,592
28,982 Campbell Soup Co. .......................................... 844,101
16,211 Clorox Co. ................................................. 726,455
170,399 The Coca Cola Co. .......................................... 9,787,293
28,752 Coca Cola Enterprises, Inc. ................................ 469,017
39,726 Colgate Palmolive Co. ...................................... 2,378,594
33,964 Conagra, Inc. .............................................. 647,439
2,586 Coors Adolph Co., Class B Shares............................ 156,453
8,667 Crown Cork & Seal, Inc. .................................... 130,005
5,363 Eastman Chemical Co. ....................................... 256,083
21,366 Eastman Kodak Co. .......................................... 1,271,277
19,945 FDX Corp. .................................................. 757,910
14,286 Fort James Corp. ........................................... 330,363
10,932 Fortune Brands, Inc. ....................................... 252,119
19,977 General Mills, Inc. ........................................ 764,120
71,756 Gillette Co. ............................................... 2,506,975
24,282 H.J. Heinz Co. ............................................. 1,062,337
11,721 Hasbro, Inc. ............................................... 176,548
9,460 Hershey Foods Corp. ........................................ 458,810
7,117 International Flavors & Fragrances, Inc. ................... 214,844
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 62
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER NON-DURABLES -- 7.0% (CONTINUED)
28,001 Kellogg Co. ................................................ $ 833,030
3,822 Liz Claiborne, Inc. ........................................ 134,725
29,070 Mattel, Inc. ............................................... 383,361
92,074 McDonald's Corp. ........................................... 3,032,688
27,217 Minnesota Mining & Manufacturing Co. ....................... 2,245,402
22,339 Nabisco Group Holdings Corp. ............................... 579,418
18,743 Nike Inc., Class B Shares................................... 746,206
22,465 Office Depot, Inc. ......................................... 140,407
99,298 PepsiCo, Inc. .............................................. 4,412,555
157,479 Philip Morris Cos., Inc. ................................... 4,183,036
3,287 Polaroid Corp. ............................................. 59,371
90,086 Procter & Gamble Co. ....................................... 5,157,424
8,959 Quaker Oats Co. ............................................ 673,045
21,202 Ralston Purina Group........................................ 422,715
3,753 Reebok International Ltd. (a)............................... 59,813
2,241 Russell Corp. .............................................. 44,820
59,783 Sara Lee Corp. ............................................. 1,154,559
30,032 Seagram Ltd. ............................................... 1,741,856
11,368 The Sherwin Williams Co. ................................... 240,860
12,573 Starbucks Corp. (a)......................................... 480,131
31,335 Target Corp. ............................................... 1,817,430
10,030 Tricon Global Restaurants, Inc. (a)......................... 283,348
4,047 Tupperware Corp. ........................................... 89,034
39,288 Unilever NV, New York Shares................................ 1,689,384
11,278 UST, Inc. .................................................. 165,646
7,863 VF Corp. ................................................... 187,238
7,820 William Wrigley Jr. Co. .................................... 627,066
---------------------------------------------------------------------------------------------
59,999,821
---------------------------------------------------------------------------------------------
CONSUMER SERVICES -- 12.0%
46 Abercrombie & Fitch Co., Class A Shares..................... 561
3,750 Alberto Culver Co., Class B Shares.......................... 114,609
29,180 Albertsons, Inc. ........................................... 970,235
158,203 America Online, Inc. ....................................... 8,345,208
4,273 American Greetings Corp., Class A Shares.................... 81,187
43,245 Automatic Data Processing, Inc. ............................ 2,316,310
18,893 Bestfoods................................................... 1,308,340
6,161 Brunswick Corp. ............................................ 102,041
41,641 Carnival Corp. ............................................. 811,999
49,784 Cendant Corp. (a)........................................... 696,976
9,788 CenturyTel, Inc. ........................................... 281,405
13,914 Circuit City Stores, Inc. .................................. 461,771
23,328 Clear Channel Communications, Inc. ......................... 1,749,600
61,872 Comcast Corp., Class A Shares............................... 2,505,816
7,863 Consolidated Stores Corp. .................................. 94,356
10,542 Convergys, Corp. (a)........................................ 546,866
30,757 Costco Cos., Inc. (a)....................................... 1,014,981
26,848 CVS Corp. .................................................. 1,073,920
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 63
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES -- 12.0% (CONTINUED)
8,371 Darden Restaurants, Inc. ................................... $ 136,029
4,816 Deluxe Corp. ............................................... 113,477
6,552 Dillard Department Stores, Inc., Class A Shares............. 80,262
22,434 Dollar General Corp. ....................................... 437,463
6,115 Dow Jones & Co. Inc. ....................................... 447,924
11,180 Dun & Bradstreet Corp. ..................................... 320,027
8,869 Ecolab, Inc. ............................................... 346,446
77,789 Eli Lilly & Co. ............................................ 7,769,177
9,638 Equifax, Inc. .............................................. 252,997
14,849 Federated Department Stores, Inc. (a)....................... 501,154
18,306 Gannett, Inc. .............................................. 1,094,928
58,720 The Gap, Inc. .............................................. 1,835,000
2,511 Great Atlantic & Pacific Tea Co., Inc. ..................... 41,746
4,992 Harcourt General, Inc. ..................................... 271,440
8,499 Harrah's Entertainment, Inc. (a)............................ 177,947
25,515 Hilton Hotels Corp. ........................................ 239,203
159,342 Home Depot, Inc. ........................................... 7,957,141
20,755 The Interpublic Group of Cos., Inc. ........................ 892,465
18,078 J.C. Penney Co. ............................................ 333,313
32,523 Kmart Corp. (a)............................................. 221,563
5,286 Knight Ridder, Inc. ........................................ 281,149
22,490 Kohls Corp. ................................................ 1,251,006
57,647 Kroger Co. (a).............................................. 1,271,837
29,772 The Limited, Inc. .......................................... 643,819
2,556 Longs Drug Stores Corp. .................................... 55,593
26,248 Lowe's Cos., Inc. .......................................... 1,077,808
16,590 Marriott International, Inc. ............................... 598,277
22,989 May Department Stores Co. .................................. 551,736
13,466 McGraw Hill Cos., Inc. ..................................... 727,164
3,541 Meredith Corp. ............................................. 119,509
3,019 National Service Industries, Inc. .......................... 58,870
11,738 New York Times Co., Class A Shares.......................... 463,651
9,220 Nordstrom, Inc. ............................................ 222,432
12,258 Omnicom Group, Inc. ........................................ 1,091,728
25,520 Paycheck Inc. .............................................. 1,071,840
8,485 R.R. Donnelley & Sons Co. .................................. 191,443
12,774 RadioShack Corp. ........................................... 605,168
17,367 Rite Aid Corp. ............................................. 113,971
8,783 Sabre Holdings Corp. (a).................................... 250,316
34,137 Safeway, Inc. (a)........................................... 1,540,432
5,712 Sealed Air Corp. (a)........................................ 299,166
24,236 Sears, Roebuck & Co. ....................................... 790,700
1,255 Spring Industries, Inc. .................................... 40,396
33,289 Staples, Inc. (a)........................................... 511,819
9,115 SuperValu, Inc. ............................................ 173,755
22,897 Sysco Corp. ................................................ 964,536
3,708 Temple Inland, Inc. ........................................ 155,736
90,554 Time Warner, Inc. .......................................... 6,882,104
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 64
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES -- 12.0% (CONTINUED)
4,017 Times Mirror Co., Class A Shares............................ $ 366,551
20,523 TJX Cos., Inc. ............................................. 384,806
14,612 Toys 'R' Us, Inc. (a)....................................... 212,787
21,283 Tribune Co. ................................................ 744,905
18,028 TXU Corp. .................................................. 531,826
4,508 USAirways Group, Inc. (a)................................... 175,812
105,011 Viacom, Inc., Non Voting Shares (a)......................... 7,160,438
6,393 W.W. Grainger, Inc. ........................................ 196,985
69,538 Walgreen Co. ............................................... 2,238,255
306,799 Wal-Mart Stores, Inc. ...................................... 17,679,293
143,117 Walt Disney Co. ............................................ 5,554,729
7,876 Wendy's International, Inc. ................................ 140,291
10,083 Winn Dixie Stores, Inc. .................................... 144,313
4,903 Young & Rubicam Inc. ....................................... 280,391
---------------------------------------------------------------------------------------------
103,763,226
---------------------------------------------------------------------------------------------
ENERGY -- 6.8%
29,312 AES Corp. (a)............................................... 1,337,360
6,177 Amerada Hess Corp. ......................................... 381,430
13,419 American Power Conversion Corp. (a)......................... 547,662
8,775 Anadorka Petroleum Corp. ................................... 432,717
7,777 Apache Corp. ............................................... 457,385
4,794 Ashland, Inc. .............................................. 168,090
22,805 Baker Hughes, Inc. ......................................... 729,760
14,917 Burlington Resources, Inc. ................................. 570,575
44,864 Chevron Corp. .............................................. 3,805,028
10,956 Cinergy Corp. .............................................. 278,693
14,657 Coastal Corp. .............................................. 892,245
43,107 Conoco, Inc., Class B Shares................................ 1,058,816
10,389 Constellation Energy Group.................................. 338,292
10,987 CP&L Energy, Inc. .......................................... 350,897
1,810 Eastern Enterprises......................................... 114,030
22,733 Edison International........................................ 466,026
16,000 El Paso Energy Co. ......................................... 815,000
50,394 Enron Corp. ................................................ 3,250,413
239,711 Exxon Mobil Corp............................................ 18,817,313
15,824 First Energy Corp. ......................................... 369,886
30,516 Halliburton Co. ............................................ 1,439,973
6,450 Kerr McGee Corp. ........................................... 380,147
21,096 LSI Logic Corp. (a)......................................... 1,141,821
3,849 McDermott International, Inc. .............................. 33,920
7,893 New Century Energies, Inc. ................................. 236,790
25,438 Occidental Petroleum Corp. ................................. 535,788
11,212 Pactiv Corp. (a)............................................ 88,295
17,457 Phillips Petroleum Co. ..................................... 884,852
6,485 Rowan Cos., Inc. (a)........................................ 196,982
147,651 Royal Dutch Petroleum Co. .................................. 9,089,765
4,047 Sapient Corp. (a)........................................... 432,776
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 65
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<C> <S> <C>
ENERGY -- 6.8% (CONTINUED)
39,181 Schlumberger Ltd. .......................................... $ 2,923,882
14,185 Sempra Energy............................................... 241,145
6,190 Sunoco Inc. ................................................ 182,218
38,000 Texaco, Inc. ............................................... 2,023,500
9,958 Tosco Corp. ................................................ 281,936
14,571 Transocean Sedco Forex, Inc. ............................... 778,638
17,442 Union Pacific Resources Group, Inc. ........................ 383,724
16,792 Unocal Corp. ............................................... 556,235
21,540 USX-Marathon Group.......................................... 539,846
30,445 Williams Cos., Inc. ........................................ 1,269,176
---------------------------------------------------------------------------------------------
58,823,027
---------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 13.5%
9,656 Aetna, Inc. ................................................ 619,794
18,236 AFLAC, Inc. ................................................ 837,716
51,276 Allstate Corp. ............................................. 1,140,891
91,986 American Express Co. ....................................... 4,794,770
17,166 American General Corp. ..................................... 1,047,126
106,158 American International Group, Inc. ......................... 12,473,566
27,110 AmSouth Bancorp............................................. 426,982
50,182 Associates First Capital Corp. ............................. 1,119,686
50,808 Bank of New York Co., Inc. ................................. 2,362,572
79,096 Bank One Corp. ............................................. 2,100,987
114,096 BankAmerica Corp. .......................................... 4,906,128
24,088 BB&T Corp. ................................................. 575,101
7,528 Bear Stearns & Co. ......................................... 313,353
13,528 Capital One Financial Corp. ................................ 603,687
93,628 Charles Schwab Corp. ....................................... 3,148,242
14,502 Charter One Financial, Inc. ................................ 333,546
85,162 Chase Manhattan Corp. ...................................... 3,922,775
12,055 Chubb Corp. ................................................ 741,382
11,199 CIGNA Corp. ................................................ 1,047,106
11,116 Cincinnati Financial Corp. ................................. 349,459
232,370 Citigroup Inc. ............................................. 14,000,292
10,727 Comerica, Inc. ............................................. 481,374
22,681 Conseco, Inc. .............................................. 221,140
7,879 Countrywide Credit Industries, Inc. ........................ 238,832
69,415 Fannie Mae.................................................. 3,622,596
21,379 Fifth Third Bancorp. ....................................... 1,352,222
28,390 First Data Corp. ........................................... 1,408,854
67,564 First Union Corp. .......................................... 1,676,432
66,855 Firstar, Corp. ............................................. 1,408,133
62,081 FleetBoston Financial Corp. ................................ 2,110,754
16,780 Franklin Resources Inc. .................................... 509,692
47,860 Freddie Mac................................................. 1,938,330
10,788 Golden West Financial Corp. of Delaware..................... 440,285
6,785 H&R Block, Inc. ............................................ 219,664
14,828 Hartford Financial Services Group, Inc. .................... 829,441
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 66
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES -- 13.5% (CONTINUED)
32,664 Household International Inc. ............................... $ 1,357,597
15,403 Huntington Bancshares....................................... 243,560
11,158 J.P. Morgan & Co., Inc. .................................... 1,228,775
7,140 Jefferson Pilot Corp. ...................................... 402,964
29,714 KeyCorp. ................................................... 523,709
8,283 Lehman Brothers Holding, Inc. .............................. 783,261
13,104 Lincoln National Corp. ..................................... 473,382
6,746 Loews Corp. ................................................ 404,760
18,521 Marsh & McLennan Cos., Inc. ................................ 1,934,287
6,810 MBIA, Inc. ................................................. 328,157
55,362 MBNA Corp. ................................................. 1,501,694
33,772 Mellon Bank Corp. .......................................... 1,230,567
26,722 Merrill Lynch & Co., Inc. .................................. 3,073,030
7,315 MGIC Investment Corp. ...................................... 332,832
77,971 Morgan Stanley Dean Witter & Co. ........................... 6,491,086
41,610 National City Corp. ........................................ 709,971
15,359 Northern Trust Corp. ....................................... 999,295
9,341 Old Kent Financial Corp. ................................... 249,866
10,029 Paine Webber Group Inc. .................................... 456,320
20,017 PNC Bank Corp. ............................................. 938,297
9,814 Providian Corp. ............................................ 883,260
15,197 Regions Financial Corp. .................................... 302,041
8,930 Safeco Corp. ............................................... 177,484
10,746 SLM Holding Corp. .......................................... 402,304
11,437 SouthTrust Corp. ........................................... 258,762
14,523 St. Paul Cos., Inc. ........................................ 495,598
11,047 State Street Corp. ......................................... 1,171,672
12,238 Summit BanCorp.............................................. 301,361
20,901 Suntrust Bank, Inc. ........................................ 954,914
19,453 Synovus Financial Corp. .................................... 342,859
8,264 T. Rowe Price Associates, Inc. ............................. 351,220
8,921 Torchmark Corp. ............................................ 220,237
116,306 Tyco International Ltd. .................................... 5,509,997
51,599 U.S. BanCorp of Oregon...................................... 993,281
9,270 Union Planters Corp. ....................................... 258,981
16,717 UnumProvident Corp. ........................................ 335,385
13,865 Wachovia Corp. ............................................. 752,176
37,760 Washington Mutual, Inc. .................................... 1,090,320
111,020 Wells Fargo & Co. .......................................... 4,302,025
---------------------------------------------------------------------------------------------
116,090,197
---------------------------------------------------------------------------------------------
HEALTH CARE -- 10.9%
106,601 Abbott Laboratories......................................... 4,750,407
8,866 Allergan, Inc. ............................................. 660,517
7,035 Alza Corp. (a).............................................. 415,944
89,756 American Home Products Corp. ............................... 5,273,165
70,704 Amgen, Inc. (a)............................................. 4,966,956
17,593 Aon Corp. .................................................. 546,483
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 67
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE -- 10.9% (CONTINUED)
3,671 Bausch & Lomb, Inc. ........................................ $ 284,044
19,982 Baxter International, Inc. ................................. 1,404,984
17,318 Becton, Dickinson & Co. .................................... 496,810
10,163 Biogen, Inc. (a)............................................ 655,513
8,256 Biomet, Inc. (a)............................................ 317,340
27,992 Boston Scientific Corp. (a)................................. 614,074
135,853 Bristol-Myers Squibb Co. ................................... 7,913,437
3,519 C.R. Bard, Inc. ............................................ 169,351
19,018 Cardinal Health, Inc. ...................................... 1,407,332
38,438 Columbia/HCA Healthcare Corp. .............................. 1,167,554
21,126 Guidant Corp. .............................................. 1,045,737
26,594 HEALTHSOUTH Corp. .......................................... 191,145
11,605 Humana, Inc. (a)............................................ 56,575
20,385 IMS Health, Inc. ........................................... 366,930
95,723 Johnson & Johnson........................................... 9,751,781
4,767 Mallinckrodt Group, Inc. ................................... 207,067
7,505 Manor Care Inc. (a)......................................... 52,535
19,356 McKesson HBOC, Inc. ........................................ 405,266
14,381 MedImmune, Inc. (a)......................................... 1,064,194
82,341 Medtronic, Inc. ............................................ 4,101,611
158,329 Merck & Co., Inc. .......................................... 12,131,960
3,167 Millipore Corp. ............................................ 238,713
8,379 Pall Corp. ................................................. 155,012
433,429 Pfizer, Inc. ............................................... 20,804,592
87,327 Pharmacia & Upjohn, Inc. ................................... 4,513,714
100,880 Schering-Plough Corp. ...................................... 5,094,440
5,800 St. Jude Medical, Inc. (a).................................. 266,075
21,614 Tenet Healthcare Corp. (a).................................. 583,578
11,215 United Healthcare Corp. .................................... 961,686
6,603 Watson Pharmaceutical, Inc. ................................ 354,911
4,270 Wellpoint Health Networks, Inc. ............................ 309,308
---------------------------------------------------------------------------------------------
93,700,741
---------------------------------------------------------------------------------------------
SEMICONDUCTORS -- 6.7%
10,500 Advanced Micro Devices, Inc. (a)............................ 811,125
13,695 Altera Corp. (a)............................................ 1,396,034
24,394 Analog Devices, Inc. (a).................................... 1,853,944
55,634 Applied Materials, Inc. (a)................................. 5,041,831
15,002 Conexant Systems, Inc. (a).................................. 729,472
230,588 Intel Corp. ................................................ 30,826,733
12,819 KLA-Tencor Corp. ........................................... 750,713
21,404 Linear Technology Corp. .................................... 1,368,518
38,243 Micron Technology, Inc. (a)................................. 3,367,774
12,186 National Semiconductor Corp. (a)............................ 691,555
8,921 Novellus Systems, Inc. (a).................................. 504,594
10,219 Sanmina Corp. (a)........................................... 873,725
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 68
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<C> <S> <C>
SEMICONDUCTORS -- 6.7% (CONTINUED)
112,673 Texas Instruments, Inc. .................................... $ 7,739,227
22,126 Xilinx, Inc. (a)............................................ 1,826,778
---------------------------------------------------------------------------------------------
57,782,023
---------------------------------------------------------------------------------------------
TECHNOLOGY -- 24.1%
24,071 3Com Corp. (a).............................................. 1,387,092
7,024 Adaptec, Inc. (a)........................................... 159,796
21,044 ADC Telecommunications, Inc. (a)............................ 1,765,065
8,276 Adobe Systems, Inc. ........................................ 1,075,880
31,100 Agilent Technologies, Inc. (a).............................. 2,293,625
5,542 Andrew Corp. (a)............................................ 186,003
22,403 Apple Computer, Inc. (a).................................... 1,173,357
4,033 Autodesk, Inc. ............................................. 139,895
16,868 BMC Software, Inc. ......................................... 615,418
12,616 Cabletron Systems, Inc. (a)................................. 318,554
10,077 Ceridian Corp. (a).......................................... 242,477
478,918 Cisco Systems, Inc. (a)..................................... 30,441,225
12,789 Citrix Systems, Inc. (a).................................... 242,192
116,863 Compaq Computer Corp. (a)................................... 2,987,310
40,556 Computer Associates International, Inc. .................... 2,075,960
11,466 Computer Sciences Corp. (a)................................. 856,366
24,812 Compuware Corp. ............................................ 257,424
10,542 Comverse Technology, Inc. (a)............................... 980,406
177,261 Dell Computer Corp. (a)..................................... 8,741,183
31,974 Electronic Data Systems Corp. .............................. 1,318,927
149,407 EMC Corp. (a)............................................... 11,495,001
22,183 Gateway, Inc. (a)........................................... 1,258,885
68,870 Hewlett Packard Co. ........................................ 8,600,141
54,938 Honeywell International, Inc. .............................. 1,850,724
122,059 International Business Machines Corp. ...................... 13,373,089
8,923 Lexmark International Group, Inc., Class A Shares (a)....... 600,072
224,210 Lucent Technologies, Inc. .................................. 13,284,442
6,200 Mercury Interactive Corp. (a)............................... 599,850
362,273 Microsoft Corp. (a)......................................... 28,981,840
148,270 Motorola, Inc. ............................................. 4,309,097
6,654 NCR Corp. (a)............................................... 259,090
20,959 Network Appliance, Inc. .................................... 1,687,199
52,222 Nextel Communications, Inc. ................................ 3,195,334
204,014 Nortel Networks Corp. ...................................... 13,923,955
22,238 Novell, Inc. (a)............................................ 205,701
195,422 Oracle Corp. (a)............................................ 16,427,662
18,616 Parametric Technology Corp. (a)............................. 204,776
14,356 PE Corp. - PE Biosystems Group.............................. 945,702
18,960 Peoplesoft, Inc. ........................................... 317,580
3,440 Perkin-Elmer, Corp. ........................................ 227,470
17,754 Pitney Bowes, Inc. ......................................... 710,160
51,001 QUALCOMM, Inc. (a).......................................... 3,060,060
10,959 Scientific-Atlanta, Inc. ................................... 816,446
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE> 69
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- 24.1% (CONTINUED)
15,646 Seagate Technology, Inc. ................................... $ 860,530
41,008 Solectron Corp. ............................................ 1,717,210
109,259 Sun Microsystems, Inc. (a).................................. 9,935,741
28,239 Tellabs, Inc. (a)........................................... 1,932,606
11,937 Teradyne, Inc. (a).......................................... 877,370
21,357 Unisys Corp. (a)............................................ 311,012
26,904 VERITAS Software Corp. (a).................................. 3,040,573
45,866 Xerox Corp. ................................................ 951,720
37,408 Yahoo!, Inc. (a)............................................ 4,633,916
---------------------------------------------------------------------------------------------
207,853,109
---------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.6%
10,192 AMR Corp. .................................................. 269,451
29,375 Burlington Northern Santa Fe Corp. ......................... 673,789
15,144 CSX Corp. .................................................. 320,863
8,375 Delta Air Lines, Inc. ...................................... 423,461
21,002 Harley-Davidson, Inc. ...................................... 808,577
7,656 Kansas City Southern Industries, Inc. ...................... 678,991
26,419 Norfolk Southern Corp. ..................................... 392,983
4,156 Ryder Systems, Inc. ........................................ 78,704
33,940 Southwest Airlines Co. ..................................... 642,739
17,090 Union Pacific Corp. ........................................ 635,535
---------------------------------------------------------------------------------------------
4,925,093
---------------------------------------------------------------------------------------------
UTILITIES -- 7.6%
21,669 ALLTEL Corp. ............................................... 1,342,124
9,448 Ameren Corp. ............................................... 318,870
22,270 American Electric Power, Inc. .............................. 659,749
258,387 AT&T Corp. ................................................. 8,171,502
106,451 Bell Atlantic Corp.+........................................ 5,409,041
129,514 BellSouth Corp. ............................................ 5,520,534
7,623 CMS Energy Corp. ........................................... 168,659
5,592 Columbia Energy Group....................................... 366,975
14,655 Consolidated Edison Co. of New York, Inc. .................. 434,154
16,450 Dominion Resources, Inc. ................................... 705,294
9,734 DTE Energy Co. ............................................. 297,496
25,308 Duke Energy Corp. .......................................... 1,426,738
15,775 Entergy Corp. .............................................. 428,882
6,808 Florida Progress Corp. ..................................... 319,125
12,258 FPL Group, Inc. ............................................ 606,771
60,593 Global Crossing Ltd. (a).................................... 1,594,353
8,232 GPU, Inc. .................................................. 222,779
66,312 GTE Corp.+.................................................. 4,127,922
11,883 Niagara Mohawk Holding, Inc. (a)............................ 165,619
3,294 Nicor, Inc. ................................................ 107,467
10,927 Northern States Power Co. of Minnesota...................... 220,589
1,885 Oneok, Inc. ................................................ 48,892
11,668 Peco Energy Co. ............................................ 470,366
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE> 70
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES -- 7.6% (CONTINUED)
2,534 Peoples Energy Corp. ....................................... $ 82,038
26,536 PG&E Corp. ................................................. 653,449
5,834 Pinnacle West Capital Corp. ................................ 197,627
10,014 PP&L Resources, Inc. ....................................... 219,682
14,793 Public Service Enterprise Group............................. 512,208
20,235 Reliant Energy, Inc. ....................................... 598,197
234,222 SBC Communications, Inc. ................................... 10,130,102
44,719 Southern Co. ............................................... 1,042,512
60,352 Sprint FON Group............................................ 3,077,952
63,064 Sprint PCS Group............................................ 3,752,308
34,920 U.S. West Inc. ............................................. 2,994,390
12,236 Unicom Corp. ............................................... 473,380
197,222 WorldCom, Inc. ............................................. 9,047,559
---------------------------------------------------------------------------------------------
65,915,305
---------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $754,623,853)................... 860,439,196
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
FACE
AMOUNT SECURITY VALUE
---------------------------------------------------------------------------------------------
<CAPTION>
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 0.1%
U.S. Treasury Bills (b):
$ 285,000 5.640% due 9/14/00............................................. 281,651
700,000 5.645% due 9/14/00............................................. 691,768
100,000 5.650% due 9/14/00............................................. 98,823
---------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost -- $1,072,242)............. 1,072,242
---------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS (Cost -- $755,696,095).................. 861,511,438
---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.1%
572,000 Goldman, Sachs & Co., 6.450% due 7/3/00; Proceeds at
maturity -- $572,307; (Fully collateralized by U.S. Treasury
Bills, Notes, and Bonds, 0.000% to 12.000% due 8/15/00
to 11/15/28; Market value -- $583,440) (Cost -- $572,000).. 572,000
---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $756,268,095*)............ $862,083,438
---------------------------------------------------------------------------------------------
</TABLE>
+ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon
Communications.
(a) Non-income producing security.
(b) Security is segregated by custodian for futures contract commitments.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE> 71
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 92.1%
-----------------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.8%
5,000 SUPERVALU Inc. ............................................. $ 95,312
2,000 W.W. Grainger, Inc. ........................................ 61,625
-----------------------------------------------------------------------------------------
156,937
-----------------------------------------------------------------------------------------
CONSUMER DURABLES -- 1.7%
4,000 Ford Motor Co. ............................................. 172,000
1,504 General Motors Corp. ....................................... 87,325
528 General Motors Corp., Class H Shares........................ 46,332
523 Visteon Corp. (a)........................................... 6,350
-----------------------------------------------------------------------------------------
312,007
-----------------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 5.6%
2,000 Anheuser-Busch Cos., Inc. .................................. 149,375
2,000 Coca-Cola Co. .............................................. 114,875
1,000 Gillette Co. ............................................... 34,937
3,000 Kimberly Clark Corp. ....................................... 172,125
5,000 PepsiCo, Inc. .............................................. 222,188
2,000 Philip Morris Cos. Inc. .................................... 53,125
3,000 Procter & Gamble Co. ....................................... 171,750
1,000 Quaker Oats Co. ............................................ 75,125
3,000 VF Corp. ................................................... 71,438
-----------------------------------------------------------------------------------------
1,064,938
-----------------------------------------------------------------------------------------
CONSUMER SERVICES -- 6.1%
6,000 Comcast Corp., Special Class A Shares (a)................... 243,000
3,000 Knight-Ridder, Inc. ........................................ 159,563
2,000 McDonald's Corp. ........................................... 65,875
5,000 New York Times Co., Class A Shares.......................... 197,500
5,000 Reader's Digest Association, Inc. .......................... 198,750
4,000 Starwood Hotels & Resorts Trust............................. 130,250
4,000 The Walt Disney Co. ........................................ 155,250
-----------------------------------------------------------------------------------------
1,150,188
-----------------------------------------------------------------------------------------
ELECTRONIC TECHNOLOGY -- 16.0%
762 Agilent Technologies, Inc. (a).............................. 56,198
2,000 Compaq Computer Corp. ...................................... 51,125
2,000 Hewlett Packard Co. ........................................ 249,750
5,000 IBM Corp. .................................................. 547,813
7,000 Intel Corp. ................................................ 935,813
12,000 LM Ericsson Telephone Co., ADR.............................. 240,000
4,000 Lucent Technologies Inc. ................................... 237,000
9,000 Motorola, Inc. ............................................. 261,562
1,600 Texas Instruments, Inc. .................................... 109,900
3,000 TXU Corp. .................................................. 88,500
4,000 United Technologies Corp. .................................. 235,500
-----------------------------------------------------------------------------------------
3,013,161
-----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE> 72
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------
<C> <S> <C>
ENERGY MINERALS -- 3.8%
4,000 Conoco Inc., Class A Shares................................. $ 88,000
6,000 Exxon Mobil Corp. .......................................... 471,000
3,000 Phillips Petroleum Co. ..................................... 152,063
-----------------------------------------------------------------------------------------
711,063
-----------------------------------------------------------------------------------------
FINANCE -- 14.7%
2,000 Allstate Corp. ............................................. 44,500
1,000 American International Group, Inc. ......................... 117,500
10,000 Arden Realty Group, Inc. ................................... 235,000
4,000 AXA Financial, Inc. ........................................ 136,000
3,000 BankAmerica Corp. .......................................... 129,000
3,200 Bear Stearns Cos. Inc. ..................................... 133,200
4,500 Chase Manhattan Corp. ...................................... 207,282
2,000 CIGNA Corp. ................................................ 187,000
2,000 Fannie Mae.................................................. 104,375
3,000 First Union Corp. .......................................... 74,438
3,000 FleetBoston Financial Corp. ................................ 102,000
2,000 Goldman Sachs Group, Inc. .................................. 189,750
5,000 Greenpoint Financial Corp. ................................. 93,750
1,000 J.P. Morgan & Co., Inc. .................................... 110,126
5,000 KeyCorp..................................................... 88,125
1,200 Lehman Brothers Holdings, Inc. ............................. 113,475
4,000 Morgan Stanley Dean Witter & Co. ........................... 333,000
1,000 Paine Webber Group, Inc. ................................... 45,500
3,000 PNC Bank Corp. ............................................. 140,625
4,000 UnionBanCal Corp. .......................................... 74,250
4,000 Washington Mutual, Inc. .................................... 115,500
-----------------------------------------------------------------------------------------
2,774,396
-----------------------------------------------------------------------------------------
HEALTH SERVICES -- 1.1%
7,000 HCA - The Healthcare Corp. ................................. 212,625
-----------------------------------------------------------------------------------------
HEALTH TECHNOLOGY -- 10.0%
2,000 Abbott Laboratories......................................... 89,125
1,000 American Home Products Corp. ............................... 58,750
1,000 Baxter International Inc. .................................. 70,313
3,000 Bristol-Myers Squibb Co. ................................... 174,750
200 Edwards Lifesciences Corp. (a).............................. 3,700
3,000 Eli Lilly & Co. ............................................ 299,625
2,000 Johnson & Johnson........................................... 203,750
6,000 Merck & Co., Inc. .......................................... 459,750
10,000 Mylan Laboratories Inc. .................................... 182,500
6,000 Pfizer Inc. ................................................ 288,000
1,000 Schering-Plough Corp. ...................................... 50,500
-----------------------------------------------------------------------------------------
1,880,763
-----------------------------------------------------------------------------------------
INDUSTRIAL SERVICES -- 0.7%
4,000 Fluor Corp. ................................................ 126,500
-----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE> 73
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------
<C> <S> <C>
NON-ENERGY MINERALS -- 0.9%
6,000 Alcoa Inc. ................................................. $ 174,000
-----------------------------------------------------------------------------------------
PROCESS INDUSTRIES -- 6.8%
3,000 Air Products & Chemicals, Inc. ............................. 92,438
6,000 Dow Chemical Co. ........................................... 181,125
17,000 General Electric Co. ....................................... 901,000
3,000 Rohm and Haas Co. .......................................... 103,500
-----------------------------------------------------------------------------------------
1,278,063
-----------------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- 2.6%
4,000 Caterpillar Inc. ........................................... 135,500
3,000 Honeywell International, Inc. .............................. 101,063
4,000 Ingersoll-Rand Co. ......................................... 161,000
2,000 Johnson Controls, Inc. ..................................... 102,625
-----------------------------------------------------------------------------------------
500,188
-----------------------------------------------------------------------------------------
RETAIL TRADE -- 5.4%
3,000 The Gap, Inc. .............................................. 93,750
4,500 Home Depot, Inc. ........................................... 224,720
9,000 The Limited, Inc. .......................................... 194,625
5,000 May Department Stores Co. .................................. 120,000
5,000 TJX Cos. Inc. .............................................. 93,750
5,000 Wal-Mart Stores, Inc........................................ 288,125
-----------------------------------------------------------------------------------------
1,014,970
-----------------------------------------------------------------------------------------
TECHNOLOGY SERVICES -- 3.4%
8,000 Automatic Data Processing, Inc. ............................ 428,500
5,000 Electronic Data Systems Corp. .............................. 206,250
-----------------------------------------------------------------------------------------
634,750
-----------------------------------------------------------------------------------------
TRANSPORTATION -- 2.1%
12,000 Knightsbridge Tankers Ltd. ................................. 240,000
8,000 Southwest Airlines Co. ..................................... 151,500
-----------------------------------------------------------------------------------------
391,500
-----------------------------------------------------------------------------------------
UTILITIES -- 10.4%
5,000 AT&T Corp. ................................................. 158,125
1,000 Bell Atlantic Corp.+........................................ 50,813
4,000 BellSouth Corp. ............................................ 170,500
4,000 Coastal Corp. .............................................. 243,500
4,000 DTE Energy Co. ............................................. 122,250
3,000 Duke Energy Corp. .......................................... 169,126
4,000 Edison International........................................ 82,000
4,000 Enron Corp. ................................................ 258,000
4,000 GTE Corp.+.................................................. 249,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE> 74
--------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-----------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES -- 10.4% (CONTINUED)
5,000 PECO Energy Co. ............................................ $ 201,563
6,000 SBC Communications Inc. .................................... 259,500
-----------------------------------------------------------------------------------------
1,964,377
-----------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $13,233,701).................... 17,360,426
-----------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
-----------------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS -- 7.9%
-----------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.2%
$500,000 General Motors Acceptance Corp., 7.000% due 9/15/02......... 496,875
500,000 Morgan Stanley Dean Witter & Co., 6.875% due 3/1/03......... 495,000
-----------------------------------------------------------------------------------------
991,875
-----------------------------------------------------------------------------------------
RETAIL TRADE -- 2.7%
500,000 The Limited Inc., 7.800% due 5/15/02........................ 505,625
-----------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost -- $1,559,315).................. 1,497,500
-----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $14,793,016*)............ $18,857,926
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
+ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged.
The surviving company was renamed Verizon Communications.
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is
substantially the same.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE> 75
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 100.0%
---------------------------------------------------------------------------------------
BIOTECHNOLOGY -- 18.8%
8,020 Alkermes, Inc. (a).......................................... $ 377,943
310 Allos Therapeutics Inc. (a)................................. 3,023
21,625 Amgen Inc. (a).............................................. 1,519,156
26,075 Chiron Corp. (a)............................................ 1,238,563
2,100 COR Therapeutics, Inc. (a).................................. 179,156
1,325 Genentech, Inc. (a)......................................... 227,900
17,380 Genzyme Corp. (a)........................................... 1,033,024
5,100 ImClone Systems Inc. (a).................................... 389,831
5,900 Nabi (a).................................................... 43,144
---------------------------------------------------------------------------------------
5,011,740
---------------------------------------------------------------------------------------
BROADCASTING/CABLE -- 10.2%
28,800 AT&T - Liberty Media Group, Class A Shares (a).............. 698,400
5,000 Cablevision Systems Corp. (a)............................... 339,375
Comcast Corp.:
844 Class A Shares (a).......................................... 32,811
12,825 Class A Special Shares (a).................................. 519,412
14,853 Viacom Inc., Class B Shares (a)............................. 1,012,789
5,600 World Wrestling Federation Entertainment, Inc. (a).......... 116,550
---------------------------------------------------------------------------------------
2,719,337
---------------------------------------------------------------------------------------
COMMUNICATIONS -- 9.0%
27,258 Adaptive Broadband Corp. (a)................................ 1,001,732
18,370 Arch Communications Group, Inc. (a)......................... 119,405
6,000 AT&T Corp. ................................................. 189,750
15,700 C-COR.net Corp. (a)......................................... 423,900
190 Net2000 Communications, Inc. (a)............................ 3,111
12,600 Nokia Oyj, ADR.............................................. 629,213
60 Palm, Inc. (a).............................................. 2,003
1,500 The Source Information Management Co. (a)................... 22,875
---------------------------------------------------------------------------------------
2,391,989
---------------------------------------------------------------------------------------
COMPUTER HARDWARE -- 3.0%
Quantum Corp.:
47,300 DLT & Storage Systems (a).................................. 458,219
29,800 Hard Disk Drive (a)........................................ 329,662
---------------------------------------------------------------------------------------
787,881
---------------------------------------------------------------------------------------
COMPUTER SOFTWARE/INTERNET -- 5.2%
20,300 America Online, Inc. (a).................................... 1,070,825
400 Juniper Networks, Inc. (a).................................. 58,225
3,400 Microsoft Corp. (a)......................................... 272,000
---------------------------------------------------------------------------------------
1,401,050
---------------------------------------------------------------------------------------
DIVERSIFIED TECHNOLOGY -- 1.6%
400 Agilent Technologies, Inc. (a).............................. 29,500
3,500 Drexler Technology Corp. (a)................................ 45,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE> 76
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------
<C> <S> <C>
DIVERSIFIED TECHNOLOGY -- 1.6% (CONTINUED)
5,750 Excel Technology, Inc. (a).................................. $ 289,297
6,600 GenRad, Inc. (a)............................................ 59,400
---------------------------------------------------------------------------------------
423,697
---------------------------------------------------------------------------------------
DRUG DELIVERY/TESTING -- 2.4%
860 Albany Molecular Research, Inc. (a)......................... 46,816
9,350 ALZA Corp. (a).............................................. 552,819
2,500 Cygnus, Inc. (a)............................................ 35,625
---------------------------------------------------------------------------------------
635,260
---------------------------------------------------------------------------------------
ELECTRONIC - MILITARY -- 2.2%
9,450 L-3 Communications Holdings, Inc. (a)....................... 539,241
1,900 Tech-Sym Corp. (a).......................................... 53,438
---------------------------------------------------------------------------------------
592,679
---------------------------------------------------------------------------------------
HEALTH CARE - MISCELLANEOUS -- 1.2%
8,000 Genzyme Surgical Products (a)............................... 79,500
4,860 Nanogen, Inc. (a)........................................... 206,246
1,650 Tularik Inc. (a)............................................ 48,675
---------------------------------------------------------------------------------------
334,421
---------------------------------------------------------------------------------------
INVESTMENT BANKING AND FINANCIAL SERVICES -- 6.0%
14,900 Astoria Financial Corp. .................................... 383,675
7,950 Lehman Brothers Holdings Inc. .............................. 751,772
2,000 Merrill Lynch & Co., Inc. .................................. 230,000
14,400 Roslyn Bancorp, Inc. ....................................... 239,175
---------------------------------------------------------------------------------------
1,604,622
---------------------------------------------------------------------------------------
MANAGED HEALTHCARE PROVIDERS -- 4.6%
14,240 United Health Group Inc. ................................... 1,221,080
---------------------------------------------------------------------------------------
MULTI-INDUSTRY -- 5.9%
33,320 Tyco International Ltd. .................................... 1,578,535
---------------------------------------------------------------------------------------
OIL FIELD EQUIPMENT/SERVICES -- 5.0%
10,200 Core Laboratories N.V. (a).................................. 295,800
17,500 Grant Prideco, Inc. (a)..................................... 437,500
15,000 Weatherford International, Inc. (a)......................... 597,187
---------------------------------------------------------------------------------------
1,330,487
---------------------------------------------------------------------------------------
PHARMACEUTICALS -- 14.6%
13,220 Forest Laboratories, Inc. (a)............................... 1,335,220
13,450 IDEC Pharmaceuticals Corp. (a).............................. 1,577,853
8,200 Isis Pharmaceuticals, Inc. (a).............................. 118,900
3,000 Pfizer Inc. ................................................ 144,000
2,499 Pharmacia Corp. ............................................ 129,167
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE> 77
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
---------------------------------------------------------------------------------------
<C> <S> <C>
PHARMACEUTICALS -- 14.6% (CONTINUED)
20,900 SICOR Inc. (a).............................................. $ 167,200
3,980 Vertex Pharmaceuticals Inc. (a)............................. 419,392
---------------------------------------------------------------------------------------
3,891,732
---------------------------------------------------------------------------------------
SEMICONDUCTORS -- 10.3%
6,500 Cirrus Logic, Inc. (a)...................................... 104,000
9,550 Intel Corp.................................................. 1,276,715
13,555 Micron Technology, Inc...................................... 1,193,687
1,400 QLogic Corp. (a)............................................ 92,487
5,400 Standard Microsystems Corp. (a)............................. 83,025
---------------------------------------------------------------------------------------
2,749,914
---------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $23,709,164*)............ $26,674,424
---------------------------------------------------------------------------------------
</TABLE>
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE> 78
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- 100.0%
-------------------------------------------------------------------------------------------------
CANADA -- 1.2%
8,000 The Toronto-Dominion Bank................................... $ 194,371
-------------------------------------------------------------------------------------------------
FINLAND -- 4.5%
15,000 Nokia Oyj................................................... 749,061
-------------------------------------------------------------------------------------------------
FRANCE -- 6.1%
4,333 Axa (a)..................................................... 685,345
4,000 Sidel S.A. ................................................. 325,732
-------------------------------------------------------------------------------------------------
1,011,077
-------------------------------------------------------------------------------------------------
GERMANY -- 1.7%
1,200 Aixtron AG.................................................. 163,230
5,900 Stinnes AG.................................................. 118,770
-------------------------------------------------------------------------------------------------
282,000
-------------------------------------------------------------------------------------------------
HONG KONG -- 5.4%
71,500 Hutchinson Whampoa Ltd. .................................... 898,875
-------------------------------------------------------------------------------------------------
IRELAND -- 2.8%
39,338 Bank of Ireland............................................. 248,882
2,076 Independent Newspapers PLC.................................. 7,661
25,638 Irish Continental Group PLC................................. 208,901
-------------------------------------------------------------------------------------------------
465,444
-------------------------------------------------------------------------------------------------
ITALY -- 1.9%
30,000 Telecom Italia Mobile S.p.A. ............................... 307,710
-------------------------------------------------------------------------------------------------
JAPAN -- 19.9%
10,000 Hosiden Corp. .............................................. 425,311
3,000 Matsushita Communication Industrial Co., Ltd. .............. 351,023
4,000 Murata Manufacturing Co., Ltd. ............................. 575,398
1,000 Seven-Eleven Japan Co., Ltd. ............................... 83,833
1,800 Softbank Corp. ............................................. 244,979
7,000 Sony Corp. ................................................. 654,979
14,000 Terumo Corp. ............................................... 475,025
29,000 Tostem Corp. ............................................... 474,174
-------------------------------------------------------------------------------------------------
3,284,722
-------------------------------------------------------------------------------------------------
MEXICO -- 2.2%
160,800 Wal-Mart de Mexico S.A. de CV (b)........................... 369,186
-------------------------------------------------------------------------------------------------
NORWAY -- 6.5%
40,000 Tomra Systems ASA........................................... 1,064,614
-------------------------------------------------------------------------------------------------
SINGAPORE -- 6.4%
22,000 Singapore Press Holdings Ltd. .............................. 343,551
70,000 Venture Manufacturing Ltd. ................................. 712,551
-------------------------------------------------------------------------------------------------
1,056,102
-------------------------------------------------------------------------------------------------
SPAIN -- 1.7%
12,000 Indra Sistemas S.A. ........................................ 275,616
-------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE> 79
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) JUNE 30, 2000
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
-------------------------------------------------------------------------------------------------
<C> <S> <C>
SWEDEN -- 5.2%
40,000 Securitas AB, Class B Shares................................ $ 852,810
700 TeleLarm Care AB (b)........................................ 7,861
-------------------------------------------------------------------------------------------------
860,671
-------------------------------------------------------------------------------------------------
SWITZERLAND -- 6.1%
25,000 Mettler-Toledo International Inc. (a)(b).................... 1,000,000
-------------------------------------------------------------------------------------------------
UNITED KINGDOM -- 28.4%
35,000 Capita Group PLC............................................ 861,555
20,000 Colt Telecom Group PLC (b).................................. 664,598
2,600 Filtronic PLC............................................... 32,571
10,000 Guardian IT PLC............................................. 205,889
150,000 Hays PLC.................................................... 830,558
68,283 Misys PLC................................................... 565,967
130,000 Serco Group PLC............................................. 1,028,310
142,909 TeleWest Communications PLC (b)............................. 492,733
-------------------------------------------------------------------------------------------------
4,682,181
-------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $8,166,840*)............. $16,501,630
-------------------------------------------------------------------------------------------------
</TABLE>
(a) All or a portion of this security is on loan (See Note 16).
(b) Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE> 80
BOND RATINGS (UNAUDITED)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"C" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
<TABLE>
<S> <C> <C>
AAA -- Bonds rated "AAA" have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest
and repay principal and differ from the highest rated issue
only in a small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than for bonds in
higher rated categories.
BB, B, CCC, -- Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded, on
CC and C balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. "BB" indicates
the lowest degree of speculation and "C" the highest degree
of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse
conditions.
</TABLE>
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3
may be applied to each generic rating from "Aa" to "Ca," where 1 is the highest
and 3 the lowest ranking within its generic category.
<TABLE>
<S> <C> <C>
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective
elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what
are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks
appear somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are
considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the
future.
Baa -- Bonds rated "Baa" are considered to be medium grade
obligations; that is, they are neither highly protected nor
poorly secured. Interest payment and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long
period of time may be small.
Caa -- Bonds rated "Caa" are of poor standing. Such issues may be
in default, or there may be present elements of danger with
respect to principal or interest.
Ca -- Bonds rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have
other marked shortcomings.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
</TABLE>
45
<PAGE> 81
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at cost...................................... $3,232,542 $65,722,755
Repurchase agreements, at cost............................ -- 2,982,000
Foreign currency, at cost................................. -- 1,762,168
---------------------------------------------------------------------------------------------
Investments, at value..................................... $3,232,542 $63,518,013
Repurchase agreements, at value........................... -- 2,982,000
Foreign currency, at value................................ -- 1,802,881
Cash...................................................... 154 4,500
Collateral for securities on loan (Note 16)............... -- 7,139,208
Receivable for securities sold............................ -- 251,615
Receivable from manager................................... 10,334 --
Dividends and interest receivable......................... 1,275 810,444
Receivable for open forward foreign currency contracts
(Note 7)............................................... -- 22,180
---------------------------------------------------------------------------------------------
TOTAL ASSETS.............................................. 3,244,305 76,530,841
---------------------------------------------------------------------------------------------
LIABILITIES:
Investment advisory fees payable.......................... -- 25,341
Distribution fees payable................................. -- --
Dividends payable......................................... 11,360 --
Administration fees payable............................... -- 11,263
Deferred compensation..................................... 1,112 --
Payable for securities purchased.......................... -- 287,694
Payable to bank........................................... -- --
Payable for securities on loan (Note 16).................. -- 7,139,208
Payable for open forward foreign currency contracts (Note
7)..................................................... -- 25,086
Accrued expenses.......................................... 22,533 35,579
---------------------------------------------------------------------------------------------
TOTAL LIABILITIES......................................... 35,005 7,524,171
---------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $3,209,300 $69,006,670
---------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares............................... $ 3,209 $ 7,220
Capital paid in excess of par value....................... 3,206,091 72,283,982
Undistributed (overdistributed) net investment income..... -- 2,946,943
Accumulated net realized gain (loss) on security
transactions, futures contracts and foreign
currencies............................................. -- (4,063,857)
Net unrealized appreciation (depreciation) of investments
and foreign currencies................................. -- (2,167,618)
---------------------------------------------------------------------------------------------
TOTAL NET ASSETS............................................ $3,209,300 $69,006,670
---------------------------------------------------------------------------------------------
SHARES OUTSTANDING:
Class I Shares............................................ 3,209,306 7,220,160
Class II Shares (Note 3).................................. -- --
---------------------------------------------------------------------------------------------
NET ASSET VALUE:
Class I Shares............................................ $1.00 $9.56
Class II Shares (Note 3).................................. -- --
---------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE> 82
JUNE 30, 2000
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH EMERGING INTERNATIONAL
INCOME INDEX AND INCOME GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$11,615,105 $755,696,095 $14,793,016 $23,709,164 $ 8,166,840
1,777,000 572,000 -- -- --
-- -- -- -- 279,261
--------------------------------------------------------------------------------------------
$14,720,268 $861,511,438 $18,857,926 $26,674,424 $16,501,630
1,777,000 572,000 -- -- --
-- -- -- -- 292,346
348 551 -- -- --
-- -- -- -- 339,800
-- 82,271 -- -- 4,855
-- -- -- -- --
76,246 658,073 53,852 2,036 23,991
-- -- -- -- --
--------------------------------------------------------------------------------------------
16,573,862 862,824,333 18,911,778 26,676,460 17,162,622
--------------------------------------------------------------------------------------------
6,824 121,937 7,129 14,954 11,901
-- 5,558 -- -- --
-- -- -- -- --
3,033 49,122 3,168 5,263 2,800
-- -- -- -- --
-- 585,311 -- -- --
-- -- 26,823 315,053 95,002
-- -- -- -- 339,800
-- -- -- -- --
25,356 92,231 23,351 33,725 44,117
--------------------------------------------------------------------------------------------
35,213 854,159 60,471 368,995 493,620
--------------------------------------------------------------------------------------------
$16,538,649 $861,970,174 $18,851,307 $26,307,465 $16,669,002
--------------------------------------------------------------------------------------------
$ 1,726 $ 24,301 $ 2,538 $ 1,020 $ 1,266
11,024,863 753,112,802 13,357,924 5,725,096 4,685,182
279,757 3,882,404 132,911 (124,773) (198,799)
2,127,140 (864,676) 1,293,024 17,740,862 3,834,471
3,105,163 105,815,343 4,064,910 2,965,260 8,346,882
--------------------------------------------------------------------------------------------
$16,538,649 $861,970,174 $18,851,307 $26,307,465 $16,669,002
--------------------------------------------------------------------------------------------
1,726,265 22,741,096 2,537,628 1,020,318 1,265,847
-- 1,560,323 -- -- --
--------------------------------------------------------------------------------------------
$9.58 $35.47 $7.43 $25.78 $13.17
-- $35.46 -- -- --
--------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE> 83
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest.................................................. $133,072 $ 2,849,909
Dividends................................................. -- 9,488
Less: Foreign withholding tax............................. -- --
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................... 133,072 2,859,397
-----------------------------------------------------------------------------------------------
EXPENSES:
Custody................................................... 11,647 9,273
Audit and legal........................................... 9,411 8,740
Investment advisory fees (Note 3)......................... 6,496 160,008
Shareholder and system servicing fees..................... 5,032 7,225
Distribution fees (Note 3)................................ -- --
Administration fees (Note 3).............................. 4,331 71,115
Shareholder communications................................ 1,509 9,449
Trustees' fees............................................ 1,191 3,314
Pricing service fees...................................... -- 7,020
Other..................................................... 538 1,523
-----------------------------------------------------------------------------------------------
TOTAL EXPENSES............................................ 40,155 277,667
Less: Investment advisory and administration fee waiver
and expense reimbursement (Note 3)..................... (14,061) --
-----------------------------------------------------------------------------------------------
NET EXPENSES.............................................. 26,094 277,667
-----------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS)................................ 106,978 2,581,730
-----------------------------------------------------------------------------------------------
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*).......................................... -- (2,176,614)
Futures contracts...................................... -- --
Foreign currency transactions.......................... -- 641,217
-----------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS).................................. -- (1,535,397)
-----------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of
Investments and Foreign Currencies:
Beginning of period.................................... -- (2,033,145)
End of period.......................................... -- (2,167,618)
-----------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION)...... -- (134,473)
-----------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND
FOREIGN CURRENCIES........................................ -- (1,669,870)
-----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS........... $106,978 $ 911,860
-----------------------------------------------------------------------------------------------
</TABLE>
* Represents net realized gains only from short-term securities for the Money
Market Portfolio.
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE> 84
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH EMERGING INTERNATIONAL
INCOME INDEX AND INCOME GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 120,127 $ 4,313,694 $ 56,443 $ 20,110 $ 5,998
249,447 563,173 172,622 22,405 87,638
-- (24,004) -- (753) (9,470)
----------------------------------------------------------------------------------------------------
369,574 4,852,863 229,065 41,762 84,166
----------------------------------------------------------------------------------------------------
-- 28,011 1,740 8,976 14,686
7,478 13,030 9,051 8,727 9,389
42,639 570,574 47,367 101,822 89,199
10,596 8,644 7,733 7,043 5,849
-- 50,881 -- -- --
18,951 228,230 21,052 27,153 20,988
2,147 42,055 3,729 3,241 3,658
591 11,495 1,591 1,645 1,594
684 -- -- -- 1,654
4,742 14,043 2,839 6,310 241
----------------------------------------------------------------------------------------------------
87,828 966,963 95,102 164,917 147,258
-- -- -- -- --
----------------------------------------------------------------------------------------------------
87,828 966,963 95,102 164,917 147,258
----------------------------------------------------------------------------------------------------
281,746 3,885,900 133,963 (123,155) (63,092)
----------------------------------------------------------------------------------------------------
2,182,518 441,599 1,293,019 17,743,491 3,835,634
-- (974,710) -- -- --
-- -- -- -- (11,377)
----------------------------------------------------------------------------------------------------
2,182,518 (533,111) 1,293,019 17,743,491 3,824,257
----------------------------------------------------------------------------------------------------
4,706,827 108,914,712 5,951,434 13,789,497 14,424,609
3,105,163 105,815,343 4,064,910 2,965,260 8,346,882
----------------------------------------------------------------------------------------------------
(1,601,664) (3,099,369) (1,886,524) (10,824,237) (6,077,727)
----------------------------------------------------------------------------------------------------
580,854 (3,632,480) (593,505) 6,919,254 (2,253,470)
----------------------------------------------------------------------------------------------------
$ 862,600 $ 253,420 $ (459,542) $ 6,796,099 $(2,316,562)
----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE> 85
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ 106,978 $ 2,581,730
Net realized gain (loss).................................. -- (1,535,397)
Change in net unrealized appreciation (depreciation)...... -- (134,473)
-----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... 106,978 911,860
-----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income..................................... (106,978) (6,628,427)
Net realized gains........................................ -- --
-----------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS........................................... (106,978) (6,628,427)
-----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 17):
Net proceeds from sale of shares.......................... 2,980,628 6,314,944
Net asset value of shares issued for reinvestment of
dividends.............................................. 96,910 6,628,427
Cost of shares reacquired................................. (4,594,624) (12,254,750)
-----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS........................................... (1,517,086) 688,621
-----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS........................... (1,517,086) (5,027,946)
NET ASSETS:
Beginning of period....................................... 4,726,386 74,034,616
-----------------------------------------------------------------------------------------
END OF PERIOD*............................................ $ 3,209,300 $ 69,006,670
-----------------------------------------------------------------------------------------
* Includes undistributed (overdistributed) net investment
income of: -- $2,946,943
-----------------------------------------------------------------------------------------
* Includes accumulated net investment loss of: -- --
-----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE> 86
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH EMERGING INTERNATIONAL
INCOME INDEX AND INCOME GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 281,746 $ 3,885,900 $ 133,963 $ (123,155) $ (63,092)
2,182,518 (533,111) 1,293,019 17,743,491 3,824,257
(1,601,664) (3,099,369) (1,886,524) (10,824,237) (6,077,727)
----------------------------------------------------------------------------------------
862,600 253,420 (459,542) 6,796,099 (2,316,562)
----------------------------------------------------------------------------------------
(923,628) (4,459,632) (372,101) -- (540,857)
(3,067,075) (595,500) (9,909,362) (10,438,952) (4,202,876)
----------------------------------------------------------------------------------------
(3,990,703) (5,055,132) (10,281,463) (10,438,952) (4,743,733)
----------------------------------------------------------------------------------------
1,084 186,511,031 97,675 522,468 565,992
3,990,703 5,055,132 10,281,463 10,438,952 4,743,733
(5,230,659) (6,680,360) (5,124,974) (8,078,032) (5,950,462)
----------------------------------------------------------------------------------------
(1,238,872) 184,885,803 5,254,164 2,883,388 (640,737)
----------------------------------------------------------------------------------------
(4,366,975) 180,084,091 (5,486,841) (759,465) (7,701,032)
20,905,624 681,886,083 24,338,148 27,066,930 24,370,034
----------------------------------------------------------------------------------------
$16,538,649 $861,970,174 $ 18,851,307 $ 26,307,465 $16,669,002
----------------------------------------------------------------------------------------
$279,757 $3,882,404 $132,911 -- $(198,799)
----------------------------------------------------------------------------------------
-- -- -- $(124,773) --
----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE> 87
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
DIVERSIFIED
MONEY STRATEGIC
MARKET INCOME
PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ 173,333 $ 5,481,753
Net realized gain (loss).................................. 2 (1,076,708)
Change in net unrealized appreciation (depreciation)...... -- (3,146,257)
-------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS......... 173,335 1,258,788
-------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income..................................... (173,333) (3,784,652)
Net realized gains........................................ (2) (980,275)
-------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS........................................... (173,335) (4,764,927)
-------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 17):
Net proceeds from sale of shares.......................... 6,854,768 15,268,923
Net asset value of shares issued for reinvestment of
dividends.............................................. 181,632 4,764,927
Cost of shares reacquired................................. (6,981,251) (23,462,777)
-------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE
TRANSACTIONS........................................... 55,149 (3,428,927)
-------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS........................... 55,149 (6,935,066)
NET ASSETS:
Beginning of year......................................... 4,671,237 80,969,682
-------------------------------------------------------------------------------------------
END OF YEAR*.............................................. $ 4,726,386 $ 74,034,616
-------------------------------------------------------------------------------------------
* Includes undistributed (overdistributed) net investment
income of: -- $6,352,423
-------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE> 88
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH EMERGING INTERNATIONAL
INCOME INDEX AND INCOME GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 923,174 $ 4,456,219 $ 372,870 $ (210,831) $ (70,920)
3,011,697 331,007 9,908,881 10,665,064 5,169,750
(5,059,149) 76,043,177 (7,236,500) 5,642,402 5,987,533
-----------------------------------------------------------------------------------------
(1,124,278) 80,830,403 3,045,251 16,096,635 11,086,363
-----------------------------------------------------------------------------------------
(1,468,909) (1,250,489) (576,238) -- (10,155)
(5,820,651) (1,775,984) (5,700,078) (3,686,844) (2,245,243)
-----------------------------------------------------------------------------------------
(7,289,560) (3,026,473) (6,276,316) (3,686,844) (2,255,398)
-----------------------------------------------------------------------------------------
433,151 434,136,254 588,380 1,667,463 864,397
7,289,560 3,026,473 6,276,316 3,686,844 2,255,398
(15,898,176) (10,247,287) (15,076,383) (11,844,324) (11,062,819)
-----------------------------------------------------------------------------------------
(8,175,465) 426,915,440 (8,211,687) (6,490,017) (7,943,024)
-----------------------------------------------------------------------------------------
(16,589,303) 504,719,370 (11,442,752) 5,919,774 887,941
37,494,927 177,166,713 35,780,900 21,147,156 23,482,093
-----------------------------------------------------------------------------------------
$ 20,905,624 $681,886,083 $ 24,338,148 $ 27,066,930 $ 24,370,034
-----------------------------------------------------------------------------------------
$921,639 $4,456,136 $371,049 $(1,618) $416,527
-----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PAGE> 89
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"). 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 shareholder 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 at the mean between the bid and asked
prices 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, adjusted for
amortization of premium and accretion of discount, 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, 1999, reclassifications were made to the Money
Market, Diversified Strategic Income, Equity Income, Equity Index, Growth and
Income, Emerging Growth and International Equity Portfolios capital accounts to
reflect permanent book/tax differences and income gains available for
distributions under income tax regulations. Accordingly, portions of accumulated
net realized gains amounting to $362 and $130 were reclassified to paid-in
capital for Diversified Strategic Income and Equity Income Portfolios,
respectively. Additionally, portions of accumulated net realized gains amounting
to $721 and overdistributed net investment income amounting to $1,368 were
reclassified to paid-in capital for Equity Index Portfolio. 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, certain Portfolios may enter into forward exchange contracts
in order to hedge against foreign currency risk. These contracts are
marked-to-market daily, by recognizing the difference between the contract
exchange rate and the current market rate as an unrealized gain or loss.
Realized gains or losses are recognized when contracts are settled.
2. DIVIDENDS
The Money Market Portfolio declares dividends daily from net investment
income and distributes such dividends monthly. Net realized capital gains, if
any, are declared and distributed annually.
54
<PAGE> 90
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 and Income and International Equity Portfolios, has
entered into an investment advisory agreement with SSB Citi Fund Management LLC
("SSBC"), a subsidiary of Salomon Smith Barney Holding Inc. ("SSBH"), which, in
turn, is a subsidiary of Citigroup Inc., ("Citigroup"). The Fund, on behalf of
the Equity Index Portfolio, has entered into an investment advisory agreement
with Travelers Investment Management Co. ("TIMCO"). In addition, the Fund, on
behalf of the Emerging Growth Portfolio, has entered into an investment advisory
agreement with SSBC. On February 10, 2000, SSBC replaced Van Kampen American
Capital Asset Management, Inc. as the investment advisor to the Emerging Growth
Portfolio. 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. For
the six months ended June 30, 2000, for the Money Market Portfolio, SSBC has
waived all of its investment advisory fee amounting to $6,496.
The respective advisers and the annual rates are as follows:
<TABLE>
<CAPTION>
PORTFOLIO ADVISOR RATE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market SSB Citi Fund Management LLC 0.30%
Diversified Strategic Income SSB Citi Fund Management LLC 0.45
Equity Income SSB Citi Fund Management LLC 0.45
Equity Index Travelers Investment Management Co. 0.15
Growth and Income SSB Citi Fund Management LLC 0.45
Emerging Growth SSB Citi Fund Management LLC 0.75
International Equity SSB Citi Fund Management LLC 0.85
--------------------------------------------------------------------------------------------------------
</TABLE>
Smith Barney Global Capital Management, Inc. ("SBGCM") serves as
sub-investment adviser to the Diversified Strategic Income Portfolio and is paid
a monthly fee by SSBC 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 SSBC. 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. For the six
months ended June 30, 2000, for the Money Market Portfolio, SSBC has waived all
of its administration fee amounting to $4,331.
In addition, SSBC has agreed to reimburse expenses in the amount of $3,234
on behalf of the Money Market Portfolio for the six months ended June 30, 2000.
Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney
Private Trust Company, another subsidiary of Citigroup, acts as the Fund's
transfer agent. CFTC receives account fees and asset-based fees that vary
according to the size and type of account. During the six months ended June 30,
2000, each Portfolio paid transfer agent fees of $2,500 to CFTC.
For the six months ended June 30, 2000, the Growth and Income, Emerging
Growth and International Equity Portfolios paid Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, brokerage commissions of $110, $195 and
$1,385 respectively.
The Fund, on behalf of the Equity Index Portfolio, has adopted a plan
("Plan") pursuant to Rule 12b-1 under the 1940 Act for the Portfolio's Class II
shares. The Plan provides that the Fund, on behalf of the Portfolio, shall pay a
fee of up to 0.25% of the average daily net assets of the Portfolio attributable
to Class II shares.
No officer, Director or employee of SSB or its affiliates receives any
compensation from the Fund for serving as a Trustee or officer of the Fund.
55
<PAGE> 91
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. INVESTMENTS
During the six months ended June 30, 2000, 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................................ $ 52,206,888 $57,777,198
Equity Income............................................... 59,000 6,772,137
Equity Index................................................ 207,742,631 7,782,191
Growth and Income........................................... 499,821 5,348,592
Emerging Growth............................................. 29,602,712 35,101,789
International Equity........................................ 196,432 5,657,769
----------------------------------------------------------------------------------------
</TABLE>
At June 30, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
APPRECIATION
PORTFOLIO APPRECIATION DEPRECIATION (DEPRECIATION)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Diversified Strategic Income................................ $ 816,920 $(3,021,662) $ (2,204,742)
Equity Income............................................... 3,462,003 (356,840) 3,105,163
Equity Index................................................ 162,160,342 (56,344,999) 105,815,343
Growth and Income........................................... 5,392,908 (1,327,998) 4,064,910
Emerging Growth............................................. 4,487,721 (1,522,461) 2,965,260
International Equity........................................ 8,589,829 (255,039) 8,334,790
----------------------------------------------------------------------------------------------------------
</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, 2000, the Portfolios had no open futures contracts.
6. OPTIONS CONTRACTS
The Diversified Strategic Income, Equity Income, Equity Index, Growth &
Income, Emerging Growth and International Equity Portfolios may from time to
time enter into option contracts.
Upon the purchase of a put option or a call option by the Portfolio, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the Portfolio will
realize a loss in the amount of the cost of the option. When the Portfolio
enters into a closing sales transaction, the Portfolio will realize a gain or
loss depending on whether the sales proceeds from the closing sales transaction
are greater or less than the cost of the option. When the Portfolio exercises a
put option, it will realize a gain or loss from the sale of the underlying
security and the
56
<PAGE> 92
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
proceeds from such sale will be decreased by the premium originally paid. When
the Portfolio exercises a call option, the cost of the security which the
Portfolio purchases upon exercise will be increased by the premium originally
paid.
At June 30, 2000, the Portfolios held no purchased call or put option
contracts.
When the Portfolio writes a call option or a put option, an amount equal to
the premium received by the Portfolio is recorded as a liability, the value of
which is marked-to-market daily. When a written option expires, the Portfolio
realizes a gain equal to the amount of the premium received. When the Portfolio
enters into a closing purchase transaction, the Portfolio realizes a gain (or
loss if the cost of the closing purchase transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
eliminated. When a written call option is exercised, the Portfolio realizes a
gain or loss from the sale of the underlying security and the proceeds from such
sale are increased by the premium originally received. When a written put option
is exercised, the amount of the premium originally received will reduce the cost
of the security which the Portfolio purchased upon exercise. When written index
options are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium
originally paid. The Portfolio enters into options for hedging purposes. The
risk in writing a covered call option is that the Portfolio gives up the
opportunity to participate in any increase in the price of the underlying
security beyond the exercise price. The risk in writing a covered put option is
that the Portfolio is exposed to the risk of loss if the market price of the
underlying security declines.
During the six months ended June 30, 2000, the Portfolios did not write any
call or put option contracts.
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, 2000, the Diversified Strategic Income Portfolio had open
forward foreign currency contracts as described below. The Portfolio bears the
market risk that arises from changes in foreign currency exchange rates. The
unrealized gain (loss) on the contracts reflected in the accompanying financial
statements were as follows:
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
LOCAL MARKET SETTLEMENT UNREALIZED
FOREIGN CURRENCY CURRENCY VALUE DATE GAIN (LOSS)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TO SELL:
British Pound....................................... 2,090,000 $3,165,593 7/24/00 $ (3,977)
Danish Krone........................................ 9,870,000 1,269,800 7/24/00 471
Euro................................................ 7,227,909 6,939,884 7/24/00 (19,884)
Euro................................................ 203,429 196,999 12/15/00 653
Euro................................................ 19,000 18,399 12/15/00 (399)
Euro................................................ 25,000 24,210 12/15/00 (420)
Euro................................................ 18,463 17,879 12/15/00 (406)
Swedish Krona....................................... 10,250,000 1,170,941 7/24/00 20,240
------------------------------------------------------------------------------------------------------------
(3,722)
------------------------------------------------------------------------------------------------------------
TO BUY:
Euro................................................ 50,000 47,946 7/5/00 816
------------------------------------------------------------------------------------------------------------
Net Unrealized Loss on Open Forward Foreign Currency
Contracts........................................... $ (2,906)
------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE> 93
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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.
During the six months ended June 30, 2000, the Portfolios did not enter
into any 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.
12. 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, 2000, there were no TBA securities held by the Portfolios.
58
<PAGE> 94
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
13. 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, in securities exceeding
the yield on the securities sold.
At June 30, 2000, there were no open mortgage roll transactions in the
Portfolio.
14. 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, 2000, the Portfolios had no open short sales against the box.
15. CAPITAL LOSS CARRYFORWARD
At December 31, 1999, the Diversified Strategic Income Portfolio had, for
Federal income tax purposes, approximately $1,725,000 of unused capital loss
carryforwards available to offset future capital gains expiring in 2007. To the
extent that these carryforward losses are used to offset capital gains, it is
probable that the gains so offset will not be distributed.
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, 2000, the Portfolios listed below had loaned common stocks and
bonds which were collateralized by cash. The market value for the securities on
loan were as follows:
<TABLE>
<CAPTION>
PORTFOLIO VALUE
------------------------------------------------------------------------
<S> <C>
Diversified Strategic Income................................ $6,919,536
International Equity........................................ 328,334
------------------------------------------------------------------------
</TABLE>
59
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
At June 30, 2000, the cash collateral held for the securities on loan was
as follows:
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
SECURITY DESCRIPTIONS VALUE
------------------------------------------------------------------------
<S> <C>
TIME DEPOSITS:
Abbey National London, 7.19% due 7/3/00................... $ 297,927
ABN AMBRO Bank, Tokyo, 7.13% due 7/3/00................... 297,927
Allied Irish, 7.13% due 7/3/00............................ 297,927
Banca Commerciale Italiano, London, 7.25% due 7/3/00...... 297,927
Banco Bilbao Viz Argentaria, Milan, 7.22% due 7/3/00...... 297,927
Banco Santander CH SA, Paris, 7.13% due 7/3/00............ 297,927
Bank of Austria, London, 7.25% due 7/3/00................. 297,927
Bank of Ireland, 7.13% due 7/3/00......................... 297,927
Bank of Scotland, London, 7.16% due 7/3/00................ 297,927
Banque Bruxelles Lambert, London, 7.25% due 7/3/00........ 297,927
Barclays Bank PLC, 7.13% due 7/3/00....................... 297,927
Bayerische Hypo-Und Vereinsbank AG, 7.13% due 7/3/00...... 297,926
BNP Paribas, London, 7.13% due 7/3/00..................... 104,852
Citibank, London, 7.13% due 7/3/00........................ 297,926
Commerzbank AG, Tokyo, 7.13% due 7/3/00................... 248,272
Credit Agricole Indozuez, Singapore, 7.13% due 7/3/00..... 276,389
Credit Commerciale, London, 7.13% due 7/3/00.............. 297,926
Dresdner Tokyo, 7.13% due 7/3/00.......................... 297,926
Fortis Bank, 7.19% due 7/3/00............................. 297,926
Halifax PLC, 7.13% due 7/3/00............................. 297,926
Landesbank Baden, Wuerttemberg, 7.19% due 7/3/00.......... 297,926
Norduetsche Landesbank, Singapore, 7.13% due 7/3/00....... 297,926
Societe Generale, 7.13% due 7/3/00........................ 297,926
Toronto Dominion, London, 7.13% due 7/3/00................ 297,926
Westdeutsche Landesbank, Singapore, 7.13% due 7/3/00...... 243,307
REPURCHASE AGREEMENT:
CS First Boston Corp., 7.23% due 7/3/00................... 9,931
------------------------------------------------------------------------
TOTAL....................................................... $7,139,208
------------------------------------------------------------------------
</TABLE>
60
<PAGE> 96
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SECURITY DESCRIPTIONS VALUE
------------------------------------------------------------------------
<S> <C>
TIME DEPOSITS:
Abbey National London, 7.19% due 7/3/00................... $ 14,181
ABN AMBRO Bank, Tokyo, 7.13% due 7/3/00................... 14,181
Allied Irish, 7.13% due 7/3/00............................ 14,181
Banca Commerciale Italiano, London, 7.25% due 7/3/00...... 14,180
Banco Bilbao Viz Argentaria, Milan, 7.22% due 7/3/00...... 14,180
Banco Santander CH SA, Paris, 7.13% due 7/3/00............ 14,180
Bank of Austria, London, 7.25% due 7/3/00................. 14,180
Bank of Ireland, 7.13% due 7/3/00......................... 14,180
Bank of Scotland, London, 7.16% due 7/3/00................ 14,180
Banque Bruxelles Lambert, London, 7.25% due 7/3/00........ 14,180
Barclays Bank PLC, 7.13% due 7/3/00....................... 14,180
Bayerische Hypo-Und Vereinsbank AG, 7.13% due 7/3/00...... 14,180
BNP Paribas, London, 7.13% due 7/3/00..................... 4,991
Citibank, London, 7.13% due 7/3/00........................ 14,180
Commerzbank AG, Tokyo, 7.13% due 7/3/00................... 11,817
Credit Agricole Indozuez, Singapore, 7.13% due 7/3/00..... 13,155
Credit Commerciale, London, 7.13% due 7/3/00.............. 14,180
Dresdner Tokyo, 7.13% due 7/3/00.......................... 14,180
Fortis Bank, 7.19% due 7/3/00............................. 14,180
Halifax PLC, 7.13% due 7/3/00............................. 14,180
Landesbank Baden, Wuerttemberg, 7.19% due 7/3/00.......... 14,180
Norduetsche Landesbank, Singapore, 7.13% due 7/3/00....... 14,180
Societe Generale, 7.13% due 7/3/00........................ 14,180
Toronto Dominion, London, 7.13% due 7/3/00................ 14,180
Westdeutsche Landesbank, Singapore, 7.13% due 7/3/00...... 11,581
REPURCHASE AGREEMENT:
CS First Boston Corp., 7.23% due 7/3/00................... 473
------------------------------------------------------------------------
TOTAL....................................................... $ 339,800
------------------------------------------------------------------------
</TABLE>
Interest income earned by the Portfolios from securities loaned for the six
months ended June 30, 2000, was as follows:
<TABLE>
<CAPTION>
PORTFOLIO VALUE
--------------------------------------------------------------------
<S> <C>
Diversified Strategic Income Portfolio...................... $5,684
International Equity Portfolio.............................. 3,059
--------------------------------------------------------------------
</TABLE>
61
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
17. SHARES OF BENEFICIAL INTEREST
At June 30, 2000, the Fund had an unlimited number of shares of beneficial
interest authorized with a par value of $0.001 per share. At June 30, 2000, the
total paid-in-capital for the Equity Index Portfolio amounted to the following
for each class:
<TABLE>
<CAPTION>
AMOUNT
--------------------------------------------------------------------------
<S> <C>
Class I..................................................... $699,902,175
Class II.................................................... 53,234,928
--------------------------------------------------------------------------
</TABLE>
Transactions in shares for each portfolio were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999*
---------------------------------------------------------------------------------------------------
<S> <C> <C>
MONEY MARKET PORTFOLIO
Shares sold................................................. 2,980,628 6,854,768
Shares issued on reinvestment............................... 96,910 181,632
Shares reacquired........................................... (4,594,624) (6,981,251)
---------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... (1,517,086) 55,149
---------------------------------------------------------------------------------------------------
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
Shares sold................................................. 606,699 1,423,399
Shares issued on reinvestment............................... 694,076 464,871
Shares reacquired........................................... (1,174,677) (2,221,018)
---------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... 126,098 (332,748)
---------------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
Shares sold................................................. 92 27,849
Shares issued on reinvestment............................... 410,989 556,880
Shares reacquired........................................... (417,852) (1,140,761)
---------------------------------------------------------------------------------------------------
Net Decrease................................................ (6,771) (556,032)
---------------------------------------------------------------------------------------------------
EQUITY INDEX PORTFOLIO -- CLASS I SHARES
Shares sold................................................. 4,526,144 12,557,783
Shares issued on reinvestment............................... 138,340 94,293
Shares reacquired........................................... (174,356) (308,578)
---------------------------------------------------------------------------------------------------
Net Increase................................................ 4,490,128 12,343,498
---------------------------------------------------------------------------------------------------
EQUITY INDEX PORTFOLIO -- CLASS II SHARES
Shares sold................................................. 806,877 772,514
Shares issued on reinvestment............................... 5,394 432
Shares reacquired........................................... (16,366) (8,528)
---------------------------------------------------------------------------------------------------
Net Increase................................................ 795,905 764,418
---------------------------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
Shares sold................................................. 6,273 34,368
Shares issued on reinvestment............................... 1,380,062 399,003
Shares reacquired........................................... (326,534) (892,426)
---------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... 1,059,801 (459,055)
---------------------------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
Shares sold................................................. 13,328 80,677
Shares issued on reinvestment............................... 405,396 201,467
Shares reacquired........................................... (215,825) (542,032)
---------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... 202,899 (259,888)
---------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Shares sold................................................. 26,640 58,533
Shares issued on reinvestment............................... 361,565 165,838
Shares reacquired........................................... (299,561) (731,874)
---------------------------------------------------------------------------------------------------
Net Increase (Decrease)..................................... 88,644 (507,503)
---------------------------------------------------------------------------------------------------
</TABLE>
* Transactions for Equity Index Portfolio -- Class II Shares are for the period
from March 22, 1999 (inception date) to December 31, 1999.
62
<PAGE> 98
FINANCIAL HIGHLIGHTS
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO 2000(1) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<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)................ 0.025 0.040 0.043 0.044 0.047 0.052
Dividends from net investment income.... (0.025) (0.040) (0.043) (0.044) (0.047) (0.052)
-------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN.............................. 2.50%++ 4.03% 4.40% 4.47% 4.80% 5.31%
-------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)......... $3,209 $4,726 $4,671 $4,753 $5,888 $5,653
-------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(2)............................. 1.22%+ 1.25% 1.24% 1.20% 0.75% 0.75%
Net investment income................... 4.98+ 3.92 4.30 4.38 4.70 5.19
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
DIVERSIFIED STRATEGIC INCOME PORTFOLIO 2000(1)(3) 1999(3) 1998(3) 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $10.44 $10.90 $10.89 $10.98 $10.01 $ 9.18
--------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(4)............... 0.37 0.73 0.69 0.77 0.88 0.74
Net realized and unrealized gain
(loss).............................. (0.23) (0.55) (0.01) 0.12 0.24 0.70
--------------------------------------------------------------------------------------------------------------------
Total Income From Operations............. 0.14 0.18 0.68 0.89 1.12 1.44
--------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.................. (1.02) (0.51) (0.67) (0.98) (0.15) (0.61)
Net realized gains..................... -- (0.13) -- -- -- --
--------------------------------------------------------------------------------------------------------------------
Total Distributions...................... (1.02) (0.64) (0.67) (0.98) (0.15) (0.61)
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........... $9.56 $10.44 $10.90 $10.89 $10.98 $10.01
--------------------------------------------------------------------------------------------------------------------
TOTAL RETURN............................. 1.32%++ 1.72% 6.41% 8.14% 11.16% 16.18%
--------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)........ $69,007 $74,035 $80,970 $62,558 $59,515 $59,316
--------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses............................... 0.78%+ 0.78% 0.78% 0.78% 0.84% 0.90%
Net investment income(4)............... 7.28+ 6.88 6.38 7.29 7.94 7.73
--------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.................. 78% 111% 86% 47% 106% 46%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) For the Money Market Portfolio, the Investment Adviser and Administrator
waived all or part of its fees for the six months ended June 30, 2000, the
year ended December 31, 1999, 1998 and the two-year period ended December
31, 1996. For the Money Market Portfolio, the Investment Adviser also
reimbursed expenses of $3,234 and $7,100 for the six months ended June 30,
2000 and year ended December 31, 1999. 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 2000 1999 1998 1997 1996 1995
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Money Market.............. $0.007 $0.005 $0.005 N/A $0.005 $0.005
<CAPTION>
EXPENSE RATIOS WITHOUT
WAIVERS AND REIMBURSEMENTS
------------------------------------------------------------------
PORTFOLIO 2000 1999 1998 1997 1996 1995
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Money Market.............. 1.87%+ 1.74% 1.74% N/A 1.25% 1.21%
</TABLE>
(3) Per share amounts have been calculated using the monthly average shares
method.
(4) Includes realized gains and losses from foreign currency transactions for
the year ended December 31, 1995.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
63
<PAGE> 99
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO 2000(1) 1999 1998(2) 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.06 $16.38 $15.31 $13.01 $12.35 $ 9.87
----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income.............. 0.33 0.67 0.53 0.77 0.63 0.54
Net realized and unrealized gain
(loss).......................... 0.22 (1.15) 1.94 2.28 0.11 2.56
----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From
Operations......................... 0.55 (0.48) 2.47 3.05 0.74 3.10
----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.............. (0.70) (0.77) (0.71) (0.75) (0.08) (0.62)
Net realized gains................. (2.33) (3.07) (0.69) -- -- --
----------------------------------------------------------------------------------------------------------------------
Total Distributions.................. (3.03) (3.84) (1.40) (0.75) (0.08) (0.62)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD....... $9.58 $12.06 $16.38 $15.31 $13.01 $12.35
----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN......................... 4.20%++ (4.75)% 16.99% 23.52% 5.99% 32.47%
----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S).... $16,539 $20,906 $37,495 $46,074 $45,616 $52,444
----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 0.93%+ 0.87% 0.79% 0.77% 0.77% 0.95%
Net investment income.............. 2.98+ 3.09 3.43 4.42 4.53 4.95
----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.............. 0% 3% 43% 42% 28% 33%
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
EQUITY INDEX PORTFOLIO - CLASS I SHARES 2000(1)(2) 1999(2) 1998(2) 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $35.86 $29.99 $23.59 $18.36 $15.58 $11.69
--------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(3)............ 0.18 0.39 0.36 0.12 0.22 0.25
Net realized and unrealized gain
(loss)........................... (0.36) 5.77 6.33 5.76 3.17 3.88
--------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations... (0.18) 6.16 6.69 5.88 3.39 4.13
--------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income............... (0.19) (0.12) (0.08) (0.17) (0.23) (0.23)
Net realized gains.................. (0.02) (0.17) (0.21) (0.48) (0.38) (0.01)
--------------------------------------------------------------------------------------------------------------------------
Total Distributions................... (0.21) (0.29) (0.29) (0.65) (0.61) (0.24)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........ $35.47 $35.86 $29.99 $23.59 $18.36 $15.58
--------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN.......................... (0.48)%++ 20.68% 28.46% 32.16% 21.68% 35.81%
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)..... $806,635 $ 654,514 $177,167 $35,351 $19,258 $15,230
--------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3)(4)...................... 0.24%+ 0.28% 0.30% 0.76% 1.06% 1.00%
Net investment income............... 1.04+ 1.20 1.36 1.08 1.37 1.84
--------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE............... 1% 3% 5% 6% 7% 5%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the Equity Index Portfolio, the Investment Adviser waived all or part of
its fees for the year ended December 31, 1998 and the year ended December
31, 1995. In addition, IDS Life reimbursed expenses of $6,842 for the year
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 EXPENSE RATIOS WITHOUT
NET INVESTMENT INCOME WAIVERS AND REIMBURSEMENTS
------------------------------------ ----------------------------------
PORTFOLIO 1998 1997 1996 1995 1998 1997 1996 1995
--------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Index - Class I Shares................ $0.02 N/A N/A $0.02 0.42% N/A N/A 1.17%
</TABLE>
(4) As a result of the 0.30% voluntary expense limitation for the ratio of
expenses to average net assets, which became effective during 1998, the
investment manager will reimburse fees for the amount that exceeds the
limitation.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
64
<PAGE> 100
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
EQUITY INDEX PORTFOLIO - CLASS II SHARES 2000(1)(2) 1999(2)(3)
-------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $35.81 $31.71
-------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income..................................... 0.13 0.24
Net realized and unrealized gain (loss)................... (0.36) 4.15
-------------------------------------------------------------------------------------
Total Income (Loss) From Operations......................... (0.23) 4.39
-------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................................... (0.10) (0.12)
Net realized gains........................................ (0.02) (0.17)
-------------------------------------------------------------------------------------
Total Distributions......................................... (0.12) (0.29)
-------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.............................. $35.46 $35.81
-------------------------------------------------------------------------------------
TOTAL RETURN++.............................................. (0.63)% 13.96%
-------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)........................... $55,335 $27,372
-------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses.................................................. 0.50% 0.51%
Net investment income..................................... 0.77 0.93
-------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE..................................... 1% 3%
-------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from March 22, 1999 (inception date) to December 31, 1999.
++ Total return is not annualized as it may not be representative of the total
return for the year.
+ Annualized.
65
<PAGE> 101
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO 2000(1) 1999 1998(2) 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $16.47 $18.47 $18.54 $16.43 $13.73 $10.75
---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income................ 0.12 0.30 0.27 0.31 0.27 0.26
Net realized and unrealized gain
(loss)............................ (0.41) 1.49 1.93 3.41 2.45 2.99
---------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations.... (0.29) 1.79 2.20 3.72 2.72 3.25
---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income................ (0.32) (0.35) (0.33) (0.29) (0.02) (0.27)
Net realized gains................... (8.43) (3.44) (1.94) (1.32) -- --
---------------------------------------------------------------------------------------------------------------------
Total Distributions.................... (8.75) (3.79) (2.27) (1.61) (0.02) (0.27)
---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......... $7.43 $16.47 $18.47 $18.54 $16.43 $13.73
---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN........................... (1.95)%++ 10.66% 11.88% 22.94% 19.83% 30.49%
---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)...... $18,851 $24,338 $35,781 $43,214 $38,502 $35,158
---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses............................. 0.90%+ 0.80% 0.72% 0.77% 0.83% 0.98%
Net investment income................ 1.27+ 1.21 1.45 1.62 1.67 2.09
---------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................ 2% 47% 13% 17% 22% 17%
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
EMERGING GROWTH PORTFOLIO 2000(1) 1999 1998(2) 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $33.11 $19.63 $16.87 $15.83 $13.76 $ 9.63
---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss(3)............... (0.12) (0.26) (0.15) (0.12) (0.10) (0.03)
Net realized and unrealized gain..... 9.48 17.91 5.98 3.32 2.55 4.16
---------------------------------------------------------------------------------------------------------------------
Total Income From Operations........... 9.36 17.65 5.83 3.20 2.45 4.13
---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income................ -- -- -- -- -- --
Net realized gains................... (16.69) (4.17) (3.07) (2.16) (0.38) --
---------------------------------------------------------------------------------------------------------------------
Total Distributions.................... (16.69) (4.17) (3.07) (2.16) (0.38) --
---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......... $25.78 $33.11 $19.63 $16.87 $15.83 $13.76
---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN........................... 28.32%++ 107.14% 37.14% 21.16% 17.83% 42.89%
---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S)...... $26,307 $27,067 $21,147 $20,004 $18,901 $17,463
---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3).......................... 1.22%+ 1.30% 1.28% 1.26% 1.27% 1.20%
Net investment loss.................. (0.91)+ (1.01) (0.88) (0.72) (0.64) (0.24)
---------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................ 112% 113% 98% 102% 84% 121%
---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the Emerging Growth Portfolio, the Investment Adviser waived all or part
of its fees for the year ended December 31, 1995. In addition, for the
Emerging Growth Portfolio, IDS Life reimbursed expenses of $5,265 for the
year 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>
EXPENSE RATIOS
PER SHARE WITHOUT
DECREASES TO NET WAIVERS AND
INVESTMENT INCOME REIMBURSEMENTS
----------------- --------------
1995 1995
PORTFOLIO ---- ----
<S> <C> <C>
Emerging Growth......................................... $0.02 1.39%
</TABLE>
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
66
<PAGE> 102
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO 2000(1)(2) 1999 1998(2) 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $20.70 $13.94 $11.78 $12.07 $ 9.98 $ 9.21
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INCOME (LOSS) FROM OPERATIONS:
Net investment income (loss)(3)...... (0.06) (0.18) (0.03) (0.02) (0.02) 0.03
Net realized and unrealized gain
(loss)............................ (2.30) 8.56 2.25 (0.24) 2.15 0.78
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Total Income (Loss) From Operations.... (2.36) 8.38 2.22 (0.26) 2.13 0.81
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LESS DISTRIBUTIONS FROM:
Net investment income................ (0.59) (0.01) (0.06) (0.03) (0.04) (0.04)
Net realized gains................... (4.58) (1.61) -- -- -- --
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Total Distributions.................... (5.17) (1.62) (0.06) (0.03) (0.04) (0.04)
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NET ASSET VALUE, END OF PERIOD......... $13.17 $20.70 $13.94 $11.78 $12.07 $ 9.98
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TOTAL RETURN........................... (11.29)%++ 66.20% 18.84% (2.18)% 21.38% 8.80%
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NET ASSETS, END OF PERIOD (000'S)...... $16,669 $24,370 $23,482 $28,347 $33,337 $28,979
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RATIOS TO AVERAGE NET ASSETS:
Expenses(4).......................... 1.41%+ 1.33% 1.40% 1.31% 1.35% 1.43%
Net investment income (loss)(3)...... (0.60)+ (0.33) (0.25) (0.23) (0.20) 0.35
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PORTFOLIO TURNOVER RATE................ 1% 17% 30% 21% 33% 34%
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</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) Includes realized gains and losses from foreign currency transactions for
the year ended December 31, 1995.
(4) During the year ended December 31, 1996 and the year ended December 31,
1995, the International Equity Portfolio has earned credits from the
custodian which reduce service fees incurred. If the credits are taken into
consideration, the ratios of expenses to average net assets would be 1.33%
and 1.37%, respectively.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
67
<PAGE> 103
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<PAGE> 104
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.
S-6225 K (8/00)
