<PAGE>
THE PRUDEDTIAL INSURANCE COMPANY OF AMERICA
--------------------
T H E
M E D L E Y
P R O G R A M
---------------------
COMMITTED TO PROVIDING
SUPERIOR INVESTMENT,
ADMINISTRATIVE AND
RECORDKEEPING SERVICES
TO INSTITUTIONAL CLIENTS
Prudential Defined Contribution Services
30 Scranton Office Park
Moosic, PA 18507-1789
(1) 800-458-6333
DECEMBER 31, 1994 REPORT TO PARTICIPANTS
<PAGE>
This report is for the information of persons participating in The Prudential
Variable Contract Account-10 (VCA-10), The Prudential Variable Contract
Account-11 (VCA-11), and The Prudential Variable Contract Account-24 (VCA-24).
The contracts issued by these separate accounts (the Accounts), together with
the fixed-dollar contract offered by The Prudential Insurance Company of America
(The Prudential), comprise the MEDLEY Program.
Under contracts entered into in 1982, The Prudential is responsible for
providing administrative and investment management services to VCA-10 and
VCA-11. The Prudential is also responsible for providing administrative services
to VCA-24, a registered unit investment trust which invests, through its
Subaccounts, in shares of The Prudential Series Fund, Inc. (the Fund). Under a
separate contract, The Prudential is also responsible for providing investment
management services to the Fund. During 1984, The Prudential reorganized its
pension and investment departments and transferred certain of their personnel to
subsidiary companies. As a result, The Prudential now receives, from The
Prudential Asset Management Company, Inc. and The Prudential Investment
Corporation, the administrative and investment management services,
respectively, that The Prudential requires to perform its obligations under the
above contracts. These changes in no way affect Prudential's responsibility to
VCA-10, VCA-11, VCA-24 or the Fund for these services.
GP-4401
<PAGE>
INVESTMENT OBJECTIVES OF THE ACCOUNTS
The investment objective of VCA-10 is the long-term appreciation of the assets
held in the Account. Since no federal income tax will be payable upon dividend
income or realized capital gains, consideration will be given to both potential
income and capital gains opportunities in selecting investments. Investments
will be made primarily in established corporations according to the standards of
a prudent investor concerned primarily with preserving the real value of his
capital by achieving a rate of growth in the value of his investments
commensurate with the rate of growth in the economy and the prevailing rate of
inflation.
The investment objective of VCA-11 is to seek as high a level of current income
as is consistent with the preservation of capital and liquidity.
Each Subaccount of VCA-24 will invest in the corresponding portfolio of the
Fund. Of the portfolios comprising the Fund, seven portfolios are presently
available to the Participants of VCA-24. The Common Stock Subaccount invests in
the Common Stock Portfolio of the Fund, the Bond Subaccount in the Bond
Portfolio, the Aggressively Managed Flexible Subaccount in the Aggressively
Managed Flexible Portfolio, the Conservatively Managed Flexible Subaccount in
the Conservatively Managed Flexible Portfolio, the Stock Index Subaccount in the
Stock Index Portfolio, the Global Equity Subaccount in the Global Equity
Portfolio, and the Government Securities Subaccount in the Government Securities
Portfolio. Additional Subaccounts and Fund portfolios may be available in the
future. The investment objectives of the seven Fund portfolios available for
investment through VCA-24 are:
COMMON STOCK PORTFOLIO-Capital appreciation through investment primarily in
common stocks of companies, including major established corporations as
well as smaller capitalization companies, that appear to offer attractive
prospects of price appreciation that is superior to broadly-based stock
indices. Current income, if any, is incidental.
BOND PORTFOLIO-A high level of income over the longer term while providing
reasonable safety of capital through investment primarily in readily
marketable intermediate and long-term fixed income securities that provide
attractive yields but do not involve substantial risk of loss of capital
through default.
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO-Achievement of a high total return
consistent with a portfolio having an aggressively managed mix of money
market instruments, fixed income securities, and common stocks, in
proportions believed by the investment manager to be appropriate for an
investor desiring diversification of investment who is willing to accept a
relatively high risk of loss in an effort to achieve greater appreciation.
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO-Achievement of a favorable total
investment return consistent with a portfolio having a conservatively
managed mix of money market instruments, fixed income securities, and
common stocks of established companies, in proportions believed by the
investment manager to be appropriate for an investor desiring
diversification of investment who prefers a relatively lower risk of loss
than that associated with the Aggressively Managed Flexible Portfolio while
recognizing that this reduces the chances of greater appreciation.
STOCK INDEX PORTFOLIO-Achievement of investment results that correspond to
the price and yield performance of publicly traded common stocks in the
aggregate by following a policy of attempting to duplicate the price and
yield performance of the Standard & Poor's 500 Composite Stock Price Index.
GLOBAL EQUITY PORTFOLIO-Long-term growth of capital through investment
primarily in common stock and common stock equivalents of foreign and
domestic issuers. Current income, if any, is incidental.
GOVERNMENT SECURITIES PORTFOLIO-A high level of income over the longer term
consistent with the preservation of capital through investment primarily in
U.S. Government securities, including intermediate and long-term U.S.
Treasury securities and debt obligations issued by agencies of or
instrumentalities established, sponsored or guaranteed by the U.S.
Government. At least 65% of the total assets of the Portfolio will be
invested in U.S. Government securities.
There is no assurance that the investment objectives of VCA-10, VCA-11, or any
Fund portfolio will be attained. Nor is there any guarantee that the amount
available to a Participant will equal or exceed the total contributions made on
that Participant's behalf. The value of the investments held in VCA-10, VCA-11,
and in each Fund portfolio may fluctuate daily, and is subject to the risks of
both changing economic conditions and the selection of investments necessary to
meet the Accounts' or portfolios' objectives.
2
<PAGE>
VCA-10
INVESTMENT ENVIRONMENT
The S&P 500 index barely budged for the fourth quarter of 1994, losing 0.02%;
thereby posting only a 1.3% return for the year. Both periods were a tug-of-war
between the positive of strong corporate earnings and the negative of rising
interest rates.
The technology sector was, by far, the best performing sector for both the
quarter and the year. Strong personal computer (PC) sales to both businesses and
consumers allowed those in the PC business to more than make up in volume what
they have lost in pricing. Conversely, the consumer cyclical sector was the
worst performer for the fourth quarter and the year. Poor performance in the
retail industry was the main driver of a weak fourth quarter. Investors had
expected a strong Christmas selling season, but were disappointed by slower than
expected sales and extensive (and early) price cutting. Responsibility for the
poor performance of the cyclical sector is placed on the retail, autos/trucks,
and housing related industries. Fears of a slowdown in the economy, which would
affect consumer confidence, and hence consumers' housing and auto purchases,
were evident.
The utility sector also performed poorly for both the quarter and year. The
telecommunications industry was largely responsible for the quarter's weak
performance, as a long distance price war hurt the prospects of AT&T, MCI and
Sprint. Electric utility companies were primarily at fault for the year's poor
performance as they were hurt by both rising interest rates and deregulation.
Rising interest rates and derivatives exposure (and potential
derivatives-related scandals) caused the finance sector to underperform for the
quarter and the year. The only areas of strength, other than the technology
sector, were in the energy (mainly large integrated oil companies) and consumer
growth/stable sectors. Their more predictable earnings attracted investors as
the uncertainty surrounding a possible economic slowdown persisted.
INVESTMENT PERFORMANCE
STOCK MARKET RETURNS
(with dividends reinvested)
<TABLE>
<CAPTION>
PERIODS ENDING DECEMBER
31, 1994
SIX MONTHS ONE YEAR
<S> <C> <C>
S&P 500 4.9% 1.3%
Returns By Economic Sector:
Technology 19.7% 20.4%
Energy 3.7% 3.9%
Industrial 1.7% (0.7)%
Utility (1.2)% (7.6)%
Finance (4.4)% (3.2)%
Consumer Cyclical (6.2)% (12.2)%
Consumer Growth & Stable 13.5% 7.5%
</TABLE>
INVESTMENT PERFORMANCE
The VCA-10 Account returned 0.1% during 1994, underperforming the S&P 500 index
by 1.2%. This was primarily the result of bad performance in the consumer
growth/stable sector.
3
<PAGE>
INVESTMENT ACTIVITY
During 1994, VCA-10 retained its strongest sector bets, remaining underweighted
in the utility and energy sectors and overweighted in the finance and industrial
sectors. The most significant shift in sector weight for the year was in the
technology sector, as it was moved from a small overweighting to an
underweighted position. The second most significant shift in sector weighting
was in the consumer growth/stable sector, reducing its underweighting. This was
primarily the result of purchases in the drug and medical supply, hospital
management, and media industries.
INVESTMENT OUTLOOK
U.S. corporate earnings are expected to continue to grow, although at a somewhat
reduced rate. Despite the interest rate increases in 1994, investors were
pleasantly surprised by profits during the past year, which were achieved
largely on the basis of increased corporate efficiency. While this efficiency
will be a factor going forward, its impact will not be nearly as great, but as
the global economy recovers, earnings should benefit. The equity returns of 1995
are expected to surpass those of 1994. We believe returns should approach their
long term average of about 10%, but remain lower than the 14+% average that has
been experienced over the last ten years. While much further tightening by the
Fed is not anticipated, there is concern that significant interest rate
increases by the Fed could lead to recession.
4
<PAGE>
CONDENSED FINANCIAL INFORMATION FOR VCA-10
NET INCOME AND CAPITAL CHANGES PER ACCUMULATION UNIT
(For a Unit outstanding throughout the year)
(Covered by the Independent Auditors' Report on page 7)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME....................... $ .0563 $ .0855 $ .0551 $ .0538 $ .0718
- -----------------------------------------------------------------------------------------
EXPENSES
For investment management fee......... .0083 .0077 .0064 .0056 .0048
For administrative expenses not
covered by the annual account
charge.............................. .0251 .0230 .0192 .0169 .0144
- -----------------------------------------------------------------------------------------
NET INVESTMENT INCOME................... .0229 .0548 .0295 .0313 .0526
- -----------------------------------------------------------------------------------------
CAPITAL CHANGES
Net realized gain on investments...... .1947 .2763 .2884 .1096 .0791
Net unrealized
appreciation/(depreciation) of
investments......................... (.2148) .2599 (.0823) .4478 (.2054)
- -----------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN UNIT VALUE... .0028 .5910 .2356 .5887 (.0737)
- -----------------------------------------------------------------------------------------
UNIT VALUE
Beginning of year..................... 3.3576 2.7666 2.5310 1.9423 2.0160
End of year........................... $3.3604 $3.3576 $2.7666 $2.5310 $1.9423
- -----------------------------------------------------------------------------------------
SUM OF AVERAGE RATIOS for the year of
(a) charge for investment management
fee to net assets* and (b) charge for
administrative expenses not covered by
the annual account charge to net
assets*............................... .9965% .9955% .9936% .9929% .9977%
- -----------------------------------------------------------------------------------------
AVERAGE RATIO for the year of net
investment income to net assets....... .6791% 1.7775% 1.1431% 1.3779% 2.7403%
- -----------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................. 31.50% 45.45% 65.20% 71.91% 105.69%
- -----------------------------------------------------------------------------------------
NUMBER OF UNITS OUTSTANDING for
Participants at end of year (000
omitted).............................. 79,189 73,569 62,592 58,699 55,621
- -----------------------------------------------------------------------------------------
<FN>
*These calculations exclude The Prudential's equity in VCA-10.
</TABLE>
The above table does not reflect the annual account charge, which does not
affect the Unit Value of VCA-10. This charge is made by reducing Participants'
accounts by a number of Units equal in value to the charge.
While both income and capital changes are shown above, the distinction between
these sources of change in VCA-10 is not particularly significant to
Participants. There is no distinction between income and realized and
unrealized gains and losses on investments in determining the amount of the
Participant's benefits and the taxes payable by the Participant on them.
5
<PAGE>
VCA-10
REPORT OF MANAGEMENT
The accompanying financial statements and all information in the annual report
are the responsibility of management of The Prudential Insurance Company of
America (The Prudential). These financial statements have been prepared in
accordance with generally accepted accounting principles, and necessarily
include amounts based on best estimates and judgments. Information presented in
one section of the annual report is consistent with information dealing with the
same or substantially similar subject matter presented elsewhere in the annual
report.
The system of internal controls for VCA-10 is an integral part of that for The
Prudential. This system is designed to provide reasonable assurance that assets
are safeguarded and that transactions are properly recorded and executed in
accordance with proper authorization. The concept of reasonable assurance is
based on the premise that the cost of internal controls should not exceed the
benefits derived. In addition, The Prudential maintains a professional staff of
internal auditors who monitor VCA-10's control structure through periodic
reviews and tests of the control aspects of accounting, financial and operating
activities. The internal auditors coordinate their program with that of the
independent certified public accountants.
The financial statements have been audited by Deloitte & Touche LLP, Certified
Public Accountants. The Independent Auditors' Report, which appears in this
annual report, expresses an independent professional opinion on the fairness of
presentation, in all material respects, of management's financial statements.
The auditors review VCA-10's financial and accounting controls and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatements.
The Prudential's Board of Directors, through its Auditing Committee, and the
VCA-10 Committee monitor management's fulfillment of its responsibilities for
accurate accounting, statement preparation and protection of assets. The
Auditing Committee is composed solely of outside directors and the VCA-10
Committee has a majority of outside members. Both The Prudential's Auditing
Committee and the outside members of the VCA-10 Committee meet with the
independent certified public accountants, management and internal auditors
periodically to evaluate each party's execution of their respective
responsibilities. Each has free and separate access to the Auditing and VCA-10
Committees to discuss accounting, financial reporting, internal control and
auditing matters.
Mark R. Fetting
Chairman
VCA-10 Committee
Eugene M. O'Hara
Chief Financial Officer
The Prudential Insurance Company of America
6
<PAGE>
VCA-10
INDEPENDENT AUDITORS' REPORT
TO THE COMMITTEE OF AND PERSONS PARTICIPATING IN THE PRUDENTIAL VARIABLE
CONTRACT ACCOUNT-10:
We have audited the accompanying statement of net assets of The Prudential
Variable Contract Account-10 of The Prudential Insurance Company of America as
of December 31, 1994, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the condensed financial information for each of the five
years in the period then ended. These financial statements and condensed
financial information are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1994, by correspondence with the custodians and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and condensed financial information
present fairly, in all material respects, the financial position of The
Prudential Variable Contract Account-10 as of December 31, 1994, the results of
its operations, the changes in its net assets and the condensed financial
information for the respective stated periods in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 16, 1995
7
<PAGE>
FINANCIAL STATEMENTS OF VCA-10
STATEMENT OF NET ASSETS DECEMBER 31, 1994
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENTS [NOTE 2] SHARES MARKET VALUE
- --------------------------------------------------------------------
<S> <C> <C>
AEROSPACE/DEFENSE (2.6%)
Gen Corp. 137,700 $ 1,635,187
General Motors Corp.(Class 'H' Stock) 67,000 2,336,625
Littelfuse, Inc.+ 48,000 1,404,000
Litton Industries, Inc.+ 42,000 1,554,000
------------
6,929,812
- ---------------------------------------------------
AUTOS & TRUCKS (2.8%)
Automotive Industries Holding, Inc.+ 120,000 2,430,000
Ford Motor Co. 70,000 1,951,250
General Motors Corp. 23,300 981,512
Modine Manufacturing Co. 70,000 2,012,500
------------
7,375,262
- ---------------------------------------------------
CHEMICALS (1.9%)
Imperial Chemical Industries (ADRs) 76,600 3,561,900
W. R. Grace & Co. 42,000 1,622,250
------------
5,184,150
- ---------------------------------------------------
COMMERCIAL SERVICES (0.7%)
Banner Aerospace, Inc.+ 272,500 1,226,250
UNC, Inc.+ 127,600 765,600
------------
1,991,850
- ---------------------------------------------------
COMPUTER SOFTWARE & SERVICES (1.9%)
General Motors Corp. (Class 'E' Stock) 70,000 2,686,250
National Data Corp. 97,900 2,520,925
------------
5,207,175
- ---------------------------------------------------
CONSUMER CYCLICAL INDICES (0.1%)
Florsheim Shoe Company+ 27,200 153,000
- ---------------------------------------------------
CONSUMER SERVICES (1.8%)
ADT Ltd.+ 126,500 1,359,875
Diebold, Inc. 87,250 3,588,156
------------
4,948,031
- ---------------------------------------------------
CONTAINERS & PACKAGING (1.8%)
Aptargroup, Inc. 18,000 517,500
Ball Corp. 72,000 2,268,000
Owens-Illinois, Inc. (New)+ 120,400 1,324,400
Seda Specialty Packaging+ 60,100 706,175
------------
4,816,075
- ---------------------------------------------------
COSMETICS & SOAPS (0.6%)
Bush Boake Allen, Inc.+ 63,000 1,701,000
- ---------------------------------------------------
DIVERSIFIED CONSUMER PRODUCTS (2.4%)
Eastman Kodak Co. 76,400 3,648,100
Whitman Corp. 163,400 2,818,650
------------
6,466,750
- ---------------------------------------------------
<CAPTION>
COMMON STOCK
INVESTMENTS [NOTE 2] SHARES MARKET VALUE
- --------------------------------------------------------------------
<S> <C> <C>
DRUGS & MEDICAL SUPPLIES (5.8%)
Gelman Sciences, Inc.+ 67,700 $ 1,007,037
Schering Plough Corp. 57,400 4,247,600
Sterile Concepts Holdings+ 126,800 2,028,800
Warner Lambert Co. 46,000 3,542,000
Zeneca Group PLC (ADRs) 113,166 4,653,952
------------
15,479,389
- ---------------------------------------------------
ELECTRICAL EQUIPMENT (1.8%)
Belden, Inc. 108,800 2,407,200
Cable Design Technologies+ 144,200 2,379,300
------------
4,786,500
- ---------------------------------------------------
ELECTRONICS (1.5%)
Marshall Industries+ 61,400 1,642,450
Methode Electronics, Inc. 145,000 2,465,000
------------
4,107,450
- ---------------------------------------------------
ENGINEERING & CONSTRUCTION (0.7%)
Giant Cement Holding, Inc.+ 150,000 1,781,250
- ---------------------------------------------------
EXPLORATION & PRODUCTION (4.0%)
Basin Exploration, Inc.+ 115,100 1,266,100
Cabot Oil & Gas Corp. 120,000 1,740,000
Enron Oil & Gas 21,000 393,750
Mesa Incorporated+ 179,200 873,600
Murphy Oil Corp. 48,000 2,040,000
Oryx Energy Co.+ 200,600 2,382,125
Parker & Parsley Petroleum Co. 38,600 791,300
Seagull Energy Corp.+ 59,200 1,132,200
------------
10,619,075
- ---------------------------------------------------
FINANCIAL SERVICES (4.6%)
American Express Co. 67,600 1,994,200
Dean Witter Discover & Co. 110,300 3,736,413
Financial Security Assurance Holdings
Ltd. 56,800 1,192,800
ITT Corp. 29,800 2,641,025
Safecard Services, Inc. 150,000 2,831,250
------------
12,395,688
- ---------------------------------------------------
FOODS (0.2%)
Universal Foods Corp. 22,800 627,000
- ---------------------------------------------------
FOOD/DRUG RETAIL (0.6%)
Rite Aid Corp. 70,000 1,636,250
- ---------------------------------------------------
FOREST PRODUCTS (1.8%)
Mead Corp. 97,000 4,716,625
- ---------------------------------------------------
</TABLE>
8
<PAGE>
FINANCIAL STATEMENTS OF VCA-10
STATEMENT OF NET ASSETS DECEMBER 31, 1994
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENTS [NOTE 2] SHARES MARKET VALUE
- --------------------------------------------------------------------
<S> <C> <C>
HOSPITAL MANAGEMENT (5.1%)
Community Health Systems+ 127,500 $ 3,474,375
Healthtrust, Inc.+ 155,900 4,949,825
National Medical Enterprises+ 365,000 5,155,625
------------
13,579,825
- ---------------------------------------------------
HOUSING RELATED (3.0%)
Leggett & Platt, Inc. 27,100 948,500
Mueller Industries, Inc.+ 90,700 2,709,663
Owens Corning Fiberglass Corp. (New)+ 60,000 1,912,500
Ply-Gem Industries, Inc. 125,200 2,394,450
------------
7,965,113
- ---------------------------------------------------
INSURANCE (7.5%)
Emphesys Financial Group 62,800 1,993,900
Equitable of Iowa Companies 85,000 2,401,250
Life Reinsurance 53,800 948,225
NAC Re Corp. 53,600 1,795,600
National Re Corp. 74,400 1,953,000
Provident Life & Accident Insurance
(Class 'B' Stock) 79,500 1,729,125
Reinsurance Group of America 31,500 775,688
TIG Holdings, Inc. 114,000 2,137,500
Trenwick Group, Inc. 50,000 2,118,750
Western National Corp. 185,000 2,381,875
W. R. Berkley Corp. 48,000 1,800,000
------------
20,034,913
- ---------------------------------------------------
INTEGRATED PRODUCERS (0.6%)
Societe Nat Elf Aquitane (ADRs)+ 44,490 1,568,273
- ---------------------------------------------------
LODGING/GAMING (1.1%)
Caesars World, Inc.+ 46,300 3,090,525
- ---------------------------------------------------
MACHINERY (6.0%)
Applied Power Co. (Class 'A' Stock) 112,500 2,854,687
Donaldson, Inc. 100,000 2,389,060
Idex Corp.+ 70,000 2,957,500
Indresco, Inc.+ 190,000 2,707,500
Kaydon Corp. 81,400 1,953,600
Parker Hannifan Corp. 16,000 728,000
Regal Beloit Corp. 186,400 2,539,700
------------
16,130,047
- ---------------------------------------------------
<CAPTION>
COMMON STOCK
INVESTMENTS [NOTE 2] SHARES MARKET VALUE
- --------------------------------------------------------------------
<S> <C> <C>
MEDIA (7.8%)
American Publishing Co. (Class 'A'
Stock) 136,400 $ 1,500,400
Comcast Corp. (Class 'A' Stock) 75,000 1,153,125
Comcast Corp. Special (Class 'A' Stock) 37,500 588,281
Harcourt General, Inc. 40,800 1,438,200
Lee Enterprises 80,000 2,760,000
Pulitzer Publishing Co. 24,800 995,100
Scripps (EW) Co. (Class 'A' Stock) 45,000 1,361,250
Tele-Communications, Inc. (New) (Class
'A' Stock)+ 170,000 3,697,500
Time Warner, Inc. 115,000 4,039,375
Times Mirror Co. Ser A 104,200 3,269,275
------------
20,802,506
- ---------------------------------------------------
MISCELLANEOUS-INDUSTRIAL (9.4%)
Ametek, Inc. 126,400 2,133,000
BW/IP, Inc. 43,700 748,362
Coltec Industries, Inc.+ 64,600 1,106,275
Danaher Corp. 35,400 1,849,650
Itel Corp. (New)+ 40,500 1,402,313
Jason, Inc.+ 167,900 1,511,100
Mark IV Industries, Inc. 113,300 2,237,675
Material Sciences Corp.+ 150,000 2,381,250
Pentair, Inc. 100,000 4,275,000
Rockwell International Corp. 39,800 1,422,850
Varlen Corp. 86,250 2,242,500
Welbilt Corp.+ 63,000 2,102,625
Wolverine Tube, Inc.+ 76,800 1,824,000
------------
25,236,600
- ---------------------------------------------------
MONEY CENTER BANKS (1.0%)
First Interstate Bancorp 40,000 2,705,000
- ---------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES (0.9%)
Wallace Computer Services 85,100 2,467,900
- ---------------------------------------------------
RAILROADS (2.1%)
Chicago & Northwestern Transp.+ 50,000 975,000
Greenbrier Companies, Inc. 140,600 2,319,900
Illinois Central Corp. 73,600 2,263,200
------------
5,558,100
- ---------------------------------------------------
REGIONAL BANKS (5.3%)
Cullen Frost Bankers, Inc. 75,000 2,315,625
First Bank System, Inc. 111,900 3,715,427
Keycorp (New) 150,625 3,765,625
Norwest Corp. 190,900 4,462,287
------------
14,258,964
- ---------------------------------------------------
</TABLE>
9
<PAGE>
FINANCIAL STATEMENTS OF VCA-10
STATEMENT OF NET ASSETS DECEMBER 31, 1994
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENTS [NOTE 2] SHARES MARKET VALUE
- --------------------------------------------------------------------
<S> <C> <C>
RESTAURANTS (1.7%)
CKE Restaurants, Inc. 57,200 $ 393,250
Morrison Restaurants, Inc. 73,400 1,798,300
Sbarro, Inc. 90,000 2,340,000
------------
4,531,550
- ---------------------------------------------------
RETAIL (2.0%)
Ethan Allen Interiors, Inc.+ 50,000 1,212,500
Haverty Furniture, Inc. 99,000 1,163,250
K Mart Corp. 79,800 1,037,400
Sears Roebuck & Co. 40,000 1,840,000
------------
5,253,150
- ---------------------------------------------------
SPECIALTY CHEMICALS (2.8%)
Ferro Corp. 134,800 3,218,350
M.A. Hanna Co. 88,100 2,092,375
OM Group, Inc. 89,000 2,136,000
------------
7,446,725
- ---------------------------------------------------
TELECOMMUNICATION SERVICES (3.5%)
Airtouch Communication, Inc.+ 33,500 975,688
Century Telephone Enterprises, Inc. 80,000 2,360,000
MCI Communications Corp. 126,000 2,315,250
Rochester Telephone Corp. 170,600 3,603,925
------------
9,254,863
- ---------------------------------------------------
TEXTILES/APPAREL (0.5%)
Interco, Inc.+ 187,000 1,262,250
- ---------------------------------------------------
TRUCKING/SHIPPING (0.4%)
Ryder System, Inc. 50,000 1,100,000
- ---------------------------------------------------
TOTAL COMMON STOCKS (98.3%)
(Cost: $237,334,998) $263,168,636
- ---------------------------------------------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS [NOTE 2] AMOUNT MARKET VALUE
<S> <C> <C>
- ---------------------------------------------------
REPURCHASE AGREEMENT
Sanwa BGK Securities Co., L.P., 5.75%
yield,
12/30/94 - 01/03/95, Amount Due -
$5,258,357 (collateralized by
$5,360,589 U.S. Treasury Notes,
5.50%, Due 04/30/96) $ 5,255,000 $ 5,256,679
- ---------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (2.0%)
(Cost: $5,255,000) $ 5,256,679
- ---------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(Cost: $242,589,998) $268,425,315
- ---------------------------------------------------
OTHER ASSETS, LESS LIABILITIES
Bank Overdraft $ (995,778)
Dividends and Interest Receivable 225,723
Receivables for Investments Sold 14,513
Payables for Investments Purchased (311,679)
Pending Transfers 263,127
- ---------------------------------------------------
TOTAL OTHER ASSETS, LESS LIABILITIES (-0.3%) $(804,094)
- ---------------------------------------------------
NET ASSETS (100%) $267,621,221
- ---------------------------------------------------
NET ASSETS REPRESENTING:
Equity of Participants
79,188,724 Accumulation Units at an Accumulation
Unit Value of $3.3604 (rounded) $266,103,064
Equity of The Prudential Insurance Company of America
1,518,157
- ---------------------------------------------------
$267,621,221
- --------------------------------------------------------------------
- --------------------------------------------------------------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipts
PLC Public Limited Company
+Non income producing securities
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
FINANCIAL STATEMENTS OF VCA-10
STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 1994
- -------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME [NOTE 2]
Dividends $ 4,172,264
Interest 299,332
- ------------------------------------------------------------------------------------------------------------
4,471,596
EXPENSES [NOTE 3]
Fees Charged to Participants for Investment Management Services 652,237
Fees Charged to Participants for Administrative Expenses 1,956,713
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME-NET 1,862,646
- ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-NET
Realized Gain on Investments-Net 14,911,860
Unrealized Decrease in Value of Investments-Net (16,570,990)
- ------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (1,659,130)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 203,516
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Investment Income-Net $ 1,862,646 $ 3,577,058
Realized Gain on Investments-Net 14,911,860 19,357,439
Unrealized Increase/(Decrease) In Value of Investments-Net (16,570,990) 17,160,828
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 203,516 40,095,325
- -------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Purchase Payments and Transfers in 56,061,218 52,887,873
Withdrawals and Transfers Out [Note 9] (36,915,465) (18,950,337)
Annual Account Charges Deducted from
Participants' Accounts [Note 4] (69,867) (49,223)
Deferred Sales Charge [Note 5] (24,016) (17,485)
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS 19,051,870 33,870,828
- -------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 19,255,386 73,966,153
NET ASSETS
Beginning of Year 248,365,835 174,399,682
- -------------------------------------------------------------------------------------------------------
End of Year $ 267,621,221 $ 248,365,835
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-10
YEARS ENDED DECEMBER 31, 1994 AND 1993
- --------------------------------------------------------------------------------
NOTE 1: GENERAL
The Prudential Variable Contract Account-10 (VCA-10 or the Account) was
established by The Prudential Insurance Company of America (The
Prudential) under the laws of the State of New Jersey and is registered
as an open-end, diversified management investment company under the
Investment Company Act of 1940, as amended. VCA-10 has been designed
for use by employers (Contract-holders) in making retirement
arrangements on behalf of their employees (Participants). Its
investments are composed primarily of common stocks. All contractual
and other obligations arising under contracts participating in VCA-10
are general corporate obligations of The Prudential, although
Participants' payments from the Account will depend upon the investment
experience of the Account.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. INVESTMENTS
EQUITY SECURITIES
The value of securities (except options and fixed income securities
including convertible bonds) held in VCA-10 will be determined once
daily as of 5:00 P.M., New York time ("Valuation Time") using composite
pricing which reflects prices as of the close of business on all major
exchanges, on each day on which the New York Stock Exchange ("NYSE") is
open for trading and, as provided below, on any other day in which
there is sufficient trading in VCA-10's portfolio securities to result
in a material change in the value of the Account. A security that is
traded on a national securities exchange will be valued at the last
sale price for such security on any major exchange on which such
security is traded as of Valuation Time, or, in the absence of recorded
sales on such exchange on the valuation date, at the average of readily
available bid and asked prices on such exchange at the Valuation Time.
Any security not traded on a national securities exchange but traded in
the over-the-counter market for which quotations are furnished through
the nationwide automated quotation system approved by the National
Association of Securities Dealers, Inc. ("NASDAQ") will be valued based
on the last sale price as of the Valuation Time on each day on which
the NYSE is open for trading, or, in the absence of recorded sales on
such day, at the average of readily available bid and asked prices, as
established by NASDAQ at the Valuation Time. Unlisted securities not
quoted on NASDAQ are valued at the average of the quoted bid and asked
prices in the over-the-counter market at the Valuation Time. Portfolio
securities for which market quotations are not readily available will
be valued at fair value as determined in good faith under the direction
of the Account's Committee.
FIXED INCOME SECURITIES
Fixed income securities including convertible bonds are valued based on
prices provided by an industry-recognized pricing service when such
prices are believed to reflect the fair market value of such
securities. Fixed income securities including convertible bonds not
priced in this manner are valued at the mean of the last reported bid
and asked prices provided by principal market makers and recognized
securities dealers in such securities.
SHORT-TERM INVESTMENTS
Short-term investments having maturities of sixty days or less are
valued at amortized cost, which approximates market value. Amortized
cost is computed using the cost on the date of purchase, adjusted for
constant accrual of discount or amortization of premium to maturity.
REPURCHASE AGREEMENTS
Repurchase agreements may be considered loans of money to the seller of
the underlying security. VCA-10 will not enter into repurchase
agreements unless the agreement is fully collateralized, i.e., the
value of the underlying collateral securities is, and during the entire
term of the agreement remains, at least equal to the amount of the
'loan' including accrued interest. VCA-10 will take possession of the
collateral and will value it daily to assure that this condition is
met. In the event that a seller defaults on a repurchase agreement,
VCA-10 may incur a loss in the market value of the collateral as well
as disposition costs; and, if a party with whom VCA-10 had entered into
a repurchase agreement becomes insolvent, VCA-10's ability to realize
on the collateral may be limited or delayed and a loss may be incurred
if the collateral securing the repurchase agreement declines in value
during the insolvency proceedings.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-10
YEARS ENDED DECEMBER 31, 1994 AND 1993
- --------------------------------------------------------------------------------
OPTIONS
Options on stocks and stocks indices traded on national securities
exchanges are valued as of the close of options trading on such
exchanges (which is currently 4:10 P.M., New York time) on the
valuation date. Stock index futures and options thereon which are
traded on commodities exchanges are valued as of the close of such
commodity exchanges (which is currently 4:15 P.M., New York time) on
the valuation date. The value of the option or future is based upon the
last sale price on the exchange on which the contract is traded or as
provided by NASDAQ or at the mean between the last bid and asked price
if such bid and asked price are of a more recent day than the last
trade price.
B. INCOME RECOGNITION
Income and realized and unrealized gains and losses on investments are
allocated to the Participants and The Prudential on a daily basis in
proportion to their respective equities in VCA-10. Realized gains and
losses from equity transactions are determined and accounted for on the
basis of average cost. Realized gains and losses from convertible bond
transactions are determined and accounted for on the basis of
identified cost. Dividend income is recorded on the ex-dividend date at
declared value. Interest income is accrued daily. Equity, long-term
bond and option transactions are recorded on the first business day
following the trade date, except that transactions on the last business
day of the year are recorded on that date. Short-term security
transactions are recorded on trade date.
C. TAXES
The operations of VCA-10 are part of, and are taxed with, the
operations of The Prudential. Under the current provisions of the
Internal Revenue Code, The Prudential does not expect to incur federal
income taxes on earnings of VCA-10 to the extent the earnings are
credited under the Contracts. As a result, the Unit Value of VCA-10 has
not been reduced by federal income taxes.
NOTE 3: EXPENSES
A daily charge, at an effective annual rate of 1.00% of the current
value of the Participant's equity in VCA-10, is paid to The Prudential.
Three quarters of this charge (0.75%) is for administrative expenses
not covered by the annual account charge, and one quarter (0.25%) is
for investment management services.
NOTE 4: ANNUAL ACCOUNT CHARGE
An annual account charge is deducted from the account of each
Participant at the time of withdrawal of the value of all of the
Participant's accounts or at the end of the accounting year by
cancelling Units. The charge will first be made against a Participant's
account under a fixed dollar annuity companion contract or fixed rate
option of the non-qualified combination contract. If the Participant
has no account under a companion contract or the fixed rate option, or
if the amount under the companion contract or the fixed rate option is
too small to pay the charge, the charge will be made against the
Participant's account in VCA-11. If the Participant has no VCA-11
account, or if the amount under that account is too small to pay the
charge, the charge will then be made against the Participant's VCA-10
account. If the Participant has no VCA-10 account, or if it is too
small to pay the charge, the charge will then be made against any one
or more of the Participant's accounts in VCA-24. The annual account
charge will not be greater than $20 and is paid to The Prudential.
NOTE 5: DEFERRED SALES CHARGE
A deferred sales charge is imposed upon that portion of certain
withdrawals which represents a return of contributions. The charge is
designed to compensate The Prudential for sales and other marketing
expenses. The maximum deferred sales charge is 7% on contributions
withdrawn from an account during the first two years of participation,
6% on contributions withdrawn during the third through fifth years, 4%
on contributions withdrawn during the sixth through tenth years, and 3%
on contributions withdrawn during the eleventh through fifteenth years.
No deferred sales charge is imposed upon contributions withdrawn for
any reason after fifteen years of participation in the Program. In
addition, no deferred sales charge is imposed upon contributions
withdrawn: (a) to purchase an annuity under a Prudential Group Annuity
contract; (b) to provide a death benefit; (c) due to resignation or
retirement by the Participant or termination of the Participant by the
Contract-holder (for all plans other than IRAs); (d) pursuant to a
systematic withdrawal plan; (e) in cases of financial hardship or
disability retirement as determined pursuant to the provisions of the
employer's retirement arrangement; or (f) as loans. Contributions
transferred among VCA-10, VCA-11, the Subaccounts of VCA-24, the
Companion Contract, and the fixed rate option of the non-qualified
combination contract are
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-10
YEARS ENDED DECEMBER 31, 1994 AND 1993
- --------------------------------------------------------------------------------
considered to be withdrawals from the Account or Subaccount from which
the transfer is made, but no deferred sales charge is imposed upon
them.
NOTE 6: PURCHASES AND SALES OF PORTFOLIO SECURITIES
For the year ended December 31, 1994, excluding short-term investments
and U.S. government securities, the aggregate cost of purchases and the
proceeds from sales of securities were $102,747,049 and $79,438,807,
respectively.
NOTE 7: UNIT TRANSACTIONS
The number of Units issued and redeemed for the years ended December
31, 1994 and 1993 is as follows:
<TABLE>
<S> <C> <C>
1994 1993
--------------------------------------------
Units issued 16,685,518 17,125,184
--------------------------------------------
Units redeemed 11,065,712 6,147,802
--------------------------------------------
</TABLE>
NOTE 8: RELATED PARTY TRANSACTIONS
For the year ended December 31, 1994, Prudential Securities
Incorporated, an indirect, wholly-owned subsidiary of The Prudential,
earned $0 in brokerage commissions from portfolio transactions executed
on behalf of VCA-10.
NOTE 9: PARTICIPANT LOANS
Loans are considered to be withdrawals from the Account from which the
loan amount was deducted, however no deferred sales charge is imposed
upon them. The principal portion of any loan repayment, however, will
be treated as a contribution to the receiving Account for purposes of
calculating any deferred sales charge imposed upon any subsequent
withdrawal. If the Participant defaults on the loan, for example by
failing to make required payments, the outstanding balance of the loan
will be treated as a withdrawal for purposes of the deferred sales
charge. The deferred sales charge will be withdrawn from the same
Accumulation Accounts, and in the same proportions, as the loan amount
was withdrawn. If sufficient funds do not remain in those Accumulation
Accounts, the deferred sales charge will be withdrawn from the
Participant's other Accumulation Accounts as well.
Withdrawals, transfers and loans from VCA-10 are considered to be
withdrawals of contributions until all of the Participant's
contributions to the Account have been withdrawn, transferred or
borrowed. No deferred sales charge is imposed upon withdrawals of any
amount in excess of contributions.
For the year ended December 31, 1994, $938,733 in participant loans has
been withdrawn from VCA-10 and $90,587 of principal has been repaid to
VCA-10. For the year ended December 31, 1993, $59,285 in participant
loans had been withdrawn from VCA-10 and $0 of principal had been
repaid to VCA-10. Loan repayments are invested in Participant's
account(s) as chosen by the Participant, which may not necessarily be
VCA-10. The initial loan proceeds may not necessarily have originated
solely from VCA-10.
14
<PAGE>
VCA-11
INVESTMENT ENVIRONMENT
As 1994 ended, the U.S. economy was growing at a robust annual rate of about 4%.
The stronger than expected growth prompted fears of renewed inflation. The
Federal Reserve reacted by raising short-term interest rates six times during
the year, increasing the federal funds interest rate (the interbank overnight
lending rate) by 2.5 percentage points to 5.5%.
In reality, inflation was actually quite well behaved in 1994. The Consumer
Price Index grew by less than 3%. However, based upon rising commodity prices,
strong employment growth, and soaring consumer confidence, expectations for
inflation in 1995 are higher, ranging from 3.5% to 4%.
Despite higher interest rates, Gross Domestic Product (GDP), the measure of
goods produced and services delivered in the US, increased by a stronger than
expected 4% in the third quarter. The strong growth evident in the fourth
quarter influenced expectations for additional interest rate increases in 1995.
INVESTMENT ACTIVITY
The returns for money market funds are greatly affected by changes in monetary
policy. As interest rates rose, VCA-11's maturities were shortened to take
advantage of rising interest rates. For example, the Account's weighted average
maturity (WAM) was as low as 31 days on August 9th, just before the Federal
Reserve raised rates by a half of a percentage point. This enabled VCA-11 to
take advantage of new investments offering higher interest rates as they came to
market. Similarly, when it became apparent that interest rates would increase
once more in November, the Account's WAM was shortened again before the meeting
and then extended afterward since it was believed there would be a pause through
year end in additional interest rate increases.
INVESTMENT OUTLOOK
Since economic growth must decelerate in order to prevent the threat of rising
inflation, short-term interest rates should continue to rise in 1995 until the
Federal Reserve is satisfied that the threat has subsided.
INVESTMENT PERFORMANCE
VCA-11 returned 3.47% for the 12 months ended December 31, 1994. The Solomon
Brothers 3-month Treasury Bill Index returned 4.42% over the same period. The
Account has a lower yield because securities are held to maturity. As older
instruments mature, the portfolio's yield may continue to rise as new
instruments are purchased. Additionally, VCA-11's rate of return reflects
reductions for expenses and management fees. The Treasury Bill Index is a broad
market gauge, not an actively managed portfolio and thus does not incur such
expenses.
15
<PAGE>
CONDENSED FINANCIAL INFORMATION FOR VCA-11
NET INCOME AND CAPITAL CHANGES PER ACCUMULATION UNIT
(For a Unit outstanding throughout the year)
(Covered by the Independent Auditors' Report on page 18)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME................................. $ .0912 $ .0682 $ .0812 $ .1215 $ .1464
- --------------------------------------------------------------------------------------------------------
EXPENSES
For investment management fee................... .0052 .0050 .0049 .0047 .0044
For administrative expenses not covered by the
annual account charge......................... .0154 .0150 .0147 .0142 .0131
- --------------------------------------------------------------------------------------------------------
NET INCREASE IN UNIT VALUE........................ .0706 .0482 .0616 .1026 .1289
- --------------------------------------------------------------------------------------------------------
UNIT VALUE
Beginning of year............................... 2.0350 1.9868 1.9252 1.8226 1.6937
End of year..................................... $ 2.1056 $ 2.0350 $ 1.9868 $ 1.9252 $ 1.8226
- --------------------------------------------------------------------------------------------------------
SUM OF AVERAGE RATIOS for the year of (a) charge
for investment management fee to net assets* and
(b) charge for administrative expenses not
covered by the annual account charge to net
assets*......................................... .9966% .9942% .9999% 1.0048% .9972%
- --------------------------------------------------------------------------------------------------------
AVERAGE RATIO for the year of net investment
income to net assets............................ 3.4176% 2.3997% 3.1433% 5.4667% 7.3333%
- --------------------------------------------------------------------------------------------------------
NUMBER OF UNITS OUTSTANDING
for Participants at end of year (000 omitted)... 35,448 29,421 27,518 26,400 25,174
- --------------------------------------------------------------------------------------------------------
<FN>
*These calculations exclude The Prudential's equity in VCA-11.
</TABLE>
The above table does not reflect the annual account charge, which does not
affect the Unit Value of VCA-11. This charge is made by reducing Participants'
accounts by a number of Units equal in value to the charge.
16
<PAGE>
VCA-11
REPORT OF MANAGEMENT
The accompanying financial statements and all information in the annual report
are the responsibility of management of The Prudential Insurance Company of
America (The Prudential). These financial statements have been prepared in
accordance with generally accepted accounting principles, and necessarily
include amounts based on best estimates and judgements. Information presented in
one section of the annual report is consistent with information dealing with the
same or substantially similar subject matter presented elsewhere in the annual
report.
The system of internal controls for VCA-11 is an integral part of that for The
Prudential. This system is designed to provide reasonable assurance that assets
are safeguarded and that transactions are properly recorded and executed in
accordance with proper authorization. The concept of reasonable assurance is
based on the premise that the cost of internal controls should not exceed the
benefits derived. In addition, The Prudential maintains a professional staff of
internal auditors who monitor VCA-11's control structure through periodic
reviews and tests of the control aspects of accounting, financial and operating
activities. The internal auditors coordinate their program with that of the
independent certified public accountants.
The financial statements have been audited by Deloitte & Touche LLP, Certified
Public Accountants. The Independent Auditors' Report, which appears in this
annual report, expresses an independent professional opinion on the fairness of
presentation, in all material respects, of management's financial statements.
The auditors review VCA-11's financial and accounting controls and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement.
The Prudential's Board of Directors, through its Auditing Committee, and the
VCA-11 Committee monitor management's fulfillment of its responsibilities for
accurate accounting, statement preparation and protection of assets. The
Auditing Committee is composed solely of outside directors and the VCA-11
Committee has a majority of outside members. Both The Prudential's Auditing
Committee and the outside members of the VCA-11 Committee meet with the
independent certified public accountants, management and internal auditors
periodically to evaluate each party's execution of their respective
responsibilities. Each has free and separate access to the Auditing and VCA-11
Committees to discuss accounting, financial reporting, internal control and
auditing matters.
Mark R. Fetting
Chairman
VCA-11 Committee
Eugene M. O'Hara
Chief Financial Officer
The Prudential Insurance Company of America
17
<PAGE>
VCA-11
INDEPENDENT AUDITORS' REPORT
TO THE COMMITTEE OF AND PERSONS PARTICIPATING IN THE PRUDENTIAL VARIABLE
CONTRACT ACCOUNT-11:
We have audited the accompanying statement of net assets of The Prudential
Variable Contract Account-11 of The Prudential Insurance Company of America as
of December 31, 1994, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the condensed financial information for each of the five
years in the period then ended. These financial statements and condensed
financial information are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1994, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and condensed financial information
present fairly, in all material respects, the financial position of The
Prudential Variable Contract Account-11 as of December 31, 1994, the results of
its operations, the changes in its net assets and the condensed financial
information for the respective stated periods in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 16, 1995
18
<PAGE>
FINANCIAL STATEMENTS OF VCA-11
STATEMENT OF NET ASSETS DECEMBER 31, 1994
<TABLE>
<CAPTION>
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
- --------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER-U.S. (45.4%)
American Home Products Corp., 5.968%
Notes, Due 01/31/95 $ 3,569,000 $ 3,551,452
Aristar, Inc., 6.402% Notes, Due
03/20/95 1,000,000 986,350
Asset Securitization Coop. Corp., 5.588%
Notes, Due 01/17/95 1,000,000 997,556
Asset Securitization Coop. Corp., 5.609%
Notes, Due 01/23/95 1,000,000 996,627
Asset Securitization Coop. Corp., 5.587%
Notes, Due 01/23/95 1,000,000 996,639
Bankers Trust (NY) Corp., 5.526% Notes,
Due 01/24/95 1,000,000 996,524
CIT Group Holdings, Inc., 6.370% Notes,
Due 03/13/95 2,000,000 1,975,268
Chrysler Financial Corp., 5.809% Notes,
Due 01/18/95 1,000,000 997,285
Coca Cola Enterprises, Inc., 6.078%
Notes, Due 02/01/95 1,000,000 994,820
Colonial Pipeline Company, 5.572% Notes,
Due 01/12/95 400,000 399,328
Duracell, Inc., 6.310% Notes, Due
01/30/95 1,000,000 994,965
Falcon Asset Securitization Corp.,
6.129% Notes, Due 01/17/95 550,000 548,509
Ford Motor Credit Co., 6.069% Notes, Due
01/17/95 1,000,000 997,311
Ford Motor Credit Co., 5.841% Notes, Due
02/01/95 1,000,000 995,023
General Electric Capital Corp., 5.553%
Notes, Due 01/03/95 1,000,000 999,694
General Electric Capital Corp., 5.851%
Notes, Due 02/02/95 1,000,000 994,862
General Electric Capital Corp., 6.571%
Notes, Due 04/13/95 1,000,000 981,782
General Motors Acceptance Corp., 5.799%
Notes, Due 01/17/95 3,000,000 2,992,347
<CAPTION>
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
- --------------------------------------------------------------------
<S> <C> <C>
Greyhound Financial Corp., 6.267% Notes,
Due 01/17/95 $ 1,900,000 $ 1,894,748
Greyhound Financial Corp., 6.210% Notes,
Due 01/26/95 1,000,000 995,715
Heller Financial, Inc., 6.401% Notes,
Due 03/14/95 1,000,000 987,400
International Lease Finance Corp.,
6.143% Notes, Due 02/21/95 750,000 743,572
Merrill Lynch & Company, Inc., 5.807%
Notes, Due 01/17/95 1,000,000 997,444
PHH Corp, 6.021% Notes, Due 01/11/95 700,000 698,833
Sears Roebuck Acceptance Corp., 6.120%
Notes, Due 02/07/95 1,000,000 993,782
Smith Barney, Inc., 5.845% Notes, Due
01/26/95 1,000,000 995,986
WMX Technologies, Inc., 5.361% Notes,
Due 02/07/95 1,000,000 994,630
Whirlpool Corp., 5.627% Notes, Due
01/09/95 1,000,000 998,607
Whirlpool Financial Corp., 5.568% Notes,
Due 01/12/95 1,000,000 998,319
Whirlpool Financial Corp., 5.703% Notes,
Due 02/06/95 1,000,000 994,400
------------ ------------
34,869,000 34,689,778
- ---------------------------------------------------
OTHER CORPORATE DEBT-U.S. (16.4%)
(MASTER NOTES, MEDIUM TERM NOTES, ASSET BACKED SECURITIES, CORPORATE
BONDS)
Beneficial Corp., 4.557% Medium Term
Note, Due 07/19/95# 1,000,000 999,625
General Motors Acceptance Corp., 5.818%
Medium Term Note, Due 05/08/95 500,000 501,873
Goldman Sachs Group, L.P., 5.375% Medium
Term Note, Due 01/11/96# 3,000,000 3,000,000
Lehman Brothers Holdings, Inc., 5.028%
Master Note, Due 05/23/95# 2,000,000 2,000,000
</TABLE>
19
<PAGE>
FINANCIAL STATEMENTS OF VCA-11
STATEMENT OF NET ASSETS DECEMBER 31, 1994
<TABLE>
<CAPTION>
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
- --------------------------------------------------------------------
<S> <C> <C>
Merrill Lynch & Company, Inc., 4.842%
Medium Term Note, Due 09/22/95# $ 1,000,000 $ 999,858
Merrill Lynch & Company, Inc., 4.905%
Medium Term Note, Due 10/02/95# 1,500,000 1,499,779
Money Market Auto Loan Trust, 3.321%
Asset Backed Security, Due 11/30/95# 1,000,000 1,000,000
Money Market Card, 3.720% Asset Backed
Security, Due 06/12/95# 545,455 545,455
Morgan Stanley Group, Inc., 3.592%
Corporate Bond, Due 12/15/95# 1,000,000 1,000,000
Morgan Stanley Group, Inc., 3.530%
Corporate Bond, Due 12/15/95# 1,000,000 1,000,000
------------ ------------
12,545,455 12,546,590
- ---------------------------------------------------
CERTIFICATES OF DEPOSIT-U.S. (13.1%)
Bank of Montreal, 5.800% Certificate of
Deposit, Due 01/30/95 3,000,000 3,000,000
Bank of Toyko, 6.460% Certificate of
Deposit, Due 03/30/95 1,000,000 1,000,000
Fuji Bank Ltd., 5.906% Certificate of
Deposit, Due 01/20/95 1,000,000 1,000,000
Fuji Bank Ltd., 6.360% Certificate of
Deposit, Due 03/21/95 2,000,000 2,000,000
Sanwa Bank, Ltd., 6.040% Certificate of
Deposit, Due 02/02/95 1,000,000 1,000,000
Sumitomo Bank, Ltd., 5.960% Certificate
of Deposit, Due 01/30/95 1,000,000 1,000,000
Sumitomo Bank, Ltd., 6.060% Certificate
of Deposit, Due 02/01/95 1,000,000 1,000,000
------------ ------------
10,000,000 10,000,000
- ---------------------------------------------------
OTHER BANK RELATED INSTRUMENTS-U.S. (5.9%)
(BANK NOTES)
American Express Centurion Bank, 4.823%
Bank Note, Due 08/18/95# 1,000,000 999,937
PNC Bank, N.A., 5.600% Bank Note, Due
01/06/95 1,000,000 999,987
<CAPTION>
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
- --------------------------------------------------------------------
<S> <C> <C>
Republic National Bank of New York,
4.550% Bank Note, Due 03/08/95 $ 500,000 $ 499,774
Republic National Bank of New York,
4.649% Bank Note, Due 03/08/95 1,000,000 999,355
Society National Bank Cleveland, 3.716%
Bank Note, Due 01/20/95 1,000,000 999,911
------------ ------------
4,500,000 4,498,964
- ---------------------------------------------------
COMMERCIAL PAPER-FOREIGN (11.1%)
American Honda Finance Corp., 6.202%
Notes, Due 01/30/95 2,000,000 1,990,092
Hanson Finance (UK) PLC, 6.356% Notes,
Due 03/03/95 1,000,000 989,393
MCA Funding Corp., 5.211% Notes, Due
01/09/95 1,000,000 998,867
National Australia Funding, Delaware,
5.704% Notes, Due 02/01/95 1,500,000 1,492,767
Orix America, Inc., 5.908% Notes, Due
01/27/95 1,000,000 995,775
Seiko Corp. of America, 6.132% Notes,
Due 01/20/95 1,000,000 996,781
Sumitomo Corp. of America, 5.254% Notes,
Due 01/09/95 1,000,000 998,861
------------ ------------
8,500,000 8,462,536
- ---------------------------------------------------
OTHER CORPORATE DEBT-FOREIGN (1.3%)
(MEDIUM TERM NOTES)
Toyota Motor Credit Corp., 6.286% Medium
Term Note, Due 01/23/95 1,000,000 999,615
- ---------------------------------------------------
CERTIFICATES OF DEPOSIT-FOREIGN (1.3%)
(EURO CERTIFICATES OF DEPOSIT)
Bayerische Vereinsbank Bank, 5.810% Euro
Certificate of Deposit, Due 01/23/95 1,000,000 1,000,012
- ---------------------------------------------------
TIME DEPOSITS-FOREIGN (3.3%) (EURO TIME DEPOSITS)
Chemical Bank (NY), 6.250% Euro Time
Deposit, Due 01/03/95 2,580,000 2,580,000
- ---------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (97.8%)
(Cost: $74,777,495) $ 74,777,495
- ---------------------------------------------------
OTHER ASSETS, LESS LIABILITIES
Bank Overdraft $ (6,348)
Interest Receivable 270,154
</TABLE>
20
<PAGE>
FINANCIAL STATEMENTS OF VCA-11
STATEMENT OF NET ASSETS DECEMBER 31, 1994
<TABLE>
<CAPTION>
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
- --------------------------------------------------------------------
<S> <C> <C>
Pending Transfers $ 1,421,994
- ---------------------------------------------------
TOTAL OTHER ASSETS, LESS LIABILITIES (2.2%) 1,685,800
- ---------------------------------------------------
NET ASSETS (100.0%) $76,463,295
- ---------------------------------------------------
<CAPTION>
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
- --------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, REPRESENTING:
Equity of Participants
35,448,241 Units at a Unit Value of $2.1056
(rounded) $ 74,641,129
Equity of The Prudential Insurance Company of America
1,822,166
- --------------------------------------------------------------------
$ 76,463,295
- --------------------------------------------------------------------
- --------------------------------------------------------------------
<FN>
#Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
FINANCIAL STATEMENTS OF VCA-11
STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 1994
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME [NOTE 2]
Interest $ 3,050,102
- ------------------------------------------------------------------------------------------------------------
EXPENSES [NOTE 3]
Fees Charged to Participants for Investment Management Services 164,873
Fees Charged to Participants for Administrative Expenses 494,619
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,390,610
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,390,610 $ 1,524,570
- -------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Purchase Payments and Transfers In 52,961,340 32,795,134
Withdrawals and Transfers Out [Note 7] (40,440,037) (28,972,376)
Annual Account Charges Deducted from Participants'
Accounts
[Note 4] (34,832) (35,335)
Deferred Sales Charge [Note 5] (16,777) (10,159)
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS 12,469,694 3,777,264
- -------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM SURPLUS TRANSFERS [NOTE 8] 0 (3,000,000)
- -------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 14,860,304 2,301,834
NET ASSETS
Beginning of Year 61,602,991 59,301,157
- -------------------------------------------------------------------------------------------------------
End of Year $ 76,463,295 $ 61,602,991
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-11
YEARS ENDED DECEMBER 31, 1994 AND 1993
- --------------------------------------------------------------------------------
NOTE 1: GENERAL
The Prudential Variable Contract Account-11 (VCA-11 or the Account) was
established by The Prudential Insurance Company of America (The
Prudential) under the laws of the State of New Jersey and is registered
as an open-end, diversified management investment company under the
Investment Company Act of 1940, as amended. VCA-11 has been designed
for use by employers (Contract-holders) in making retirement
arrangements on behalf of their employees (Participants). Its
investments are primarily composed of short-term securities. All
contractual and other obligations arising under contracts participating
in VCA-11 are general corporate obligations of The Prudential, although
Participants' payments from the Account will depend upon the investment
experience of the Account.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SHORT-TERM INVESTMENTS
Pursuant to an exemptive order from the Securities and Exchange
Commission, securities having a remaining maturity of 397 days or less
are valued at amortized cost which approximates market value. Amortized
cost is computed using the cost on the date of purchase adjusted for
constant accrual of discount or amortization of premium to maturity.
The rate displayed is the effective yield from the date of purchase to
the date of maturity.
B. INCOME RECOGNITION
Income on investments is allocated to the Participants and The
Prudential on a daily basis in proportion to their respective equities
in VCA-11. Interest income is accrued daily. Security transactions are
recorded on trade date.
C. TAXES
The operations of VCA-11 are part of, and are taxed with, the
operations of The Prudential. Under the current provisions of the
Internal Revenue Code, The Prudential does not expect to incur federal
income taxes on earnings of VCA-11 to the extent the earnings are
credited under the contracts. As a result, the Unit Value of VCA-11 has
not been reduced by federal income taxes.
NOTE 3: EXPENSES
A daily charge, at an effective annual rate of 1.00% of the current
value of the Participant's equity in VCA-11, is paid to The Prudential.
Three quarters of this charge (0.75%) is for administrative expenses
not covered by the annual account charge, and one quarter (0.25%) is
for investment management services.
NOTE 4: ANNUAL ACCOUNT CHARGE
An annual account charge is deducted from the account of each
Participant at the time of withdrawal of the value of all of the
Participant's accounts or at the end of the accounting year by
cancelling Units. The charge will first be made against a Participant's
account under a fixed dollar annuity companion contract or fixed rate
option of the non-qualified combination contract. If the Participant
has no account under a companion contract or the fixed rate option, or
if the amount under the companion contract or the fixed rate option is
too small to pay the charge, the charge will be made against the
Participant's account in VCA-11. If the Participant has no VCA-11
account, or if the amount under that account is too small to pay the
charge, the charge will then be made against the Participant's VCA-10
account. If the Participant has no VCA-10 account, or if it is too
small to pay the charge, the charge will then be made against any one
or more of the Participant's accounts in VCA-24. The annual account
charge will not be greater than $20 and is paid to The Prudential.
NOTE 5: DEFERRED SALES CHARGE
A deferred sales charge is imposed upon that portion of certain
withdrawals which represents a return of contributions. The charge is
designed to compensate The Prudential for sales and other marketing
expenses. The maximum deferred sales charge is 7% on contributions
withdrawn from an account during the first two years of participation,
6% on contributions withdrawn during the third through fifth years, 4%
on contributions withdrawn during the sixth through tenth years, and 3%
on contributions withdrawn during the eleventh through fifteenth years.
No deferred sales charge is imposed upon contributions withdrawn for
any reason after fifteen years of participation in a Program. In
addition, no deferred sales charge is imposed upon contributions
withdrawn: (a) to purchase an annuity under a Prudential Group Annuity
contract; (b) to provide a death benefit; (c) due to resignation or
retirement by the Participant or termination of the Participant by the
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-11
YEARS ENDED DECEMBER 31, 1994 AND 1993
- --------------------------------------------------------------------------------
Contract-holder (for all plans other than IRAs); (d) pursuant to a
systematic withdrawal plan; (e) in cases of financial hardship or
disability retirement as determined pursuant to the provisions of the
employer's retirement arrangement; or (f) as loans. Contributions
transferred among VCA-10, VCA-11, the Subaccounts of VCA-24, the
companion contract, and the fixed rate option of the non-qualified
combination contract are considered to be withdrawals from the Account
or Subaccount from which the transfer is made, but no deferred sales
charge is imposed upon them.
NOTE 6: UNIT TRANSACTIONS
The number of Units issued and redeemed for the years ended December
31, 1994 and 1993 is as follows:
<TABLE>
<S> <C> <C>
1994 1993
--------------------------------------------
Units issued 25,656,212 16,302,144
--------------------------------------------
Units redeemed 19,628,580 14,399,755
--------------------------------------------
</TABLE>
NOTE 7: PARTICIPANT LOANS
Loans are considered to be withdrawals from the Account from which the
loan amount was deducted, however, no deferred sales charge is imposed
upon them. The principal portion of any loan repayment, however, will
be treated as a contribution to the receiving Account for purposes of
calculating any deferred sales charge imposed upon any subsequent
withdrawal. If the Participant defaults on the loan, for example by
failing to make required payments, the outstanding balance of the loan
will be treated as a withdrawal for purposes of the deferred sales
charge. The deferred sales charge will be withdrawn from the same
Accumulation Accounts, and in the same proportions, as the loan amount
was withdrawn. If sufficient funds do not remain in those Accumulation
Accounts, the deferred sales charge will be withdrawn from the
Participant's other Accumulation Accounts as well.
Withdrawals, transfers and loans from VCA-11 are considered to be
withdrawals of contributions until all of the Participant's
contributions to the Account have been withdrawn, transferred or
borrowed. No deferred sales charge is imposed upon withdrawals of any
amount in excess of contributions.
For the year ended December 31, 1994, $379,019 in participant loans has
been withdrawn from VCA-11 and $27,165 of principal has been repaid to
VCA-11. For the year ended December 31, 1993, $24,363 in participant
loans had been withdrawn from VCA-11 and $0 of principal had been
repaid to VCA-11. Loan repayments are invested in Participant's
account(s) as chosen by the Participant, which may not necessarily be
VCA-11. The initial loan proceeds may not necessarily have originated
solely from VCA-11.
NOTE 8: NET DECREASE IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
The decrease in net assets resulting from surplus transfers represents
the net withdrawals from the Equity of The Prudential from VCA-11.
24
<PAGE>
VCA-24
INVESTMENT PERFORMANCE
For the economy, 1994 was the best of times. Employment surged, manufacturing
output rose, and consumer confidence was at its highest in years. It was a good
year to look for a job.
For the stock and bond markets, though, it felt like the worst of times. The
investment of choice was a short-term money market fund. The Standard & Poor's
500 Stock Index gained 1.3% on a total return basis. The bond market had its
worst year since 1927. The Lehman Brothers Aggregate Bond Index fell 2.9%. U.S.
Treasury bills topped both stocks and bonds, earning 3.9%.
What happened? While optimists thought the economy was soaring like a rocket,
the Federal Reserve saw an unguided missile. As commodity prices began to climb
in late 1993 and early 1994, the nation's central bank feared higher inflation.
So the Federal Reserve raised short term interest rates: not once, but six times
in 1994, from 3% to 5.5%.
Ironically, it was the fear of inflation and not real inflation, that drove the
markets, since actual reported inflation never rose above 3% in 1994. Inflation
not only erodes consumers' purchasing power, it also reduces the value of
financial assets: stock prices sag because corporate costs climb and the prices
of bonds fall as interest rates rise.
The Common Stock Portfolio outperformed the S&P 500 Index and the average
variable life/annuity growth portfolio this year. The Portfolio rose 2.78% over
the year. The Common Stock Subaccount rose 2.01% for the year.
The Bond Portfolio declined 3.23% in total return as interest rates rose in
1994. The Bond Portfolio outperformed the average bond fund by holding an
intermediate-term effective maturity of roughly 6 years. Bonds in this maturity
range hold their value better than long-term bonds as interest rates rise. On
December 31, 1994 the Portfolio held 49% of assets in corporate bonds, 35% in
U.S. Government bonds, and 13% in mortgage-backed securities. The Portfolio
maintained an overall "AA" credit quality. The Bond Subaccount declined 3.95%
during 1994.
The Aggressively Managed Flexible Portfolio declined 3.16% in 1994. The
Portfolio invests in a mix of stocks, bonds and money market securities, and
adjusts its allocations among the sectors to benefit from changing market
conditions. At December 31, 1994, it held 51% of assets in large company stocks,
11% in small company stocks, 31% in bonds and 7% in cash. For 1994, the
Aggressively Managed Flexible Subaccount declined 3.89%.
The Conservatively Managed Flexible Portfolio declined 0.97% in 1994. Like its
aggressive counterpart, the Conservatively Managed Flexible Portfolio invests in
a mix of stocks, bonds and money market securities, adjusting the blend as
market conditions change. Unlike its aggressive counterpart, it holds a greater
cash position, has no small company stocks, and its bond portion generally has
an intermediate-term maturity. At December 31, 1994, it held 36% of assets in
large company stocks, 31% in bonds and 33% in cash. The Conservatively Managed
Flexible Subaccount declined 1.70% for the year.
The Stock Index Portfolio gained 1.01% in 1994, in line with the 1.32% gain of
the S&P 500, the unmanaged stock market index which this Portfolio is designed
to emulate. Investment management fees account for the slight difference in
returns between the Portfolio and the S&P 500 Index. The Portfolio holds all 500
stocks included in the S&P 500 Index, and attempts to duplicate its performance.
For the year, the Stock Index Subaccount rose 0.26%.
In 1994, the Global Equity Portfolio declined 4.89%. By region, the Portfolio
held 20% of assets in the Pacific Basin (excluding Japan), 19% in Europe, 17% in
Japan and 17% in the U.S. as of December 31, 1994. The Portfolio did profit from
performance in Europe, where the economy is coming out of a long and deep
recession, and Korea, because of the growth of the electronics markets. In
continental Europe, the Portfolio holds positions in discount retailers,
technology firms and parts and equipment suppliers. In Korea, the Portfolio's
holdings in Samsung Electronics have benefited from the personal computer-led
boom in demand for semiconductor memory. During 1994, the Global Equity
Subaccount declined 5.59%.
The Government Securities Portfolio held securities with longer maturities, so
it lost value as interest rates rose. It declined 5.16% during 1994. The
Government Securities Portfolio invests in intermediate- and long-term bonds
issued by the U.S. Government and its agencies. (Neither the market value of
U.S. Government securities nor the Portfolio's shares are guaranteed by the U.S.
Government.) At year end, 33% of assets were invested in U.S. Treasuries, 37% in
U.S. Government agencies, 14% in mortgages, 8% in asset-backed securities, and
8% in cash. The Government Securities Subaccount declined 5.87% during 1994.
25
<PAGE>
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUE INFORMATION PER VCA-24 UNIT
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------------------
COMMON STOCK
---------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C>
Beginning of period
(rounded)................... $ 2.0136 $ 1.6646 $ 1.4690 $ 1.1745 $ 1.2484
End of period (rounded)....... $ 2.0541 $ 2.0136 $ 1.6646 $ 1.4690 $ 1.1745
Accumulation Units
Outstanding at end of period
(000 omitted)............. 99,323 79,985 51,639 35,657 21,964
<CAPTION>
AGGRESSIVELY
MANAGED FLEXIBLE
---------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C>
Beginning of period
(rounded)................... $ 1.8609 $ 1.6223 $ 1.5189 $ 1.2201 $ 1.2056
End of period (rounded)....... $ 1.7886 $ 1.8609 $ 1.6223 $ 1.5189 $ 1.2201
Accumulation Units
Outstanding at end of period
(000 omitted)............. 44,729 36,035 23,410 16,859 12,229
<CAPTION>
STOCK INDEX
---------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C>
Beginning of period
(rounded)................... $ 2.0072 $ 1.8440 $ 1.7342 $ 1.3469 $ 1.4086
End of period (rounded)....... $ 2.0123 $ 2.0072 $ 1.8440 $ 1.7342 $ 1.3469
Accumulation Units
Outstanding at end of period
(000 omitted)............. 40,522 32,178 20,554 10,724 4,232
<CAPTION>
BOND
---------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C>
Beginning of period
(rounded)................... $ 1.7435 $ 1.5950 $ 1.4992 $ 1.2973 $ 1.2075
End of period (rounded)....... $ 1.6746 $ 1.7435 $ 1.5950 $ 1.4992 $ 1.2973
Accumulation Units
Outstanding at end of period
(000 omitted)............. 14,575 14,481 10,103 7,928 5,824
CONSERVATIVELY
MANAGED FLEXIBLE
---------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C>
Beginning of period
(rounded)................... $ 1.7473 $ 1.5691 $ 1.4781 $ 1.2508 $ 1.1971
End of period (rounded)....... $ 1.7175 $ 1.7473 $ 1.5691 $ 1.4781 $ 1.2508
Accumulation Units
Outstanding at end of period
(000 omitted)............. 43,594 36,932 24,223 16,385 11,857
GLOBAL EQUITY
-----------------------------------------------------------
01/01/94 01/01/93 01/01/92 05/01/91*
TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91
<S> <C> <C> <C> <C> <C>
Beginning of period
(rounded)................... $ 1.3791 $ 0.9707 $ 1.0127 $ 1.0000
End of period (rounded)....... $ 1.3020 $ 1.3791 $ 0.9707 $ 1.0127
Accumulation Units
Outstanding at end of period
(000 omitted)............. 21,739 12,368 3,180 1,300
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES
-----------------------------------------------------------
01/01/94 01/01/93 01/01/92 05/01/91*
TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91
<S> <C> <C> <C> <C> <C> <C>
Beginning of period
(rounded)................... $ 1.3196 $ 1.1811 $ 1.1242 $ 1.0000
End of period (rounded)....... $ 1.2421 $ 1.3196 $ 1.1811 $ 1.1242
Accumulation Units
Outstanding at end of period
(000 omitted)............. 16,140 15,556 9,269 6,641
<FN>
*COMMENCEMENT OF OPERATIONS
</TABLE>
26
<PAGE>
VCA-24
REPORT OF MANAGEMENT
The accompanying financial statements and all information in the annual report
are the responsibility of management of The Prudential Insurance Company of
America (The Prudential). These financial statements have been prepared in
accordance with generally accepted accounting principles, and necessarily
include amounts based on best estimates and judgments. Information presented in
one section of the annual report is consistent with information dealing with the
same or substantially similar subject matter presented elsewhere in the annual
report.
The system of internal controls for VCA-24 is an integral part of that for The
Prudential. This system is designed to provide reasonable assurance that assets
are safeguarded and that transactions are properly recorded and executed in
accordance with proper authorization. The concept of reasonable assurance is
based on the premise that the cost of internal controls should not exceed the
benefits derived. In addition, The Prudential maintains a professional staff of
internal auditors who monitor VCA-24's control structure through periodic
reviews and tests of the control aspects of accounting, financial and operating
activities. The internal auditors coordinate their program with that of the
independent certified public accountants.
The financial statements have been audited by Deloitte & Touche LLP, Certified
Public Accountants. The Independent Auditors' Report, which appears in this
annual report, expresses an independent professional opinion on the fairness of
presentation, in all material respects, of management's financial statements.
The auditors review VCA-24's financial and accounting controls and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement.
The Prudential's Board of Directors, through its Auditing Committee, monitors
management's fulfillment of its responsibilities for accurate accounting,
statement preparation and protection of assets. The Auditing Committee is
composed solely of outside directors and meets with the independent certified
public accountants, management and internal auditors periodically to evaluate
each party's execution of their respective responsibilities. Each has free and
separate access to the Auditing Committee to discuss accounting, financial
reporting, internal control and auditing matters.
Mark R. Fetting
President
Prudential Defined Contribution Services
Eugene M. O'Hara
Chief Financial Officer
The Prudential Insurance Company of America
27
<PAGE>
VCA-24
INDEPENDENT AUDITORS' REPORT
TO THE CONTRACT-HOLDERS OF THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT-24 AND THE
BOARD OF DIRECTORS OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA:
We have audited the accompanying statements of net assets of The Prudential
Variable Contract Account-24 of The Prudential Insurance Company of America
(comprising, respectively, the Common Stock, Bond, Aggressively Managed
Flexible, Conservatively Managed Flexible, Stock Index, Global Equity, and
Government Securities Subaccounts) as of December 31, 1994, the related
statements of operations for the year then ended, and the statements of changes
in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1994. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the respective Subaccounts
constituting The Prudential Variable Contract Account-24 as of December 31,
1994, the results of their operations and the changes in their net assets for
the respective stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 16, 1995
28
<PAGE>
FINANCIAL STATEMENTS OF VCA-24
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF NET ASSETS
December 31, 1994
<CAPTION>
SUBACCOUNTS
-------------------------------------------------------------------------------------------------
AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED GLOBAL GOVERNMENT
COMMON STOCK BOND FLEXIBLE FLEXIBLE STOCK INDEX EQUITY SECURITIES
------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment in Shares of
The Prudential Series
Fund, Inc. Portfolios
at Net Asset Value
[Note 2].............. $ 204,091,123 $24,526,736 $80,097,594 $74,900,913 $81,264,605 $28,283,453 $20,072,728
Pending Transfers....... 506,630 94,926 207,106 289,508 646,300 162,126 188,013
------------- ------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS.............. 204,597,753 24,621,662 80,304,700 75,190,421 81,910,905 28,445,579 20,260,741
NET ASSETS,
REPRESENTING:
Equity of
Participants........ 204,021,182 24,407,810 80,003,811 74,873,662 81,542,929 28,304,183 20,047,432
Equity of The
Prudential Insurance
Company of
America............. 576,571 213,852 300,889 316,759 367,976 141,396 213,309
------------- ------------ ------------ ------------ ------------ ------------ ------------
$ 204,597,753 $24,621,662 $80,304,700 $75,190,421 $81,910,905 $28,445,579 $20,260,741
------------- ------------ ------------ ------------ ------------ ------------ ------------
------------- ------------ ------------ ------------ ------------ ------------ ------------
STATEMENTS OF OPERATIONS
Year Ended December 31, 1994
<CAPTION>
SUBACCOUNTS
-------------------------------------------------------------------------------------------------
AGGRESSIVELY CONSERVATIVELY
COMMON MANAGED MANAGED STOCK GLOBAL GOVERNMENT
STOCK BOND FLEXIBLE FLEXIBLE INDEX EQUITY SECURITIES
------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Distribution
Received............ $ 12,651,397 $ 1,602,923 $ 4,359,171 $ 3,334,994 $ 1,974,871 $ 81,345 $ 1,318,034
EXPENSES [NOTE 3]
Fees Charged to
Participants for
Administrative
Expenses............ 1,388,820 177,681 555,269 534,979 542,091 181,683 154,640
------------- ------------ ------------ ------------ ------------ ------------ ------------
INVESTMENT INCOME-NET... 11,262,577 1,425,242 3,803,902 2,800,015 1,432,780 (100,338) 1,163,394
Realized and Unrealized
Loss on
Investments-Net.......
Realized Loss on
Investments-Net....... (73,835) (288,665) (129,071) (183,256) (3,497) (130,149) (451,346)
Unrealized Decrease in
Value of
Investments-Net (7,505,048) (2,086,974) (6,483,168) (3,803,749) (1,145,148) (1,430,865) (1,993,696)
------------- ------------ ------------ ------------ ------------ ------------ ------------
NET LOSS ON
INVESTMENTS........... (7,578,883) (2,375,639) (6,612,239) (3,987,005) (1,148,645) (1,561,014) (2,445,042)
NET INCREASE/(DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS............ $ 3,683,694 $ (950,397) $(2,808,337) $(1,186,990) $ 284,135 $(1,661,352) $(1,281,648)
------------- ------------ ------------ ------------ ------------ ------------ ------------
------------- ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
29
<PAGE>
FINANCIAL STATEMENTS OF VCA-24
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------
AGGRESSIVELY
COMMON MANAGED
STOCK BOND FLEXIBLE
---------------------------- ---------------------------- ----------------------------
YEARS ENDED DECEMBER 31 1994 1993 1994 1993 1994 1993
- ------------------------------
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ 3,683,694 $ 22,623,399 $ (950,397) $ 1,761,009 $ (2,808,337) $ 6,925,882
ACCUMULATION UNIT TRANSACTIONS
Purchase Payments and
Transfers In [Note 8]..... 65,892,826 67,975,653 8,453,804 10,851,076 27,554,349 27,496,377
Withdrawals and Transfers
Out [Note 8].............. (26,512,808) (15,420,726) (8,339,324) (3,465,092) (11,787,729) (5,347,755)
Annual Account Charges
Deducted from
Participants' Accumulation
Accounts [Note 4]......... (62,784) (43,059) (8,160) (7,041) (23,750) (15,288)
Deferred Sales Charge [Note
5]........................ (26,031) (17,025) (2,855) (3,903) (6,972) (8,289)
------------- ------------- ------------- ------------- ------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM ACCUMULATION
UNIT TRANSACTIONS........... 39,291,203 52,494,843 103,465 7,375,040 15,735,898 22,125,045
------------- ------------- ------------- ------------- ------------- -------------
TOTAL INCREASE/(DECREASE) IN
NET ASSETS.................. 42,974,897 75,118,242 (846,932) 9,136,049 12,927,561 29,050,927
NET ASSETS
Beginning of Year......... 161,622,856 86,504,614 25,468,594 16,332,545 67,377,139 38,326,212
------------- ------------- ------------- ------------- ------------- -------------
End of Year............... $ 204,597,753 $ 161,622,856 $ 24,621,662 $ 24,468,594 $ 80,304,700 $ 67,377,139
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
<CAPTION>
CONSERVATIVELY
MANAGED
FLEXIBLE
----------------------------
YEARS ENDED DECEMBER 31 1994 1993
- ------------------------------
------------- -------------
<S> <C> <C>
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ (1,186,990) $ 5,253,050
ACCUMULATION UNIT TRANSACTIONS
Purchase Payments and
Transfers In [Note 8]..... 21,956,428 26,024,716
Withdrawals and Transfers
Out [Note 8].............. (10,391,865) (4,743,372)
Annual Account Charges
Deducted from
Participants' Accumulation
Accounts [Note 4]......... (25,350) (18,462)
Deferred Sales Charge [Note
5]........................ (7,805) (3,275)
------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM ACCUMULATION
UNIT TRANSACTIONS........... 11,531,408 21,259,607
------------- -------------
TOTAL INCREASE/(DECREASE) IN
NET ASSETS.................. 10,344,418 26,512,657
NET ASSETS
Beginning of Year......... 64,846,003 38,333,346
------------- -------------
End of Year............... $ 75,190,421 $ 64,846,003
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STOCK GLOBAL GOVERNMENT
INDEX EQUITY SECURITIES
---------------------------- ---------------------------- ----------------------------
YEARS ENDED DECEMBER 31 1994 1993 1994 1993 1994 1993
- ------------------------------
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ 284,135 $ 4,448,656 $ (1,661,352) $ 3,122,390 $ (1,281,648) $ 1,542,752
ACCUMULATION UNIT TRANSACTIONS
Purchase Payments and
Transfers In [Note 8]..... 28,168,953 32,087,824 26,544,981 13,036,574 7,998,321 10,866,579
Withdrawals and Transfers
Out [Note 8].............. (11,473,983) (9,847,059) (13,664,123) (2,204,412) (7,191,336) (2,810,474)
Annual Account Charges
Deducted from
Participants' Accumulation
Accounts [Note 4]......... (13,939) (9,376) (2,860) (794) (2,516) (1,941)
Deferred Sales Charge [Note
5]........................ (14,227) (5,444) (1,968) (2,693) (2,287) (5,456)
------------- ------------- ------------- ------------- ------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM ACCUMULATION
UNIT TRANSACTIONS........... 16,666,804 22,225,945 12,876,030 10,828,675 802,182 8,048,708
------------- ------------- ------------- ------------- ------------- -------------
TOTAL INCREASE/(DECREASE) IN
NET ASSETS.................. 16,950,939 26,674,601 11,214,678 13,951,065 (479,466) 9,591,460
NET ASSETS
Beginning of Year......... 64,959,966 38,285,365 17,230,901 3,279,836 20,740,207 11,148,747
------------- ------------- ------------- ------------- ------------- -------------
End of Year............... $ 81,910,905 $ 64,959,966 $ 28,445,579 $ 17,230,901 $ 20,260,741 $ 20,740,207
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-24
YEARS ENDED DECEMBER 31, 1994 AND 1993
- --------------------------------------------------------------------------------
NOTE 1: GENERAL
The Prudential Variable Contract Account-24 (VCA-24 or the Account) was
established by The Prudential Insurance Company of America (The
Prudential) under the laws of the State of New Jersey and is registered
as a unit investment trust under the Investment Company Act of 1940, as
amended. VCA-24 has been designed for use by employers
(Contract-holders) in making retirement arrangements on behalf of their
employees (Participants).
The Account is comprised of seven Subaccounts. Each of the Subaccounts
invests in a corresponding portfolio of The Prudential Series Fund,
Inc. (the Fund). The Common Stock Subaccount invests in the Common
Stock Portfolio, the Bond Subaccount invests in the Bond Portfolio, the
Aggressively Managed Flexible Subaccount invests in the Aggressively
Managed Flexible Portfolio, the Conservatively Managed Flexible
Subaccount invests in the Conservatively Managed Flexible Portfolio,
the Stock Index Subaccount invests in the Stock Index Portfolio, the
Global Equity Subaccount invests in the Global Equity Portfolio, and
the Government Securities Subaccount invests in the Government
Securities Portfolio. All contractual and other obligations arising
under contracts participating in VCA-24 are general corporate
obligations of The Prudential, although Participants' payments from the
Account will depend upon the investment experience of the Account.
NOTE 2: INVESTMENT INFORMATION
The number of shares of each portfolio of the Fund, the Net Asset Value
(NAV) per share for each portfolio held by the Subaccounts of VCA-24,
and the aggregate cost of investments in such shares as of December 31,
1994 are as follows:
<TABLE>
<CAPTION>
AGGRESSIVELY CONSERVATIVELY
COMMON MANAGED MANAGED STOCK GLOBAL GOVERNMENT
STOCK BOND FLEXIBLE FLEXIBLE INDEX EQUITY SECURITIES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Number of Shares 9,877,426 2,443,304 5,168,917 5,314,021 5,433,190 2,037,874 1,918,751
- ------------------------------------------------------------------------------------------------------------------------
NAV per Share $ 20.6624 $ 10.0384 $ 15.4960 $ 14.0950 $ 14.9571 $ 13.8789 $ 10.4614
- ------------------------------------------------------------------------------------------------------------------------
Cost at 12-31-94 $ 193,133,287 $ 26,198,377 $ 82,014,022 $ 75,753,115 $ 75,611,983 $ 26,755,251 $ 21,365,353
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 3: EXPENSES
A daily charge at an effective annual rate of 0.75% of the Net Asset
Value of each Subaccount of VCA-24 is paid to The Prudential for
administrative expenses not covered by the annual account charge.
NOTE 4: ANNUAL ACCOUNT CHARGE
An annual account charge is deducted from the account of each
Participant at the time of withdrawal of the value of all of the
Participant's accounts or at the end of the accounting year by
cancelling Units. The charge will first be made against a Participant's
account under a fixed dollar annuity companion contract or fixed rate
option of the non-qualified combination contract. If the Participant
has no account under a companion contract or the fixed rate option, or
if the amount under the companion contract or the fixed rate option is
too small to pay the charge, the charge will be made against the
Participant's account in VCA-11. If the Participant has no VCA-11
account or if the amount under that account is too small to pay the
charge, the charge will then be made against the Participant's VCA-10
account. If the Participant has no VCA-10 account, or if it is too
small to pay the charge, the charge will then be made against any one
or more of the Participant's accounts in VCA-24. The annual account
charge will not exceed $20 and is paid to The Prudential.
NOTE 5: DEFERRED SALES CHARGE
A deferred sales charge is imposed upon the withdrawal of certain
purchase payments to compensate The Prudential for sales and other
marketing expenses. The maximum deferred sales charge is 7% on
contributions withdrawn during the first two years of participation, 6%
on contributions withdrawn during the third through fifth years, 4% on
contributions withdrawn during the sixth through tenth years, and 3% on
contributions withdrawn during the eleventh through fifteenth years. No
deferred sales charge is imposed upon contributions withdrawn for any
reason after fifteen years of participation in a Program. In addition,
no deferred sales charge is imposed upon contributions withdrawn: (a)
to purchase an annuity under a Prudential Group Annuity contract; (b)
to provide a death benefit; (c) due to resignation or retirement by the
Participant or
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-24
YEARS ENDED DECEMBER 31, 1994 AND 1993
- --------------------------------------------------------------------------------
termination of the Participant by the Contract-Holder (for all plans
other than IRAs); (d) pursuant to a systematic withdrawal plan; (e) in
cases of financial hardship or disability retirement as determined
pursuant to the provisions of the employer's retirement arrangement; or
(f) as loans.
NOTE 6: TAXES
The operations of VCA-24 are part of, and are taxed with, the
operations of The Prudential. Under the current provisions of the
Internal Revenue Code, The Prudential does not expect to incur federal
income taxes on earnings of VCA-24 to the extent the earnings are
credited under the Contract. As a result, the Unit Value of VCA-24 has
not been reduced by federal income taxes.
NOTE 7: UNIT TRANSACTIONS
The number of units issued and redeemed during the year ended December
31, 1994 is as follows:
1994
<TABLE>
<CAPTION>
AGGRESSIVELY CONSERVATIVELY
COMMON MANAGED MANAGED STOCK GLOBAL GOVERNMENT
STOCK BOND FLEXIBLE FLEXIBLE INDEX EQUITY SECURITIES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Units issued 32,467,788 5,000,706 15,263,070 12,718,412 14,115,039 19,450,002 6,275,588
- ------------------------------------------------------------------------------------------------------------------------
Units redeemed 13,129,215 4,906,946 6,568,889 6,056,615 5,771,986 10,078,803 5,691,522
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The number of units issued and redeemed during the year ended December
31, 1993 is as follows:
1993
<TABLE>
<CAPTION>
AGGRESSIVELY CONSERVATIVELY
COMMON MANAGED MANAGED STOCK GLOBAL GOVERNMENT
STOCK BOND FLEXIBLE FLEXIBLE INDEX EQUITY SECURITIES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Units issued 36,592,441 6,523,236 15,653,731 15,557,078 16,718,104 11,028,500 8,517,056
- ------------------------------------------------------------------------------------------------------------------------
Units redeemed 8,246,685 2,144,333 3,028,678 2,848,195 5,093,916 1,840,920 2,230,209
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8: PARTICIPANT LOANS
Loans are considered to be withdrawals from the Subaccount from which
the loan amount was deducted, however, no deferred sales charge is
imposed upon them. The principal portion of any loan repayment,
however, will be treated as a contribution to the receiving Subaccount
for purposes of calculating any deferred sales charge imposed upon any
subsequent withdrawal. If the Participant defaults on the loan by, for
example failing to make required payments, the outstanding balance of
the loan will be treated as a withdrawal for purposes of the deferred
sales charge. The deferred sales charge will be withdrawn from the same
Accumulation Accounts, and in the same proportions, as the loan amount
was withdrawn. If sufficient funds do not remain in those Accumulation
Accounts, the deferred sales charge will be withdrawn from the
Participant's other Accumulation Accounts as well.
Withdrawals, transfers and loans from each Subaccount of VCA-24 are
considered to be withdrawals of contributions until all of the
Participant's contributions to the Subaccount have been withdrawn,
transferred or borrowed. No deferred sales charge is imposed upon
withdrawals of any amount in excess of contributions.
For the year ended December 31, 1994, the amount of participant loans
that has been withdrawn from the Subaccounts and the amount of
principal that has been repaid to the Subaccounts is as follows:
1994
<TABLE>
<CAPTION>
AGGRESSIVELY CONSERVATIVELY
COMMON MANAGED MANAGED STOCK GLOBAL GOVERNMENT
STOCK BOND FLEXIBLE FLEXIBLE INDEX EQUITY SECURITIES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Loans $ 619,162 $ 100,860 $ 331,831 $ 274,301 $ 315,157 $ 183,069 $ 51,430
- ------------------------------------------------------------------------------------------------------------------------
Repayments $ 65,846 $ 10,295 $ 33,864 $ 25,486 $ 26,259 $ 17,114 $ 4,043
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-24
YEARS ENDED DECEMBER 31, 1994 AND 1993
- --------------------------------------------------------------------------------
For the year ended December 31, 1993, the amount of participant loans
that was withdrawn from the Subaccounts and the amount of principal
that was repaid to the Subaccounts is as follows:
1993
<TABLE>
<CAPTION>
AGGRESSIVELY CONSERVATIVELY
COMMON MANAGED MANAGED STOCK GLOBAL GOVERNMENT
STOCK BOND FLEXIBLE FLEXIBLE INDEX EQUITY SECURITIES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Loans $ 124,633 $ 18,267 $ 31,385 $ 20,578 $ 14,671 $ 5,799 $ 2,963
- ------------------------------------------------------------------------------------------------------------------------
Repayments $ 0 $ 0 $ 132 $ 0 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Loan repayments are invested in Participant's account(s) as chosen by
the Participant, which may not necessarily be the Subaccount from which
the loan amount was deducted. The initial loan proceeds may not
necessarily have originated solely from the Subaccounts of VCA-24.
33
<PAGE>
The Prudential Series Fund, Inc. Year Ended December 31, 1994
DEAR MEDLEY PARTICIPANT:
THIS INFORMATION SUPPLEMENTS THE FINANCIAL STATEMENTS AND OTHER INFORMATION
INCLUDED IN THIS REPORT TO PARTICIPANTS IN THE MEDLEY PROGRAM. IT HIGHLIGHTS THE
INVESTMENT PERFORMANCE OF THE SEVEN PORTFOLIOS OF THE PRUDENTIAL SERIES FUND,
INC. WHICH ARE AVAILABLE THROUGH THE PRUDENTIAL VARIABLE CONTACT ACCOUNT-24.
THE PORTFOLIOS IN THE PRUDENTIAL SERIES FUND, INC. SUPPORT VARIABLE LIFE
INSURANCE AND VARIABLE ANNUITY CONTRACTS ISSUED BY THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA AND ITS SUBSIDIARIES. THESE CONTRACTS HAVE THEIR OWN FEES
AND EXPENSES. THE PORTFOLIOS ARE NOT AVAILABLE OUTSIDE OF THESE CONTRACTS.
U.S. FINANCIAL MARKETS REVIEW
THE BEST OF TIMES. THE WORST OF TIMES.
For the economy, 1994 was the best of times. Employment surged, manufacturing
output rose and consumer confidence was at its highest in years. It was a good
year to look for a job.
INTEREST RATES ROSE HIGHER AND HIGHER
For the U.S. stock and bond markets, though, it felt like the worst of times.
The Standard & Poor's 500 Stock Index gained only 1.3% on a total return basis.
The Lehman Brothers Aggregate Bond Index fell 2.9%. The investment of choice was
a short-term money market fund. U.S. Treasury bills topped both stocks and
bonds, earning 3.9%.
What happened? While optimists thought the economy was soaring like a rocket,
the Federal Reserve saw an unguided missile. As commodity prices began to climb
in late 1993 and early 1994, the nation's central bank feared higher inflation.
So the Federal Reserve raised short-term interest rates in 1994: not once, but
six times, from 3% to 5.5%.
Ironically, it was the FEAR of inflation, not real inflation, that drove the
markets, since actual reported inflation never rose above 3% in 1994. Inflation
not only erodes purchasing power, it also reduces the value of financial assets:
stock prices sag because corporate costs climb and bond prices fall as interest
rates rise.
Let's look a little closer at the stock and bond markets:
STOCKS: A TUG-OF-WAR.
In the stock market, simultaneously rising corporate earnings and higher
interest rates puzzled investors throughout the year. As corporate earnings
improved, so did the price of stocks. As the Federal Reserve pushed interest
rates higher, though, stock prices declined.
Despite this volatility, your portfolio managers were able to find some
opportunities:
- INDUSTRIAL company stocks benefited from increasing economic activity
around the world. Demand for steel, paper and chemicals surged, and as
their prices rose, so did the stock prices of companies that produced
them.
- TECHNOLOGY stocks performed well as foreign companies tried to catch
up to the U.S.'s prowess in technology.
- FINANCIAL stocks, including banks and insurance companies, fell
because of fears of rising interest rates and did not recover as much
as we had hoped once rates stabilized. Real estate investment trusts
performed well as real estate prices came out of a prolonged
recession.
- ENERGY stock prices dipped as winter got off to a warm start in the
Northeast. Believing that winter would eventually arrive, we added to
natural gas holdings as they fell, although prices have not yet
improved.
BONDS: SHORTER WAS BETTER.
1994 was the worst year for the bond market since 1927. After several years of
double-digit total returns, long-term U.S. government bonds lost 7.7% on a total
return basis, while one-to three-year government notes gained 0.5%, as measured
by Lehman Brothers. Short-term maturities fared better because their prices fall
less than those of longer-term bonds as interest rates rise.
FOREIGN STOCK MARKET REVIEW
THE WORLD: REAWAKENING FROM RECESSION.
ONCE AGAIN, FOREIGN STOCKS FARED BETTER THAN U.S. STOCKS
While the U.S. stock and bond markets were grappling with rising interest rates,
the rest of the world was beginning to shrug off the effects of a global
recession. This helped foreign stock markets outperform U.S. stocks for the
second year in a row. For the year, the Morgan Stanley Capital International
(MSCI) World Index gained 5.6% in U.S. dollars.
While rising interest rates prompted inflation worries in the U.S. stock market,
the concern worldwide was more that these rising rates could stifle the global
economic recovery. In Japan and Asia, which are heavily dependent on U.S. growth
and spending, stocks fell late in the year after rising in the first half. It
was just the opposite in Europe, where the four-year long recession is
officially over. Stocks there rose in the second half after a tough first half.
- --------------------------------------------------------------------------------
THE RATES OF RETURN QUOTED ON THE FOLLOWING PAGES REFLECT DEDUCTION OF
INVESTMENT MANAGEMENT FEES AND FUND EXPENSES BUT NOT PRODUCT CHARGES. THEY
REFLECT THE REINVESTMENT OF DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS. THEY ARE
NOT AN ESTIMATE OR A GUARANTEE OF FUTURE PERFORMANCE. CONTRACT UNIT VALUES
INCREASE OR DECREASE BASED ON THE PERFORMANCE OF THE PORTFOLIO. CHANGES IN
CONTRACT VALUES DEPEND NOT ONLY ON THE INVESTMENT PERFORMANCE OF THE PORTFOLIO,
BUT ALSO ON THE INSURANCE AND ADMINISTRATIVE CHARGES, APPLICABLE SALES CHARGES,
AND THE MORTALITY AND EXPENSE RISK CHARGE THAT MAY BE APPLICABLE UNDER A
CONTRACT. THESE CONTRACT CHARGES EFFECTIVELY REDUCE THE DOLLAR AMOUNT OF ANY NET
GAINS AND INCREASE THE DOLLAR AMOUNT OF ANY NET LOSSES. THE GOVERNMENT
SECURITIES PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
34
<PAGE>
INVESTMENT REVIEW
BOND PORTFOLIO
PORTFOLIO MANAGER Barbara Kenworthy
[Photo]
The BOND PORTFOLIO declined 3.2% in total return in 1994 as interest rates rose,
placing 14 in a field of 39 BBB-rated corporate bond funds in variable
life/annuity products. (SOURCE: LIPPER ANALYTICAL SERVICES)
The Portfolio has a new manager: Barbara Kenworthy. Barbara has more than 20
years experience in portfolio management, and joined the Prudential last year
from the Dreyfus Corp. where she managed several bond funds rated four and five
stars by Morningstar. She also manages the Prudential Government Income Fund and
the Prudential Diversified Bond Fund.
The Bond Portfolio outperformed the average fund by holding an
intermediate-term effective maturity of roughly six years. Bonds in this
maturity range hold their value better than long-term bonds as interest rates
rise.
On December 31, the Portfolio held 49% of assets in corporate bonds, 35% in U.S.
government bonds, and 13% in mortgage-backed securities. The Portfolio
maintained an overall "AA" credit quality.
In the last six months, the Portfolio increased its investments in corporate
bonds from 40% to 49% to take advantage of their higher coupons. The cash
position was more than halved, from 7% to 3%, to lock in today's higher yields.
VALUE OF $10,000 INVESTED IN BOND PORTFOLIO VS. LEHMAN AGGREGATE INDEX AND
LIPPER VIP CORPORATE BOND AVERAGE OVER TEN YEARS
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PORTFOLIO PERFORMANCE DOES NOT REFLECT SEPARATE ACCOUNT EXPENSES OR OTHER
PRODUCT CHARGES.
[Chart GRAPH 1]
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
ONE RANK THREE RANK FIVE RANK TEN RANK
YEAR YEARS YEARS YEARS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Portfolio -3.2% 14 4.5% 20 7.6% 12 9.2% 7
- ----------------------------------------------------------------------------------------------------------------
Lipper VIP Corp BBB* -3.8 39 4.7 31 7.5 27 9.4 9
- ----------------------------------------------------------------------------------------------------------------
Lehman Aggregate Index -2.9 4.6 7.7 10.0
- ----------------------------------------------------------------------------------------------------------------
<FN>
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES, THE
LIPPER AVERAGE AND INDEX INCEPTION RETURNS REFLECT THE FUND'S FIRST FULL
CALENDAR MONTH OF PERFORMANCE.
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER Q&A: BARBARA KENWORTHY
We talked to Bond Portfolio Manager Barbara Kenworthy about her investment
philosophy:
Q. DO YOU CONCENTRATE ON ANY ONE AREA OF THE GOVERNMENT BOND MARKET?
A. I like to have the flexibility to explore all the sectors in the government
bond market and I think you'd call me an active trader. In a typical day, I'll
evaluate market conditions and look for opportunities at what I consider a fair
risk level. For instance, before the Fed's last rate hike I shifted as much
money out of short-term Treasurys as possible because they were losing value
fast in the face of higher expected short-term rates. I found value instead in
some discounted mortgages and in longer maturity Treasury bonds.
Q. HOW ABOUT MATURITIES? WILL YOU STAY IN THE INTERMEDIATE-TERM RANGE?
A. I certainly believe intermediate-term bonds offer good value for investors
right now, but I also like longer-term securities because they'll appreciate the
most if a rally materializes. I know investors don't want to see their net asset
value fall, so I'm cautious. I might consider moving the Portfolio's effective
maturity out as far as 10 years, for instance. On the other hand, I won't
hesitate to pull those maturities in if the market turns more bearish. You might
see an effective maturity as low as six years if bond prices start falling
again.
Q. DO YOU PLAN TO INVEST IN DERIVATIVES?
A. Derivatives can be a good way to defend a portfolio's net asset value against
extreme price swings, but I would only consider using traditional derivatives,
like put and call options, which can help me improve total return without too
much risk to principal. These products have been around long enough to be tested
in many different market environments; they shouldn't result in unpleasant
surprises. I'm more cautious about the more exotic securities that are largely
untested and could lead to big price swings if the markets become more
turbulent. I'd put both IOs and POs (interest only and principal only
mortgage-backed securities) in this category. But I never say never. When used
prudently as part of an overall portfolio strategy, even these securities can
add value.
- --------------------------------------------------------------------------------
THE LEHMAN AGGREGATE INDEX (LAI) IS COMPRISED OF 4,842 GOVERNMENT AND CORPORATE
BONDS. THE LAI IS AN UNMANAGED INDEX AND INCLUDES THE REINVESTMENT OF ALL
DIVIDENDS, BUT DOES NOT REFLECT THE PAYMENT OF TRANSACTION COSTS AND ADVISORY
FEES ASSOCIATED WITH AN INVESTMENT IN THE PORTFOLIO. THE SECURITIES THAT
COMPRISE THE LAI MAY DIFFER SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO.
THE LAI IS NOT THE ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF
INCOME FUNDS AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) AVERAGE IS CALCULATED BY LIPPER
ANALYTICAL SERVICES, INC. AND REFLECTS THE INVESTMENT RETURN OF PORTFOLIOS
UNDERLYING VARIABLE LIFE AND VARIABLE ANNUITY INSURANCE PRODUCTS. THESE RETURNS
ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT CHARGES.
35
<PAGE>
INVESTMENT REVIEW
GOVERNMENT SECURITIES PORTFOLIO
PORTFOLIO MANAGER David Graham
[Photo]
The GOVERNMENT SECURITIES PORTFOLIO held a long-term maturity in 1994, so it
lost ground as interest rates rose. Its 5.2% decline in total return ranked 20
of 25 variable life/annuity U.S. Government portfolios. (SOURCE: LIPPER
ANALYTICAL SERVICES)
Effective in January, the Portfolio has a new manager: David Graham. David also
manages four mutual funds for Prudential: the GNMA Fund, the Adjustable Rate
Securities Fund, the Government Securities Trust: Intermediate Term Series and
the U.S. Government Fund.
The Government Securities Portfolio invests in intermediate- and long-term bonds
issued by the U.S. government and its agencies. (Neither the market value of
U.S. government securities nor the Portfolio's shares are guaranteed by the U.S.
government.)
At year end, 37% of assets were invested in agencies, 33% in U.S. Treasurys, 14%
in mortgages, 8% in asset-backed securities and 8% was in cash.
The Portfolio should fare better now that long term bond yields appear to be
near their peak for this market cycle.
VALUE OF $10,000 INVESTED IN GOVERNMENT SECURITIES PORTFOLIO VS. LEHMAN
GOVERNMENT INDEX AND LIPPER VIP U.S. GOVERNMENT AVERAGE SINCE INCEPTION
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PORTFOLIO PERFORMANCE DOES NOT REFLECT SEPARATE ACCOUNT EXPENSES OR OTHER
PRODUCT CHARGES.
[Chart GRAPH 2]
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ONE RANK THREE RANK FIVE RANK SINCE
YEAR YEARS YEARS INCEPTION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gov't Sec. Portfolio -5.2% 20 4.2% 10 7.0% 10 8.1%
- ---------------------------------------------------------------------------------------------------------
Lipper VIP US Gov't* -4.0 25 4.0 17 7.1 14 7.5
- ---------------------------------------------------------------------------------------------------------
Lehman Gov't Index -3.4 4.7 7.5 8.5
- ---------------------------------------------------------------------------------------------------------
<FN>
INCEPTION DATE: 5/1/89
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES, THE
LIPPER AVERAGE AND INDEX INCEPTION RETURNS REFLECT THE FUND'S FIRST CALENDAR
MONTH OF PERFORMANCE.
</TABLE>
- --------------------------------------------------------------------------------
THE PORTFOLIO IS WELL DIVERSIFIED.
- ----------------------------------
How It Looked as of 12/31/94
[Pie Chart]
Agency 37%
Treasury 33%
Mortgage 12%
Asset-backed 8%
CMO 2%
Cash 8%
AGENCY: Issued by U.S. government agencies, with implied guarantee
TREASURY: Backed by the full faith and credit of the U.S. government
MORTGAGE: Bonds backed by pools of mortgages
ASSET-BACKED: Bonds backed by pools of collateralized loan receivables
CMO: Collateralized mortgage obligations, parts of MBS pools
THE PORTFOLIO IS HIGH QUALITY.
- ------------------------------
How It Rated as of 12/31/94
AAA. . . . . . . . . . . . . . . . 91.0%
AA . . . . . . . . . . . . . . . . . 1.4
Non-Rated. . . . . . . . . . . . . . 0.0
Cash . . . . . . . . . . . . . . . . 7.6
SOME U.S. GOVERNMENT SECURITIES ARE GUARANTEED AS TO TIMELY PAYMENT OF PRINCIPAL
AND INTEREST. THE UNDERLYING SECURITIES IN THE PORTFOLIO MAY CARRY THIS
GUARANTY; NOT THE PORTFOLIO SHARES THEMSELVES. MORTGAGE-BACKED SECURITIES ENTAIL
ADDITIONAL PREPAYMENT AND EXTENSION RISK.
- --------------------------------------------------------------------------------
THE LEHMAN GOVERNMENT INDEX IS A WEIGHTED INDEX COMPRISED OF SECURITIES ISSUED
OR BACKED BY THE U.S. GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES WITH A
REMAINING MATURITY OF ONE TO 30 YEARS. THE LGI IS AN UNMANAGED INDEX AND
INCLUDES THE REINVESTMENT OF ALL DIVIDENDS, BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE LGI MAY DIFFER SUBSTANTIALLY FROM
THE SECURITIES IN THE PORTFOLIO. THE LGI IS NOT THE ONLY INDEX THAT MAY BE USED
TO CHARACTERIZE PERFORMANCE OF INCOME FUNDS AND OTHER INDICES MAY PORTRAY
DIFFERENT COMPARATIVE PERFORMANCE.
THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) AVERAGE IS CALCULATED BY LIPPER
ANALYTICAL SERVICES, INC. AND REFLECTS THE INVESTMENT RETURN OF PORTFOLIOS
UNDERLYING VARIABLE LIFE AND VARIABLE ANNUITY INSURANCE PRODUCTS. THESE RETURNS
ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT CHARGES.
36
<PAGE>
INVESTMENT REVIEW
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO
PORTFOLIO MANAGER Mark Stumpp
[Photo]
The CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO declined 1.0% in 1994, ranking 22
of 57 variable life/annuity flexible portfolios. (SOURCE: LIPPER ANALYTICAL
SERVICES)
The Conservatively Managed Flexible Portfolio invests in a mix of stocks, bonds
and money market securities, adjusting the blend as market conditions change. It
generally holds a greater cash position than its aggressive counterpart, has no
small company stocks, and its bond portion generally has an intermediate-term
maturity. At December 31, it held 36% of assets in large company stocks, 31% in
bonds and 33% in cash.
Mark Stumpp became Portfolio Manager of the Conservatively Managed Flexible
Portfolio in November 1994. Previously, he was the Portfolio's managing director
of research. Stumpp holds a Ph.D. in economics from Brown University.
VALUE OF $10,000 INVESTED IN CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO VS. S&P
500, LEHMAN AGGREGATE INDEX, AND LIPPER VIP FLEX AVERAGE OVER TEN YEARS
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO PERFORMANCE
DOES NOT REFLECT SEPARATE ACCOUNT EXPENSES OR OTHER PRODUCT CHARGES.
[Chart GRAPH 3]
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
ONE RANK THREE RANK FIVE RANK TEN RANK
YEAR YEARS YEARS YEARS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Conserv. Man. Flex Port -1.0% 22 5.9% 23 8.3% 19 10.4% 8
- ----------------------------------------------------------------------------------------------------------------
Lipper VIP Flex* -1.9 57 5.8 50 8.6 41 11.4 10
- ----------------------------------------------------------------------------------------------------------------
S & P 500 1.3 6.3 8.7 14.4
- ----------------------------------------------------------------------------------------------------------------
Lehman Aggregate Index -2.9 4.6 7.7 10.0
- ----------------------------------------------------------------------------------------------------------------
<FN>
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES, THE
LIPPER AVERAGE AND INDEX INCEPTION RETURNS REFLECT THE FUND'S FIRST CALENDAR
MONTH OF PERFORMANCE.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO
PORTFOLIO MANAGER Mark Stumpp
The AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO declined 3.2% in 1994, ranking 41 of
57 variable life/annuity flexible portfolios. (SOURCE: LIPPER ANALYTICAL
SERVICES)
The Portfolio invests in a mix of stocks, bonds and money market securities, and
adjusts its allocations among the sectors to benefit from changing market
conditions. At December 31, it held 51% of assets in large company stocks, 11%
in small company stocks, 31% in bonds and 7% in cash.
Mark Stumpp became Portfolio Manager of the Aggressively Managed Flexible
Portfolio in November 1994. Previously, he was the Portfolio's managing
director of research. Stumpp holds a Ph.D. in economics from Brown University.
The Aggressively Managed Flexible Portfolio generally holds more assets in
stocks, including small company stocks, and less in cash than the Conservatively
Managed Flexible Portfolio. The Portfolio emphasized stocks and cash during
1994, and reduced the average maturity of its holdings in bonds when it became
apparent that interest rates would rise. Toward year end, Stumpp sold some
stocks to buy bonds when it appeared that interest rates were near their highs.
VALUE OF $10,000 INVESTED IN AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO VS. S&P
500, LEHMAN AGGREGATE INDEX, AND LIPPER VIP FLEX AVERAGE OVER TEN YEARS
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO PERFORMANCE
DOES NOT REFLECT SEPARATE ACCOUNT EXPENSES OR OTHER PRODUCT CHARGES.
[Chart GRAPH 4]
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
ONE RANK THREE RANK FIVE RANK TEN RANK
YEAR YEARS YEARS YEARS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Agress. Man. Flex Port -3.2% 41 6.4% 19 9.0% 12 11.7% 6
- ----------------------------------------------------------------------------------------------------------------
Lipper VIP Flex* -1.9 57 5.8 50 8.6 41 11.4 10
- ----------------------------------------------------------------------------------------------------------------
S & P 500 1.3 6.3 8.7 14.4
- ----------------------------------------------------------------------------------------------------------------
Lehman Aggregate Index -2.9 4.6 7.7 10.0
- ----------------------------------------------------------------------------------------------------------------
<FN>
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES, THE
LIPPER AVERAGE AND INDEX INCEPTION RETURNS REFLECT THE FUND'S FIRST CALENDAR
MONTH OF PERFORMANCE.
</TABLE>
- --------------------------------------------------------------------------------
THE S&P 500 IS A CAPITAL WEIGHTED INDEX, REPRESENTING THE AGGREGATE MARKET VALUE
OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE NEW YORK STOCK
EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES THE REINVESTMENT OF ALL
DIVIDENDS, BUT DOES NOT REFLECT THE PAYMENT OF TRANSACTION COSTS AND ADVISORY
FEES ASSOCIATED WITH AN INVESTMENT IN THE PORTFOLIO. THE S&P 500 IS NOT THE ONLY
INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF THIS PORTFOLIO AND OTHER
INDEXES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
THE LEHMAN AGGREGATE INDEX (LAI) IS COMPRISED OF 4,842 GOVERNMENT AND CORPORATE
BONDS. THE LAI IS AN UNMANAGED INDEX AND INCLUDES THE REINVESTMENT OF ALL
DIVIDENDS, BUT DOES NOT REFLECT THE PAYMENT OF TRANSACTION COSTS AND ADVISORY
FEES ASSOCIATED WITH AN INVESTMENT IN THE PORTFOLIO. THE SECURITIES THAT
COMPRISE THE LAI MAY DIFFER SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO.
THE LAI IS NOT THE ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF
INCOME AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) AVERAGE IS CALCULATED BY LIPPER
ANALYTICAL SERVICES, INC. AND REFLECTS THE INVESTMENT RETURN OF PORTFOLIOS
UNDERLYING VARIABLE LIFE AND VARIABLE ANNUITY INSURANCE PRODUCTS. THESE RETURNS
ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT CHARGES.
37
<PAGE>
INVESTMENT REVIEW
STOCK INDEX PORTFOLIO
PORTFOLIO MANAGER John Moschberger
[Photo]
The Stock Index Portfolio gained 1.0% in 1994, in line with the 1.3% gain of the
S&P 500, the unmanaged stock market index this Portfolio is designed to track.
Investment management fees account for the slight difference in returns.
The Portfolio holds all 500 stocks included in the S&P 500 Index, and attempts
to duplicate its performance. Portfolio Manager John Moschberger manages the
Portfolio by investing funds received daily while trying to minimize commissions
and transaction costs.
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES, THE
LIPPER AVERAGE AND INDEX INCEPTION RETURNS REFLECT THE FUND'S FIRST CALENDAR
MONTH OF PERFORMANCE.
** LIPPER LISTS THE STOCK INDEX PORTFOLIO IN ITS S&P 500 INDEX UNIVERSE. FOR
PURPOSES OF THE CONTRACTOWNER LETTER, WE COMPARED THE PORTFOLIO TO LIPPER'S
GROWTH & INCOME UNIVERSE; THEREFORE, NO RANKS ARE GIVEN.
VALUE OF $10,000 INVESTED IN STOCK INDEX PORTFOLIO VS. S&P 500 AND LIPPER VIP
GROWTH AND INCOME AVERAGE SINCE INCEPTION
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PORTFOLIO PERFORMANCE DOES NOT REFLECT SEPARATE ACCOUNT EXPENSES OR OTHER
PRODUCT CHARGES.
[Chart GRAPH 5]
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
ONE THREE FIVE SINCE
YEAR YEARS YEARS INCEPTION
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Index Port** 1.0% 5.9% 8.2% 13.0%
- -----------------------------------------------------------------------------
Lipper VIP Growth & Income* -0.4 7.1 8.8 11.9
- -----------------------------------------------------------------------------
S&P 500 1.3 6.3 8.7 12.3
- -----------------------------------------------------------------------------
<FN>
INCEPTION DATE: 10/19/87
</TABLE>
THE S&P 500 IS WELL DIVERSIFIED.
- --------------------------------
How It Looked as of 12/31/94
[Pie Chart]
Consumer Growth 29%
Industrial 17%
Utility 14%
Finance 11%
Technology 10%
Energy 10%
Consumer Cyclical 9%
Source: Prudential Investment Corporation.
HOW U. S. STOCKS FARED COMPARED WITH OTHER ASSET CLASSES.
- ---------------------------------------------------------
1994 Investment Total Returns
[Bar Chart]
U.S. Bonds -3.5%
U.S. Stocks 1.3%
Global Stocks 5.6%
Source: Prudential Investment Corporation. For purposes of comparison only.
Bonds as measured by the Lehman Brothers Government/Corporate Aggregate. U.S.
stocks as measured by the S&P 500 Index. Global stocks as measured by the Morgan
Stanley Capital International-World Index.
- --------------------------------------------------------------------------------
THE S&P 500 IS A CAPITAL WEIGHTED INDEX, REPRESENTING THE AGGREGATE MARKET VALUE
OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE NEW YORK STOCK
EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES THE REINVESTMENT OF ALL
DIVIDENDS, BUT DOES NOT REFLECT THE PAYMENT OF TRANSACTION COSTS AND ADVISORY
FEES ASSOCIATED WITH AN INVESTMENT IN THE PORTFOLIO. THE S&P 500 IS NOT THE ONLY
INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF THIS PORTFOLIO AND OTHER
INDEXES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) AVERAGE IS CALCULATED BY LIPPER
ANALYTICAL SERVICES, INC. AND REFLECTS THE INVESTMENT RETURN OF PORTFOLIOS
UNDERLYING VARIABLE LIFE AND VARIABLE ANNUITY INSURANCE PRODUCTS. THESE RETURNS
ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT CHARGES.
38
<PAGE>
INVESTMENT REVIEW
COMMON STOCK PORTFOLIO
PORTFOLIO MANAGER Tom Jackson
[Photo]
The COMMON STOCK PORTFOLIO outperformed the S&P 500 Index and the average
variable life/annuity growth portfolio in 1994. The Portfolio rose 2.8% over the
year, ranking 10 among 71 similar funds. (SOURCE: LIPPER ANALYTICAL SERVICES)
Portfolio Manager Tom Jackson adheres to a value investment style: he looks for
stocks with prices that are low when compared with potential earnings, cash
flow and book value. That led him to selectively add to positions in finance
stocks whose prices had fallen as interest rates rose. He also continued to hold
large positions in industrial and consumer-oriented cyclical stocks in the auto
and retail industries to reap the benefit of a growing economy.
Jackson had built up a relatively large 20% cash position before stocks tumbled
earlier in the year. He then spent much of the end of the year taking advantage
of low prices, buying selectively to bring cash down to 11%. Major purchases
toward year-end included Chrysler, Dean Witter Discover, JP Morgan, and Lehman
Brothers.
VALUE OF $10,000 INVESTED IN COMMON STOCK PORTFOLIO VS. S&P 500 AND LIPPER
GROWTH AVERAGE OVER TEN YEARS
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PORTFOLIO PERFORMANCE DOES NOT REFLECT SEPARATE ACCOUNT EXPENSES OR OTHER
PRODUCT CHARGES.
[Chart GRAPH 6]
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
ONE RANK THREE RANK FIVE RANK TEN RANK
YEAR YEARS YEARS YEARS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stock Port 2.8% 10 12.7% 2 11.3% 8 15.0% 4
Lipper VIP Growth Avg.* -1.0 71 6.5 48 9.1 43 13.5 21
S&P 500 1.3 6.3 8.7 14.4
<FN>
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES, THE
LIPPER AVERAGE AND INDEX INCEPTION RETURNS REFLECT THE FUND'S FIRST CALENDAR
MONTH OF PERFORMANCE.
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER Q&A: TOM JACKSON
We talked with Common Stock Portfolio Manager Tom Jackson about the mood of the
stock market.
Q: WHY HAVE YOU DECIDED IT'S A GOOD TIME TO PUT YOUR CASH TO WORK IN THE STOCK
MARKET?
A: I see many attractively priced stocks out there right now. In the current
market, there is an inordinate amount of stocks selling at price-to-earnings
multiples that I think make them bargains.
Q: WHY DO YOU THINK SO MANY OF THOSE BARGAINS ARE FOUND IN THE FINANCE SECTOR?
A: Money and credit are the raw materials for financial service products and
rising interest rates are viewed by the market as rising costs that may
negatively impact the profitability of the companies in these businesses. At
current prices, I believe that these rates are largely discounted. In the
meantime, an aging population with increased savings needs, combined with the
globalization of finance, provides attractive opportunities for growth in a
broad array of financial services.
Q: WHAT DO YOU LOOK FOR AS SIGNS A COMPANY IS TAKING STEPS TO IMPROVE ITS STOCK
PRICE?
A: There are many clues that a company with sound fundamentals may be taking
steps to get back on track: replacing poor management, restructuring to increase
competitiveness, selling an unprofitable old business or acquiring a profitable
new one, or introducing an exciting new product.
Q: HOW LONG DOES IT TAKE FOR A STOCK TO REACH ITS TRUE VALUE?
A: Patience is a virtue. A stock's price may be down temporarily for legitimate
reasons, while I feel the company is taking steps necessary to turn things
around. It's important to be patient and disciplined in the meantime and to
stick to your strategy while you wait for the price to appreciate. If the market
provides the opportunity to buy the business at a significant discount to its
true worth, the buyer can afford to be a patient holder. I think high portfolio
turnover is a negative for the investor. Trading involves commissions, which are
a cost, and to the degree that gains are realized, taxes must be paid.
- --------------------------------------------------------------------------------
THE S&P 500 IS A CAPITAL WEIGHTED INDEX, REPRESENTING THE AGGREGATE MARKET VALUE
OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE NEW YORK STOCK
EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES THE REINVESTMENT OF ALL
DIVIDENDS, BUT DOES NOT REFLECT THE PAYMENT OF TRANSACTION COSTS AND ADVISORY
FEES ASSOCIATED WITH AN INVESTMENT IN THE PORTFOLIO. THE S&P 500 IS NOT THE ONLY
INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF THIS PORTFOLIO AND OTHER
INDEXES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) AVERAGE IS CALCULATED BY LIPPER
ANALYTICAL SERVICES, INC. AND REFLECTS THE INVESTMENT RETURN OF PORTFOLIOS
UNDERLYING VARIABLE LIFE AND VARIABLE ANNUITY INSURANCE PRODUCTS. THESE RETURNS
ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT CHARGES.
39
<PAGE>
INVESTMENT REVIEW
GLOBAL EQUITY PORTFOLIO
PORTFOLIO MANAGER Dan Duane
[Photo]
In 1994 the GLOBAL EQUITY PORTFOLIO declined 4.9%, ranking 21 of 26 variable
life/annuity global equity portfolios. (SOURCE: LIPPER ANALYTICAL SERVICES.)
The Portfolio's performance trailed the Morgan Stanley World Index because it
held fewer assets in Japan, which led the world in total return measured in U.S.
dollars. The Portfolio holds 17% of assets in Japan, while the World Index
allocation is 28%. In addition, the Portfolio holds more assets in other smaller
Pacific Basin countries than the index, and stocks there fell more than
elsewhere in the world.
By region, the Portfolio held 20% of assets in the Pacific Basin (excluding
Japan), 19% in Europe, 17% in Japan and 17% in the U.S. as of December 31.
The Portfolio did profit from its performance in Europe, where the economy is
coming out of a long and deep recession, and in Korea, because of the growth of
the electronics industry. In continental Europe, we held positions in discount
retailers, technology firms and parts and equipment suppliers. In Korea, our
holdings in Samsung Electronics have benefited from the PC-led boom in demand
for semiconductor memories.
VALUE OF $10,000 INVESTED IN GLOBAL EQUITY PORTFOLIO VS. MORGAN STANLEY WORLD
INDEX AND LIPPER VIP GLOBAL AVERAGE SINCE INCEPTION
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
PORTFOLIO PERFORMANCE DOES NOT REFLECT SEPARATE ACCOUNT EXPENSES OR OTHER
PRODUCT CHARGES.
[Chart GRAPH 7]
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ONE RANK THREE RANK FIVE RANK SINCE
YEAR YEARS YEARS INCEPTION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Global Equity Port -4.9% 21 9.6% 7 5.0% 7 8.3%
- ---------------------------------------------------------------------------------------------------------
Lipper VIP Global Avg* -0.7 26 8.8 15 7.4 8 9.7
- ---------------------------------------------------------------------------------------------------------
MSCI World Index 5.6 7.4 4.2 7.9
- ---------------------------------------------------------------------------------------------------------
<FN>
INCEPTION DATE: 9/19/88
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES, THE
LIPPER AVERAGE AND INDEX INCEPTION RETURNS REFLECT THE FUND'S FIRST CALENDAR
MONTH OF PERFORMANCE.
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER Q&A: DAN DUANE
Since the value of the U.S. dollar versus other currencies affects returns of
foreign stocks to U.S. investors, we talked with Global Equity Portfolio Manager
Dan Duane about how the foreign markets are reacting to the weak U.S. dollar.
Q: HOW DOES THE WEAK U.S. DOLLAR IMPACT RETURNS?
A: Generally, investors believe the dollar's movements have more impact on total
returns than they actually do. It's true that when the U.S. dollar is weak,
returns from stocks denominated in a foreign currency are enhanced when
translated back into U.S. dollars. One French franc, for instance, buys more
dollars. When we value our holdings every day, or when they pay dividends or we
take profits in them, we translate the value of our holdings into U.S. dollars.
Since one unit of foreign money now buys more dollars, our dollar value
automatically rises.
Q: WHAT HAPPENS IF THE DOLLAR STARTS RISING?
A: We are looking for companies that will benefit from a rising dollar. These
are generally companies that have their assets or revenues denominated in
dollars and their costs denominated in a foreign currency. That steers us to
producers of commodities, since most enjoy revenues that are priced in dollars
(metals, oil, gold, timber). In addition, most technology and telecommunications
company revenues are priced in dollars. So companies from all these sectors are
important in our Portfolio for two reasons--because the global recovery should
stimulate demand for their products and because their stocks are a good hedge
against a rising dollar.
- --------------------------------------------------------------------------------
THE MORGAN STANLEY INDEX IS A WEIGHTED INDEX COMPRISED OF APPROXIMATELY 1500
COMPANIES LISTED ON THE STOCK EXCHANGES OF THE U.S.A., EUROPE, CANADA,
AUSTRALIA, NEW ZEALAND AND THE FAR EAST. THE COMBINED MARKET CAPITALIZATION OF
THESE COMPANIES REPRESENTS APPROXIMATELY 60% OF THE AGGREGATE MARKET VALUE OF
THE STOCK EXCHANGES IN THE COUNTRIES COMPRISING THE WORLD INDEX. THE WORLD INDEX
IS AN UNMANAGED INDEX AND INCLUDES THE REINVESTMENT OF ALL DIVIDENDS, BUT DOES
NOT REFLECT THE PAYMENT OF TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH
AN INVESTMENT IN THE PORTFOLIO. THE SECURITIES THAT COMPRISE THE WORLD INDEX MAY
DIFFER SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO. THE WORLD INDEX IS
NOT THE ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF GLOBAL FUNDS
AND OTHER INDEXES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) AVERAGE IS CALCULATED BY LIPPER
ANALYTICAL SERVICES, INC. AND REFLECTS THE INVESTMENT RETURN OF PORTFOLIOS
UNDERLYING VARIABLE LIFE AND VARIABLE ANNUITY INSURANCE PRODUCTS. THESE RETURNS
ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT CHARGES.
40
<PAGE>
INVESTMENT ADVISOR'S OUTLOOK
1995 MAY BE A BETTER YEAR FOR INVESTORS THAN 1994. BUT IT WON'T BE A YEAR FOR
TAKING BIG RISKS. IN OUR VIEW, BONDS ARE THE DOMESTIC ASSET CLASS OF CHOICE.
U.S. STOCKS AND BONDS ARE LIKELY TO PRODUCE SIMILAR RETURNS, AND THAT MAKES
BONDS MORE ATTRACTIVE ON A RISK-ADJUSTED BASIS. SO LOOK FOR BARGAINS, CONSIDER
FOREIGN SECURITIES AND BE PREPARED FOR A YEAR OF AVERAGE RETURNS.
GROWTH AND INFLATION
/ / In 1995, we're looking for more moderate growth from the U.S. economy. This
means Gross Domestic Product should slow from the 4.0% range--a manageable rate
and one that shouldn't cause concern in either the bond or stock markets.
/ / Inflation, 1994's big concern, will likely creep up next year. Much of that
increase has already been discounted by the markets and shouldn't have a
significant impact on long-term interest rates.
THE BIGGEST RISK TO OUR OUTLOOK? THE FEDERAL RESERVE'S INTEREST RATE HIKES COULD
CHOKE OFF GROWTH, OR THERE COULD BE A BIG CHANGE IN THE AVAILABILITY OF CERTAIN
COMMODITIES (POSSIBLY BECAUSE OF A WAR OR NATURAL DISASTER) THAT COULD RAISE THE
INFLATION ANTE.
THE U.S. STOCK MARKET
/ / The U.S. stock market appears headed for an average year in 1995. That
means total returns possibly in the high single digits. Of course, we haven't
thought for awhile that the handsome double-digit returns we enjoyed in the
1980s would materialize again any time soon, so anything in excess of inflation
looks pretty fair. And if inflation remains relatively benign as we expect,
market returns after inflation will be close to historic averages.
/ / Corporate earnings growth and investor demand should play a big role in
stock performance in 1995. If either is tepid, expect our return forecast to
fall accordingly. Stock values are still a bit ahead of earnings, as well, which
could indicate some type of correction is likely. This is a year when stock
selection is crucial.
/ / We anticipate the demand for bonds will be another factor affecting stock
prices. If rates rise higher, stocks will be vulnerable.
ON THE OTHER HAND? IF ECONOMIC GROWTH STALLS OUT, EXPECT STOCK PRICES TO FALL.
THE GLOBAL MARKET
/ / Foreign economies should fare better than the U.S. Most countries climbed
out of the world-wide recession after the U.S. did--and they have farther to go
since the recession was worse overseas than it was in the U.S.
/ / That means respectable foreign stock returns, possibly in excess of U.S.
returns. And if U.S. interest rates stabilize, European stock prices should
benefit.
/ / We really like the stronger companies that produce commodities. Not only
should they benefit from a surge in demand, but their goods are usually priced
in dollars. That means they won't be hurt if the dollar starts to gain ground
against foreign currencies.
/ / Our favorite regions are Europe, where the economies are really revving up,
and the Pacific Basin. Even though valuations tend to be high there, this area
is in transition to a more developed one; we see healthier, growing economies on
the horizon as a result.
WHAT COULD HOLD BACK RETURNS? IF THE U.S. ECONOMY REVERSES COURSE AND HEADS INTO
NEGATIVE TERRITORY, THE WORLD'S OTHER ECONOMIES WOULD PROBABLY FOLLOW. AND ALL
STOCK MARKETS COULD BE LACKLUSTER PERFORMERS EVEN IF THIS SCENARIO REMAINS ONLY
A THREAT.
THE BOND MARKET
/ / After being beaten down badly in 1994, bonds are beginning to look
attractive. With long-term U.S. Treasury yields in the 8% range, bonds will be a
tough competitor for all domestic asset classes. We expect bonds to earn their
coupon and deliver modest capital gains.
/ / Bond returns will continue to be driven by the strength of the economy and
the Federal Reserve's response, at least until mid-year. We anticipate at least
one more Fed move before it quits and considers its anti-inflationary campaign
of 1994 a success.
/ / Due to the Fed's aggressive actions in 1994, we believe yields on long-term
bonds are near their peaks for this market cycle, and will begin to decline as
the economy slows in the second half of 1995. Thus, while we anticipate some
volatility during the first half of 1995, long-term Treasury yields are likely
to end the year at 7.5% or lower.
/ / In that kind of market, the best performing bond sectors can change from
day to day. Diversification will help keep returns competitive while limiting
risk.
OUR WORRIES? CREDIT QUALITY MAY BEGIN TO DETERIORATE IF THE ECONOMY SLOWS DOWN,
WHICH MAY NOT BODE WELL FOR THE STOCK MARKET. IF THE STOCK MARKET CORRECTS
SHARPLY AS A RESULT, HIGH YIELD BONDS MIGHT NOT FARE WELL. IN ADDITION, IF THE
ECONOMY CONTINUES TO RACE AHEAD AT A 4.0% CLIP, INTEREST RATES WILL LIKELY
CONTINUE TO CLIMB.
/ / / / / /
THAT COMPLETES OUR REVIEW OF 1994 AND OUR OUTLOOK FOR 1995. WE HOPE YOU FOUND IT
HELPFUL. ALL OF US AT THE PRUDENTIAL THANK YOU FOR YOUR BUSINESS AND LOOK
FORWARD TO HELPING YOU PROVIDE FOR YOUR FUTURE FINANCIAL SECURITY.
ROBERT P. HILL E. MICHAEL CAULFIELD
CHAIRMAN PRESIDENT
THE PRUDENTIAL SERIES FUND, INC. THE PRUDENTIAL SERIES FUND, INC.
41
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$563,227,825)............................ $ 531,295,677
Cash....................................... 702
Interest receivable........................ 11,014,524
--------------
Total Assets............................. 542,310,903
--------------
LIABILITIES
Accrued expenses........................... 39,255
Payable to investment adviser.............. 579,489
Payable for portfolio shares redeemed...... 43,560
--------------
Total Liabilities........................ 662,304
--------------
NET ASSETS................................... $ 541,648,599
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 539,579
Paid-in capital, in excess of par........ 583,467,451
--------------
584,007,030
Undistributed net investment income........ 381,010
Accumulated net realized losses............ (10,807,293)
Net unrealized depreciation................ (31,932,148)
--------------
Net assets, December 31, 1994.............. $ 541,648,599
--------------
--------------
Net asset value per share of 53,957,906
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 10.0384
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Interest................................... $ 38,674,225
---------------
EXPENSES
Investment management fee.................. 2,251,096
Shareholders' reports...................... 180,661
Accounting fees............................ 77,978
Custodian expense -- net................... 28,771
Professional fees.......................... 21,380
Directors' expense......................... 2,086
Miscellaneous expenses..................... 98
---------------
2,562,070
---------------
NET INVESTMENT INCOME........................ 36,112,155
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (4,246,256)
Net unrealized loss on investments......... (50,839,016)
---------------
NET LOSS ON INVESTMENTS...................... (55,085,272)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 18,973,117)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 36,112,155 $ 31,295,792
Net realized gain (loss) on investments................................................ (4,246,256) 8,958,204
Net unrealized gain(loss) on investments............................................... (50,839,016) 7,179,211
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (18,973,117) 47,433,207
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (35,627,999) (31,001,007)
Net realized gain from investment transactions......................................... (1,267,553) (7,690,651)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (36,895,552) (38,691,658)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,414,897 and 9,888,368 shares, respectively]...................... 36,662,212 111,911,952
Reinvestment of dividend distributions [3,610,015 and 3,457,814 shares,
respectively]......................................................................... 36,895,552 38,691,658
Capital stock repurchased [(4,963,909) and (1,044,056) shares, respectively]........... (52,266,357) (11,890,355)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 21,291,407 138,713,255
------------------ -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................................................. (34,577,262) 147,454,804
NET ASSETS:
Beginning of year...................................................................... 576,225,861 428,771,057
------------------ -------------------
End of year............................................................................ $ 541,648,599 $ 576,225,861
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
42
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
COMMON STOCK PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$2,419,493,392).......................... $2,665,964,937
Cash....................................... 155
Interest and dividends receivable.......... 5,114,347
Receivable for securities sold............. 391,399
--------------
Total Assets............................. 2,671,470,838
--------------
LIABILITIES
Accrued expenses........................... 239,413
Payable for securities purchased........... 50,317,741
Payable to investment adviser.............. 2,947,775
Payable for portfolio shares redeemed...... 193,892
--------------
Total Liabilities........................ 53,698,821
--------------
NET ASSETS................................... $2,617,772,017
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 1,266,927
Paid-in capital, in excess of par........ 2,372,417,930
--------------
2,373,684,857
Accumulated distributions in excess of net
investment income........................ (5,718,849)
Accumulated net realized gains............. 3,334,464
Net unrealized appreciation................ 246,471,545
--------------
Net assets, December 31, 1994.............. $2,617,772,017
--------------
--------------
Net asset value per share of 126,692,657
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 20.6624
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 50,216,245
Interest................................... 20,648,244
---------------
70,864,489
---------------
EXPENSES
Investment management fee.................. 10,874,059
Foreign withholding tax.................... 1,200,006
Shareholders' reports...................... 651,725
S.E.C. fees................................ 144,182
Accounting fees............................ 143,460
Custodian expense -- net................... 77,177
Professional fees.......................... 71,071
Directors' expense......................... 2,913
Miscellaneous expenses..................... 127
---------------
13,164,720
---------------
NET INVESTMENT INCOME........................ 57,699,769
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 84,713,465
Net unrealized loss on investments......... (76,779,978)
---------------
NET GAIN ON INVESTMENTS...................... 7,933,487
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 65,633,256
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 57,699,769 $ 36,054,825
Net realized gain on investments....................................................... 84,713,465 124,861,589
Net unrealized gain (loss) on investments.............................................. (76,779,978) 185,462,685
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 65,633,256 346,379,099
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (56,757,732) (36,692,128)
Net realized gain from investment transactions......................................... (106,046,594) (103,435,491)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (162,804,326) (140,127,619)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [19,167,446 and 21,331,255 shares, respectively].................... 412,393,503 447,667,281
Reinvestment of dividend distributions [7,934,974 and 6,632,819 shares,
respectively]......................................................................... 162,804,326 140,127,619
Capital stock repurchased [(2,170,186) and (1,143,204) shares, respectively]........... (46,752,467) (24,126,373)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 528,445,362 563,668,527
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 431,274,292 769,920,007
NET ASSETS:
Beginning of year...................................................................... 2,186,497,725 1,416,577,718
------------------ -------------------
End of year............................................................................ $ 2,617,772,017 $ 2,186,497,725
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
43
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$3,347,362,272).......................... $3,478,056,152
Cash....................................... 1,392
Interest and dividends receivable.......... 23,489,135
Receivable for securities sold............. 35,026,977
--------------
Total Assets............................. 3,536,573,656
--------------
LIABILITIES
Accrued expenses........................... 323,207
Payable for securities purchased........... 49,250,851
Payable to investment adviser.............. 5,363,453
Payable for portfolio shares redeemed...... 95,846
--------------
Total Liabilities........................ 55,033,357
--------------
NET ASSETS................................... $3,481,540,299
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,246,733
Paid-in capital, in excess of par........ 3,405,640,023
--------------
3,407,886,756
Accumulated distributions in excess of net
investment income........................ (7,770,622)
Accumulated distributions in excess of net
realized gains........................... (49,268,078)
Net unrealized appreciation (depreciation)
Securities............................... 130,693,880
Foreign currency translations............ (1,637)
--------------
Net assets, December 31, 1994.............. $3,481,540,299
--------------
--------------
Net asset value per share of 224,673,289
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 15.4960
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 40,972,935
Interest................................... 80,410,745
---------------
121,383,680
---------------
EXPENSES
Investment management fee.................. 20,399,604
Shareholders' reports...................... 895,362
Foreign withholding tax.................... 571,581
Accounting fees............................ 231,918
Custodian expense -- net................... 153,924
S.E.C. fees................................ 129,279
Professional fees.......................... 120,289
Directors' expense......................... 3,420
Miscellaneous expenses..................... 189
---------------
22,505,566
---------------
NET INVESTMENT INCOME........................ 98,878,114
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on investments --
Securities transactions.................. 23,860,613
Futures contracts........................ (22,340)
---------------
Net realized gain on investments........... 23,838,273
---------------
Net unrealized loss on investments and
foreign currencies--
Securities............................... (230,569,722)
Foreign currency translations............ (1,637)
---------------
Net unrealized loss on investments and
foreign currencies....................... (230,571,359)
---------------
NET LOSS ON INVESTMENTS AND FOREIGN
CURRENCIES................................... (206,733,086)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 107,854,972)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 98,878,114 $ 94,441,961
Net realized gain on investments....................................................... 23,838,273 202,429,143
Net unrealized gain(loss) on investments and foreign currency translations............. (230,571,359) 106,972,046
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (107,854,972) 403,843,150
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (96,126,295) (96,961,144)
Net realized gain from investment transactions......................................... (98,311,584) (167,511,713)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (194,437,879) (264,472,857)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [22,611,559 and 28,416,647 shares, respectively].................... 370,947,414 490,167,019
Reinvestment of dividend distributions [12,531,550 and 15,710,066 shares,
respectively]......................................................................... 194,437,879 264,472,857
Capital stock repurchased [(4,617,224) and (2,154,837) shares, respectively]........... (73,719,278) (37,398,394)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 491,666,015 717,241,482
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 189,373,164 856,611,775
NET ASSETS:
Beginning of year...................................................................... 3,292,167,135 2,435,555,360
------------------ -------------------
End of year............................................................................ $ 3,481,540,299 $ 3,292,167,135
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
44
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$3,443,877,594).......................... $3,468,953,719
Cash....................................... 2,043
Interest and dividends receivable.......... 24,063,629
Receivable for securities sold............. 20,886,513
--------------
Total Assets............................. 3,513,905,904
--------------
LIABILITIES
Accrued expenses........................... 304,995
Payable for securities purchased........... 7,467,333
Payable to investment adviser.............. 4,963,479
Payable for portfolio shares redeemed...... 65,811
--------------
Total Liabilities........................ 12,801,618
--------------
NET ASSETS................................... $3,501,104,286
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,483,940
Paid-in capital, in excess of par........ 3,488,749,211
--------------
3,491,233,151
Distributions in excess of net investment
income................................... (2,593,413)
Accumulated distributions in excess of net
realized gains........................... (12,611,577)
Net unrealized appreciation................ 25,076,125
--------------
Net assets, December 31, 1994.............. $3,501,104,286
--------------
--------------
Net asset value per share of 248,394,018
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 14.0950
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 21,577,417
Interest................................... 121,932,781
---------------
143,510,198
---------------
EXPENSES
Investment management fee.................. 18,730,421
Shareholders' reports...................... 982,095
Foreign withholding tax.................... 524,162
Accounting fees............................ 216,958
S.E.C. fees................................ 165,214
Custodian expense -- net................... 114,541
Professional fees.......................... 102,549
Directors' expense......................... 3,365
Miscellaneous expenses..................... 182
---------------
20,839,487
---------------
NET INVESTMENT INCOME........................ 122,670,711
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments --
Securities transactions.................. 30,566,616
Futures contracts........................ 184,405
---------------
Net realized gain on investments........... 30,751,021
Net unrealized loss on investments......... (184,854,002)
---------------
NET LOSS ON INVESTMENTS...................... (154,102,981)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 31,432,270)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 122,670,711 $ 83,594,970
Net realized gain on investments....................................................... 30,751,021 116,251,058
Net unrealized gain(loss) on investments............................................... (184,854,002) 86,497,365
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (31,432,270) 286,343,393
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (120,740,360) (84,057,597)
Net realized gain from investment transactions......................................... (37,214,012) (113,728,724)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (157,954,372) (197,786,321)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [34,889,459 and 48,698,296 shares, respectively].................... 514,344,688 736,447,769
Reinvestment of dividend distributions [11,198,868 and 13,291,624 shares,
respectively]......................................................................... 157,954,372 197,786,321
Capital stock repurchased [(5,887,371) and (2,225,762) shares, respectively]........... (84,977,146) (33,653,303)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 587,321,914 900,580,787
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 397,935,272 989,137,859
NET ASSETS:
Beginning of year...................................................................... 3,103,169,014 2,114,031,155
------------------ -------------------
End of year............................................................................ $ 3,501,104,286 $ 3,103,169,014
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
45
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$584,600,736)............................ $ 665,573,026
Cash....................................... 125
Interest and dividends receivable.......... 1,826,860
--------------
Total Assets............................. 667,400,011
--------------
LIABILITIES
Accrued expenses........................... 43,939
Payable for securities purchased........... 1,961,738
Payable to investment adviser.............. 594,419
Payable for daily variation margin on open
futures contracts (see Note 2)........... 178,025
Payable for portfolio shares redeemed...... 87,683
--------------
Total Liabilities........................ 2,865,804
--------------
NET ASSETS................................... $ 664,534,207
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 444,295
Paid-in capital, in excess of par........ 584,354,669
--------------
584,798,964
Accumulated distributions in excess of net
investment income........................ (448,482)
Distributions in excess of net realized
gains.................................... (1,303,715)
Net unrealized appreciation
Securities............................... 80,972,290
Futures contracts........................ 515,150
--------------
Net assets, December 31, 1994.............. $ 664,534,207
--------------
--------------
Net asset value per share of 44,429,452
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 14.9571
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 17,703,412
Interest................................... 848,482
---------------
18,551,894
---------------
EXPENSES
Investment management fee.................. 2,223,022
Shareholders' reports...................... 169,859
Foreign withholding tax.................... 104,365
Accounting fees............................ 92,457
Custodian expense -- net................... 25,969
Professional fees.......................... 17,287
S.E.C. fees................................ 17,213
Directors' expense......................... 2,108
Miscellaneous expenses..................... 35
---------------
2,652,315
---------------
NET INVESTMENT INCOME........................ 15,899,579
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments --
Securities transactions.................. 225,124
Futures contracts........................ (1,036,890)
---------------
Net realized loss on investments........... (811,766)
---------------
Net unrealized gain (loss) on investments
--
Securities............................... (8,921,232)
Futures contracts........................ 486,200
---------------
Net unrealized loss on investments......... (8,435,032)
---------------
NET LOSS ON INVESTMENTS...................... (9,246,798)
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 6,652,781
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 15,899,579 $ 12,982,334
Net realized gain (loss) on investments................................................ (811,766) 2,033,345
Net unrealized gain (loss) on investments.............................................. (8,435,032) 33,892,763
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 6,652,781 48,908,442
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (15,754,398) (13,030,262)
Net realized gain from investment transactions......................................... (958,203) (1,280,819)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (16,712,601) (14,311,081)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,553,644 and 10,331,253 shares, respectively]..................... 68,598,345 152,405,579
Reinvestment of dividend distributions [1,130,115 and 959,900 shares, respectively].... 16,712,601 14,311,081
Capital stock repurchased [(1,718,830) and (1,313,029) shares, respectively]........... (25,854,984) (19,639,158)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 59,455,962 147,077,502
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 49,396,142 181,674,863
NET ASSETS:
Beginning of year...................................................................... 615,138,065 433,463,202
------------------ -------------------
End of year............................................................................ $ 664,534,207 $ 615,138,065
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
46
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GLOBAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$333,259,423)............................ $ 340,065,997
Foreign currency, at value (cost:
$7,107,458).............................. 7,169,111
Dividends and interest receivable.......... 240,756
Receivable for securities sold............. 2,036,391
Receivable for portfolio shares sold....... 5,435
Other assets............................... 163,813
--------------
Total Assets............................. 349,681,503
--------------
LIABILITIES
Bank overdraft............................. 151,478
Accrued expenses........................... 507,759
Payable for securities purchased........... 2,689,594
Payable to investment adviser.............. 598,694
--------------
Total Liabilities........................ 3,947,525
--------------
NET ASSETS................................... $ 345,733,978
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 249,106
Paid-in capital, in excess of par........ 339,734,079
--------------
339,983,185
Distributions in excess of net investment
income................................... (306,676)
Accumulated net realized losses............ (830,366)
Net unrealized appreciation on securities
and foreign currency translations........ 6,887,835
--------------
Net assets, December 31, 1994.............. $ 345,733,978
--------------
--------------
Net asset value per share of 24,910,615
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 13.8790
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 2,857,120
Interest................................... 602,579
---------------
3,459,699
---------------
EXPENSES
Investment management fee.................. 1,798,467
Custodian expense -- net................... 695,706
Income taxes -- foreign.................... 284,990
Accounting fees............................ 101,774
S.E.C. fees................................ 82,504
Shareholders' reports...................... 17,205
Professional fees.......................... 2,375
Directors' expense......................... 1,886
Miscellaneous expenses..................... 70
---------------
2,984,977
---------------
NET INVESTMENT INCOME........................ 474,722
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
SECURITIES AND FOREIGN CURRENCIES
Net realized loss on securities and foreign
currency transactions.................... (578,250)
Net unrealized loss on securities and
foreign currency translations............ (16,334,560)
---------------
NET LOSS ON SECURITIES AND FOREIGN
CURRENCIES................................... (16,912,810)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ (16,438,088)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 474,722 $ 113,317
Net realized gain (loss) on securities and foreign currency transactions............... (578,250) 2,342,360
Net unrealized gain (loss) on securities and foreign currency translations............. (16,334,560) 21,161,913
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (16,438,088) 23,617,590
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (499,141) (403,351)
Net realized gain from investment transactions......................................... (394,438) (839,910)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (893,579) (1,243,261)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [17,513,960 and 5,977,164 shares, respectively]..................... 254,421,899 78,356,145
Reinvestment of dividend distributions [64,991 and 90,677 shares, respectively]........ 893,579 1,243,261
Capital stock repurchased [(751,122) and (141,366) shares, respectively]............... (10,781,034) (1,761,681)
Initial capitalization repurchased [(735,674) and (391,272) shares, respectively]...... (10,558,000) (5,164,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 233,976,444 72,673,725
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 216,644,777 95,048,054
NET ASSETS:
Beginning of year...................................................................... 129,089,201 34,041,147
------------------ -------------------
End of year............................................................................ $ 345,733,978 $ 129,089,201
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
47
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$507,031,047)............................ $ 478,087,478
Cash....................................... 329
Interest receivable........................ 8,947,544
Receivable for portfolio shares sold....... 1,059,634
--------------
Total Assets............................. 488,094,985
--------------
LIABILITIES
Accrued expenses........................... 5,192
Payable to investment adviser.............. 515,488
--------------
Total Liabilities........................ 520,680
--------------
NET ASSETS................................... $ 487,574,305
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 466,072
Paid-in capital, in excess of par........ 526,044,120
--------------
526,510,192
Undistributed net investment income........ 931,495
Accumulated net realized losses............ (10,923,813)
Net unrealized depreciation................ (28,943,569)
--------------
Net assets, December 31, 1994.............. $ 487,574,305
--------------
--------------
Net asset value per share of 46,607,219
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 10.4614
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Interest................................... $ 35,819,887
---------------
EXPENSES
Investment management fee.................. 2,125,130
Shareholders' reports...................... 168,609
Accounting fees............................ 73,159
Custodian expense -- net................... 13,387
Professional fees.......................... 9,127
Directors' expense......................... 2,077
Miscellaneous expenses..................... 31
S.E.C. fees................................ (3,561)
---------------
2,387,959
---------------
NET INVESTMENT INCOME........................ 33,431,928
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (10,380,614)
Net unrealized loss on investments......... (52,690,952)
---------------
NET LOSS ON INVESTMENTS...................... (63,071,566)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 29,639,638)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 33,431,928 $ 25,803,560
Net realized gain (loss) on investments................................................ (10,380,614) 884,434
Net unrealized gain(loss) on investments............................................... (52,690,952) 19,594,824
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (29,639,638) 46,282,818
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (32,955,665) (25,487,269)
Net realized gain from investment transactions......................................... 0 (1,904,203)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (32,955,665) (27,391,472)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,591,224 and 15,693,270 shares, respectively]..................... 41,656,912 185,551,898
Reinvestment of dividend distributions [3,094,061 and 2,328,874 shares,
respectively]......................................................................... 32,955,665 27,391,472
Capital stock repurchased [(5,912,961) and (449,498) shares, respectively]............. (64,569,681) (5,251,752)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 10,042,896 207,691,618
------------------ -------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............................................................................ (52,552,407) 226,582,964
NET ASSETS:
Beginning of year...................................................................... 540,126,712 313,543,748
------------------ -------------------
End of year............................................................................ $ 487,574,305 $ 540,126,712
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
48
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
BOND PORTFOLIO
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 95.3% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 14.4%
Abbey National First Capital,
8.200%, 10/15/04.............................. $ 3,000,000 $ 2,928,630
Aristar, Inc.,
5.750%, 07/15/98.............................. 2,000,000 1,837,600
7.500%, 07/01/99.............................. 2,000,000 1,919,440
Associates Corp. of North America,
8.375%, 01/15/98.............................. 500,000 499,995
8.800%, 01/14/95.............................. 1,000,000 1,000,380
Chase Manhattan Corp.,
8.000%, 06/15/99.............................. 2,000,000 1,964,800
Chemical Bank,
6.625%, 08/15/05.............................. 2,000,000 1,713,160
Chrysler Finance Corp., M.T.N.,
5.260%, 07/06/95, Tranche #TR00029............ 900,000 890,334
5.340%, 07/05/95, Tranche #TR00028............ 2,300,000 2,276,356
Chrysler Financial Corp.,
9.500%, 12/15/99.............................. 5,000,000 5,187,800
Citicorp, M.T.N.,
8.500%, 02/24/97, Tranche #TR00128............ 3,000,000 3,018,390
Coles Myer Finance USA, Ltd., M.T.N.,
5.560%, 02/15/99, Tranche #TR00018............ 6,000,000 5,413,140
Countrywide Funding Corp., M.T.N.,
6.880%, 08/03/98, Tranche #TR00025............ 4,000,000 3,811,040
Equicredit Home Equity Loan Trust, CMO,
7.850%, 08/15/07, Series 1994-3, Class A-3.... 5,000,000 4,823,438
First Fidelity Bancorp,
9.750%, 05/25/95.............................. 5,000,000 5,049,300
Ford Motor Credit Co.,
6.250%, 02/26/98.............................. 3,000,000 2,826,090
General Motors Acceptance Corp.,
8.400%, 10/15/99.............................. 3,700,000 3,698,483
General Motors Acceptance Corp., M.T.N.,
7.500%, 11/04/97, Tranche #TR00598............ 2,000,000 1,946,940
Goldman Sachs Group, L.P.,
6.100%, 04/15/98.............................. 2,000,000 1,856,980
**John Hancock Mutual Life Insurance Co.,
7.375%, 02/15/24.............................. 3,000,000 2,414,670
Mellon Financial Co.,
6.500%, 12/01/97.............................. 2,000,000 1,912,200
NationsBank Corp. of North Carolina,
6.625%, 01/15/98.............................. 3,000,000 2,859,210
%Nomura Asset Securities Corp., CMO,
8.026%, 12/15/06, 1994 MDA, Class A-3......... 3,000,000 2,821,875
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
**Potomac Capital Investment Corp., M.T.N.,
6.190%, 04/28/97, Series B.................... $ 3,500,000 $ 3,466,627
Republic New York Corp.,
9.125%, 05/15/21.............................. 2,850,000 2,978,591
Sovereign Bancorp, Inc.
6.750%, 09/01/00.............................. 5,000,000 4,475,000
Union Bank Finland, Ltd.,
5.250%, 06/15/96.............................. 3,000,000 2,872,530
Zurich Reinsurance Centre Holdings, Inc.,
7.125%, 10/15/23.............................. 2,000,000 1,587,680
--------------
78,050,679
--------------
FOREIGN -- 15.7%
Australia & New Zealand Banking Group, Ltd.,
6.250%, 02/01/04.............................. 3,000,000 2,566,560
**Banco Del Estado-Chile,
8.390%, 08/01/01.............................. 2,100,000 1,979,250
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 4,100,000 3,977,000
Canadian Pacific Forest Products Ltd.,
10.250%, 01/15/03............................. 4,000,000 3,963,390
Carter Holt Harvey, Ltd.,
8.875%, 12/01/04.............................. 2,500,000 2,524,150
**Cemex, SA,
8.875%, 06/10/98.............................. 6,000,000 5,265,000
Central Puerto and Cent Negue, SA,
10.750%, 11/02/97............................. 3,000,000 2,872,500
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 4,000,000 3,275,000
%Hydro-Quebec,
3.438%, 09/30/49, Series G-1E4................ 3,000,000 2,507,813
**Kansallis-Osake Pankki, N.Y.,
8.650%, 12/29/49.............................. 5,000,000 4,837,500
Korea Development Bank,
8.090%, 10/06/04.............................. 5,400,000 5,284,940
National Australia Bank, Ltd.,
9.700%, 10/15/98.............................. 1,700,000 1,774,970
Nippon Telegraph & Telephone Corp.,
9.500%, 07/27/98.............................. 1,800,000 1,869,588
Noranda, Inc.,
8.125%, 06/15/04.............................. 2,000,000 1,912,380
Nova Scotia, Province of Canada,
8.875%, 07/01/19.............................. 3,000,000 2,900,460
Ontario, Province of Canada,
15.750%, 03/15/12............................. 3,475,000 4,139,280
**%Petroleos Mexicanos,
5.563%, 03/08/99.............................. 2,500,000 2,375,000
Republic of Argentina,
8.375%, 12/20/03.............................. 4,000,000 2,850,000
Republic of Columbia,
7.250%, 02/23/04.............................. 2,500,000 2,059,375
8.750%, 10/06/99.............................. 3,500,000 3,338,125
</TABLE>
49
<PAGE>
BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Republic of Italy,
6.875%, 09/27/23.............................. $ 4,000,000 $ 3,150,880
Republic of South Africa,
9.625%, 12/15/99.............................. 4,000,000 3,961,250
**Republic of Trinidad and Tobago,
11.750%, 10/03/04............................. 4,000,000 4,050,000
Saskatchewan, Province of Canada,
8.000%, 07/15/04.............................. 4,000,000 3,872,560
Svenska Handelsbanken,
8.125%, 08/15/07.............................. 2,500,000 2,350,225
**Tenaga Nasional Berhad,
7.875%, 06/15/04.............................. 3,000,000 2,856,570
United States of Mexico with Rights,
6.250%, 12/31/19, Class B..................... 4,000,000 2,175,000
--------------
84,688,766
--------------
INDUSTRIAL -- 17.2%
Arkla, Inc., M.T.N.,
9.320%, 12/18/00, Tranche #TR00043............ 2,000,000 1,962,460
9.380%, 03/15/96, Tranche #TR00018............ 1,300,000 1,308,567
Boise Cascade Corp.,
9.875%, 02/15/01.............................. 1,000,000 1,002,040
Borden, Inc.,
7.875%, 02/15/23.............................. 2,000,000 1,463,680
Carnival Cruise Lines, Inc.,
5.750%, 03/15/98.............................. 3,000,000 2,766,810
Comsat Corp.,
8.125%, 04/01/04.............................. 4,000,000 3,898,480
Crane Co.,
7.250%, 06/15/99.............................. 3,000,000 2,842,020
Delta Air Lines, Inc., M.T.N.,
7.790%, 12/01/98.............................. 1,000,000 928,400
8.380%, 06/12/98, Tranche #TR00017............ 2,000,000 1,897,680
Enterprise Rent A Car, M.T.N.,
8.750%, 12/15/99 Tranche #TR00001............. 3,000,000 2,989,650
Federal Express Corp.,
9.650%, 06/15/12.............................. 3,000,000 3,164,610
Fleming Companies, Inc., C.D.,
10.625%, 12/15/01............................. 4,000,000 4,000,000
Georgia-Pacific Corp.,
9.625%, 03/15/22.............................. 1,500,000 1,515,075
J.C. Penney Co., Inc.,
9.750%, 06/15/21.............................. 6,400,000 6,902,144
Laidlaw, Inc.,
8.250%, 05/15/23.............................. 2,500,000 2,177,225
News America Holdings, Inc.,
7.450%, 06/01/00.............................. 3,000,000 2,796,330
7.750%, 02/01/24.............................. 3,300,000 2,684,352
Noble Affiliates, Inc.,
7.250%, 10/15/23.............................. 2,000,000 1,596,200
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013............ 3,000,000 2,887,500
Philip Morris Companies, Inc.,
7.500%, 01/15/02.............................. 2,500,000 2,343,100
9.000%, 01/01/01.............................. 4,800,000 4,858,032
Procter & Gamble Co., ESOP,
9.360%, 01/01/21, Series A.................... 4,900,000 5,286,120
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 5,750,000 5,606,250
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Royal Caribbean Cruises Ltd.,
11.375%, 05/15/02............................. $ 4,000,000 $ 4,250,000
Sears, Roebuck & Co.,
9.375%, 11/01/11.............................. 2,000,000 2,090,040
**Shurgard Securities Trust, CMO,
8.240%, 06/15/04.............................. 3,000,000 2,882,813
Tele-Communications, Inc.,
10.125%, 04/15/22............................. 5,000,000 5,015,400
Time Warner, Inc.,
**6.050%, 07/01/95............................ 2,500,000 2,479,075
7.450%, 02/01/98.............................. 2,200,000 2,096,885
Transco Energy Co.,
11.250%, 07/01/99............................. 2,500,000 2,659,375
Westinghouse Electric Corp.,
8.375%, 06/15/02.............................. 2,000,000 1,858,260
Whitman Corp.,
7.500%, 08/15/01.............................. 3,000,000 2,852,100
--------------
93,060,673
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 45.5%
Federal Farm Credit Bank,
8.650%, 10/01/99, Series A.................... 150,000 153,375
Federal Farm Credit Bank, M.T.N.,
7.900%, 03/01/96.............................. 2,800,000 2,816,744
Federal Home Loan Mortgage Corporation,
9.800%, 03/25/96.............................. 4,000,000 4,095,000
Federal Home Loan Mortgage Corporation, CMO,
6.800%, 08/15/05, Series 1224, Class 1224-F... 5,000,000 4,757,800
Federal Home Loan Mortgage Corporation, REMIC,
6.500%, 10/15/06, Series 1194, Class 1194-G... 5,000,000 4,428,100
7.500%, 09/15/05, Series 1295, Class 1295-G... 8,300,000 7,934,219
Federal National Mortgage Association,
7.000%, 10/01/13-01/01/24..................... 33,044,696 30,002,267
9.000%, 10/01/16-09/01/21..................... 792,613 797,724
11.000%, 11/01/20............................. 6,159,127 6,647,977
Federal National Mortgage Association, REMIC,
Zero Coupon, 09/25/15, Tranche #TR1989-102,
Class 102A.................................. 1,387,991 1,027,113
6.500%, 07/25/20, Tranche #TR1992-138, Class
D........................................... 5,000,000 4,492,150
8.600%, 04/25/03, Series 1989-92, Class
92-D........................................ 1,086,155 1,087,849
9.000%, 03/25/20, Series 1990-24, Class
24-E........................................ 2,000,000 2,028,120
Government National Mortgage Association,
7.500%, 05/20/02.............................. 690,383 649,823
International Bank for Reconstruction and
Development,
12.375%, 10/15/02............................. 750,000 923,213
Resolution Funding Corp.,
Zero Coupon, 10/15/15......................... 17,100,000 3,219,075
8.125%, 10/15/19, Class A..................... 700,000 703,283
8.625%, 01/15/21.............................. 200,000 211,562
United States Treasury Bonds,
6.250%, 08/15/23.............................. 4,800,000 3,902,256
8.125%, 08/15/19.............................. 8,250,000 8,359,560
</TABLE>
50
<PAGE>
BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
10.750%, 08/15/05............................. $ 10,800,000 $ 12,973,500
11.250%, 02/15/15............................. 6,400,000 8,456,000
11.625%, 11/15/04............................. 15,130,000 18,950,325
12.000%, 08/15/13............................. 6,000,000 7,978,140
United States Treasury Notes,
3.875%, 09/30/95.............................. 7,000,000 6,837,040
6.250%, 02/15/03.............................. 6,000,000 5,426,220
6.375%, 08/15/02, Series 2002................. 4,200,000 3,845,604
6.875%, 03/31/97, Series 1997................. 1,500,000 1,472,805
7.250%, 08/15/04.............................. 1,100,000 1,055,824
7.500%, 02/29/96, Series 1996................. 9,300,000 9,310,137
7.875%, 02/15/96-07/31/96, Series 1996........ 36,000,000 36,151,740
8.875%, 11/15/97, Series 1997................. 20,370,000 20,907,972
9.000%, 05/15/98, Series B-1998............... 3,000,000 3,100,770
9.250%, 01/15/96, Series 1996................. 12,000,000 12,228,720
9.250%, 08/15/98, Series D-1998............... 9,300,000 9,703,992
--------------
246,635,999
--------------
UTILITIES -- 2.5%
%Central Maine Power Co., M.T.N.,
5.978%, 08/03/95, Tranche #TR00036............ 4,000,000 4,000,000
Consolidated Edison of New York, Inc.,
9.700%, 12/01/25.............................. 2,100,000 2,273,922
Pennsylvania Power & Light Co.,
9.375%, 07/01/21.............................. 1,150,000 1,179,268
Southern Union Co.,
7.600%, 02/01/24.............................. 3,000,000 2,511,450
Texas Utilities Electric Co.,
5.875%, 04/01/98.............................. 4,000,000 3,702,920
--------------
13,667,560
--------------
TOTAL LONG-TERM BONDS
(Cost $548,035,825)............................................ 516,103,677
--------------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 2.8% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95, (see Note 4)................ $ 15,192,000 $ 15,192,000
--------------
OTHER ASSETS -- 1.9%
(net of liabilities)........................................... 10,352,922
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 541,648,599
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
C.D. Certificates of Deposit
CMO Collateralized Mortgage Obligations
ESOP Employee Stock Ownership Plan
L.P. Limited Partnership
M.T.N. Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $42,727,259. The aggregate value, $39,858,505 is
approximately 7.4% of net assets. (See Note 2)
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
51
<PAGE>
COMMON STOCK PORTFOLIO
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 87.3% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 3.4%
AAR Corp........................................ 650,000 $ 8,693,750
Lockheed Corp................................... 207,900 15,098,738
Loral Corp...................................... 900,000 34,087,500
United Technologies Corp........................ 500,000 31,437,500
--------------
89,317,488
--------------
ALUMINUM -- 1.3%
+Alumax, Inc.................................... 267,500 7,590,313
Aluminum Co. of America......................... 300,000 25,987,500
--------------
33,577,813
--------------
AUTOS - CARS & TRUCKS -- 4.0%
Chrysler Corp................................... 975,000 47,775,000
Ford Motor Co................................... 800,000 22,400,000
General Motors Corp............................. 700,000 29,575,000
+Navistar International Corp.................... 395,200 5,977,400
--------------
105,727,400
--------------
BANKS AND SAVINGS & LOANS -- 5.9%
Bank of New York Company, Inc................... 900,000 26,100,000
BankAmerica Corp................................ 550,000 21,725,000
Chase Manhattan Corp............................ 600,000 20,625,000
Comerica, Inc................................... 700,000 17,062,500
First of America Bank Corp...................... 187,000 5,610,000
Great Western Financial Corp.................... 1,000,000 16,000,000
J.P. Morgan & Co., Inc.......................... 300,000 16,800,000
Mellon Bank Corp................................ 276,398 8,464,689
Mercantile Bankshares Corp...................... 279,600 5,487,150
NationsBank Corp................................ 350,000 15,793,750
--------------
153,668,089
--------------
CHEMICALS -- 0.9%
Eastman Chemical Co............................. 466,550 23,560,774
--------------
CHEMICALS - SPECIALTY -- 1.5%
+ESSEF Corp..................................... 110,000 1,677,500
IMC Global, Inc................................. 705,500 30,512,875
Witco Corp...................................... 268,800 6,619,200
--------------
38,809,575
--------------
COMMERCIAL SERVICES -- 0.6%
Wellman, Inc.................................... 550,000 15,537,500
--------------
COMPUTER SERVICES -- 1.0%
Comdisco, Inc................................... 900,000 20,812,500
Gerber Scientific, Inc.......................... 419,800 5,457,400
+Harris Computer Systems Corp................... 15,000 183,750
--------------
26,453,650
--------------
CONSTRUCTION -- 0.0%
+Willcox & Gibbs, Inc........................... 107,199 629,793
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.8%
International Business Machines Corp............ 300,000 22,050,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 2.8%
Baxter International, Inc....................... 2,100,000 59,325,000
Upjohn Co....................................... 450,000 13,837,500
--------------
73,162,500
--------------
ELECTRONICS -- 7.7%
Amdahl Corp..................................... 850,000 9,350,000
+Digital Equipment Corp......................... 2,500,000 83,125,000
Harris Corp..................................... 300,000 12,750,000
Hewlett-Packard Co.............................. 175,000 17,478,125
Tandy Corp...................................... 1,418,000 71,077,250
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Varian Associates, Inc.......................... 145,000 $ 5,075,000
Zero Corp....................................... 120,500 1,687,000
--------------
200,542,375
--------------
FINANCIAL SERVICES -- 6.8%
American Express Co............................. 2,100,000 61,950,000
Dean Witter, Discover & Co...................... 1,200,000 40,650,000
Lehman Brothers Holdings, Inc................... 900,000 13,275,000
Republic New York Corp.......................... 225,000 10,181,250
Salomon, Inc.................................... 700,000 26,250,000
Travelers, Inc.................................. 800,000 26,000,000
--------------
178,306,250
--------------
FOREST PRODUCTS -- 6.1%
International Paper Co.......................... 415,000 31,280,625
James River Corp. of Virginia................... 560,000 11,340,000
Rayonier, Inc................................... 125,000 3,812,500
Scott Paper Co.................................. 1,650,000 114,056,250
--------------
160,489,375
--------------
GAS PIPELINES -- 0.3%
NorAm Energy Corp............................... 1,300,000 6,987,500
--------------
HEALTHCARE -- 1.1%
+Foundation Health Corp......................... 950,000 29,450,000
--------------
HOSPITAL MANAGEMENT -- 3.2%
+American Medical Holdings, Inc................. 649,600 15,671,600
+Beverly Enterprises, Inc....................... 39,300 564,938
Columbia / HCA Healthcare Corp.................. 400,000 14,600,000
+Hillhaven Corp................................. 459,400 9,762,250
National Medical Enterprises, Inc............... 2,965,000 41,880,625
--------------
82,479,413
--------------
HOUSING RELATED -- 0.5%
Centex Corp..................................... 600,000 13,650,000
--------------
INSURANCE -- 13.0%
Alexander & Alexander Services, Inc............. 1,050,000 19,425,000
American General Corp........................... 1,000,000 28,250,000
Chubb Corp...................................... 700,000 54,162,500
Citizens Corp................................... 500,000 8,500,000
Continental Corp................................ 2,300,000 43,700,000
Emphesys Financial Group, Inc................... 441,400 14,014,450
Equitable Companies, Inc........................ 1,518,700 27,526,438
First Colony Corp............................... 1,253,600 28,049,300
John Alden Financial Corp....................... 141,000 4,053,750
Old Republic International Corp................. 1,000,590 21,262,538
Providian Corp.................................. 340,500 10,512,937
SAFECO Corp..................................... 800,000 41,600,000
SCOR U.S. Corp.................................. 195,600 1,638,150
St. Paul Companies, Inc......................... 400,000 17,900,000
Western National Corp........................... 1,528,200 19,675,575
--------------
340,270,638
--------------
LODGING -- 2.0%
Loews Corp...................................... 600,000 52,125,000
--------------
MINERAL RESOURCES -- 1.6%
Amax Gold, Inc.................................. 131,342 788,052
Cyprus Amax Minerals Co......................... 1,533,200 40,054,850
+Nord Resources Corp............................ 130,500 831,938
--------------
41,674,840
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 1.8%
American Water Works Co., Inc................... 135,000 3,645,000
ITT Corp........................................ 500,000 44,312,500
+Worldtex, Inc.................................. 107,199 388,596
--------------
48,346,096
--------------
</TABLE>
52
<PAGE>
COMMON STOCK PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.8%
Avnet, Inc...................................... 310,000 $ 11,470,000
Eastman Kodak Co................................ 500,000 23,875,000
Gibson Greetings, Inc........................... 750,000 11,062,500
--------------
46,407,500
--------------
PETROLEUM -- 4.8%
Amerada Hess Corp............................... 325,000 14,828,125
Atlantic Richfield Co........................... 250,000 25,437,500
Elf Aquitaine, ADR.............................. 1,836,033 64,720,163
Occidental Petroleum Corp....................... 1,100,000 21,175,000
--------------
126,160,788
--------------
PETROLEUM SERVICES -- 2.3%
+B.J. Services Co............................... 500,000 8,437,500
Oryx Energy Co.................................. 1,600,000 19,000,000
Total SA, ADR................................... 717,640 21,170,380
Union Texas Petroleum Holdings, Inc............. 504,500 10,468,375
--------------
59,076,255
--------------
RAILROADS -- 0.9%
+Southern Pacific Rail Corp..................... 1,300,000 23,562,500
--------------
RETAIL -- 5.7%
Dayton-Hudson Corp.............................. 119,600 8,461,700
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 1,300,000 34,775,000
+Federated Department Stores, Inc............... 700,000 13,475,000
K mart Corp..................................... 2,300,000 29,900,000
Petrie Stores Corp.............................. 540,000 12,082,500
U.S. Shoe Corp.................................. 1,491,600 27,967,500
+Waban, Inc..................................... 1,300,000 23,075,000
--------------
149,736,700
--------------
STEEL -- 0.5%
+Bethlehem Steel................................ 500,000 9,000,000
Carpenter Technology Corp....................... 50,000 2,800,000
--------------
11,800,000
--------------
TELECOMMUNICATIONS -- 3.5%
Sprint Corp..................................... 1,700,000 46,962,500
Telefonica de Espana, SA, ADR................... 1,300,000 45,662,500
--------------
92,625,000
--------------
TRUCKING/SHIPPING -- 0.8%
OMI Corp........................................ 1,000,000 6,625,000
Overseas Shipholding Group, Inc................. 600,000 13,800,000
--------------
20,425,000
--------------
UTILITY - ELECTRIC -- 0.7%
American Electric Power Co., Inc................ 180,000 5,917,500
General Public Utilities Corp................... 500,000 13,125,000
--------------
19,042,500
--------------
TOTAL COMMON STOCKS
(Cost $2,039,308,682).......................................... 2,285,652,312
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 1.4% SHARES VALUE
------------- --------------
<S> <C> <C>
AUTOS - CARS & TRUCKS -- 0.5%
**Chrysler Corp. (Conv. Pfd.)................... 95,000 13,050,625
--------------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
PREFERRED STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
TOBACCO -- 0.9%
RJR Nabisco Holdings Corp. (Conv. Pfd.)......... 4,000,000 $ 24,000,000
--------------
TOTAL PREFERRED STOCKS
(Cost $36,922,710)............................................. 37,050,625
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 13.1% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. $ 343,262,000 $ 343,262,000
--------------
LIABILITIES -- (1.8%)
(net of other assets).......................................... (48,192,920)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $2,617,772,017
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $10,923,100. The aggregate value, $13,050,625 is
approximately 0.5% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending December
31, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
53
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 58.8% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 0.8%
Boeing Co....................................... 287,200 $ 13,426,600
Loral Corp...................................... 392,000 14,847,000
--------------
28,273,600
--------------
ALUMINUM -- 1.1%
Aluminum Co. of America......................... 426,700 36,962,888
--------------
AUTOS - CARS & TRUCKS -- 1.2%
Ford Motor Co................................... 442,900 12,401,200
General Motors Corp. (Class 'E' Stock).......... 814,600 31,362,100
--------------
43,763,300
--------------
BANKS AND SAVINGS & LOANS -- 1.9%
Bank of New York Company, Inc................... 1,549,400 44,932,600
Norwest Corp.................................... 597,800 13,973,575
Washington Mutual, Inc.......................... 407,800 6,881,625
--------------
65,787,800
--------------
BEVERAGES -- 0.3%
+Dr. Pepper/Seven-Up Cos., Inc.................. 467,300 11,974,563
--------------
CHEMICALS -- 2.4%
A. Schulman, Inc................................ 189,400 5,208,500
Air Products & Chemicals, Inc................... 470,900 21,013,913
Dow Chemical Co................................. 316,800 21,304,800
Eastman Chemical Co............................. 326,500 16,488,250
Imperial Chemical Industries, PLC, ADR.......... 275,400 12,806,100
+McWhorter Technologies, Inc.................... 243,950 3,628,756
OM Group, Inc................................... 183,700 4,408,800
--------------
84,859,119
--------------
CHEMICALS - SPECIALTY -- 0.9%
IMC Global, Inc................................. 699,100 30,236,075
--------------
COMMERCIAL SERVICES -- 1.0%
First Financial Management Corp................. 156,700 9,656,638
ServiceMaster, L.P.............................. 443,550 10,811,531
Southeby's Holdings, Inc. (Class 'A' Stock)..... 465,100 5,348,650
Wellman, Inc.................................... 355,300 10,037,225
--------------
35,854,044
--------------
COMPUTER SERVICES -- 2.7%
+American Management Systems, Inc............... 673,100 12,957,175
Automatic Data Processing, Inc.................. 690,400 40,388,400
First Data Corp................................. 509,800 24,151,775
+Microsoft Corp................................. 161,300 9,859,463
National Data Corp.............................. 232,200 5,979,150
--------------
93,335,963
--------------
COSMETICS & SOAPS -- 0.3%
Gillette Co..................................... 125,700 9,396,075
--------------
DIVERSIFIED GAS -- 0.4%
+Basin Exploration, Inc......................... 281,700 3,098,700
Cross Timbers Oil Co............................ 810,000 12,150,000
--------------
15,248,700
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.8%
International Business Machines Corp............ 381,000 28,003,500
--------------
DRUGS AND HOSPITAL SUPPLIES -- 2.6%
Abbott Laboratories............................. 580,700 18,945,338
Baxter International, Inc....................... 725,000 20,481,250
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Pfizer, Inc..................................... 285,300 $ 22,039,425
Schering-Plough Corp............................ 350,100 25,907,400
+Thermotrex Corp................................ 354,100 4,780,350
--------------
92,153,763
--------------
ELECTRICAL EQUIPMENT -- 1.2%
Baldor Electric Co.............................. 489,440 13,214,880
Belden, Inc..................................... 409,700 9,115,825
W.W. Grainger, Inc.............................. 177,600 10,256,400
Westinghouse Electric Corp...................... 674,200 8,258,950
--------------
40,846,055
--------------
ELECTRONICS -- 2.0%
+ADT Ltd........................................ 1,314,400 14,129,800
Emerson Electric Co............................. 883,800 55,237,500
--------------
69,367,300
--------------
FINANCIAL SERVICES -- 2.2%
Dean Witter, Discover & Co...................... 903,400 30,602,675
Federal Home Loan Mortgage Corp................. 403,700 20,386,850
GFC Financial Corp.............................. 232,400 7,378,700
Manufactured Home Communities, Inc.............. 717,900 14,268,262
T. Rowe Price & Associates...................... 170,200 5,106,000
--------------
77,742,487
--------------
FOODS -- 2.4%
Archer-Daniels-Midland Co....................... 3,512,040 72,435,825
Pioneer Hi-Bred International, Inc.............. 301,500 10,401,750
--------------
82,837,575
--------------
FOREST PRODUCTS -- 1.8%
Caraustar Industries, Inc....................... 419,500 9,333,875
International Paper Co.......................... 134,800 10,160,550
Willamette Industries, Inc...................... 881,200 41,857,000
--------------
61,351,425
--------------
GAS PIPELINES -- 0.3%
+Seagull Energy Corp............................ 535,400 10,239,525
--------------
HEALTHCARE -- 0.2%
+Sybron International Corp...................... 205,100 7,075,950
--------------
HOSPITAL MANAGEMENT -- 2.1%
Columbia / HCA Healthcare Corp.................. 840,442 30,676,132
+Health Care and Retirement Corp................ 576,400 17,364,050
+Healthtrust, Inc.-The Hospital Co.............. 374,700 11,896,725
+Homedco Group, Inc............................. 111,500 4,195,188
National Medical Enterprises, Inc............... 583,600 8,243,350
--------------
72,375,445
--------------
INSURANCE -- 3.4%
American International Group, Inc............... 411,800 40,356,400
CCP Insurance, Inc.............................. 74,800 1,524,050
Chubb Corp...................................... 302,000 23,367,250
General Re Corp................................. 323,900 40,082,625
NAC Re Corp..................................... 277,400 9,292,900
PennCorp Financial Group, Inc................... 256,100 3,361,313
--------------
117,984,538
--------------
LEISURE -- 1.3%
Carnival Corp. (Class 'A' Stock)................ 1,755,500 37,304,375
Royal Caribbean Cruise, Ltd..................... 233,600 6,657,600
--------------
43,961,975
--------------
MACHINERY -- 0.1%
+Thermo Fibertek, Inc........................... 219,800 3,489,325
--------------
</TABLE>
54
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
MEDIA -- 3.4%
American Media, Inc. (Class 'A' Stock).......... 408,600 $ 6,639,750
Capital Cities/ABC, Inc......................... 347,400 29,615,850
Comcast Corp. (Class 'A' Stock)................. 276,000 4,243,500
Gannett Co., Inc................................ 400,000 21,300,000
+Rogers Communications, Inc. (Class 'B'
Stock)........................................ 350,100 4,679,441
Shaw Communications, Inc. (Class 'B' Stock)..... 703,700 5,016,572
+Tele-Communications, Inc. (Class 'A' Stock).... 1,107,200 24,081,600
Tribune Co...................................... 420,400 23,016,900
--------------
118,593,613
--------------
MINERAL RESOURCES -- 1.8%
Placer Dome, Inc................................ 912,000 19,836,000
Potash Corp. of Saskatchewan, Inc............... 876,500 29,801,000
+Sante Fe Pacific Gold Corp..................... 950,300 12,235,112
--------------
61,872,112
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 6.1%
+American Business Information, Inc............. 624,500 11,553,250
Danaher Corp.................................... 110,300 5,763,175
Expeditors International of Washington, Inc..... 359,000 7,808,250
General Electric Co............................. 660,800 33,700,800
Illinois Tool Works, Inc........................ 936,600 40,976,250
Libbey, Inc..................................... 323,600 5,663,000
Martin Marietta Materials, Inc.................. 631,800 11,214,450
Modine Manufacturing Co......................... 308,900 8,880,875
Pentair, Inc.................................... 258,200 10,908,950
+Scholastic Corp................................ 139,800 7,129,800
The Rival Co.................................... 181,700 3,179,750
+Thermo Electron Corp........................... 563,100 25,269,113
Tyco International Ltd.......................... 881,600 41,876,000
--------------
213,923,663
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.7%
+DeVRY, Inc..................................... 380,100 11,783,100
Kellwood Co..................................... 533,900 11,211,900
--------------
22,995,000
--------------
PETROLEUM -- 2.5%
Amoco Corp...................................... 401,000 23,709,125
Royal Dutch Petroleum Co., ADR.................. 586,300 63,027,250
--------------
86,736,375
--------------
PETROLEUM SERVICES -- 0.8%
+Mesa, Inc...................................... 1,037,800 5,059,275
Total SA, ADR................................... 739,100 21,803,450
--------------
26,862,725
--------------
RAILROADS -- 0.3%
Illinois Central Corp........................... 372,700 11,460,525
--------------
REAL ESTATE DEVELOPMENT -- 1.6%
Crescent Real Estate Equities, Inc.............. 480,600 13,036,275
Duke Realty Investments, Inc.................... 434,000 12,260,500
Equity Residential Properties Trust............. 451,100 13,533,000
Federal Realty Investment Trust................. 285,200 5,882,250
Weingarten Realty Investors..................... 306,800 11,620,050
--------------
56,332,075
--------------
RESTAURANTS -- 0.2%
Sbarro, Inc..................................... 342,900 8,915,400
--------------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
RETAIL -- 2.0%
Dayton-Hudson Corp.............................. 307,400 $ 21,748,550
Edison Brothers Stores.......................... 143,400 2,652,900
Harcourt General, Inc........................... 468,800 16,525,200
Tiffany & Co.................................... 203,300 7,928,700
+Toys 'R' Us, Inc............................... 707,400 21,575,700
--------------
70,431,050
--------------
STEEL -- 2.1%
Broken Hill Proprietary Co., Ltd., ADR.......... 539,050 33,218,955
+LTV Corp....................................... 933,000 15,161,250
Worthington Industries, Inc..................... 1,206,100 24,122,000
--------------
72,502,205
--------------
TELECOMMUNICATIONS -- 2.4%
+Airtouch Communications, Inc................... 527,900 15,375,088
AT&T Corp....................................... 846,200 42,521,550
TCA Cable TV, Inc............................... 482,300 10,490,025
Telecomunicacoes Brasileiras, SA, ADR........... 39,700 1,776,455
Telefonos de Mexico (Class 'L' Stock), ADR...... 290,000 11,890,000
--------------
82,053,118
--------------
TEXTILES -- 0.4%
Russell Corp.................................... 168,900 5,299,237
Unifi, Inc...................................... 272,500 6,948,750
--------------
12,247,987
--------------
TOBACCO -- 1.1%
Philip Morris Companies, Inc.................... 438,900 25,236,750
UST, Inc........................................ 463,400 12,859,350
--------------
38,096,100
--------------
TOTAL COMMON STOCKS
(Cost $1,884,990,437).......................................... 2,046,142,938
--------------
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 24.6% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 3.1%
Associates Corp. of North America,
8.250%, 12/01/99.............................. $ 33,900,000 $ 33,701,685
Banc One Credit Card Master Trust, CMO,
7.750%, 12/15/99, Series 1994-B, Class B...... 5,000,000 4,937,500
Chase Manhattan Credit Card Trust,
7.400%, 05/15/00, Series 1992-1............... 5,000,000 4,921,850
Ford Credit Grantor Trust, CMO,
7.300%, 10/15/99, TR 1994-8, Class A.......... 13,614,932 13,449,000
Ford Motor Credit Co.,
7.750%, 11/15/02.............................. 2,815,000 2,684,468
General Motors Acceptance Corp., M.T.N.,
6.500%, 06/10/96.............................. 10,000,000 9,789,200
7.000%, 05/19/97, Tranche #TR00401............ 10,000,000 9,683,700
7.000%, 06/02/97, Tranche #TR00476............ 6,000,000 5,806,980
7.375%, 07/20/98, Tranche #TR00667............ 4,500,000 4,329,855
7.850%, 03/05/97, Tranche #TR00187............ 3,200,000 3,161,153
</TABLE>
55
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
%MBNA Master Credit Card Trust, CMO,
5.495%, 01/15/02, Series 1994-1, Class A...... $ 7,500,000 $ 7,480,313
Standard Credit Card Master Trust, CMO,
7.250%, 04/07/08, Series 1994-2A, Class A..... 4,500,000 4,100,625
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #TR00248............ 3,330,000 3,338,924
--------------
107,385,253
--------------
FOREIGN -- 4.4%
**Banco Del Estado-Chile,
8.390%, 08/01/01.............................. 3,500,000 3,298,750
Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 7,300,000 7,081,000
**Cemex, SA,
8.875%, 06/10/98.............................. 5,000,000 4,387,500
**Cemex, SA, M.T.N.,
9.500%, 09/20/01, Tranche #TR00010............ 12,500,000 10,625,000
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 7,250,000 5,935,938
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 15,100,000 12,835,000
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 7,342,500
Empresas La Moderna, SA,
10.250%, 11/12/97............................. 2,000,000 1,750,000
Financiera Energetic Nacional,
6.625%, 12/13/96.............................. 5,100,000 4,896,000
**Financiera Energetic Nacional, M.T.N.,
9.000%, 11/08/99.............................. 9,900,000 9,420,432
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 3,700,000 3,669,359
**Grupo Embotellador Mexicana,
10.750%, 11/19/97............................. 8,020,000 7,137,800
Grupo Televisa, SA,
10.000%, 11/09/97............................. 4,000,000 3,620,000
**Kansallis-Osake Pankki, N.Y.,
8.650%, 12/29/49.............................. 9,000,000 8,707,500
Korea Development Bank,
5.875%, 12/01/98.............................. 1,900,000 1,727,290
6.750%, 12/01/05.............................. 8,000,000 6,778,080
9.250%, 06/15/98.............................. 10,400,000 10,565,672
Korea Electric Power Corp.,
7.750%, 04/01/13.............................. 2,225,000 1,929,921
New Zealand Government,
9.875%, 01/15/11.............................. 7,300,000 8,225,713
Republic of Columbia,
7.125%, 05/11/98.............................. 2,700,000 2,479,782
7.250%, 02/23/04.............................. 4,100,000 3,377,375
8.750%, 10/06/99.............................. 900,000 858,375
Republic of South Africa,
9.625%, 12/15/99.............................. 8,300,000 8,219,593
**Republic of Trinidad and Tobago,
11.750%, 10/03/04............................. 9,000,000 9,112,500
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
United Mexican States,
5.820%, 06/28/01.............................. $ 1,375,000 $ 976,250
6.970%, 08/12/00.............................. 2,300,000 1,771,000
8.500%, 09/15/02.............................. 6,925,000 5,574,625
--------------
152,302,955
--------------
INDUSTRIAL -- 5.3%
Avenor, Inc.,
9.375%, 02/15/04.............................. 11,100,000 10,472,156
Columbia/HCA Healthcare Corp., M.T.N.,
8.850%, 01/01/07, Tranche #TR00009............ 15,400,000 15,369,200
Delta Air Lines, Inc.,
7.710%, 05/14/97.............................. 1,300,000 1,238,328
9.750%, 05/15/21.............................. 10,790,000 9,918,384
9.875%, 01/01/98.............................. 27,650,000 27,964,381
10.375%, 02/01/11............................. 6,950,000 6,794,807
Enterprise Rent A Car, M.T.N.,
8.750%, 12/15/99, Tranche #TR00001............ 13,750,000 13,702,563
Fleming Companies, Inc., C.D.,
10.625%, 12/15/01............................. 28,000,000 28,000,000
Ford Motor Co.,
9.000%, 09/15/01.............................. 3,000,000 3,061,140
News America Holdings, Inc.,
7.750%, 01/20/24.............................. 4,650,000 3,797,981
%Occidental Petroleum Corp., M.T.N.,
6.312%, 11/04/99.............................. 5,000,000 4,960,460
Oryx Energy Co.,
9.300%, 05/01/96.............................. 2,350,000 2,330,355
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013............ 10,500,000 10,106,250
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 7,600,000 7,410,000
RJR Nabisco, Inc.,
8.625%, 12/01/02.............................. 14,080,000 13,059,621
8.750%, 08/15/05.............................. 2,500,000 2,279,300
Tele-Communications, Inc.,
7.875%, 08/01/13.............................. 7,000,000 5,830,650
9.875%, 06/15/22.............................. 4,700,000 4,606,657
Transco Energy,
9.125%, 05/01/98.............................. 14,000,000 14,017,500
--------------
184,919,733
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 11.8%
Federal National Mortgage Association,
Zero Coupon, 07/05/14......................... 10,000,000 2,035,200
Government National Mortgage Association,
8.950%, 10/15/28, Pool #222286................ 4,024,004 4,000,514
United States Treasury Bonds,
6.250%, 08/15/23.............................. 21,510,000 17,486,985
8.875%, 08/15/17.............................. 53,900,000 58,717,043
8.875%, 02/15/19, Series 2019................. 29,800,000 32,537,726
9.250%, 02/15/16, Series 2016................. 16,200,000 18,227,592
11.250%, 02/15/15............................. 119,750,000 158,219,688
12.000%, 08/15/13............................. 17,250,000 22,937,153
United States Treasury Notes,
6.500%, 08/15/97.............................. 15,000,000 14,545,350
7.500%, 10/31/99, Series 1999................. 42,250,000 41,642,445
</TABLE>
56
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
7.750%, 11/30/99.............................. $ 16,125,000 $ 16,064,530
7.875%, 11/15/04.............................. 24,750,000 24,819,547
--------------
411,233,773
--------------
TOTAL LONG-TERM BONDS
(Cost $886,300,335)............................................ 855,841,714
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 16.5% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK-RELATED INSTRUMENTS -- 1.1%
Bank of Tokyo, Ltd., C.D.,
6.460%, 03/30/95.............................. 5,000,000 5,000,000
Banque Nationale De Paris, C.D.,
6.010%, 02/01/95.............................. 15,000,000 15,000,000
Fuji Bank, Ltd, C.D.,
5.906%, 01/20/95.............................. 14,000,000 14,000,000
Sanwa Bank, Ltd., C.D.,
6.040%, 02/02/95.............................. 4,000,000 4,000,000
--------------
38,000,000
--------------
COMMERCIAL PAPER -- 5.2%
American Home Products Corp.,
5.900%, 01/31/95.............................. 16,000,000 15,926,578
American Honda Finance Corp.,
5.980%, 01/31/95.............................. 2,000,000 1,990,698
American Telephone & Telegraph Co.,
6.300%, 03/24/95.............................. 500,000 493,000
Asset Securitization Cooperative Corp.,
5.970%, 02/02/95.............................. 4,000,000 3,980,100
6.050%, 02/01/95.............................. 3,100,000 3,084,892
Bankers Trust New York Corp.,
5.150%, 04/03/95.............................. 5,000,000 4,935,625
5.440%, 01/24/95.............................. 7,800,000 7,775,248
Chemical Bank,
6.000%, 01/23/95.............................. 250,000 249,167
6.250%, 01/03/95.............................. 656,000 656,000
CIT Group Holdings, Inc.,
5.500%, 01/17/95.............................. 11,000,000 10,976,472
Coca-Cola Enterprises, Inc.,
6.170%, 03/07/95.............................. 16,000,000 15,827,240
Corporate Asset Funding Co., Inc.,
5.500%, 01/11/95.............................. 3,000,000 2,996,333
Dean Witter, Discover & Co.,
5.970%, 02/01/95.............................. 16,000,000 15,923,053
First National Bank of Chicago,
5.180%, 02/27/95, Tranche #TR00072............ 1,000,000 999,143
5.688%, 02/22/95, Tranche #TR00087............ 5,000,000 5,000,000
Ford Motor Credit Co.,
6.070%, 01/31/95.............................. 4,335,000 4,314,534
Gateway Fuel Corp.,
5.800%, 01/20/95.............................. 1,082,000 1,079,037
General Electric Capital Corp.,
5.500%, 01/12/95.............................. 4,000,000 3,994,500
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
General Motors Acceptance Corp.,
5.740%, 01/17/95.............................. $ 16,100,000 $ 16,064,061
Greyhound Financial Corp.,
6.300%, 01/27/95.............................. 2,000,000 1,991,600
Hanson Finance, PLC,
6.280%, 03/01/95.............................. 1,000,000 990,057
Household Finance Corp.,
5.500%, 01/12/95.............................. 5,000,000 4,993,125
International Lease Finance Corp.,
6.200%, 03/20/95.............................. 5,000,000 4,934,556
ITT Corp.,
5.820%, 01/17/95.............................. 2,000,000 1,995,473
ITT Financial Corp.,
6.200%, 01/23/95.............................. 6,000,000 5,979,333
Konica Finance USA Corp.,
6.200%, 01/10/95.............................. 1,000,000 998,794
McKenna Triangle National Corp.,
6.150%, 01/17/95.............................. 100,000 99,761
Merrill Lynch & Co., Inc.,
5.750%, 01/17/95.............................. 5,000,000 4,988,819
Morgan Guaranty Trust Co.,
6.500%, 05/18/95.............................. 259,200 252,882
NationsBank Corp. of North Carolina,
5.400%, 01/23/95.............................. 11,000,000 10,967,000
Newell Co.,
6.000%, 01/05/95.............................. 8,946,000 8,943,018
Public Service Electric & Gas Co.,
6.020%, 01/10/95.............................. 8,700,000 8,689,816
Sears, Roebuck Acceptance Corp.,
6.050%, 02/06/95.............................. 10,000,000 9,942,861
Transamerica Corp.,
6.150%, 01/20/95.............................. 350,000 348,984
--------------
182,381,760
--------------
MEDIUM TERM NOTES -- 0.6%
NationsBank Corp. of Texas, M.T.N.,
6.030%, 01/31/95, Tranche #TR00023............ 5,000,000 5,000,000
PNC Bank N.A., M.T.N.,
5.150%, 02/22/95, Tranche #TR00005............ 5,000,000 5,000,033
%Xerox Credit Corp., M.T.N.,
6.800%, 06/02/95, Tranche #TR00016............ 10,000,000 10,002,050
--------------
20,002,083
--------------
PROMISSORY NOTES -- 0.1%
SRD Finance, Inc.,
6.150%, 01/12/95.............................. 3,000,000 2,995,388
Sumitomo Electric Finance U.S.A., Inc.,
6.050%, 01/26/95.............................. 2,000,000 1,992,269
--------------
4,987,657
--------------
</TABLE>
57
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 9.5%
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. $ 330,700,000 $ 330,700,000
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 576,071,500
--------------
OTHER ASSETS -- 0.1%
(net of liabilities)........................................... 3,484,147
--------------
TOTAL NET ASSETS -- 100.0%....................................... $3,481,540,299
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
C.D. Certificates of Deposit
CMO Collateralized Mortgage Obligations
L.P. Limited Partnership
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $63,175,092. The aggregate value, $58,625,420 is
approximately 1.7% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending December
31, 1994.
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
58
<PAGE>
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 34.8% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 1.1%
+Coltec Industries, Inc......................... 311,000 $ 5,325,875
GenCorp, Inc.................................... 676,800 8,037,000
Loral Corp...................................... 338,100 12,805,538
Rockwell International Corp..................... 253,100 9,048,325
+UNC, Inc....................................... 289,100 1,734,600
--------------
36,951,338
--------------
AUTOS - CARS & TRUCKS -- 1.9%
A.O. Smith Corp................................. 466,800 11,436,600
Ford Motor Co................................... 318,300 8,912,400
General Motors Corp............................. 192,800 8,145,800
General Motors Corp. (Class 'E' Stock).......... 325,600 12,535,600
General Motors Corp. (Class 'H' Stock).......... 465,900 16,248,263
Titan Wheel International, Inc.................. 332,600 9,229,650
--------------
66,508,313
--------------
BANKS AND SAVINGS & LOANS -- 2.4%
First Bank System, Inc.......................... 490,900 16,322,425
First Interstate Bancorp........................ 300,000 20,287,500
KeyCorp......................................... 937,400 23,435,000
Norwest Corp.................................... 1,060,200 24,782,175
--------------
84,827,100
--------------
CHEMICALS -- 1.1%
Imperial Chemical Industries, PLC, ADR.......... 371,300 17,265,450
OM Group, Inc................................... 308,400 7,401,600
W.R. Grace & Co................................. 318,800 12,313,650
--------------
36,980,700
--------------
CHEMICALS - SPECIALTY -- 0.8%
Ferro Corp...................................... 655,200 15,642,900
M.A. Hanna Co................................... 464,000 11,020,000
--------------
26,662,900
--------------
COMMERCIAL SERVICES -- 0.2%
+Welbilt Corp................................... 168,600 5,627,025
--------------
COMPUTER SERVICES -- 0.5%
National Data Corp.............................. 413,400 10,645,050
+Paxar Corp..................................... 818,343 8,183,430
--------------
18,828,480
--------------
CONSTRUCTION -- 0.2%
Ply-Gem Industries.............................. 400,000 7,650,000
--------------
CONTAINERS -- 0.5%
Ball Corp....................................... 363,600 11,453,400
+Sealed Air Corp................................ 167,800 6,082,750
--------------
17,536,150
--------------
DIVERSIFIED GAS -- 0.1%
+Basin Exploration, Inc......................... 148,000 1,628,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 1.1%
Schering-Plough Corp............................ 289,000 21,386,000
Warner-Lambert Co............................... 210,600 16,216,200
--------------
37,602,200
--------------
ELECTRICAL EQUIPMENT -- 0.3%
Belden Corp..................................... 524,300 11,665,675
--------------
ELECTRONICS -- 0.4%
+ADT Ltd........................................ 620,000 6,665,000
+IMO Industries, Inc............................ 477,900 5,973,750
--------------
12,638,750
--------------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- 1.3%
American Express Co............................. 319,000 $ 9,410,500
Dean Witter, Discover & Co...................... 736,500 24,948,938
Reinsurance Group of America, Inc............... 487,800 12,012,075
--------------
46,371,513
--------------
FOODS -- 0.4%
Universal Foods Corp............................ 542,000 14,905,000
--------------
FOREST PRODUCTS -- 0.6%
Mead Corp....................................... 455,900 22,168,137
--------------
FURNITURE -- 0.1%
Leggett & Platt, Inc............................ 128,700 4,504,500
--------------
GAS PIPELINES -- 0.4%
Enron Oil & Gas Co.............................. 332,700 6,238,125
+Seagull Energy Corp............................ 387,200 7,405,200
--------------
13,643,325
--------------
HOSPITAL MANAGEMENT -- 1.3%
+Healthtrust, Inc.-The Hospital Co.............. 735,700 23,358,475
National Medical Enterprises, Inc............... 1,650,000 23,306,250
--------------
46,664,725
--------------
HOUSING RELATED -- 0.8%
+Giant Cement Holdings, Inc..................... 415,200 4,930,500
+Owens-Corning Fiberglas Corp................... 662,800 21,209,600
--------------
26,140,100
--------------
INSURANCE -- 2.4%
Emphesys Financial Group, Inc................... 314,600 9,988,550
Equitable of Iowa Companies..................... 372,700 10,528,775
Financial Security Assurance Holdings, Ltd...... 226,200 4,750,200
National Re Corp................................ 207,600 5,449,500
PennCorp Financial Group, Inc................... 638,400 8,379,000
Provident Life & Accident Insurance Co. (Class
'B' Stock).................................... 177,200 3,854,100
TIG Holdings, Inc............................... 588,300 11,030,625
Trenwick Group, Inc............................. 276,200 11,703,975
W.R. Berkley Corp............................... 192,800 7,230,000
Western National Corp........................... 900,000 11,587,500
--------------
84,502,225
--------------
LEISURE -- 0.4%
+Caesars World, Inc............................. 213,100 14,224,424
--------------
MACHINERY -- 0.6%
DT Industries, Inc.............................. 234,500 2,520,875
+INDRESCO, Inc.................................. 390,700 5,567,475
Kaydon Corp..................................... 229,700 5,512,800
Parker-Hannifin Corp............................ 136,500 6,210,750
--------------
19,811,900
--------------
MEDIA -- 2.2%
Central Newspapers (Class 'A' Stock)............ 331,700 9,329,063
Comcast Corp. (Class 'A' Stock)................. 362,500 5,573,438
Comcast Corp. (Special Class 'A' Stock)......... 9,600 150,600
Lee Enterprises, Inc............................ 168,700 5,820,150
Media General, Inc. (Class 'A' Stock)........... 123,600 3,507,150
+Tele-Communications, Inc. (Class 'A' Stock).... 848,200 18,448,350
Time Warner, Inc................................ 599,500 21,057,437
Times Mirror Co. (Class 'A' Stock).............. 400,000 12,550,000
--------------
76,436,188
--------------
</TABLE>
59
<PAGE>
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY -- 4.8%
American Publishing Co. (Class 'A' Stock)....... 161,400 $ 1,775,400
BW/IP, Inc. (Class 'A' Stock)................... 379,200 6,493,800
Danaher Corp.................................... 227,800 11,902,550
Diebold, Inc.................................... 421,400 17,330,075
Donaldson Company, Inc.......................... 400,400 9,609,600
+Enterra Corp................................... 280,300 5,325,700
+FMC Corp....................................... 110,800 6,398,700
+IDEX Corp...................................... 190,400 8,044,400
+Itel Corp...................................... 168,700 5,841,238
ITT Corp........................................ 144,000 12,762,000
+Litton Industries, Inc......................... 259,700 9,608,900
Mark IV Industries, Inc......................... 545,300 10,769,675
Mascotech, Inc.................................. 607,300 7,818,988
Pentair, Inc.................................... 472,950 19,982,137
+SPS Transaction Services, Inc.................. 192,800 5,061,000
Textron, Inc.................................... 96,400 4,856,150
Trinity Industries, Inc......................... 385,500 12,143,250
+Wolverine Tube, Inc............................ 279,500 6,638,125
York International Corp......................... 199,000 7,338,125
--------------
169,699,813
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.0%
Eastman Kodak Co................................ 372,300 17,777,325
Whitman Corp.................................... 913,400 15,756,150
--------------
33,533,475
--------------
PETROLEUM -- 0.9%
Cabot Oil & Gas Corp. (Class 'A' Stock)......... 594,400 8,618,800
Elf Aquitaine, ADR.............................. 530,100 18,686,025
Parker & Parsley Petroleum Co................... 257,800 5,284,900
--------------
32,589,725
--------------
PETROLEUM SERVICES -- 0.7%
+Mesa, Inc...................................... 1,008,400 4,915,950
Murphy Oil Corp................................. 190,800 8,109,000
Oryx Energy Co.................................. 849,400 10,086,625
--------------
23,111,575
--------------
RAILROADS -- 1.1%
Burlington Northern, Inc........................ 259,000 12,464,375
+Chicago & North Western Transportation Co...... 671,600 12,928,300
Illinois Central Corp........................... 440,000 13,530,000
--------------
38,922,675
--------------
REAL ESTATE DEVELOPMENT -- 0.7%
Zeneca Group, PLC, ADR.......................... 607,200 24,971,100
--------------
RESTAURANTS -- 0.4%
Morrison Restaurants, Inc....................... 350,300 8,582,350
+Shoney's, Inc.................................. 530,100 6,758,775
--------------
15,341,125
--------------
RETAIL -- 1.3%
+Best Products Corp., Inc....................... 1,081,600 7,030,400
+Caldor Corp.................................... 382,100 8,501,725
Harcourt General, Inc........................... 277,500 9,781,875
K mart Corp..................................... 621,400 8,078,200
Rite Aid Corp................................... 258,200 6,035,425
Sears, Roebuck & Co............................. 139,800 6,430,800
--------------
45,858,425
--------------
RUBBER -- 0.3%
Goodyear Tire & Rubber Co....................... 269,800 9,072,024
--------------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
STEEL -- 0.3%
+Material Sciences Corp......................... 675,000 $ 10,715,624
--------------
TELECOMMUNICATIONS -- 1.6%
+Airtouch Communications, Inc................... 385,500 11,227,688
Century Telephone Enterprises, Inc.............. 337,300 9,950,350
MCI Communications Corp......................... 661,100 12,147,713
+Nextel Communications, Inc. (Class 'A'
Stock)........................................ 495,400 7,121,375
Rochester Telephone Corp........................ 797,700 16,851,412
--------------
57,298,538
--------------
TEXTILES -- 0.4%
+Owens-Illinois, Inc............................ 552,700 6,079,700
V.F. Corp....................................... 181,900 8,844,888
--------------
14,924,588
--------------
TRUCKING/SHIPPING -- 0.2%
Ryder System, Inc............................... 385,500 8,481,000
--------------
TOTAL COMMON STOCKS
(Cost $1,152,952,120).......................................... 1,218,998,355
--------------
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 27.3% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 5.2%
Associates Corp. of North America,
6.875%, 01/15/97.............................. $ 5,250,000 $ 5,117,018
8.250%, 12/01/99.............................. 34,100,000 33,900,515
8.375%, 01/15/98.............................. 1,100,000 1,099,989
Banc One Credit Card Master Trust, CMO,
7.750%, 12/15/99, Series 1994-B, Class B...... 5,100,000 5,036,250
%Chrysler Financial Corp.,
3.813%, 11/15/96.............................. 13,200,000 13,264,415
Chrysler Financial Corp., M.T.N.,
5.390%, 08/27/96, Tranche #TR00041............ 7,300,000 7,005,810
CIGNA Mortgage Securities, Inc.,
9.400%, 01/15/02, Series 1988-1, Class A2..... 3,362,186 3,329,614
Citicorp, M.T.N.,
8.500%, 02/24/97, Tranche #TR00128............ 5,100,000 5,131,263
Dean Witter, Discover & Co.,
6.000%, 03/01/98.............................. 2,500,000 2,334,275
Discover Card Trust,
7.875%, 04/16/98, Series #1991-C, Class B..... 10,000,000 9,959,300
Federal Express Corp., M.T.N.,
10.010%, 06/01/98, Tranche #SR00067........... 3,000,000 3,101,790
10.050%, 06/15/99, Tranche #SR00068........... 500,000 521,055
First Union Corp.,
9.450%, 06/15/99.............................. 4,000,000 4,112,080
Ford Credit Grantor Trust, CMO,
7.300%, 10/15/99, Series 1994-8, Class A...... 11,669,941 11,527,714
Ford Motor Credit Co.,
7.750%, 11/15/02.............................. 3,300,000 3,146,979
General Motors Acceptance Corp.,
8.250%, 08/01/96.............................. 5,000,000 4,985,950
</TABLE>
60
<PAGE>
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
General Motors Acceptance Corp., M.T.N.,
6.300%, 09/10/97, Tranche #TR00532............ $ 5,000,000 $ 4,735,700
6.500%, 06/10/96.............................. 13,000,000 12,725,960
7.375%, 07/20/98, Tranche #TR00667............ 4,650,000 4,474,184
7.500%, 11/04/97, Tranche #TR00598............ 15,000,000 14,602,050
7.850%, 03/05/97, Tranche #TR00187............ 3,300,000 3,259,938
Mellon Financial Co.,
6.500%, 12/01/97.............................. 1,650,000 1,577,565
Standard Credit Card Master Trust,
7.250%, 04/07/08, Series 1994-2A, Class A..... 4,650,000 4,237,313
Standard Credit Card Trust,
9.375%, 03/10/96, Series 1990-1............... 7,000,000 7,028,420
Union Bank Finland, Ltd.,
5.250%, 06/15/96.............................. 16,650,000 15,942,542
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #00248.............. 2,600,000 2,606,968
--------------
184,764,657
--------------
FOREIGN -- 4.5%
**Banco Del Estado-Chile,
8.390%, 08/01/01.............................. 3,700,000 3,487,250
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 7,300,000 7,081,000
**%Cemex, SA,
6.250%, 10/25/95, Series B.................... 4,250,000 4,165,000
**Cemex, SA, M.T.N.,
9.500%, 09/20/01, Tranche #TR00010............ 12,500,000 10,625,000
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 10,000,000 8,187,500
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 5,190,000 4,411,500
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 7,342,500
Financiera Energetic Nacional,
6.625%, 12/13/96.............................. 5,000,000 4,800,000
**Financiera Energetic Nacional, M.T.N.,
9.000%, 11/08/99.............................. 9,900,000 9,420,432
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 5,150,000 5,107,352
**Grupo Condumex, SA, M.T.N.,
6.250%, 07/27/96.............................. 4,300,000 3,827,000
**Grupo Embotellador Mexicana,
10.750%, 11/19/97............................. 8,015,000 7,133,350
Grupo Televisa, SA,
10.000%, 11/09/97............................. 7,250,000 6,561,250
%Hydro-Quebec,
3.438%, 09/30/49.............................. 3,500,000 2,925,780
**Kansallis-Osake Pankki, N.Y.,
8.650%, 12/29/49.............................. 10,000,000 9,675,000
Kansallis-Osake Pankki, N.Y., C.D.,
6.125%, 05/15/98.............................. 6,160,000 5,715,494
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Korea Development Bank,
5.875%, 12/01/98.............................. $ 1,900,000 $ 1,727,290
6.750%, 12/01/05.............................. 10,400,000 8,811,504
9.250%, 06/15/98.............................. 10,000,000 10,159,300
Korea Electric Power Corp.,
7.750%, 04/01/13.............................. 2,350,000 2,038,343
Republic of Columbia,
7.125%, 05/11/98.............................. 2,775,000 2,548,664
7.250%, 02/23/04.............................. 5,400,000 4,448,250
8.750%, 10/06/99.............................. 925,000 882,219
Republic of South Africa,
9.625%, 12/15/99.............................. 8,200,000 8,120,563
**Republic of Trinidad and Tobago,
11.750%, 10/03/04............................. 9,300,000 9,416,250
United Mexican States,
5.820%, 06/28/01.............................. 1,375,000 976,250
6.970%, 08/12/00.............................. 2,300,000 1,771,000
8.500%, 09/15/02.............................. 6,850,000 5,514,250
--------------
156,879,291
--------------
INDUSTRIAL -- 4.3%
Arkla, Inc., M.T.N.,
9.250%, 12/18/97, Tranche #TR00027............ 3,000,000 2,988,840
Avenor, Inc.,
9.375%, 02/15/04.............................. 11,225,000 10,590,086
Coca-Cola Enterprises, Inc.,
6.500%, 11/15/97.............................. 3,750,000 3,582,975
Columbia/HCA Healthcare Corp., M.T.N.,
8.850%, 01/01/07, Tranche #TR00009............ 12,700,000 12,674,600
Comdisco, Inc.,
8.950%, 05/15/95.............................. 19,420,000 19,533,800
Delta Air Lines, Inc.,
9.750%, 05/15/21.............................. 10,800,000 9,927,575
10.375%, 02/01/11............................. 6,850,000 6,697,040
**Enterprise Rent A Car, M.T.N.,
8.750%, 12/15/99.............................. 13,750,000 13,702,563
Ford Motor Co.,
9.000%, 09/15/01.............................. 3,900,000 3,979,482
Hanson Overseas Corp.,
5.500%, 01/15/96.............................. 2,000,000 1,953,980
News America Holdings, Inc.,
7.750%, 01/20/24.............................. 4,550,000 3,716,304
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013............ 12,000,000 11,550,000
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 8,950,000 8,726,250
RJR Nabisco, Inc.,
8.625%, 12/01/02.............................. 14,350,000 13,310,056
8.750%, 08/15/05.............................. 2,550,000 2,324,886
Sears, Roebuck & Co., M.T.N.,
9.420%, 04/01/96, Series IV................... 1,000,000 1,018,625
Sears, Roebuck Acceptance Corp.,
9.000%, 09/15/96.............................. 2,000,000 2,024,140
Tele-Communications, Inc.,
7.875%, 08/01/13.............................. 6,800,000 5,664,060
9.875%, 06/15/22.............................. 4,700,000 4,606,658
**Time Warner, Inc.,
6.050%, 07/01/95.............................. 8,000,000 7,933,040
</TABLE>
61
<PAGE>
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Westinghouse Electric Corp., M.T.N.,
8.700%, 06/20/96, Tranche #TR00029............ $ 2,950,000 $ 2,956,136
--------------
149,461,096
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 13.3%
Federal National Mortgage Association,
9.050%, 04/10/00.............................. 14,000,000 14,647,500
United States Treasury Bonds,
6.250%, 08/15/23.............................. 29,585,000 24,051,717
11.250%, 02/15/15............................. 168,850,000 223,093,063
12.000%, 08/15/13............................. 50,450,000 67,082,861
United States Treasury Notes,
6.000%, 11/30/97.............................. 87,600,000 83,534,484
7.250%, 11/15/96.............................. 21,000,000 20,835,990
7.500%, 10/31/99.............................. 8,550,000 8,427,050
7.750%, 11/30/99.............................. 4,525,000 4,508,031
7.875%, 11/15/04.............................. 19,075,000 19,128,601
--------------
465,309,297
--------------
TOTAL LONG-TERM BONDS
(Cost $997,384,451)............................................ 956,414,341
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 36.9% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK-RELATED INSTRUMENTS -- 5.9%
Bank of Tokyo, Ltd., C.D.,
6.460%, 03/30/95.............................. 25,000,000 25,000,000
Banque Nationale De Paris, C.D.,
6.010%, 02/01/95.............................. 35,000,000 35,000,000
Chemical Bank, N.Y., T.D.,
6.250%, 01/03/95.............................. 7,393,000 7,393,000
Fuji Bank, Ltd., C.D.,
5.906%, 01/20/95.............................. 7,000,000 7,000,000
6.360%, 03/21/95.............................. 15,000,000 15,000,000
Fuji Bank, Ltd., T.D.,
6.400%, 01/03/95.............................. 25,000,000 25,000,000
National Westminister Bank, PLC, C.D.,
5.800%, 01/23/95.............................. 1,000,000 999,870
Republic National Bank of New York, C.D.,
4.300%, 03/08/95.............................. 21,000,000 20,988,906
Sanwa Bank, Ltd., C.D.,
6.040%, 02/02/95.............................. 50,000,000 50,000,000
Sumitomo Bank, Ltd., C.D.,
5.960%, 01/30/95.............................. 10,000,000 10,000,000
Sumitomo Bank, Ltd., T.D.,
6.060%, 02/01/95.............................. 10,000,000 10,000,000
--------------
206,381,776
--------------
COMMERCIAL PAPER -- 23.8%
%American Express Centurion Bank,
4.500%, 08/04/95, Tranche #TR00037............ 4,000,000 3,999,765
American Home Products Corp.,
5.900%, 01/31/95.............................. 61,440,000 61,158,059
American Honda Finance Corp.,
5.980%, 01/31/95.............................. 13,000,000 12,939,535
Aristar, Inc.,
5.540%, 01/23/95.............................. 1,000,000 996,922
6.300%, 03/20/95.............................. 2,000,000 1,973,400
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Asset Securitization Cooperative Corp.,
5.500%, 01/23/95.............................. $ 9,000,000 $ 8,972,500
5.970%, 02/02/95.............................. 6,000,000 5,970,150
6.050%, 02/01/95.............................. 12,800,000 12,737,618
Bankers Trust New York Corp.,
5.150%, 04/03/95.............................. 25,637,000 25,306,924
5.440%, 01/24/95.............................. 17,200,000 17,145,419
Barclays Bank, PLC,
6.100%, 02/17/95.............................. 500,000 496,188
Chrysler Financial Corp.,
5.750%, 01/17/95.............................. 23,000,000 22,948,569
CIESCO,
5.500%, 01/11/95.............................. 5,000,000 4,993,889
CIT Group Holdings, Inc.,
5.500%, 01/17/95.............................. 13,000,000 12,972,194
5.970%, 02/01/95.............................. 14,000,000 13,932,672
Coca-Cola Enterprises, Inc.,
6.015%, 02/01/95.............................. 23,000,000 22,888,555
6.120%, 01/31/95.............................. 31,970,000 31,817,823
6.170%, 03/07/95.............................. 4,900,000 4,847,092
Corporate Receivables Corp.,
6.170%, 03/07/95.............................. 47,000,000 46,492,518
6.570%, 05/23/95.............................. 11,100,000 10,816,395
Dean Witter, Discover & Co.,
5.970%, 02/01/95.............................. 7,344,000 7,308,680
Deerfield Capital,
6.090%, 01/17/95.............................. 19,900,000 19,852,870
Duracell, Inc.,
6.300%, 02/10/95.............................. 2,000,000 1,986,700
Falcon Asset Securitization Corp.,
6.100%, 01/13/95.............................. 11,000,000 10,981,360
6.170%, 03/07/95.............................. 8,975,000 8,878,092
General Electric Capital Corp.,
6.430%, 04/13/95.............................. 6,150,000 6,040,154
6.450%, 04/13/95-04/18/95..................... 36,350,000 35,684,396
General Motors Acceptance Corp.,
5.740%, 01/17/95.............................. 60,500,000 60,364,951
Golden Peanut Co.,
5.600%, 02/01/95-02/03/95..................... 9,500,000 9,455,589
Greyhound Financial Corp.,
6.180%, 02/16/95.............................. 7,649,000 7,591,225
6.290%, 02/08/95.............................. 5,000,000 4,968,550
6.300%, 01/27/95.............................. 7,000,000 6,970,600
6.330%, 02/07/95.............................. 2,000,000 1,987,692
Hanson Finance, PLC,
5.470%, 01/17/95.............................. 2,000,000 1,995,746
6.260%, 03/03/95.............................. 5,000,000 4,948,703
6.270%, 03/09/95.............................. 13,000,000 12,852,829
6.280%, 03/01/95.............................. 4,000,000 3,960,227
Heller Financial, Inc.,
6.300%, 03/14/95.............................. 6,000,000 5,926,500
International Lease Finance Corp.,
6.200%, 03/20/95.............................. 10,000,000 9,869,111
ITT Corp.,
5.820%, 01/17/95.............................. 7,000,000 6,984,157
ITT Financial Corp.,
6.200%, 01/20/95.............................. 28,000,000 27,918,022
Maguire/Thomas Partners,
6.100%, 01/18/95.............................. 5,000,000 4,987,292
MCA Funding Corp.,
5.100%, 01/09/95.............................. 5,000,000 4,995,750
5.120%, 01/17/95.............................. 22,000,000 21,956,196
</TABLE>
62
<PAGE>
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
McKenna Triangle National Corp.,
6.100%, 01/23/95.............................. $ 1,000,000 $ 996,611
Merrill Lynch & Co., Inc.,
5.750%, 01/17/95.............................. 15,000,000 14,966,458
Morgan Stanley Group, Inc.,
6.270%, 03/01/95.............................. 8,500,000 8,415,616
National Australia Funding, Inc.,
5.600%, 02/01/95.............................. 2,000,000 1,990,978
NationsBank Corp. of North Carolina,
5.400%, 01/23/95.............................. 19,000,000 18,943,000
Newell Co.,
6.000%, 01/05/95.............................. 21,054,000 21,046,982
Preferred Receivables Funding Corp.,
5.650%, 01/11/95.............................. 13,000,000 12,983,678
Public Service Electric & Gas Co.,
6.020%, 01/17/95.............................. 11,000,000 10,974,248
Republic National Bank of New York,
5.750%, 02/01/95.............................. 5,000,000 4,999,985
Sears Roebuck Acceptance Corp.,
6.050%, 02/07/95.............................. 37,000,000 36,782,368
State Street Bank & Trust,
5.950%, 01/17/95.............................. 33,377,000 33,299,769
WCP Funding, Inc.,
6.280%, 03/06/95.............................. 4,000,000 3,956,738
Westpac Capital Corp.,
6.280%, 03/14/95.............................. 6,000,000 5,926,733
Whirlpool Corp.,
5.660%, 02/02/95.............................. 2,000,000 1,990,567
Whirlpool Financial Corp.,
5.600%, 02/06/95-02/09/95..................... 3,000,000 2,983,667
5.610%, 02/10/95.............................. 5,000,000 4,970,392
WMX Technologies,
5.200%, 05/12/95.............................. 4,000,000 3,925,467
5.225%, 02/07/95.............................. 3,000,000 2,984,760
Xerox Credit Corp.,
5.970%, 02/01/95.............................. 32,000,000 31,846,107
--------------
835,855,703
--------------
MEDIUM TERM NOTES -- 2.4%
PNC Bank N.A., M.T.N.,
5.150%, 02/22/95, Tranche #TR00005............ 10,000,000 10,000,066
%Corestates Capital Corp., M.T.N.,
6.020%, 07/19/95, Tranche #TR00076............ 10,000,000 10,002,084
**%Goldman Sachs Group, L.P., M.T.N.,
3.875%, 04/13/95.............................. 48,000,000 48,000,000
%Xerox Credit Corp., M.T.N.,
6.800%, 06/02/95, Tranche #TR00016............ 15,000,000 15,003,075
--------------
83,005,225
--------------
PROMISSORY NOTES -- 1.3%
Diamond Lease USA, Inc.,
6.100%, 01/18/95.............................. 1,000,000 997,458
Lehman Brothers Holdings, Inc.,
5.028%, 05/23/95.............................. 32,000,000 32,000,000
Seiko Corporation of America,
6.100%, 01/20/95.............................. 3,000,000 2,991,358
SRD Finance, Inc.,
6.100%, 01/12/95.............................. 3,000,000 2,995,425
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Sumitomo Electric Finance U.S.A., Inc.,
6.050%, 01/26/95.............................. $ 8,000,000 $ 7,969,078
--------------
46,953,319
--------------
REPURCHASE AGREEMENTS -- 3.5%
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. 121,345,000 121,345,000
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 1,293,541,023
--------------
OTHER ASSETS -- 1.0%
(net of liabilities)........................................... 32,150,567
--------------
TOTAL NET ASSETS -- 100.0%....................................... $3,501,104,286
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
C.D. Certificates of Deposit
CMO Collateralized Mortgage Obligations
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
T.D. Time Deposit
**Indicates a restricted security; the aggregate cost of the restricted
securities is $148,547,029. The aggregate value, $142,653,385 is
approximately 4.1% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending December
31, 1994.
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
63
<PAGE>
STOCK INDEX PORTFOLIO
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 96.1% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 2.1%
AlliedSignal, Inc............................... 54,100 $ 1,839,400
Boeing Co....................................... 64,850 3,031,737
E-Systems, Inc.................................. 6,200 258,075
General Dynamics Corp........................... 12,100 526,350
Lockheed Corp................................... 11,900 864,237
Loral Corp...................................... 16,300 617,362
Martin Marietta Corp............................ 18,400 816,500
McDonnell Douglas Corp.......................... 7,500 1,065,000
Northrop Grumman Corp........................... 9,300 390,600
Raytheon Co..................................... 25,800 1,647,975
Rockwell International Corp..................... 41,800 1,494,350
United Technologies Corp........................ 24,200 1,521,575
--------------
14,073,161
--------------
AIRLINES -- 0.3%
+AMR Corp....................................... 14,600 777,450
Delta Air Lines, Inc............................ 9,900 499,950
Southwest Airlines Co........................... 27,100 453,925
+USAir Group, Inc............................... 10,500 45,938
--------------
1,777,263
--------------
ALUMINUM -- 0.5%
Alcan Aluminum, Ltd............................. 42,450 1,077,169
Aluminum Co. of America......................... 16,900 1,463,962
Reynolds Metals Co.............................. 12,100 592,900
--------------
3,134,031
--------------
AUTOS - CARS & TRUCKS -- 2.6%
Chrysler Corp................................... 67,800 3,322,200
Cummins Engine Co., Inc......................... 8,300 375,575
Dana Corp....................................... 18,800 439,450
Echlin, Inc..................................... 10,900 327,000
Ford Motor Co................................... 191,800 5,370,400
General Motors Corp............................. 142,700 6,029,075
Genuine Parts Co................................ 23,650 851,400
Johnson Controls, Inc........................... 7,500 367,500
+Navistar International Corp.................... 14,500 219,312
Safety Kleen Corp............................... 11,050 162,987
--------------
17,464,899
--------------
BANKS AND SAVINGS & LOANS -- 5.1%
Banc One Corp................................... 77,622 1,969,658
Bank of Boston Corp............................. 20,300 525,262
BankAmerica Corp................................ 70,548 2,786,646
Bankers Trust NY Corp........................... 15,300 847,237
Barnett Banks, Inc.............................. 18,700 717,612
Boatmen's Bancshares, Inc....................... 19,500 528,937
Chase Manhattan Corp............................ 36,501 1,254,722
Chemical Banking Corp........................... 48,382 1,735,704
Citicorp........................................ 74,100 3,065,887
CoreStates Financial Corp....................... 28,000 728,000
First Chicago Corp.............................. 17,800 849,950
First Fidelity Bancorp.......................... 15,600 700,050
First Interstate Bancorp........................ 15,500 1,048,187
First Union Corp................................ 32,500 1,344,688
Fleet Financial Group, Inc...................... 26,700 867,750
Golden West Financial Corp...................... 12,200 430,050
Great Western Financial Corp.................... 24,500 392,000
H.F. Ahmanson & Co.............................. 22,200 357,975
J.P. Morgan & Co., Inc.......................... 36,650 2,052,400
KeyCorp......................................... 47,100 1,177,500
Mellon Bank Corp................................ 27,850 852,906
NationsBank Corp................................ 52,239 2,357,285
NBD Bancorp, Inc................................ 30,425 832,884
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Norwest Corp.................................... 60,800 $ 1,421,200
PNC Bank Corp................................... 44,300 935,838
Shawmut National Corp........................... 22,300 365,163
Suntrust Banks, Inc............................. 23,100 1,103,025
U.S. Bancorp.................................... 18,900 427,613
Wachovia Corp................................... 32,400 1,044,900
Wells Fargo & Co................................ 10,400 1,508,000
--------------
34,229,029
--------------
BEVERAGES -- 3.5%
Adolph Coors Co. (Class 'B' Stock).............. 7,100 118,925
Anheuser-Busch Companies, Inc................... 49,900 2,538,663
Brown-Forman Corp. (Class 'B' Stock)............ 15,300 466,650
Coca-Cola Co.................................... 246,100 12,674,150
PepsiCo, Inc.................................... 150,800 5,466,500
Seagram Co., Ltd................................ 70,300 2,073,850
--------------
23,338,738
--------------
CHEMICALS -- 2.8%
Air Products & Chemicals, Inc................... 21,700 968,362
Dow Chemical Co................................. 52,500 3,530,625
E.I. du Pont de Nemours & Co.................... 129,700 7,295,625
Eastman Chemical Co............................. 15,900 802,950
Hercules, Inc................................... 7,800 899,925
Mallinckrodt Group, Inc......................... 14,800 442,150
Monsanto Co..................................... 22,500 1,586,250
Nalco Chemical Co............................... 12,900 432,150
Rohm & Haas Co.................................. 13,100 748,337
Sigma-Aldrich Corp.............................. 9,000 297,000
Union Carbide Corp.............................. 28,600 840,125
W.R. Grace & Co................................. 17,900 691,388
--------------
18,534,887
--------------
CHEMICALS - SPECIALTY -- 0.4%
Engelhard Corp.................................. 18,850 419,413
First Mississippi Corp.......................... 3,700 92,500
Great Lakes Chemical Corp....................... 13,700 780,900
Morton International, Inc....................... 28,100 800,850
Praxair, Inc.................................... 25,100 514,550
Raychem Corp.................................... 7,800 277,875
--------------
2,886,088
--------------
COMMERCIAL SERVICES -- 0.2%
Deluxe Corp..................................... 15,300 405,450
John H. Harland Co.............................. 5,900 118,000
Moore Corp., Ltd................................ 18,300 345,413
Ogden Corp...................................... 7,600 142,500
--------------
1,011,363
--------------
COMPUTER SERVICES -- 2.8%
Autodesk, Inc................................... 8,800 348,700
Automatic Data Processing, Inc.................. 26,700 1,561,950
+Ceridian Corp.................................. 8,200 220,375
+Cisco Systems.................................. 50,000 1,756,250
Computer Associates International, Inc.......... 31,350 1,520,475
+Computer Sciences Corp......................... 9,900 504,900
First Data Corp................................. 20,600 975,925
+Harris Computer Systems Corp................... 370 4,532
+Intergraph Corp................................ 7,600 61,750
+Lotus Development Corp......................... 9,000 369,000
+Microsoft Corp................................. 109,900 6,717,638
+Novell, Inc.................................... 70,000 1,198,750
+Oracle Systems Corp............................ 54,400 2,400,400
</TABLE>
64
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Sun Microsystems, Inc.......................... 19,300 $ 685,150
+Tandem Computers, Inc.......................... 21,100 361,338
--------------
18,687,133
--------------
CONSTRUCTION -- 0.2%
Fluor Corp...................................... 15,600 672,750
Foster Wheeler Corp............................. 6,800 202,300
Kaufman & Broad Home Corp....................... 6,366 81,962
Pulte Corp...................................... 5,100 117,300
--------------
1,074,312
--------------
CONTAINERS -- 0.2%
Ball Corp....................................... 5,400 170,100
Bemis Co., Inc.................................. 10,000 240,000
+Crown Cork & Seal, Inc......................... 17,300 653,075
--------------
1,063,175
--------------
COSMETICS & SOAPS -- 2.3%
Alberto Culver Co. (Class 'B' Stock)............ 5,000 136,250
Avon Products, Inc.............................. 13,400 800,650
Clorox Co....................................... 9,900 582,862
Colgate Palmolive Co............................ 28,500 1,806,188
Gillette Co..................................... 41,900 3,132,025
International Flavors & Fragrances, Inc......... 21,000 971,250
Procter & Gamble Co............................. 130,552 8,094,224
--------------
15,523,449
--------------
DIVERSIFIED GAS -- 0.2%
Coastal Corp.................................... 19,900 512,425
Eastern Enterprises............................. 4,100 107,625
ENSERCH Corp.................................... 12,200 160,125
NICOR, Inc...................................... 10,300 234,325
ONEOK, Inc...................................... 4,600 82,800
--------------
1,097,300
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 2.3%
Alco Standard Corp.............................. 10,388 651,847
Avery Dennison Corp............................. 10,500 372,750
+COMPAQ Computer Corp........................... 49,400 1,951,300
Honeywell, Inc.................................. 24,900 784,350
International Business Machines Corp............ 111,100 8,165,850
Pitney-Bowes, Inc............................... 29,600 939,800
+Unisys Corp.................................... 31,100 268,238
Xerox Corp...................................... 20,182 1,998,018
--------------
15,132,153
--------------
DRUGS AND HOSPITAL SUPPLIES -- 7.7%
Abbott Laboratories............................. 155,000 5,056,875
Allergan, Inc................................... 12,100 341,825
+ALZA Corp...................................... 15,200 273,600
American Home Products Corp..................... 58,200 3,652,050
+Amgen, Inc..................................... 25,600 1,510,400
Bausch & Lomb, Inc.............................. 11,300 382,787
Baxter International, Inc....................... 53,600 1,514,200
Becton, Dickinson & Co.......................... 14,000 672,000
+Biomet, Inc.................................... 21,600 302,400
Bristol-Myers Squibb Co......................... 97,140 5,621,978
C.R. Bard, Inc.................................. 9,900 267,300
Eli Lilly & Co.................................. 55,800 3,661,875
Johnson & Johnson............................... 122,600 6,712,350
Medtronic, Inc.................................. 22,000 1,223,750
Merck & Co., Inc................................ 240,050 9,151,906
Pfizer, Inc..................................... 58,300 4,503,675
Schering-Plough Corp............................ 36,700 2,715,800
St. Jude Medical, Inc........................... 8,500 337,875
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
United States Surgical Corp..................... 10,500 $ 199,500
Upjohn Co....................................... 32,700 1,005,525
Warner-Lambert Co............................... 25,500 1,963,500
--------------
51,071,171
--------------
ELECTRICAL EQUIPMENT -- 0.1%
Westinghouse Electric Corp...................... 66,800 818,300
--------------
ELECTRONICS -- 4.1%
+Advanced Micro Devices, Inc.................... 17,700 440,288
Amdahl Corp..................................... 23,300 256,300
AMP, Inc........................................ 20,200 1,469,550
Apple Computer, Inc............................. 22,400 873,600
+Cray Research, Inc............................. 4,700 74,025
+Data General Corp.............................. 5,400 54,000
+Digital Equipment Corp......................... 26,400 877,800
EG&G, Inc....................................... 9,700 137,012
Emerson Electric Co............................. 42,700 2,668,750
Harris Corp..................................... 7,400 314,500
Hewlett-Packard Co.............................. 48,500 4,843,937
Intel Corp...................................... 79,800 5,097,225
Micron Technology, Inc.......................... 19,800 873,675
Motorola, Inc................................... 107,800 6,238,925
+National Semiconductor Corp.................... 23,900 466,050
Perkin-Elmer Corp............................... 8,100 207,562
Tandy Corp...................................... 12,265 614,783
Tektronix, Inc.................................. 5,600 191,800
Texas Instruments, Inc.......................... 17,500 1,310,312
Thomas & Betts Corp............................. 3,500 234,938
+Zenith Electronics Corp........................ 8,300 96,488
--------------
27,341,520
--------------
FINANCIAL SERVICES -- 2.6%
American Express Co............................. 94,200 2,778,900
Beneficial Corp................................. 9,700 378,300
Dean Witter, Discover & Co...................... 32,245 1,092,299
Federal Home Loan Mortgage Corporation.......... 34,150 1,724,575
Federal National Mortgage Association........... 51,700 3,767,637
H & R Block, Inc................................ 19,800 735,075
Household International , Inc................... 17,500 649,688
MBNA Corp....................................... 27,800 649,825
Merrill Lynch & Co., Inc........................ 39,200 1,401,400
National City Corp.............................. 28,200 729,675
Salomon, Inc.................................... 20,600 772,500
Transamerica Corp............................... 14,200 706,450
Travelers, Inc.................................. 62,031 2,016,008
--------------
17,402,332
--------------
FOODS -- 3.2%
Archer-Daniels-Midland Co....................... 98,764 2,037,007
Campbell Soup Co................................ 47,900 2,113,587
ConAgra, Inc.................................... 47,600 1,487,500
CPC International, Inc.......................... 28,200 1,501,650
Fleming Companies, Inc.......................... 6,700 155,775
General Mills, Inc.............................. 30,000 1,710,000
Giant Food, Inc. (Class 'A' Stock).............. 10,900 237,075
H.J. Heinz & Co................................. 47,100 1,730,925
Hershey Foods Corp.............................. 16,300 788,513
Kellogg Co...................................... 42,500 2,470,313
Pet, Inc........................................ 19,900 393,025
Pioneer Hi-Bred International, Inc.............. 16,600 572,700
Quaker Oats Co.................................. 26,000 799,500
Ralston-Ralston Purina Group.................... 19,240 858,585
Sara Lee Corp................................... 91,000 2,297,750
</TABLE>
65
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Sysco Corp...................................... 34,800 $ 896,100
W. M. Wrigley, Jr. Co........................... 22,300 1,101,063
--------------
21,151,068
--------------
FOREST PRODUCTS -- 1.8%
Boise Cascade Corp.............................. 7,686 205,600
Champion International Corp..................... 17,900 653,350
Federal Paper Board Co., Inc.................... 8,500 246,500
Georgia-Pacific Corp............................ 17,200 1,229,800
International Paper Co.......................... 23,600 1,778,850
James River Corp. of Virginia................... 15,900 321,975
Kimberly-Clark Corp............................. 31,000 1,565,500
Louisiana Pacific Corp.......................... 21,000 572,250
Mead Corp....................................... 11,100 539,737
Potlatch Corp................................... 5,800 216,050
Scott Paper Co.................................. 14,100 974,663
Stone Container Corp............................ 17,066 294,388
Temple Inland, Inc.............................. 10,500 473,813
Union Camp Corp................................. 13,100 617,338
Westvaco Corp................................... 12,400 486,700
Weyerhaeuser Co................................. 39,300 1,473,750
--------------
11,650,264
--------------
GAS PIPELINES -- 0.6%
+Columbia Gas System, Inc....................... 9,500 223,250
Consolidated Natural Gas Co..................... 17,900 635,450
Enron Corp...................................... 47,400 1,445,700
NorAm Energy Corp............................... 21,100 113,413
Panhandle Eastern Corp.......................... 22,990 454,053
Peoples Energy Corp............................. 6,400 167,200
Transco Energy Co............................... 7,600 126,350
Williams Companies, Inc......................... 19,900 499,987
--------------
3,665,403
--------------
HOSPITAL MANAGEMENT -- 0.6%
+Beverly Enterprises, Inc....................... 17,000 244,375
Columbia / HCA Healthcare Corp.................. 68,132 2,486,818
Community Psychiatric Centers................... 6,900 75,900
Manor Care, Inc................................. 11,850 324,394
National Medical Enterprises, Inc............... 30,600 432,225
Service Corp. International..................... 17,800 493,950
Shared Medical Systems Corp..................... 4,700 153,925
--------------
4,211,587
--------------
HOUSING RELATED -- 0.6%
Armstrong World Industries, Inc................. 7,100 273,350
Centex Corp..................................... 6,000 136,500
Fleetwood Enterprises, Inc...................... 8,700 163,125
Lowe's Companies, Inc........................... 30,000 1,042,500
Masco Corp...................................... 29,300 662,913
Maytag Corp..................................... 19,500 292,500
+Owens-Corning Fiberglas Corp................... 8,600 275,200
Skyline Corp.................................... 1,000 19,250
Stanley Works................................... 9,000 321,750
Whirlpool Corp.................................. 14,200 713,550
--------------
3,900,638
--------------
INSURANCE -- 3.1%
Aetna Life & Casualty Co........................ 21,500 1,013,187
Alexander & Alexander Services, Inc............. 8,500 157,250
American General Corp........................... 40,400 1,141,300
American International Group, Inc............... 60,225 5,902,050
Chubb Corp...................................... 16,800 1,299,900
CIGNA Corp...................................... 13,700 871,662
Continental Corp................................ 10,600 201,400
General Re Corp................................. 15,750 1,949,062
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Jefferson-Pilot Corp............................ 9,650 $ 500,594
Lincoln National Corp........................... 17,800 623,000
Marsh & McLennan Companies, Inc................. 13,800 1,093,650
Providian Corp.................................. 18,500 571,188
SAFECO Corp..................................... 11,700 608,400
St. Paul Companies, Inc......................... 16,000 716,000
Torchmark Corp.................................. 13,900 484,763
U.S. Healthcare, Inc............................ 30,500 1,258,125
United Healthcare Corp.......................... 32,700 1,475,587
UNUM Corp....................................... 14,500 547,375
USF&G Corp...................................... 14,900 203,013
USLIFE Corp..................................... 4,100 142,987
--------------
20,760,493
--------------
LEISURE -- 1.0%
+Bally Entertainment Corp....................... 7,200 44,100
Brunswick Corp.................................. 18,300 345,412
Handleman Co.................................... 5,850 66,544
Hasbro, Inc..................................... 16,500 482,625
+King World Productions, Inc.................... 6,650 229,425
Mattel, Inc..................................... 34,356 863,195
Outboard Marine Corp............................ 3,900 76,537
Walt Disney Co.................................. 102,200 4,713,975
--------------
6,821,813
--------------
LODGING -- 0.3%
Hilton Hotels Corp.............................. 9,400 633,325
Marriott International, Inc..................... 23,700 666,563
+Promus Companies, Inc.......................... 19,950 618,450
--------------
1,918,338
--------------
MACHINERY -- 1.2%
Briggs & Stratton Corp.......................... 5,200 170,300
Caterpillar, Inc................................ 38,500 2,122,312
Cincinnati Milacron, Inc........................ 6,900 163,013
+Clark Equipment Co............................. 3,200 173,600
Cooper Industries, Inc.......................... 22,100 754,162
Deere & Co...................................... 16,500 1,093,125
Dover Corp...................................... 10,700 552,387
Eaton Corp...................................... 14,900 737,550
Giddings & Lewis, Inc........................... 6,900 101,775
+Giddings & Lewis, Inc. (Contingent Payment
Right)........................................ 1,000 0
Harnischfeger Industries, Inc................... 8,400 236,250
Ingersoll-Rand Co............................... 19,700 620,550
PACCAR, Inc..................................... 7,130 315,503
Parker-Hannifin Corp............................ 9,300 423,150
Snap-On Inc..................................... 8,000 266,000
SPX Corp........................................ 1,500 24,938
Timken Co....................................... 6,400 225,600
+Varity Corp.................................... 8,810 319,363
--------------
8,299,578
--------------
MEDIA -- 3.0%
Capital Cities/ABC, Inc......................... 29,800 2,540,450
CBS, Inc........................................ 12,150 672,806
Comcast Corp. (Special Class 'A' Stock)......... 44,400 696,525
Dow Jones & Co., Inc............................ 18,300 567,300
Dun & Bradstreet Corp........................... 32,760 1,801,800
Gannett Co., Inc................................ 27,800 1,480,350
Interpublic Group of Companies, Inc............. 14,400 462,600
Knight-Ridder, Inc.............................. 9,900 499,950
McGraw-Hill, Inc................................ 9,400 628,625
Meredith Corp................................... 2,900 135,213
</TABLE>
66
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
New York Times Co. (Class 'A' Stock)............ 19,800 $ 438,075
R. R. Donnelley & Sons Co....................... 29,500 870,250
+Tele-Communications, Inc. (Class 'A' Stock).... 109,900 2,390,325
Time Warner, Inc................................ 71,940 2,526,893
Times Mirror Co. (Class 'A' Stock).............. 24,000 753,000
Tribune Co...................................... 12,500 684,375
+Viacom, Inc. (Class 'B' Stock)................. 66,367 2,696,159
--------------
19,844,696
--------------
MINERAL RESOURCES -- 1.1%
American Barrick Resources Corp................. 67,100 1,492,975
ASARCO, Inc..................................... 8,700 247,950
Burlington Resources, Inc....................... 24,600 861,000
Cyprus Amax Minerals Co......................... 17,600 459,800
Echo Bay Mines, Ltd............................. 21,800 231,625
Homestake Mining Co............................. 26,300 450,388
Inco, Ltd....................................... 22,200 635,475
Newmont Mining Corp............................. 16,100 579,600
Phelps Dodge Corp............................... 13,300 822,937
Pittston Services Group......................... 7,300 193,450
Placer Dome, Inc................................ 45,800 996,150
+Sante Fe Pacific Gold Corp..................... 46,916 604,044
--------------
7,575,394
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 4.5%
Bassett Furniture Industries, Inc............... 2,612 74,442
Browning-Ferris Industries, Inc................. 37,400 1,061,225
Crane Co........................................ 5,500 147,813
Ecolab, Inc..................................... 12,000 252,000
+FMC Corp....................................... 6,900 398,475
General Electric Co............................. 326,400 16,646,400
General Signal Corp............................. 9,262 295,226
Illinois Tool Works, Inc........................ 21,400 936,250
ITT Corp........................................ 22,400 1,985,200
+JWP, Inc....................................... 4,200 0
Millipore Corp.................................. 5,500 266,062
Morrison Knudsen Corp........................... 5,800 73,950
NACCO Industries, Inc. (Class 'A' Stock)........ 1,600 77,400
Pall Corp....................................... 21,900 410,625
PPG Industries, Inc............................. 40,400 1,499,850
Rollins Environmental Services, Inc............. 9,400 45,825
Teledyne, Inc................................... 10,300 207,287
Textron, Inc.................................... 17,100 861,412
Trinova Corp.................................... 5,600 164,500
TRW, Inc........................................ 12,300 811,800
Tyco International, Ltd......................... 14,300 679,250
W.W. Grainger, Inc.............................. 9,500 548,625
WMX Technologies, Inc........................... 91,700 2,407,125
Zurn Industries, Inc............................ 2,000 36,000
--------------
29,886,742
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 2.3%
American Greetings Corp. (Class 'A' Stock)...... 13,800 372,600
Black & Decker Corp............................. 16,500 391,875
Corning, Inc.................................... 42,400 1,266,700
Dial Corp....................................... 17,600 374,000
Eastman Kodak Co................................ 63,300 3,022,575
Jostens, Inc.................................... 8,100 150,863
Minnesota Mining & Manufacturing Co............. 80,500 4,296,687
+National Education Corp........................ 2,700 11,138
Polaroid Corp................................... 9,500 308,750
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Premark International, Inc...................... 12,300 $ 538,125
Rubbermaid, Inc................................. 30,800 885,500
Unilever N.V., ADR.............................. 30,400 3,541,600
Whitman Corp.................................... 19,700 339,825
--------------
15,500,238
--------------
PETROLEUM -- 8.8%
Amerada Hess Corp............................... 17,500 798,438
Amoco Corp...................................... 94,730 5,600,911
Ashland Oil, Inc................................ 11,600 400,200
Atlantic Richfield Co........................... 30,485 3,101,848
Chevron Corp.................................... 123,900 5,529,037
Exxon Corp...................................... 236,800 14,385,600
Kerr-McGee Corp................................. 9,900 455,400
Louisiana Land & Exploration Co................. 6,500 236,438
+Maxus Energy Corp.............................. 23,000 77,625
Mobil Corp...................................... 75,800 6,386,150
Occidental Petroleum Corp....................... 59,700 1,149,225
Pennzoil Co..................................... 9,100 401,538
Phillips Petroleum Co........................... 49,700 1,627,675
Royal Dutch Petroleum Co........................ 102,000 10,965,000
Santa Fe Energy Resources, Inc.................. 15,970 127,760
Sun Co., Inc.................................... 21,000 603,750
Tenneco, Inc.................................... 32,700 1,389,750
Texaco, Inc..................................... 49,600 2,969,800
Unocal Corp..................................... 46,300 1,261,675
USX-Marathon Group.............................. 54,800 897,350
--------------
58,365,170
--------------
PETROLEUM SERVICES -- 0.9%
Baker Hughes, Inc............................... 26,700 487,275
Dresser Industries, Inc......................... 35,000 660,625
Halliburton Co.................................. 21,800 722,125
Helmerich & Payne, Inc.......................... 5,100 130,687
McDermott International, Inc.................... 9,700 240,075
Oryx Energy Co.................................. 18,600 220,875
+Rowan Companies, Inc........................... 15,200 93,100
Schlumberger, Ltd............................... 46,600 2,347,475
Sonat, Inc...................................... 16,000 448,000
+Western Atlas, Inc............................. 9,700 364,963
--------------
5,715,200
--------------
RAILROADS -- 1.0%
Burlington Northern, Inc........................ 17,300 832,562
Conrail Inc..................................... 15,100 762,550
CSX Corp........................................ 19,856 1,382,474
Norfolk Southern Corp........................... 25,800 1,564,125
Santa Fe Pacific Corp........................... 36,260 634,550
Union Pacific Corp.............................. 39,300 1,793,063
--------------
6,969,324
--------------
RESTAURANTS -- 0.7%
Luby's Cafeterias, Inc.......................... 4,550 101,806
McDonald's Corp................................. 133,800 3,913,650
+Ryan's Family Steak Houses, Inc................ 8,500 63,750
+Shoney's, Inc.................................. 7,900 100,725
Wendy's International, Inc...................... 19,700 283,188
--------------
4,463,119
--------------
RETAIL -- 5.9%
Albertson's, Inc................................ 48,300 1,400,700
American Stores Co.............................. 27,600 741,750
Brown Group, Inc................................ 3,000 96,000
Bruno's, Inc.................................... 13,700 114,737
Charming Shoppes, Inc........................... 18,300 121,237
Circuit City Stores, Inc........................ 18,700 416,075
</TABLE>
67
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Dayton Hudson Corp.............................. 13,614 $ 963,190
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 21,950 587,163
Great Atlantic & Pacific Tea Co., Inc........... 7,000 126,875
Hartcourt General, Inc.......................... 15,406 543,062
+Hartmarx Corp.................................. 2,600 15,275
Home Depot, Inc................................. 85,749 3,944,454
J.C. Penney Co., Inc............................ 44,700 1,994,737
K mart Corp..................................... 85,700 1,114,100
+Kroger Co...................................... 22,100 533,163
Liz Claiborne, Inc.............................. 15,600 263,250
Longs Drug Stores, Inc.......................... 3,600 114,300
May Department Stores Co........................ 47,300 1,596,375
Melville Corp................................... 20,200 623,675
Mercantile Stores Co., Inc...................... 7,100 280,450
Newell Co....................................... 30,000 630,000
Nike, Inc. (Class 'B' Stock).................... 14,100 1,052,212
Nordstrom, Inc.................................. 15,400 646,800
Oshkosh B' Gosh, Inc. (Class 'A' Stock)......... 1,900 26,600
Pep Boys-Manny, Moe & Jack...................... 11,700 362,700
+Price/Costco, Inc.............................. 42,566 548,037
Reebok International, Ltd....................... 15,600 616,200
Rite Aid Corp................................... 17,100 399,713
Sears, Roebuck & Co............................. 66,900 3,077,400
Sherwin-Williams Co............................. 16,200 536,625
Stride Rite Corp................................ 9,400 104,575
Supervalu, Inc.................................. 13,700 335,650
The Gap, Inc.................................... 27,300 832,650
The Limited, Inc................................ 68,700 1,245,187
TJX Companies, Inc.............................. 14,300 223,438
+Toys 'R' Us, Inc............................... 54,850 1,672,925
Wal-Mart Stores, Inc............................ 438,600 9,320,250
Walgreen Co..................................... 23,700 1,036,875
Winn Dixie Stores, Inc.......................... 14,300 734,663
Woolworth Corp.................................. 24,400 366,000
--------------
39,359,068
--------------
RUBBER -- 0.2%
B.F. Goodrich Co................................ 4,700 203,863
Cooper Tire & Rubber Co......................... 16,200 382,725
Goodyear Tire & Rubber Co....................... 28,900 971,762
--------------
1,558,350
--------------
STEEL -- 0.4%
+Armco, Inc..................................... 19,500 129,188
+Bethlehem Steel Corp........................... 21,000 378,000
+Inland Steel Industries, Inc................... 8,900 312,612
Nucor Corp...................................... 16,600 921,300
USX-U.S. Steel Group............................ 14,140 501,970
Worthington Industries, Inc..................... 17,300 346,000
--------------
2,589,070
--------------
TELECOMMUNICATIONS -- 4.5%
+Airtouch Communications........................ 94,200 2,743,575
Alltel Corp..................................... 30,000 903,750
Ameritech Corp.................................. 104,600 4,223,225
+Andrew Corp.................................... 4,900 256,025
AT&T Corporation................................ 299,173 15,033,443
+DSC Communications Corp........................ 21,200 760,550
+M/A-Com, Inc................................... 2,300 16,675
MCI Communications Corp......................... 123,300 2,265,638
Northern Telecom, Ltd........................... 48,000 1,602,000
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Scientific-Atlanta, Inc......................... 14,500 $ 304,500
Sprint Corp..................................... 65,400 1,806,675
--------------
29,916,056
--------------
TEXTILES -- 0.2%
National Service Industries, Inc................ 9,500 243,438
Russell Corp.................................... 7,200 225,900
Springs Industries, Inc......................... 3,700 136,900
V.F. Corp....................................... 12,018 584,375
--------------
1,190,613
--------------
TOBACCO -- 1.9%
American Brands, Inc............................ 39,000 1,462,500
Philip Morris Companies, Inc.................... 166,100 9,550,750
+RJR Nabisco Holdings Corp...................... 62,557 344,063
UST, Inc........................................ 38,600 1,071,150
--------------
12,428,463
--------------
TRUCKING/SHIPPING -- 0.3%
Consolidated Freightways, Inc................... 6,500 145,438
+Federal Express Corp........................... 10,400 626,600
Roadway Services, Inc........................... 7,600 431,300
Ryder System, Inc............................... 14,600 321,200
Yellow Corp..................................... 6,000 143,250
--------------
1,667,788
--------------
UTILITY - COMMUNICATIONS -- 4.2%
Bell Atlantic Corp.............................. 83,100 4,134,225
BellSouth Corp.................................. 94,400 5,109,400
GTE Corp........................................ 182,620 5,547,083
NYNEX Corp...................................... 79,800 2,932,650
Pacific Telesis Group........................... 80,500 2,294,250
Southwestern Bell Corp.......................... 115,000 4,643,125
U S West, Inc................................... 86,800 3,092,250
--------------
27,752,983
--------------
UTILITY - ELECTRIC -- 3.8%
American Electric Power Co., Inc................ 35,300 1,160,487
Baltimore Gas & Electric Co..................... 27,650 611,756
Carolina Power & Light Co....................... 30,500 812,062
Central & South West Corp....................... 36,400 823,550
CINergy Corp.................................... 27,739 648,399
Consolidated Edison Co. of NY, Inc.............. 44,900 1,156,175
Detroit Edison Co............................... 28,300 739,337
Dominion Resources, Inc......................... 32,050 1,145,788
Duke Power Co................................... 39,200 1,494,500
Entergy Corp.................................... 42,900 938,438
FPL Group, Inc.................................. 35,900 1,260,987
Houston Industries, Inc......................... 24,700 879,938
Niagara Mohawk Power Corp....................... 26,200 373,350
Northern States Power Co........................ 12,900 567,600
Ohio Edison Co.................................. 28,200 521,700
Pacific Enterprises............................. 15,700 333,625
Pacific Gas & Electric Co....................... 82,600 2,013,375
PacifiCorp...................................... 54,200 982,375
PECO Energy Co.................................. 42,500 1,041,250
Public Service Enterprise Group, Inc............ 47,100 1,248,150
SCEcorp......................................... 84,800 1,240,200
Southern Co..................................... 124,300 2,486,000
Texas Utilities Co.............................. 42,829 1,370,528
Unicom Corp..................................... 41,000 984,000
Union Electric Company.......................... 19,600 693,350
--------------
25,526,920
--------------
TOTAL COMMON STOCKS
(Cost $557,376,390)............................................ 638,348,680
--------------
</TABLE>
68
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 4.1% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 3.9%
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. $ 25,939,000 $ 25,939,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.2%
United States Treasury Bills,
++5.590%, 03/16/95............................ 100,000 98,882
++5.640%, 03/16/95............................ 1,200,000 1,186,464
--------------
1,285,346
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 27,224,346
--------------
##
VARIATION MARGIN ON OPEN FUTURES CONTRACTS -- 0.0%...............
(178,025)
--------------
LIABILITIES -- (0.2%)
(net of other assets).......................................... (860,794)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 664,534,207
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
+No dividend was paid on this security during the 12 months ending December
31, 1994.
++Entire amount pledged as collateral for futures transactions (See Note 2).
##Open futures contracts as of December 31, 1994 are as follows:
PAR VALUE
COVERED BY CONTRACT TYPE EXPIRATION DATE VALUE OF CONTRACTS
$24,628,425 S&P 500 Index Futures Mar 95 $25,143,575
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
69
<PAGE>
GLOBAL EQUITY PORTFOLIO
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 87.0% SHARES VALUE
------------- --------------
<S> <C> <C>
AUSTRALIA -- 6.7%
Brambles Industries, Ltd.
(Miscellaneous - Basic Industry).............. 314,800 $ 3,006,681
Broken Hill Proprietary Co., Ltd.
(Metals - Diversified)........................ 303,900 4,617,732
BTR Nylex, Ltd.
(Miscellaneous - Basic Industry).............. 1,391,344 2,588,736
Coca-Cola Amatil, Ltd.
(Foods)....................................... 817,705 5,198,194
Publishing and Broadcasting, Ltd.
(Media)....................................... 50,000 139,933
Western Mining Corp. Holdings, Ltd.
(Metals - Diversified)........................ 1,336,312 7,728,382
--------------
23,279,658
--------------
BELGIUM -- 0.9%
Bekaert, NPV
(Miscellaneous - Basic Industry).............. 4,500 3,194,107
--------------
FEDERAL REPUBLIC OF GERMANY -- 2.5%
BASF, AG
(Chemicals)................................... 18,900 3,896,719
Bilfinger & Berger Bau, AG
(Construction)................................ 3,744 1,908,663
Preussag, AG
(Miscellaneous - Basic Industry).............. 9,270 2,691,898
--------------
8,497,280
--------------
FINLAND -- 0.7%
Kymmene Corp.
(Forest Products)............................. 85,200 2,320,066
--------------
FRANCE -- 4.6%
Guyenne et Gascogne
(Retail)...................................... 3,100 783,561
Imetal
(Mineral Resources)........................... 32,880 3,176,574
Lafarge Coppee
(Construction)................................ 47,510 3,380,228
**Lafarge Coppee
(Construction)................................ 1,100 78,263
Legrand
(Electrical Equipment)........................ 2,700 3,275,791
Plastic Omnium
(Autos - Cars & Trucks)....................... 6,765 729,571
Valeo, SA
(Autos - Cars & Trucks)....................... 88,885 4,425,112
--------------
15,849,100
--------------
HONG KONG -- 4.4%
Cdl Hotels International, Ltd.
(Real Estate Development)..................... 3,908,174 1,540,540
Citic Pacific, Ltd.
(Miscellaneous - Basic Industry).............. 1,387,000 3,343,141
Guoco Group, Ltd.
(Financial Services).......................... 1,243,000 5,317,389
Hung Hing Printing Group, Ltd.
(Miscellaneous - Basic Industry).............. 3,452,000 709,361
Hutchison Whampoa, Ltd.
(Miscellaneous - Basic Industry).............. 1,097,000 4,480,155
--------------
15,390,586
--------------
INDONESIA -- 0.4%
PT Kabelmetal Indonesia (Foreign)
(Telecommunications).......................... 1,047,400 1,429,572
--------------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
JAPAN -- 17.0%
Aiwa
(Electronics)................................. 122,000 $ 2,999,498
Autobacs Seven
(Retail)...................................... 41,700 4,979,729
DDI Corp.
(Telecommunications).......................... 370 3,193,176
Japan Associated Finance
(Financial Services).......................... 26,000 4,044,155
Kamigumi Co.
(Trucking/Shipping)........................... 302,000 3,212,444
Keyence Corp.
(Electrical Equipment)........................ 37,000 4,195,685
Kyocera Corp.
(Electrical Equipment)........................ 59,000 4,375,414
Minebea Co., Ltd.
(Miscellaneous - Basic Industry).............. 434,000 3,658,404
Murata Manufacturing Co., Ltd.
(Electronics)................................. 55,500 2,144,255
Nichiei Co., Ltd.
(Financial Services).......................... 77,300 4,964,576
Nissen Co., Ltd.
(Retail)...................................... 68,520 2,117,828
Nisshin Steel Co., Ltd.
(Steel)....................................... 578,000 2,911,751
Rohm Co.
(Electronics)................................. 102,000 4,319,518
Shin-Etsu Chemical Co.
(Chemicals)................................... 176,000 3,497,040
Sony Music Entertainment
(Leisure)..................................... 65,600 3,686,503
Tokyo Electron, Ltd.
(Electrical Equipment)........................ 141,000 4,386,352
--------------
58,686,328
--------------
MALAYSIA -- 3.9%
Hong Leong Industries Berhad
(Construction)................................ 3,000 15,508
I.J.M. Corp. Berhad (Loan Stock)
(Construction)................................ 810,000 1,887,409
Malaysian Airline Systems Berhad
(Airlines).................................... 421,000 1,261,269
Renong Berhad
(Miscellaneous - Basic Industry).............. 2,181,000 2,699,025
Resorts World Berhad
(Leisure)..................................... 804,000 4,722,929
Technology Resources Industries Berhad
(Miscellaneous - Basic Industry).............. 904,000 2,885,295
United Merchant Group Berhad
(Financial Services).......................... 666 1,226
--------------
13,472,661
--------------
MEXICO -- 2.2%
Cementos Apasco, SA (Class 'A' Stock)
(Housing Related)............................. 426,400 2,125,573
Cifra, SA (Class 'B' Stock)
(Retail)...................................... 1,259,800 2,562,648
Femsa (Class 'B' Stock)
(Miscellaneous - Basic Industry).............. 604,900 1,549,030
Grupo Financiero Banamex (Class 'L' Stock)
(Banks and Savings & Loans)................... 5,720 16,556
</TABLE>
70
<PAGE>
GLOBAL EQUITY PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Grupo Financiero Banamex Accival, SA (Class 'C'
Stock)
(Banks and Savings & Loans)................... 414,100 $ 1,223,572
--------------
7,477,379
--------------
NETHERLANDS -- 0.5%
Boskalis Westminster, CVA
(Construction)................................ 91,050 1,857,002
--------------
NEW ZEALAND -- 1.1%
Fletcher Challenge, Ltd.
(Forest Products)............................. 1,574,000 3,697,877
--------------
REPUBLIC OF KOREA -- 1.4%
Pohang Iron & Steel Co., Ltd.
(Steel)....................................... 3,800 306,988
Samsung Electronics Co.
(Electronics)................................. 27,390 3,786,316
Samsung Electronics Co. (New)
(Electronics)................................. 1,309 178,462
Shinsegae Department Store
(Retail)...................................... 4,200 434,115
--------------
4,705,881
--------------
SINGAPORE -- 6.5%
Fraser & Neave, Ltd.
(Beverages)................................... 303,000 3,139,142
Overseas Union Bank, Ltd. (Foreign)
(Banks and Savings & Loans)................... 740,000 4,315,609
Sembawang Maritime, Ltd.
(Trucking/Shipping)........................... 706,500 3,417,376
Singapore Airlines, Ltd. (Foreign)
(Airlines).................................... 508,000 4,670,463
United Overseas Bank, Ltd. (Foreign)
(Banks and Savings & Loans)................... 527,000 5,568,302
Wing Tai Holdings, Ltd.
(Miscellaneous - Basic Industry).............. 856,250 1,515,695
--------------
22,626,587
--------------
SPAIN -- 2.7%
Acerinox, SA
(Steel)....................................... 30,760 3,212,862
Centros Commerciales Pryca, SA
(Retail)...................................... 93,362 1,407,776
Dragados Y Construcciones, SA
(Construction)................................ 118,900 1,670,924
Vallehermoso, SA
(Real Estate Development)..................... 167,233 2,902,760
--------------
9,194,322
--------------
SWEDEN -- 4.2%
Astra, AB (Series 'B' Free)
(Drugs and Hospital Supplies)................. 145,150 3,701,724
Hennes & Mauritz (Series 'B' Free)
(Retail)...................................... 90,200 4,624,974
Mo Och Domsjo, AB (Series 'B' Free)
(Forest Products)............................. 57,000 2,654,170
Volvo, AB (Series 'B' Free)
(Autos - Cars & Trucks)....................... 190,200 3,583,573
--------------
14,564,441
--------------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
THAILAND -- 0.9%
Land & House Public Co., Ltd. (Foreign)
(Construction)................................ 25,700 $ 458,618
Sahaviriya Steel Industry
(Metals - Diversified)........................ 764,800 1,949,699
Sahaviriya Steel Industry (Foreign)
(Metals - Diversified)........................ 322,000 820,872
--------------
3,229,189
--------------
UNITED KINGDOM -- 8.9%
Barclays, PLC
(Banks and Savings & Loans)................... 246,900 2,360,517
British Sky Broadcasting Group, PLC
(Media)....................................... 620,600 2,490,829
Carlton Communications
(Communications).............................. 192,600 2,703,295
Guest Kean & Nettlefolds, PLC
(Autos - Cars & Trucks)....................... 446,570 4,105,274
**Guest Kean & Nettlefolds, PLC
(Autos - Cars & Trucks)....................... 22,870 210,242
J. Sainsbury, PLC
(Retail)...................................... 299,500 1,928,464
Powergen, PLC
(Utility - Electric).......................... 294,000 2,465,795
S.G. Warburg Group, PLC
(Financial Services).......................... 171,900 1,861,344
Siebe, PLC
(Machinery)................................... 500,840 4,369,066
TeleWest Communications, PLC
(Media)....................................... 1,200,000 3,192,089
Vodafone Group, PLC
(Telecommunications).......................... 1,503,900 4,988,840
--------------
30,675,755
--------------
UNITED STATES -- 17.5%
+Adaptec, Inc.
(Computer Services)........................... 206,600 4,880,925
+Applied Materials, Inc.
(Electrical Equipment)........................ 81,000 3,422,250
+Cirrus Logic, Inc.
(Electronics)................................. 106,500 2,396,250
+Electronic Arts, Inc.
(Computer Services)........................... 139,700 2,689,225
Exide Corp.
(Autos - Cars & Trucks)....................... 61,000 3,431,250
Mattel, Inc.
(Leisure)..................................... 171,050 4,297,631
MCI Communications Corp.
(Telecommunications).......................... 162,300 2,982,263
+Microsoft Corp.
(Computer Services)........................... 72,800 4,449,900
Mobil Corp.
(Petroleum)................................... 48,500 4,086,125
Motorola, Inc.
(Electronics)................................. 105,900 6,128,962
+Nextel Communications, Inc. (Class 'A' Stock)
(Telecommunications).......................... 186,600 2,682,375
Norwest Corp.
(Banks and Savings & Loans)................... 155,000 3,623,125
+Oracle Systems Corp.
(Computer Services)........................... 115,900 5,114,087
Pohang Iron & Steel Co., Ltd., ADR
(Steel)....................................... 60,800 1,778,400
</TABLE>
71
<PAGE>
GLOBAL EQUITY PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Silicon Graphics, Inc.
(Computer Services)........................... 157,800 $ 4,891,800
Time Warner, Inc.
(Media)....................................... 103,300 3,628,413
--------------
60,482,981
--------------
TOTAL COMMON STOCKS
(Cost $296,456,732)............................................ 300,630,772
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 3.2% SHARES VALUE
------------- --------------
<S> <C> <C>
FEDERAL REPUBLIC OF GERMANY -- 0.7%
Krones, AG
(Machinery)................................... 4,368 2,452,270
--------------
FINLAND -- 2.4%
Nokia, AB
(Miscellaneous - Basic Industry).............. 55,900 8,236,414
--------------
REPUBLIC OF KOREA -- 0.1%
Samsung Electronics Co.
(Electronics)................................. 5,213 394,033
--------------
TOTAL PREFERRED STOCKS
(Cost $7,891,492).............................................. 11,082,717
--------------
<CAPTION>
MARKET
RIGHTS AND WARRANTS -- 0.4% SHARES VALUE
------------- --------------
<S> <C> <C>
FEDERAL REPUBLIC OF GERMANY -- 0.2%
)Kamigumi Co. (Warrants),
(Trucking/Shipping)........................... 1,000 164,553
)Nissen Co., Ltd. (Warrants),
(Retail)...................................... 316 397,638
--------------
562,191
--------------
FRANCE -- 0.0%
**Lafarge Coppee (Warrants),
(Construction)................................ 1,000 5,074
--------------
SWITZERLAND -- 0.1%
\Nitori Co., Ltd. (Warrants),
(Furniture)................................... 2,950 507,066
--------------
UNITED STATES -- 0.1%
#Autobacs Seven Warrants 95 #1,
(Retail)...................................... 35 130,813
#Autobacs Seven Warrants 96 #2,
(Retail)...................................... 35 127,313
--------------
258,126
--------------
TOTAL RIGHTS AND WARRANTS
(Cost $1,517,852).............................................. 1,332,457
--------------
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS -- 0.3% VALUE VALUE
------------- --------------
<S> <C> <C>
SINGAPORE -- 0.1%
Sembawang Maritime, Ltd.,
(1.500%, 10/25/98
(Trucking/Shipping)........................... $ 154,000 $ 240,906
--------------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
UNITED STATES -- 0.2%
MDX Public Co., Ltd.,
(4.750%, 9/17/03
(Real Estate Development)..................... $ 1,227,000 $ 779,145
--------------
TOTAL CONVERTIBLE BONDS
(Cost $1,393,348).............................................. 1,020,051
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 7.5% AMOUNT VALUE
------------- --------------
<S> <C> <C>
UNITED STATES
REPURCHASE AGREEMENTS
(Sanawa, 5.750%, entered 12/30/94; maturing
01/03/95 in the amount of $26,000,000
(collateralized by $25,575,000 United States
Treasury Notes, 7.875%, 01/15/98)........... $ 26,000,000 $ 26,000,000
--------------
- -C-UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS
- 0.0%......................................................... 17,247
--------------
OTHER ASSETS -- 1.6%
(net of liabilities)........................................... 5,650,734
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 345,733,978
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
AB Aktiebolag (Swedish Stock Company)
ADR American Depository Receipt
AG Aktiengesellschaft (West German Stock Company)
CVA Certificaten Van Affecton (Guaranteed)
NPV Net Present Value
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
#These are American warrants with an underlying Japanese security.
)These are German warrants with an underlying Japanese security.
\These are Swiss warrants with an underlying Japanese security.
**Indicates a restricted security; the aggregate cost of the restricted
securities is $216,115. The aggregate value, $293,578 is approximately .1%
of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending December
31, 1994.
- -C- Forward Foreign Exchange Contracts as of December 31, 1994:
FOREIGN CURRENCY SOLD EXPIRATION DATE UNREALIZED APPRECIATION
Australian Dollar
171,259 January 1995 $17,247
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
72
<PAGE>
GOVERNMENT SECURITIES PORTFOLIO
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 90.5% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 8.0%
Collateralized Mortgage Obligation, Trust 63
(Class E),
9.000%, 09/20/99.............................. $ 1,000,000 $ 995,310
ContiMortgage Home Equity Loan Trust, CMO,
7.960%, 09/15/09, Series 1994-4, Class A2..... 5,000,000 4,900,000
Equicon Home Equity Loan Trust, CMO,
7.850%, 03/18/14, Series 1994-2, Class A2..... 3,000,000 2,949,375
Equicredit Home Equity Loan Trust, CMO,
7.440%, 10/15/05, Series 1994-3, Class A2..... 5,000,000 4,871,875
European Investment Bank,
9.125%, 06/01/02.............................. 3,500,000 3,672,515
Green Tree Financial Corp., CMO,
7.250%, 11/15/19, Series 1994-6, Class A2..... 5,000,000 4,880,469
Olympic Automobile Receivables Trust, CMO,
6.850%, 06/15/01, Series 1994-B, Class A2..... 3,000,000 2,914,687
%People's Bank Credit Card Master Trust, CMO,
5.525%, 03/15/01, Series 1994-2, Class A...... 4,000,000 3,730,562
Vanderbilt Mortgage Finance, CMO,
7.600%, 07/10/19, Series 1994-A, Class A2..... 4,000,000 3,856,250
Western Financial Grantor Trust, CMO,
6.650%, 12/01/99, Series 1994-3, Class A...... 3,570,339 3,489,449
World Omni Automobile Lease Securitization
Trust, CMO,
6.450%, 09/25/00, Series 1994-A, Class A...... 3,000,000 2,907,188
--------------
39,167,680
--------------
INDUSTRIAL -- 0.6%
%Aircraft Lease Portfolio Securitization, Ltd.,
CMO,
7.800%, 09/15/04, Series 1994-1, Class A4..... 3,000,000 2,918,906
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 81.9%
Federal Farm Credit Bank, M.T.N.,
5.930%, 08/18/03.............................. 3,859,000 3,330,819
7.900%, 03/01/96.............................. 7,000,000 7,041,860
8.600%, 05/30/06.............................. 1,250,000 1,286,913
Federal Home Loan Bank,
5.000%, 10/25/95.............................. 5,000,000 4,903,100
Federal Home Loan Mortgage Corporation, Gold
Fixed Participation,
6.095%, 02/23/01.............................. 12,000,000 11,032,440
6.130%, 08/19/99.............................. 7,000,000 6,492,500
6.270%, 01/27/04.............................. 5,000,000 4,326,550
6.485%, 02/18/04.............................. 10,000,000 8,734,400
6.550%, 04/02/03.............................. 4,000,000 3,558,760
6.600%, 11/12/99.............................. 4,000,000 3,820,000
7.500%, 01/01/00-07/23/07..................... 28,463,802 26,902,313
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Federal Home Loan Mortgage Corporation, REMIC,
7.500%, 09/15/05, Series 1295, Class 1295-G... $ 2,100,000 $ 2,007,453
Federal National Mortgage Association,
Zero Coupon, 10/09/19......................... 22,500,000 3,009,375
7.600%, 04/14/04.............................. 7,000,000 6,573,420
7.850%, 09/10/98.............................. 3,000,000 3,010,320
8.200%, 12/23/96, Series K.................... 5,000,000 5,026,550
8.200%, 08/10/98, Series F.................... 2,000,000 1,996,240
8.500%, 06/10/96, Series G.................... 5,500,000 5,549,830
11.000%, 11/01/20............................. 7,527,510 8,124,968
Federal National Mortgage Association, M.T.N.,
5.930%, 09/26/03.............................. 5,000,000 4,309,000
5.990%, 10/01/03.............................. 5,000,000 4,327,100
7.800%, 02/21/07.............................. 5,000,000 4,701,563
8.625%, 06/30/04.............................. 3,000,000 3,087,330
Federal National Mortgage Association, REMIC,
6.500%, 07/25/20, Trust 1992-138, Class D..... 4,000,000 3,593,720
8.950%, 12/25/18, Trust 1990-45, Class 45-G... 2,000,000 1,993,750
Financing Corp.,
9.400%, 02/08/18.............................. 9,850,000 10,955,072
Government National Mortgage Association,
7.000%, 09/15/22-01/15/24..................... 33,750,027 30,290,650
8.500%, 07/15/08-08/15/24..................... 7,292,192 7,165,689
International Bank for Reconstruction and
Development,
7.625%, 01/19/23.............................. 5,000,000 4,662,300
8.375%, 10/01/99.............................. 7,900,000 8,102,398
Private Export Funding Corp.,
8.750%, 06/30/03, Series KK................... 9,950,000 10,294,867
Resolution Funding Corp.,
8.125%, 10/15/19, Principle Only Class A...... 4,200,000 4,219,698
Student Loan Marketing Association,
7.300%, 08/01/12.............................. 19,850,000 18,255,648
Tennessee Valley Authority Power,
8.375%, 10/01/99, Power 1989, Series D........ 6,300,000 6,402,375
8.625%, 11/15/29, Power 1989, Series G........ 3,100,000 3,076,037
United States Treasury Bonds,
6.250%, 08/15/23.............................. 1,600,000 1,300,752
7.625%, 11/15/22.............................. 3,200,000 3,088,512
7.875%, 02/15/21.............................. 500,000 493,750
8.000%, 11/15/21.............................. 11,400,000 11,444,574
8.125%, 08/15/19-08/15/21..................... 18,605,000 18,887,658
8.750%, 08/15/20.............................. 11,300,000 12,219,933
8.875%, 08/15/17-02/15/19..................... 11,850,000 12,917,785
9.250%, 02/15/16.............................. 800,000 900,128
10.375%, 11/15/12............................. 4,000,000 4,760,000
10.750%, 08/15/05............................. 7,300,000 8,769,125
11.250%, 02/15/15............................. 3,400,000 4,492,250
11.625%, 11/15/04............................. 3,750,000 4,696,875
United States Treasury Bonds, Stripped,
Zero Coupon, 02/15/05-02/15/12................ 4,750,000 1,756,783
</TABLE>
73
<PAGE>
GOVERNMENT SECURITIES PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
United States Treasury Notes,
4.625%, 08/15/95.............................. $ 4,700,000 $ 4,633,918
5.875%, 05/15/95.............................. 2,300,000 2,294,963
6.875%, 08/31/99.............................. 2,400,000 2,310,000
7.000%, 04/15/99.............................. 13,000,000 12,597,780
7.125%, 09/30/99.............................. 11,700,000 11,363,625
7.750%, 03/31/96-11/30/99..................... 7,000,000 6,995,320
8.000%, 08/15/99.............................. 10,100,000 10,158,378
8.500%, 11/15/00.............................. 2,000,000 2,061,560
8.625%, 08/15/97.............................. 7,600,000 7,743,715
8.875%, 02/15/99.............................. 10,700,000 11,074,500
--------------
399,126,892
--------------
TOTAL LONG-TERM BONDS
(Cost $470,157,047)............................................ 441,213,478
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 7.6% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. 36,874,000 $ 36,874,000
--------------
OTHER ASSETS -- 1.9%
(net of liabilities)........................................... 9,486,827
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 487,574,305
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
CMO Collateralized Mortgage Obligations
M.T.N. Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 75 THROUGH 82.
74
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF THE BOND, COMMON STOCK,
AGGRESSIVELY MANAGED FLEXIBLE, CONSERVATIVELY MANAGED FLEXIBLE,
STOCK INDEX, GLOBAL EQUITY AND GOVERNMENT SECURITIES PORTFOLIOS OF
THE PRUDENTIAL SERIES FUND, INC.
FOR THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993
NOTE 1: GENERAL
The Prudential Series Fund, Inc. ("Series Fund"), a Maryland corporation,
organized on November 15, 1982, is a diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Series Fund is composed of fourteen Portfolios, each with a separate series of
capital stock. The Bond, Common Stock, Aggressively Managed Flexible,
Conservatively Managed Flexible, Stock Index, Global Equity, and Government
Securities portfolios presented herein are available only for investment by
VCA-24 and other various separate accounts of The Prudential Insurance Company
of America ("The Prudential"), Pruco Life Insurance Company and Pruco Life
Insurance Company of New Jersey (together referred to as the "Companies") to
fund benefits under certain variable life insurance and variable annuity
contracts issued by the Companies.
The shareholders of Pruco Life Series Fund, Inc. ("Pruco Fund") and the Series
Fund approved the merger of the Pruco Fund into the Series Fund as of November
1, 1986. The merger combined five portfolios with identical investment
strategies (Money Market, Bond, Common Stock, Aggressively Managed Flexible and
Conservatively Managed Flexible) of the Pruco Fund with their counterpart in the
Series Fund. The merger was effected by converting the net assets of the Pruco
Fund at the merger date into shares of the Series Fund at the share price of
that day and was accounted for as a pooling of interest.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SECURITIES VALUATION: Equity securities are valued at market. Securities traded
on a national securities exchange are valued at the last sales price on such
exchange as of the close of the New York Stock Exchange or, in the absence of
recorded sales, at the mean between the most recently quoted bid and asked
prices. For any securities not traded on a national securities exchange but
traded in the over-the-counter market, the securities are valued at the mean
between the most recently quoted bid and asked prices, except that securities
for which quotations are furnished through a nationwide automated quotation
system approved by the National Association of Securities Dealers, Inc.
("NASDAQ") are valued at the last sales price or if there was no sale on such
day, at the mean between the most recently quoted bid and asked prices.
Convertible debt securities are valued at the mean between the most recently
quoted bid and asked prices provided by principal market makers. High yield
bonds are valued either by quotes received from principal market makers or by an
independent pricing service which determines prices by analysis of quality,
coupon, maturity and other adjustment factors. Long-term bonds are valued at
market, based on valuation prices by an independent pricing service which
determines prices by analysis of quality, coupon, maturity and other adjustment
factors. Short-term investments are valued at amortized cost, which with accrued
interest approximates market value. Amortized cost is computed using the cost on
the date of purchase adjusted for constant amortization of discount or premium
to maturity. The interest rates shown for Commercial Paper, Promissory Notes,
and certain U.S. Government Agency Obligations on the Schedules of Investments
are the discount rates paid at the time of purchase. Any security for which a
quotation is unavailable is valued at fair value as determined in good faith by
or under the direction of the Series Fund's Board of Directors.
The ability of issuers of debt securities held by specific Portfolios of the
Series Fund to meet their obligations may be affected by economic developments
in a specific country or industry.
The portfolios of the Fund may invest up to 15% of their total assets in
securities which are subject to legal or contractual restrictions on resale or
for which no readily available market exists ("restricted securities").
Restricted securities are valued pursuant to the valuation procedures noted
above.
DERIVATIVE FINANCIAL INSTRUMENTS: The Series Fund may engage in various
portfolio strategies to seek increased returns by hedging the portfolios against
adverse movements in the equity, debt, and currency markets. Losses may arise
due to changes in the value of the contract or if the counterparty does not
perform under the contract.
OPTION WRITING: When the Series Fund sells an option, an amount equal to the
premium received is recorded as a liability and is subsequently adjusted to the
current market value of the option written. Premiums received
75
<PAGE>
from writing options which expire unexercised are treated on the expiration date
as gains from the sale of securities. As to options which are closed, the
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
gain, or if the premium received is less than the amount paid for the closing
purchase transaction, as a loss. If a call option is exercised, the premium is
added to the proceeds from the sale in determining whether a gain or loss has
been realized.
The Series Fund's use of written options involves, to varying degrees, elements
of market risk in excess of the amount recognized in the statement of assets and
liabilities. The contract or notional amounts reflect the extent of the Series
Fund's involvement in these financial instruments. Risks arise from the possible
movements in foreign exchange rates and securities values underlying these
instruments.
STOCK INDEX FUTURES: Portfolios of the Fund may attempt to reduce the risk of
investment in equity securities by hedging a portion of their equity portfolios
through the use of stock index futures traded on a commodities exchange or board
of trade. A stock index futures contract is an agreement in which the seller of
the contract agrees to deliver to the buyer an amount of cash equal to a
specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the agreement was made. Upon entering into a futures contract, a
Portfolio is required to pledge to the broker liquid assets equal to the minimum
"initial margin," approximately 5% of the contract amount. The Portfolio further
agrees to receive or pay to the broker an amount of cash equal to the futures
contract's daily fluctuation in value. These receipts or payments are known as
the "variation margin" and are recorded as unrealized gains or losses. When a
futures contract is closed, the Portfolio records a realized gain or loss equal
to the difference between the value of the contract at the time it was opened
and the value at the time it was closed.
FOREIGN CURRENCY TRANSACTIONS: The books and records of the Series Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of investment securities, other assets and liabilities at the
mid daily rate of exchange as reported by a major New York City bank;
(ii) purchases and sales of investment securities, income and expenses at the
rate of exchange prevailing on the respective dates of such transactions.
Since the net assets of the Series Fund are presented at the foreign exchange
rates and market values at the close of the fiscal period, it is not practical
to isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from change
in the market prices of securities held at the end of the fiscal period.
Similarly, it is not practical to isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market prices
of equities sold during the fiscal year.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of government supervision and regulation of foreign security markets.
The Global Equity Portfolio may invest up to 100% of its total assets in common
stock and convertible securities denominated in a foreign currency and issued by
foreign or domestic issuers. The Bond Portfolio may invest up to 20% of its
assets in United States currency denominated debt securities issued outside the
United States by foreign or domestic issuers. In addition, the bond components
of the Conservatively Managed Flexible and Aggressively Managed Flexible
Portfolios may each invest up to 20% of their assets in such securities.
Further, the Aggressively Managed Flexible Portfolio may invest up to 30% of its
total assets in debt and equity securities denominated in a foreign currency and
issued by foreign or domestic issuers. In addition, the Common Stock Portfolio
may invest up to 30% of its total assets in non-United States currency
denominated common stock and fixed-income securities convertible into common
stock of foreign and U.S. issuers.
Net realized gains and losses on foreign currency transactions represent net
foreign exchange gains and losses from holding of foreign currencies; currency
gains or losses realized between the trade and settlement dates on security
transactions; and the difference between the amounts of the dividends and
foreign taxes recorded on the Series Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net currency gains and losses from valuing
foreign currency denominated assets and liabilities at fiscal period end
exchange rates are reflected as a component of unrealized loss on foreign
currencies.
76
<PAGE>
FORWARD FOREIGN EXCHANGE CONTRACTS: The Series Fund is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Series Fund's records. However, the effect on operations is recorded from the
date the Series Fund enters into such contracts. Premium or discount is
amortized over the life of the contracts.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Dividend income is recorded on
the ex-dividend date. Interest income is accrued daily on both long-term bonds,
and short-term investments. Interest income also includes net amortization from
the purchase of fixed-income securities. Long-term security and option
transactions are recorded on the first business day following the trade date,
except that transactions on the last business day of the reporting cycle are
recorded on that date. Short-term security and futures transactions are recorded
on trade date. Realized gains and losses from security transactions are
determined and accounted for on the basis of identified cost.
DISTRIBUTIONS AND TAXES: The Portfolios of the Series Fund intend to continue
to qualify for and elect the special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code, thereby relieving the
Series Fund of Federal income taxes. To so qualify, the Series Fund intends to
distribute substantially all of its net investment income and net realized
capital gains, if any, less any available capital loss carry forward. As of
December 31, 1994, (based on an October 31 measurement period) the Bond
Portfolio had a net capital loss carry forward of $643,550 (expiring in 2002).
The Global Equity Portfolio had a net capital loss carry forward of $6,265,350
(expiring in 2002). These amounts will be available to offset any future taxable
gains.
EXPENSES: Each Portfolio pays for certain expenses incurred in its individual
operation, and also pays a portion of the Series Fund's general administrative
expenses allocated on the basis of the asset size of the respective Portfolios.
The Series Fund has an arrangement with Chemical Banking Corporation, a
custodian bank. On a daily basis, cash funds which are not invested earn a
credit which is used to offset custody charges on a Portfolio basis, exclusive
of the Global Equity Portfolio, for which Brown Brothers Harriman & Co. is the
custodian bank. For the year ended December 31, 1994, the total of the credits
used was:
<TABLE>
<S> <C>
Conservatively Managed Flexible Portfolio..................... $ 91,232
Aggressively Managed Flexible Portfolio....................... 41,492
Government Securities Portfolio............................... 15,374
Bond Portfolio................................................ 4,838
</TABLE>
NOTE 3: INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGEMENT AND ACCOUNTING FEES: Pursuant to an investment advisory
agreement (the "Agreement"), The Prudential receives an investment management
fee, calculated daily, at an effective annual rate of 0.35% of the average daily
net assets of the Stock Index Portfolio: 0.40% of the average daily net assets
of the Bond and Government Securities Portfolios; 0.45% of average daily net
assets of the Common Stock Portfolio; 0.55% of the average daily net assets of
the Conservatively Managed Flexible Portfolio; 0.60% of the average daily net
assets of the Aggressively Managed Flexible Portfolio; and 0.75% of the average
daily net assets of the Global Equity Portfolio. Under the Agreement, The
Prudential has agreed to refund to a portfolio (other than the Global Equity
Portfolio), the portion of the management fee for that Portfolio equal to the
amount that the aggregate annual ordinary operating expenses (excluding
interest, taxes and brokerage commissions) exceeds 0.75% of the Portfolio's
average daily net assets. The Agreement also requires the Series Fund to
reimburse The Prudential for the cost of maintaining staff and personnel who
provide daily accounting services for the operation of the Series Fund with the
exception of the Global Equity Portfolio.
DIRECTORS' EXPENSES: The Series Fund pays for the fees and expenses of those
members of the Series Fund's Board of Directors who are not officers or
employees of The Prudential or its affiliates.
BROKERAGE COMMISSIONS: For the year ended December 31, 1994, Prudential
Securities Inc., an indirect, wholly-owned subsidiary of The Prudential, earned
$560,155 in brokerage commissions from Portfolio transactions executed on behalf
of the Series Fund.
OTHER TRANSACTIONS WITH AFFILIATES: As of December 31, 1994, The Prudential had
investments of $1,158,347 in the Global Equity Portfolio.
77
<PAGE>
NOTE 4: JOINT REPURCHASE AGREEMENT ACCOUNT
The Portfolios of the Series Fund transfer uninvested cash balances into a
single joint account, the daily aggregate balance of which is invested in one or
more repurchase agreements collateralized by U.S. Government obligations. The
Series Fund's undivided interest in the joint repurchase agreement account
represented $974,388,000 in the principal amount as of December 31, 1994. The
Portfolios of the Series Fund with cash in the joint account had the following
percentage participation in the account:
<TABLE>
<S> <C>
Common Stock Portfolio........................................ 35.23%
Aggressively Managed Flexible Portfolio....................... 33.94%
Conservatively Managed Flexible Portfolio..................... 12.45%
Government Securities Portfolio............................... 3.78%
Stock Index Portfolio......................................... 2.66%
Bond Portfolio................................................ 1.56%
All other portfolios (currently not available to VCA-24)...... 10.38%
----------
100.00%
</TABLE>
As of such date, each repurchase agreement in the joint account and the
collateral thereof were as follows:
Banker's Trust Securities Repurchase Agreement, dated 12/30/94, in the principal
amount of $225,000,000, repurchase price $225,143,746, due 1/3/95;
collateralized by $225,555,000 U.S. Treasury Notes, 8%, due 5/15/01.
Goldman Sachs Repurchase Agreement, dated 12/30/94, in the principal amount of
$67,388,000, repurchase price $67,427,309, due 1/3/95; collateralized by
$61,265,000 U.S. Treasury Bonds, 8.875%, due 2/15/19.
Morgan Stanley Repurchase Agreement, dated 12/30/94, in the principal amount of
$278,000,000, repurchase price $278,171,508, due 1/3/95; collateralized by
$143,865,000 U.S. Treasury Notes, 5.125%, due 3/31/98; $142,980,000 U.S.
Treasury Notes, 8.75%, due 10/15/97.
Nomura Securities Repurchase Agreement, dated 12/30/94, in the principal amount
of $179,000,000, repurchase price $179,119,333, due 1/3/95; collateralized by
$26,435,000 U.S. Treasury Bonds, 7.125%, due 2/15/23; $33,240,000 U.S. Treasury
Bonds, 7.875%, due 2/15/21; $118,360,000 U.S. Treasury Bonds, 8.125%, due
8/15/19.
Smith Barney Repurchase Agreement, dated 12/30/94, in the principal amount of
$100,000,000, repurchase price $100,065,552, due 1/3/95; collateralized by
$4,805,000 U.S. Treasury Bonds, 12.0%, due 8/15/13; $17,000,000 U.S. Treasury
Bonds, 7.125%, due 2/15/23; $15,000,000 U.S. Treasury Bonds, 8.875%, due
2/15/19; $17,000,000 U.S. Treasury Bonds, 11.875%, due 11/15/03; $33,000,000
U.S. Treasury Bonds, 11.125%, due 8/15/03.
UBS Securities Repurchase Agreement, dated 12/30/94, in the principal amount of
$125,000,000, repurchase price $125,079,860, due 1/3/95; collateralized by
$45,000,000 U.S. Treasury Bonds, 14.0%, due 11/15/11; $62,000,000 U.S. Treasury
Notes, 5.125%, due 3/31/96.
NOTE 5: PURCHASE AND SALE OF SECURITIES
The aggregate cost of purchase and the proceeds from the sales of securities
(excluding short-term issues) for the year ended December 31, 1994 were as
follows:
Cost of Purchases:
<TABLE>
<CAPTION>
AGGRESSIVELY CONSERVATIVELY
COMMON MANAGED MANAGED STOCK GLOBAL GOVERNMENT
BOND STOCK FLEXIBLE FLEXIBLE INDEX EQUITY SECURITIES
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities.......... $230,427,085 $ 0 $2,110,107,294 $2,264,216,698 $ 0 $ 2,014,070 $170,067,390
Equity Securities........ $ 0 $798,167,933 $1,463,207,489 $587,491,444 $ 59,347,016 $298,502,390 $ 0
</TABLE>
78
<PAGE>
Proceeds From Sales:
<TABLE>
<CAPTION>
AGGRESSIVELY CONSERVATIVELY
COMMON MANAGED MANAGED STOCK GLOBAL GOVERNMENT
BOND STOCK FLEXIBLE FLEXIBLE INDEX EQUITY SECURITIES
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities.......... $161,141,232 $ 0 $1,985,428,664 $2,265,817,380 $ 0 $ 3,180,314 $192,629,378
Equity Securities........ $ 0 $133,822,827 $1,492,407,199 $430,107,759 $ 10,703,691 $ 80,485,320 $ 0
</TABLE>
The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of December 31, 1994 were as follows:
<TABLE>
<CAPTION>
AGGRESSIVELY CONSERVATIVELY
COMMON MANAGED MANAGED STOCK GLOBAL GOVERNMENT
BOND STOCK FLEXIBLE FLEXIBLE INDEX EQUITY SECURITIES
----------- ------------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation... $ 1,403,760 376,581,396 224,521,828 147,865,296 105,889,895 29,685,605 947,221
Gross Unrealized Depreciation... 33,335,908 130,109,851 93,827,948 122,789,171 24,917,605 22,797,770 29,890,790
Total Net Unrealized............ (31,932,148) 246,471,545 130,693,880 25,076,125 80,972,290 6,887,835 (28,943,569)
Tax Basis....................... 563,227,825 2,419,493,392 3,347,362,272 3,443,877,594 584,600,736 340,366,881 507,031,047
</TABLE>
NOTE 6: FINANCIAL HIGHLIGHTS
The following average per share data, ratios and supplemental information by
Portfolio have been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
BOND
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 11.103 $ 10.829 $ 11.002 $ 10.332 $ 10.321 $ 9.942 $ 10.038
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.682 0.686 0.761 0.797 0.825 0.886 0.875
Net realized and unrealized
gains (losses) on
investments................... (1.040) 0.398 0.013 0.842 (0.004) 0.424 (0.069)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.358) 1.084 0.774 1.639 0.821 1.310 0.806
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.683) (0.657) (0.728) (0.779) (0.810) (0.854) (0.902)
Distributions from net realized
gains......................... (0.024) (0.153) (0.219) (0.190) 0 (0.077) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.707) (0.810) (0.947) (0.969) (0.810) (0.931) (0.902)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.065) 0.274 (0.173) 0.670 0.011 0.379 (0.096)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 10.038 $ 11.103 $ 10.829 $ 11.002 $ 10.332 $ 10.321 $ 9.942
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (3.23%) 10.13 % 7.19 % 16.44 % 8.32 % 13.49 % 8.19%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $541.6 $576.2 $428.8 $318.7 $227.7 $191.1 $148.8
Ratio of expenses net of
reimbursement to average net
assets........................ 0.45 % 0.46 % 0.47 % 0.49 % 0.47 % 0.53 % 0.53%
Ratio of net investment income
to average net assets......... 6.41 % 6.05 % 6.89 % 7.43 % 8.06 % 8.56 % 8.52%
Portfolio turnover rate......... 31.57 % 41.12 % 60.53 % 131.01 % 42.10 % 272.85 % 222.20%
Number of shares outstanding at
end of period (in millions)... 54.0 51.9 39.6 29.0 22.0 18.5 15.0
<CAPTION>
01/01/87 01/01/86 01/01/85
TO TO TO
12/31/87 12/31/86* 12/31/85*
----------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 11.048 $ 10.967 $ 9.998
----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.859 0.904 1.073
Net realized and unrealized
gains (losses) on
investments................... (0.821) 0.607 0.739
----------- ----------- -----------
Total from investment
operations.................. 0.038 1.511 1.812
----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.990) (0.909) (0.843)
Distributions from net realized
gains......................... (0.058) (0.521) 0
----------- ----------- -----------
Total distributions......... (1.048) (1.430) (0.843)
----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.010) 0.081 0.969
----------- ----------- -----------
Net Asset Value at end of
period........................ $ 10.038 $ 11.048 $ 10.967
----------- ----------- -----------
----------- ----------- -----------
Total Investment Rate of
Return:**..................... 0.29 % 14.45 % 18.65 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $139.5 $110.1 $40.9
Ratio of expenses net of
reimbursement to average net
assets........................ 0.53 % 0.51 % 0.68 %
Ratio of net investment income
to average net assets......... 8.15 % 8.11 % 9.85 %
Portfolio turnover rate......... 238.41 % 246.82 % 92.56 %
Number of shares outstanding at
end of period (in millions)... 13.9 10.0 2.5
</TABLE>
All calculations are based on average month-end shares outstanding, where
applicable.
*The per share information of the Portfolios of The Prudential Series Fund,
Inc. has not been restated to reflect the operations of the Pruco Life Series
Fund, Inc. prior to the November 1, 1986 merger.
**Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns.
79
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 21.487 $ 18.903 $ 17.905 $ 15.449 $ 18.539 $ 15.463 $ 13.620
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.512 0.417 0.444 0.482 0.577 0.474 0.402
Net realized and unrealized
gains (losses) on
investments................... 0.054 3.666 2.050 3.414 (1.573) 4.064 1.909
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. 0.566 4.083 2.494 3.896 (0.996) 4.538 2.311
Distributions to Shareholders:
Distributions from net
investment income............. (0.487) (0.404) (0.439) (0.478) (0.563) (0.503) (0.468)
Distributions from net realized
gains......................... (0.904) (1.095) (1.057) (0.962) (1.531) (0.959) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (1.391) (1.499) (1.496) (1.440) (2.094) (1.462) (0.468)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.825) 2.584 0.998 2.456 (3.090) 3.076 1.843
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 20.662 $ 21.487 $ 18.903 $ 17.905 $ 15.449 $ 18.539 $ 15.463
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... 2.78% 21.87% 14.17% 26.01% (5.21%) 29.73 % 17.05%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $2,617.8 $2,186.5 $1,416.6 $1,032.8 $700.5 $675.5 $500.1
Ratio of expenses net of
reimbursement to average net
assets........................ 0.55 % 0.53 % 0.53 % 0.51 % 0.56 % 0.56 % 0.57%
Ratio of net investment income
to average net assets......... 2.39 % 1.99 % 2.33 % 2.66 % 3.37 % 2.66 % 2.67%
Portfolio turnover rate......... 6.90 % 12.95 % 15.70 % 20.85 % 84.84 % 73.54 % 62.35%
Number of shares outstanding at
end of period (in millions)... 126.7 101.8 74.9 57.7 45.3 36.4 32.3
<CAPTION>
AGGRESSIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 16.957 $ 16.005 $ 16.288 $ 13.996 $ 14.446 $ 13.123 $ 12.326
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.473 0.566 0.583 0.650 0.715 0.813 0.724
Net realized and unrealized
gains (losses) on
investments................... (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.548) 2.448 1.190 3.459 0.249 2.802 1.564
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767)
Distributions from net realized
gains......................... (0.462) (0.929) (0.914) (0.513) 0 (0.666) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 15.496 $ 16.957 $ 16.005 $ 16.288 $ 13.996 $ 14.446 $ 13.123
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (3.16%) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $3,481.5 $3,292.2 $2,435.6 $1,990.7 $1,507.8 $1,386.5 $1,103.9
Ratio of expenses net of
reimbursement to average net
assets........................ 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70%
Ratio of net investment income
to average net assets......... 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52%
Portfolio turnover rate......... 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45%
Number of shares outstanding at
end of period (in millions)... 224.7 194.1 152.2 122.2 107.7 96.0 84.1
<CAPTION>
01/01/87 01/01/86 01/01/85
TO TO TO
12/31/87 12/31/86* 12/31/85*
----------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 14.815 $ 14.634 $ 11.160
----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.393 0.448 0.340
Net realized and unrealized
gains (losses) on
investments................... (0.065) 1.765 3.306
----------- ----------- -----------
Total from investment
operations.................. 0.328 2.213 3.646
Distributions to Shareholders:
Distributions from net
investment income............. (0.496) (0.275) (0.172)
Distributions from net realized
gains......................... (1.027) (1.757) 0
----------- ----------- -----------
Total distributions......... (1.523) (2.032) (0.172)
----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.195) 0.181 3.474
----------- ----------- -----------
Net Asset Value at end of
period........................ $ 13.620 $ 14.815 $ 14.634
----------- ----------- -----------
----------- ----------- -----------
Total Investment Rate of
Return:**..................... 1.67 % 15.10 % 32.84 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $451.0 $247.9 $68.8
Ratio of expenses net of
reimbursement to average net
assets........................ 0.51 % 0.52 % 0.88 %
Ratio of net investment income
to average net assets......... 2.34 % 2.90 % 2.44 %
Portfolio turnover rate......... 79.91 % 117.15 % 91.70 %
Number of shares outstanding at
end of period (in millions)... 33.1 16.7 2.0
01/01/87 01/01/86 01/01/85
TO TO TO
12/31/87 12/31/86* 12/31/85*
----------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 13.555 $ 12.810 $ 10.469
----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.577 0.611 0.584
Net realized and unrealized
gains (losses) on
investments................... (0.753) 1.342 2.095
----------- ----------- -----------
Total from investment
operations.................. (0.176) 1.953 2.679
----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.673) (0.456) (0.338)
Distributions from net realized
gains......................... (0.380) (0.752) 0
----------- ----------- -----------
Total distributions......... (1.053) (1.208) (0.338)
----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.229) 0.745 2.341
----------- ----------- -----------
Net Asset Value at end of
period........................ $ 12.326 $ 13.555 $ 12.810
----------- ----------- -----------
----------- ----------- -----------
Total Investment Rate of
Return:**..................... (1.83 %) 15.48 % 25.87 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $1,062.4 $593.6 $138.7
Ratio of expenses net of
reimbursement to average net
assets........................ 0.71 % 0.67 % 0.93 %
Ratio of net investment income
to average net assets......... 4.09 % 4.43 % 4.65 %
Portfolio turnover rate......... 123.83 % 133.76 % 56.46 %
Number of shares outstanding at
end of period (in millions)... 86.2 43.8 6.1
</TABLE>
All calculations are based on average month-end shares outstanding, where
applicable.
*The per share information of the Portfolios of The Prudential Series Fund,
Inc. has not been restated to reflect the operations of the Pruco Life Series
Fund, Inc. prior to the November 1, 1986 merger.
**Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns.
80
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CONSERVATIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 14.905 $ 14.243 $ 14.318 $ 13.060 $ 13.361 $ 12.295 $ 11.889
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.528 0.486 0.558 0.687 0.821 0.891 0.773
Net realized and unrealized
gains (losses) on
investments................... (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.151) 1.715 0.968 2.425 0.678 2.046 1.197
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791)
Distributions from net realized
gains......................... (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 14.095 $ 14.905 $ 14.243 $ 14.318 $ 13.060 $ 13.361 $ 12.295
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (0.97%) 12.20 % 6.95 % 19.07 % 5.27 % 16.99 % 10.19%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6
Ratio of expenses net of
reimbursement to average net
assets........................ 0.61 % 0.60 % 0.62 % 0.63 % 0.65 % 0.64 % 0.65%
Ratio of net investment income
to average net assets......... 3.61 % 3.22 % 3.88 % 4.89 % 6.21 % 6.81 % 6.22%
Portfolio turnover rate......... 125.18 % 79.46 % 62.07 % 115.35 % 44.04 % 153.92 % 110.67%
Number of shares outstanding at
end of period (in millions)... 248.4 208.2 148.4 104.8 84.2 73.0 66.3
<CAPTION>
01/01/87 01/01/86 01/01/85
TO TO TO
12/31/87 12/31/86* 12/31/85*
----------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 12.571 $ 12.173 $ 10.469
----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.656 0.652 0.725
Net realized and unrealized
gains (losses) on
investments................... (0.399) 1.046 1.443
----------- ----------- -----------
Total from investment
operations.................. 0.257 1.698 2.168
----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.709) (0.517) (0.464)
Distributions from net realized
gains......................... (0.230) (0.783) 0
----------- ----------- -----------
Total distributions......... (0.939) (1.300) (0.464)
----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.682) 0.398 1.704
----------- ----------- -----------
Net Asset Value at end of
period........................ $ 11.889 $ 12.571 $ 12.173
----------- ----------- -----------
----------- ----------- -----------
Total Investment Rate of
Return:**..................... 1.54 % 14.17 % 21.11 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $803.9 $375.4 $75.9
Ratio of expenses net of
reimbursement to average net
assets........................ 0.66 % 0.64 % 0.86 %
Ratio of net investment income
to average net assets......... 5.05 % 5.10 % 5.99 %
Portfolio turnover rate......... 140.69 % 207.78 % 54.89 %
Number of shares outstanding at
end of period (in millions)... 67.6 29.9 4.2
</TABLE>
<TABLE>
<CAPTION>
STOCK INDEX
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 15.202 $ 14.218 $ 13.605 $ 10.760 $ 11.732 $ 9.454 $ 8.531
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.377 0.361 0.350 0.351 0.357 0.326 0.357
Net realized and unrealized
gains (losses) on
investments................... (0.231) 1.002 0.600 2.814 (0.792) 2.570 0.951
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. 0.146 1.363 0.950 3.165 (0.435) 2.896 1.308
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.368) (0.346) (0.329) (0.307) (0.309) (0.354) (0.385)
Distributions from net realized
gains......................... (0.023) (0.033) (0.008) (0.013) (0.228) (0.264) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.391) (0.379) (0.337) (0.320) (0.537) (0.618) (0.385)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.245) 0.984 0.613 2.845 (0.972) 2.278 0.923
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 14.957 $ 15.202 $ 14.218 $ 13.605 $ 10.760 $ 11.732 $ 9.454
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... 1.01% 9.66% 7.13% 29.72% (3.63%) 30.93 % 15.44%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $664.5 $615.1 $433.5 $236.9 $104.5 $53.8 $36.0
Ratio of expenses net of
reimbursement to average net
assets........................ 0.42 % 0.42 % 0.46 % 0.47 % 0.60 % 0.69 % 0.78%
Ratio of net investment income
to average net assets......... 2.50 % 2.43 % 2.56 % 2.82 % 3.23 % 2.95 % 3.87%
Portfolio turnover rate......... 1.74 % 0.60 % 0.43 % 1.10 % 17.80 % 14.54 % 15.62%
Number of shares outstanding at
end of period (in millions)... 44.4 40.5 30.5 17.4 9.7 4.6 3.8
<CAPTION>
10/19/87
TO
12/31/87
-----------
<S> <C>
Net Asset Value at beginning of
period........................ $ 8.071
-----------
Income From Investment
Operations:
Net investment income........... 0.047
Net realized and unrealized
gains (losses) on
investments................... 0.548
-----------
Total from investment
operations.................. 0.595
-----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.135)
Distributions from net realized
gains......................... 0
-----------
Total distributions......... (0.135)
-----------
Net increase (decrease) in Net
Asset Value................... 0.460
-----------
Net Asset Value at end of
period........................ $ 8.531
-----------
-----------
Total Investment Rate of
Return:**..................... 7.35 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $24.5
Ratio of expenses net of
reimbursement to average net
assets........................ 0.45 %
Ratio of net investment income
to average net assets......... 0.53 %
Portfolio turnover rate......... 0.47 %
Number of shares outstanding at
end of period (in millions)... 2.9
</TABLE>
All calculations are based on average month-end shares outstanding, where
applicable.
*The per share information of the Portfolios of The Prudential Series Fund,
Inc. has not been restated to reflect the operations of the Pruco Life Series
Fund, Inc. prior to the November 1, 1986 merger.
**Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns.
81
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GLOBAL EQUITY
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 09/19/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period $ 14.639 $ 10.368 $ 10.792 $ 9.866 $ 11.547 $ 10.508 $ 9.818
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.028 0.023 0.051 0.096 0.203 0.079 0.052
Net realized and unrealized
gains (losses) on
investments................... (0.744) 4.433 (0.419) 1.020 (1.802) 1.806 0.787
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.716) 4.456 (0.368) 1.116 (1.599) 1.885 0.839
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.019) (0.079) (0.056) (0.100) (0.067) (0.073) (0.149)
Distributions from net realized
gains......................... (0.025) (0.106) 0 (0.090) (0.015) (0.773) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.044) (0.185) (0.056) (0.190) (0.082) (0.846) (0.149)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.760) 4.271 (0.424) 0.926 (1.681) 1.039 0.690
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 13.879 $ 14.639 $ 10.368 $ 10.792 $ 9.866 $ 11.547 $ 10.508
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (4.89%) 43.14 % (3.42 %) 11.39 % (12.91 %) 18.82 % 8.57 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $345.7 $129.1 $34.0 $34.3 $26.2 $29.4 $26.9
Ratio of expenses net of
reimbursement to average net
assets........................ 1.23 % 1.44 % 1.87 % 1.62 % 1.67 % 1.47 % 0.42 %
Ratio of net investment income
to average net assets......... 0.20 % 0.18 % 0.49 % 0.92 % 1.92 % 0.70 % 0.51 %
Portfolio turnover rate......... 37.46 % 54.54 % 78.16 % 136.21 % 43.12 % 47.95 % 6.40 %
Number of shares outstanding at
end of period (in millions)... 24.9 8.8 3.3 3.2 2.7 2.5 2.6
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES
----------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 11.784 $ 11.094 $ 11.133 $ 10.146 $ 10.324 $ 10.017
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.703 0.700 0.731 0.736 0.791 0.545
Net realized and unrealized
gains (losses) on
investments................... (1.311) 0.678 (0.092) 0.847 (0.177) 0.613
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.608) 1.378 0.639 1.583 0.614 1.158
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.723) (0.642) (0.593) (0.596) (0.769) (0.489)
Distributions from net realized
gains......................... 0.008 (0.046) (0.085) 0 (0.023) (0.362)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.715) (0.688) (0.678) (0.596) (0.792) (0.851)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.323) 0.690 (0.039) 0.987 (0.178) 0.307
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 10.461 $ 11.784 $ 11.094 $ 11.133 $ 10.146 $ 10.324
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (5.16%) 12.56 % 5.85 % 16.11 % 6.34 % 11.60 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $487.6 $540.1 $315.5 $95.0 $23.7 $17.0
Ratio of expenses net of
reimbursement to average net
assets........................ 0.45 % 0.46 % 0.53 % 0.58 % 0.74 % 0.50 %
Ratio of net investment income
to average net assets......... 6.30 % 5.91 % 6.58 % 6.97 % 7.86 % 5.06 %
Portfolio turnover rate......... 34.19 % 18.59 % 80.71 % 127.18 % 379.45 % 208.86 %
Number of shares outstanding at
end of period (in millions)... 46.6 45.8 28.3 8.5 2.3 1.6
</TABLE>
All calculations are based on average month-end shares outstanding, where
applicable.
**Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns.
82
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors of The Prudential Series Fund, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Bond, Common Stock, Aggressively Managed
Flexible, Conservatively Managed Flexible, Stock Index, Global Equity and
Government Securities Portfolios (seven of the portfolios comprising The
Prudential Series Fund, Inc.) as of December 31, 1994, the related statements of
operations for the year then ended and the statements of changes in net assets
for each of the two years in the period then ended. These financial statements
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1994, by correspondence with
the custodians and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the respective portfolios of The
Prudential Series Fund, Inc. as of December 31, 1994, the results of their
operations for the year then ended and the changes in their net assets for each
of the two years in the period then ended in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 10, 1995
83
<PAGE>
<TABLE>
<S> <C>
The Prudential Insurance Company of America BULK RATE
c/o Prudential Defined Contribution Services U.S. POSTAGE
30 Scranton Office Park PAID
Moosic, Pennsylvania 18507-1789 PERMIT No. 2145
Newark, N.J.
ADDRESS CORRECTION REQUESTED
FORWARDING AND
RETURN POSTAGE GUARANTEED
</TABLE>
PRUDENTIAL DEFINED CONTRIBUTION SERVICES
A Unit of
ThePrudential
<PAGE>
GRAPH DESCRIPTIONS
GRAPH #1 BOND PORTFOLIO
Graph represents the growth of $10,000 invested in the Bond Portfolio
compared with Lehman Aggregate Index and Lipper VIP Corporate Bond Average.
In the ten years ended December 31, 1994, an investment of $10,000 would
have a value of $24,088, $25,848, and $24,353, respectively.
GRAPH #2 GOVERNMENT SECURITIES PORTFOLIO
Graph represents the growth of $10,000 invested in the Government Securities
Portfolio compared with Lehman Government Index and Lipper VIP U.S. Government
Average. In the seven years ended December 31, 1994, an investment of
$10,000 would have a value of $15,567, $15,901, and $15,457, respectively.
<PAGE>
Graph 3: Conservatively Managed Flexible Portfolio
Graph represents the growth of $10,000 invested in Conservatively
Managed Flexible Portfolio compared with the S&P 500, Lehman Aggregate Index,
and Lipper VIP Flex Average. In the ten years ended December 31, 1994,
an investment of $10,000 would have a value of $26,961, $38,269, $25,848, and
$29,766, respectively.
Graph 4: Aggressively Managed Flexible Portfolio
Graph represents the growth of $10,000 invested in Aggressively Managed
Flexible Portfolio compared with S&P 500, Lehman Aggregate Index, and Lipper
VIP Flex Average. In the ten years ended December 31, 1994, an investment
of $10,000 would have a value of $30,187, $38,269, $25,848, and $29,766,
respectively.
<PAGE>
GRAPH 5 STOCK INDEX PORTFOLIO
Graph represents the growth of $10,000 invested in the Stock Index Portfolio
compared with the S&P 500 and Lipper VIP Growth and Income Average. In the
nine years ended December 31, 1994, an investment of $10,000 would have a
value of $24,066, $22,968, and $22,342, respectively.
GRAPH 6 COMMON STOCK PORTFOLIO
Graph represents the growth of $10,000 invested in the Common Stock Portfolio
compared with the S&P 500 and Lipper VIP Growth Average. In the ten years
ended December 31, 1994, an investment of $10,000 would have a value of
$40,332, $38,269, and $34,760, respectively.
GRAPH 7 GLOBAL EQUITY PORTFOLIO
Graph represents the growth of $10,000 invested in the Global Equity Portfolio
compared with Morgan Stanley World Index and Lipper VIP Global Average. In
the eight years ended December 31, 1994, an investment of $10,000 would
have a value of $16,452, $16,134, and $17,668, respectively.
