<PAGE>
THE PRUDENTIAL [Logo]
Annual
Report to
Contract
Owners
December 31, 1994
PRUCO LIFE'S
PRUVIDER-Service Mark-
[Logo]
The Prudential Series Fund, Inc.
and
Pruco Life PRUvider Variable Appreciable Account
<PAGE>
[Logo]
<PAGE>
TABLE OF CONTENTS
NOTE: **The back inside cover provides important toll-free
telephone numbers for customer service.
PAGE
I. LETTER TO CONTRACT OWNERS
Summarizes the results of The Prudential Series Fund, Inc. and
provides an economic overview..................................... 4
II. THE PRUDENTIAL SERIES FUND, INC.
The Pruco Life PRUvider Variable Appreciable Account is one of
several Accounts investing in The Prudential Series Fund, Inc.
1. FINANCIAL STATEMENTS............................................ A1
2. INVESTMENT OBJECTIVES........................................... B1
3. SCHEDULE OF INVESTMENTS
Lists the holdings in each of the investment options of The
Prudential Series Fund, Inc. ................................... B2
4. NOTES TO THE FINANCIAL STATEMENTS............................... B12
5. INDEPENDENT AUDITOR'S REPORT.................................... B17
III. PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT
1. FINANCIAL STATEMENTS
Provides financial data at the product level including
investment results net of certain product related charges....... C1
2. NOTES TO FINANCIAL STATEMENTS................................... C3
3. INDEPENDENT AUDITOR'S REPORT.................................... C4
IV. APPENDIX
1. REPORT OF MANAGEMENT............................................ i
2. GLOSSARY........................................................ ii
3. BOARDS OF DIRECTORS............................................. iv
3
<PAGE>
PRUvider Annual Report Year Ended December 31, 1994
DEAR CONTRACT OWNER:
AS A POLICYHOLDER OF THE PRUDENTIAL OR ONE OF ITS SUBSIDIARIES, YOU'VE ENTRUSTED
THE CONSERVATIVELY MANAGED FLEXIBLE AND AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIOS
OF THE PRUDENTIAL SERIES FUND, INC. WITH YOUR VARIABLE LIFE ASSETS. WE
APPRECIATE THE CONFIDENCE YOU HAVE SHOWN IN US.
AS YOU MAY KNOW, DRAMATICALLY RISING INTEREST RATES MADE 1994 A DIFFICULT YEAR
IN THE FINANCIAL MARKETS. FOR THE FIRST TIME IN FOUR YEARS, SHORT-TERM MONEY
MARKET INVESTMENTS EARNED MORE THAN U.S. STOCKS OR BONDS LAST YEAR. IN OUR VIEW,
1995 WON'T BE A YEAR FOR TAKING RISKS, EITHER. BE PREPARED FOR A YEAR OF MODEST
RETURNS.
THAT'S WHY WE'VE WRITTEN THIS REPORT. WE WANT TO REVIEW WITH YOU WHAT HAS
HAPPENED IN THE STOCK AND BOND MARKETS OVER THE LAST YEAR, INCLUDING A
PORTFOLIO-BY-PORTFOLIO DESCRIPTION OF INVESTMENT ACTIVITY. WE CONCLUDE THIS
LETTER WITH OUR OUTLOOK FOR THE FINANCIAL MARKETS IN 1995 -- WE LOOK FOR STABLE
LONG-TERM INTEREST RATES AND RETURNS IN THE STOCK MARKET THAT ARE CLOSER
TO LONG-TERM, HISTORICAL AVERAGES.
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 rise
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 our 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 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.
4
<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.
[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>
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.
[Graph] #2
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 SECURITIES THAT
COMPRISE THE S&P 500 MAY DIFFER SUBSTANTIALLY FROM THE SECURITIES 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 INSURANCE PRODUCTS. THESE RETURNS ARE NET OF
INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT CHARGES.
5
<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.
YOUR PRUDENTIAL/PRUCO SECURITIES REPRESENTATIVE STANDS READY TO DISCUSS THESE
ISSUES AND TO ASSIST YOU IN ANY WAY HE OR SHE CAN. WE BELIEVE THAT YOUR
PERSONAL FINANCIAL REPRESENTATIVE -- THE ONE WHO UNDERSTANDS YOU AND YOUR
LONG-TERM INVESTMENT NEEDS -- IS A VERY VALUABLE RESOURCE GIVEN TODAY'S
TURBULENT FINANCIAL MARKETS. WE URGE YOU TO TAKE ADVANTAGE OF YOUR
REPRESENTATIVE'S TRAINING AND EXPERTISE TO HELP YOU MANAGE YOUR INVESTMENTS IN A
MANNER MOST BENEFICIAL TO YOU AND YOUR FAMILY.
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.
6
<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 B12 THROUGH B16.
A1
<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 B12 THROUGH B16.
A2
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
INVESTMENT OBJECTIVES
(Schedule of Investments appear on the following pages)
- --------------------------------------------------------------------------------
BALANCED PORTFOLIOS
CONSERVATIVELY A favorable total return through investment in a blend of
MANAGED FLEXIBLE money market instruments, fixed income securities and
common stocks managed towards a lower potential risk of
loss than the Aggressively Managed Flexible Portfolio and
correspondingly lower potential for appreciation.
AGGRESSIVELY MANAGED Higher total return through investment in a blend of money
FLEXIBLE market instruments, fixed income securities and common
stocks managed with a higher degree of risk of loss in
order to attain potentially higher results than the
Conservatively Managed Flexible Portfolio.
- --------------------------------------------------------------------------------
B1
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
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
--------------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
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
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
</TABLE>
B2
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
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
--------------
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
--------------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
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
--------------
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
</TABLE>
B3
<PAGE>
AGGRESSIVELY 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.,
6.500%, 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
%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
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
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
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
</TABLE>
B4
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
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
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
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
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
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>
B5
<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 B12 THROUGH B16.
B6
<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>
B7
<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>
B8
<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>
B9
<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>
B10
<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 B12 THROUGH B16.
B11
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF THE
AGGRESSIVELY MANAGED FLEXIBLE AND CONSERVATIVELY MANAGED FLEXIBLE
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. Shares in the Series Fund are currently sold only to certain
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 Portfolio options available to PRUvider contract owners are the
Aggressively Managed Flexible and the Conservatively Managed Flexible
Portfolios.
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 from writing
options which expire unexercised are treated on the expiration date as gains
from the sale of
B12
<PAGE>
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 bond components of the Aggressively Managed Flexible and Conservatively
Managed Flexible Portfolios may each invest up to 20% of their assets in United
States currency denominated debt securities issued outside the United States by
foreign or domestic issuers. 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.
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.
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.
B13
<PAGE>
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.
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. For the
year ended December 31, 1994, the total of the credit used was:
<TABLE>
<S> <C>
Conservatively Managed Flexible Portfolio..................... $ 91,232
Aggressively Managed Flexible Portfolio....................... 41,492
</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 0.55% of the average daily
net assets of the Conservatively Managed Flexible Portfolio and 0.60% of the
average daily net assets of the Aggressively Managed Flexible Portfolio. Under
the Agreement, The Prudential has agreed to refund to a 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.
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.
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>
Aggressively Managed Flexible Portfolio....................... 33.94%
Conservatively Managed Flexible Portfolio..................... 12.45%
All other portfolios (currently not available to PRUvider).... 53.61%
----------
100.00%
</TABLE>
B14
<PAGE>
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
MANAGED MANAGED
FLEXIBLE FLEXIBLE
-------------- --------------
<S> <C> <C>
Debt Securities................. $2,110,107,294 $2,264,216,698
Equity Securities............... $1,463,207,489 $ 587,491,444
</TABLE>
Proceeds From Sales:
<TABLE>
<CAPTION>
AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
FLEXIBLE FLEXIBLE
-------------- --------------
<S> <C> <C>
Debt Securities................. $1,985,428,664 $2,265,817,380
Equity Securities............... $1,492,407,199 $ 430,107,759
</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
MANAGED MANAGED
FLEXIBLE FLEXIBLE
-------------- --------------
<S> <C> <C>
Gross Unrealized Appreciation... $ 224,521,828 147,865,296
Gross Unrealized Depreciation... 93,827,948 122,789,171
Total Net Unrealized............ 130,693,880 25,076,125
Tax Basis....................... 3,347,362,272 3,443,877,594
</TABLE>
B15
<PAGE>
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>
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........................ $ 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>
<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>
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.
B16
<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 Aggressively Managed Flexible and
Conservatively Managed Flexible Portfolios (two 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 custodian 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
B17
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------
AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
TOTAL FLEXIBLE FLEXIBLE
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 87,858,560 $ 38,633,529 $ 49,225,031
-------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 337,089 0 337,089
-------------- -------------- --------------
NET ASSETS........................................ $ 87,521,471 $ 38,633,529 $ 48,887,942
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 85,745,930 $ 37,774,804 $ 47,971,126
Equity of Pruco Life Insurance Company.......... 1,775,541 858,725 916,816
-------------- -------------- --------------
$ 87,521,471 $ 38,633,529 $ 48,887,942
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------
AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
TOTAL FLEXIBLE FLEXIBLE
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 2,445,440 $ 942,724 $ 1,502,716
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 576,113 251,732 324,381
-------------- -------------- --------------
NET INVESTMENT INCOME............................. 1,869,327 690,992 1,178,335
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 1,439,356 951,248 488,108
Realized loss on shares redeemed
[average cost basis].......................... (2,077) (1,569) (508)
Net unrealized loss on investments.............. (4,745,569) (2,528,354) (2,217,215)
-------------- -------------- --------------
NET LOSS ON INVESTMENTS........................... (3,308,290) (1,578,675) (1,729,615)
-------------- -------------- --------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ (1,438,963) $ (887,683) $ (551,280)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE C3.
C1
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
TOTAL FLEXIBLE FLEXIBLE
------------------------------ ------------------------------ ------------------------------
1994 1993 1994 1993 1994 1993
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income............ $ 1,869,327 $ 564,708 $ 690,992 $ 255,767 $ 1,178,335 $ 308,941
Capital gains distributions
received....................... 1,439,356 1,502,084 951,248 776,668 488,108 725,416
Realized gain (loss) on shares
redeemed
[average cost basis]........... (2,077) 1,490 (1,569) 55 (508) 1,435
Net unrealized loss on
investments.................... (4,745,569) (776,739) (2,528,354) (355,699) (2,217,215) (421,040)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ (1,438,963) 1,291,543 (887,683) 676,791 (551,280) 614,752
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 48,924,502 36,912,827 21,856,622 16,111,519 27,067,880 20,801,308
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ 638,522 1,139,174 327,110 536,120 311,412 603,054
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE IN NET ASSETS....... 48,124,061 39,343,544 21,296,049 17,324,430 26,828,012 22,019,114
NET ASSETS:
Beginning of year................ 39,397,410 53,866 17,337,480 13,050 22,059,930 40,816
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 87,521,471 $ 39,397,410 $ 38,633,529 $ 17,337,480 $ 48,887,942 $ 22,059,930
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE C3.
C2
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
FOR THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993
NOTE 1: GENERAL
Pruco Life PRUvider Variable Appreciable Account (the "Account") was established
on July 10, 1992 under Arizona law as a separate investment account of Pruco
Life Insurance Company ("Pruco Life") which is a wholly-owned subsidiary of The
Prudential Insurance Company of America ("The Prudential"). The assets of the
Account are segregated from Pruco Life's other assets.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. There are two subaccounts within the Account, each
of which invests only in a corresponding portfolio of The Prudential Series
Fund, Inc. (the "Series Fund"). The Series Fund is a diversified open-end
management investment company, and is managed by The Prudential.
NOTE 2: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share for each portfolio of the Series Fund, the number
of shares of each portfolio held by the subaccounts of the Account and the
aggregate cost of investments in such shares at December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
PORTFOLIOS
-------------------------------
AGGRESSIVELY CONSERVATIVELY
PORTFOLIO MANAGED MANAGED
INFORMATION FLEXIBLE FLEXIBLE
- ------------------------------- -------------- ---------------
<S> <C> <C>
Number of shares: 2,493,128 3,492,385
Net asset value per share: $ 15.4960 $ 14.0950
Cost: $ 41,517,592 $ 51,863,286
</TABLE>
NOTE 3: CHARGES AND EXPENSES
A. Mortality Risk and Expense Risk Charges
The mortality risk and expense risk charges at an effective annual rate of
0.90% are applied daily against the net assets representing equity of
Contract owners held in each subaccount.
B. Deferred Sales Charge
A deferred sales charge is imposed upon the surrender of certain variable
life insurance contracts to compensate Pruco Life for sales and other
marketing expenses. The amount of any sales charge will depend on the number
of years that have elapsed since the Contract was issued. No sales charge
will be imposed after the tenth year of the Contract. No sales charge will
be imposed on death benefits.
C. Partial Withdrawal Charge
The partial withdrawal of the cash surrender value from certain variable
life insurance contracts invokes a charge of $15.
NOTE 4: TAXES
The operations of the subaccounts form a part of, and are taxed with, the
operations of Pruco Life. Under the Internal Revenue Code, all ordinary income
and capital gains allocated to the Contract owners are not taxed to Pruco Life.
As a result, the net asset values of the subaccounts are not affected by federal
income taxes on distributions received by the subaccounts.
NOTE 5: NET INCREASE IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
The increase in net assets resulting from surplus transfers represents the net
contributions of Pruco Life to the Account.
C3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners of
Pruco Life PRUvider Variable Appreciable
Account and the Board of Directors
of Pruco Life Insurance Company
Newark, New Jersey
We have audited the accompanying statements of net assets of Pruco Life PRUvider
Variable Appreciable Account of Pruco Life Insurance Company (comprising,
respectively, the Aggressively Managed Flexible and Conservatively Managed
Flexible subaccounts) as of December 31, 1994, and the related statements of
operations for the periods presented in the year then ended, and the statement
of changes in net assets for each of the periods presented in the two years then
ended. These financial statements are the responsibility of the Company'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 Pruco Life PRUvider Variable Appreciable Account as of December
31, 1994, and 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 10, 1995
C4
<PAGE>
REPORT OF MANAGEMENT
The accompanying financial statements and all information in the annual
report are the responsibility of management of Pruco Life Insurance Company (the
Company) and the Prudential Series Fund Inc. (the Series Fund). They have been
prepared in conformity with generally accepted accounting principles. The
statements necessarily include amounts based on management's 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 systems of internal controls for the Series Fund and the Company's
Variable Insurance and Annuity Accounts under Variable Life Insurance and
Variable Annuity products are integral parts of those for the Company. As such,
management depends upon the Company's systems of internal controls in meeting
its responsibilities for reliable financial statements. These systems are
designed to provide reasonable assurance that assets are safeguarded and that
transactions are properly recorded and executed in accordance with management's
authorization. The concept of reasonable assurance is based on the premise that
the cost of internal controls should not exceed the benefits derived. The
control environment is enhanced by the selection and training of competent
management, a business ethics policy demanding the highest standards of conduct
by employees in carrying out the Company's affairs, organizational arrangements
that provide for segregation of duties and delegation of authority, and the
communication of accounting and operating policies and procedures throughout the
organization. In addition, the Company uses the services of The Prudential's
professional staff of internal auditors who monitor the 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, independent
auditors. The independent auditor's reports, which appear in this annual report,
each express an independent professional opinion on the fairness of presentation
of management's financial statements. The auditors review the Plan's financial
and accounting controls and conduct such tests and procedures as they deem
necessary under generally accepted auditing standards.
The Company's Board of Directors, and the Series Fund's Board of Directors
monitor management's fulfillment of its responsibilities for accurate
accounting, statement preparation and protection of assets. The Series Fund's
Board of Directors has a majority of outside directors and these outside
directors constitute an informal auditing committee. They meet with the
independent certified public accountants, management and internal auditors
periodically to evaluate the discharge by each of their respective
responsibilities, and each has free and separate access to the Series Fund's
Board of Directors to discuss accounting, financial reporting, internal control
and auditing matters.
<TABLE>
<S> <C>
Robert P. Hill Stephen P. Tooley
Chairman of the Board Vice President and Comptroller
The Prudential Series Fund, Inc. Pruco Life Insurance Company
</TABLE>
I
<PAGE>
GLOSSARY OF TERMS FOR THE REPORT TO CONTRACT OWNERS
(NOTE: ADDITIONAL EXPLANATION WILL BE FOUND IN NOTES TO FINANCIAL STATEMENTS)
ACCUMULATION UNIT -- The measure for determining the Contract owner's share in
the separate account of a deferred variable annuity during the accumulation
period before annuity benefits begin to be paid. Contract owner transactions
such as purchase payments, transfers, and withdrawals result in changes to the
number of accumulation units credited to the Contract owner. Investment results
and daily charges affect the value of the accumulation unit.
ANNUITY UNIT -- The measure of the fixed number of benefit units purchased by
the accumulation units when annuitizing via a variable payout annuity.
AMERICAN DEPOSITORY RECEIPT (ADR) -- A certificate issued by an American bank to
evidence ownership of a block of foreign shares. The certificate can be traded
like a share of stock.
BOND -- A debt security which obligates the issuer to pay interest at specific
intervals and to redeem the bond for a specified amount on the maturity date. A
bond can be categorized based on the time interval between issue date and
maturity date. Short-term bond: 2 years or less; medium-term bond: 2 - 10 years;
long-term bond: 10 years or more.
CERTIFICATE OF DEPOSIT (CD) -- A short-term, interest-bearing bond issued by a
bank or a savings and loan.
COMMERCIAL PAPER -- A short-term, unsecured promissory note issued by either a
corporation or bank.
COMMON STOCK -- The basic unit of ownership of a public corporation which
entitles stockholders to dividend payments, although amount and frequency of
dividends are not guaranteed. (see also Stock)
CONVERTIBLE BOND -- A bond that is exchangeable for another type of security
(usually common stock).
COUPON RATE -- The annual rate of interest the issuer of a bond will pay
bondholders.
DEFAULTED SECURITY -- A bond which fails to make interest payments in a timely
manner.
FUTURES CONTRACT -- A contract calling for the delivery of a specified quantity
of cash, a financial security or a commodity. The contract includes a specific
price and future time at which the exchange may take place.
LOAN PARTICIPATION -- A loan to a corporation which is sold by a bank in the
form of a short-term, unsecured promissory note.
NET ASSETS -- The term used to designate the total value of securities owned,
cash, receivables, and other assets less any liabilities.
MARKET VALUE -- The dollar value of a security on a given day, usually based on
the last sales price of that given day.
OPTION CONTRACT -- A contract giving the investor the right to buy or sell an
underlying security at a fixed price before the expiration date. An option which
grants the investor the right to buy the underlying security is a Call Option; a
Put Option gives the investor the right to sell the underlying security.
PIK BOND/STOCK (PAY IN KIND) -- A security which has the option to pay interest
or dividends in the form of either additional bonds or shares of stock.
PREFERRED STOCK -- A high quality unit of ownership of a public corporation
which entitles the holder to preference over common stock holders in the payment
of dividends. (see also Stock)
PORTFOLIO TURNOVER -- A measure of portfolio trading activity.
REALIZED GAIN/LOSS -- The amount of profit or loss from the sale of securities.
Calculated as the sale price minus the purchase price.
II
<PAGE>
REPURCHASE AGREEMENT -- An agreement where an investor loans cash to a bank in
exchange for a Treasury security held as collateral and interest on the loan.
The agreement indicates that the cash and collateral are exchanged back the
following day. These securities are used to invest idle cash.
RESTRICTED SECURITY -- A security which is sold privately because it is not
registered with the SEC.
RIGHT -- Privilege granted to stockholders of a company to buy shares of a new
issue of common stock (at a price below the public offering price) before it is
offered to the public.
STOCK -- Unit of ownership in a public corporation. The value of a share of
stock varies, according to how buyers and sellers of the stock view the
corporation's future success. Shareholders generally receive dividend payments,
which are their part of the corporation's earnings. (see also Common Stock;
Preferred Stock)
TIME DEPOSIT (TD) -- A non-negotiable short-term, interest bearing bond issued
by a bank or savings & loan. The maturity period can be from 1 day to 6 months.
UNREALIZED GAIN/LOSS -- The increase or decrease in the value of a security,
based on its daily market price and its original purchase price. A gain or loss
is "unrealized" until the sale of the security.
VARIATION MARGIN -- A term used in the daily valuation of futures contracts. It
refers to the difference between the current and previous day's settling price.
WARRANT -- A security which entitles the holder to buy additional shares of
common stock at a specified price (usually higher than the market price at the
time of issuance), over a period of years.
III
<PAGE>
BOARD OF
DIRECTORS THE PRUDENTIAL SERIES FUND, INC.
ROBERT P. HILL W. SCOTT McDONALD, JR., E. MICHAEL CAULFIELD
CHAIRMAN AND CEO, PhD. PRESIDENT,
PRUDENTIAL DIRECT; EXECUTIVE VICE PRUDENTIAL PREFERRED
CHAIRMAN OF THE BOARD, PRESIDENT, FINANCIAL SERVICES;
SERIES FUND FAIRLEIGH DICKINSON PRESIDENT, SERIES FUND
UNIVERSITY
SAUL K. FENSTER, PhD. JOSEPH WEBER, PhD.
PRESIDENT, NEW JERSEY VICE PRESIDENT,
INSTITUTE OF TECHNOLOGY INTERCLASS
(INTERNATIONAL
CORPORATE LEARNING)
- --------------------------------------------------------------------------------
BOARD OF
DIRECTORS PRUCO LIFE INSURANCE COMPANY
E. MICHAEL CAULFIELD GARNETT L. KEITH, JR. I. EDWARD PRICE
PRESIDENT, VICE CHAIRMAN, CEO,
PRUDENTIAL PREFERRED THE PRUDENTIAL PRUDENTIAL
FINANCIAL SERVICES INSURANCE COMPANY OF INTERNATIONAL INSURANCE
ROBERT P. HILL AMERICA DONALD G. SOUTHWELL
CHAIRMAN AND CEO, IRA J. KLEINMAN PRESIDENT,
PRUDENTIAL DIRECT; PRESIDENT, PRUDENTIAL INSURANCE
CHAIRMAN OF THE BOARD PRUDENTIAL SELECT AND
OF MARKETING COMPANY FINANCIAL SERVICES
PRUCO LIFE AND PRUCO ESTHER H. MILNES
LIFE OF NEW JERSEY SENIOR VICE PRESIDENT,
PRUDENTIAL INSURANCE
AND
FINANCIAL SERVICES;
PRESIDENT, PRUCO LIFE
AND
PRUCO LIFE OF NEW
JERSEY
IV
<PAGE>
The toll-free numbers shown below can be used to make transfers and
reallocations. Unit values for each investment option are available to all
contract owners from the 800 number.
However, you must be enrolled to allocate premiums, transfer funds or get the
following information by telephone:
- How your premiums are being allocated
- Current investment option values in your contract.
The phone lines are open each business day during the hours shown.
Please be sure to have your contract number available when you call.
[MAP]
-
1-800-634-7879
8am-4pm Central Time
-
1-800-356-4050
8am-4pm Eastern Time
-
1-800-635-9587
8am-4pm Eastern Time
- --------------------------------------------------------------------------------
In the past, contract owners who held several contracts of the same type, at the
same address,
received multiple copies of Annual Reports and Semi-Annual Reports. In an effort
to lessen waste
and to reduce your Fund's expense of postage and printing, we will now mail only
one copy of each
contract owner report for your related contracts at the same address. No action
on your part is
necessary. Upon request, we will furnish you with additional reports. The above
toll-free numbers
should be used to request any additional copies. Proxy material and tax
information will continue to
be sent to each account of record.
This annual report is authorized for use with prospective investors only when
preceded or accompanied by a current
prospectus for The Prudential Series Fund, Inc. and for the applicable variable
life insurance or annuity contract. These
products are available through Pruco Securities Corp., Newark, NJ, a subsidiary
of The Prudential. These prospectuses
contain more information concerning charges and expenses and should be read
carefully before you invest or send money.
<PAGE>
PEACE OF MIND. IT COMES WITH EVERY PIECE OF THE
ROCK.
Since 1875, The Prudential has been helping
individuals and families meet their financial
needs. Changing times mean changing needs. Whether
providing superior insurance protection for home,
family, and business, providing for future
education and retirement expenses, or offering
innovations like our Living Needs
Benefit-Registered Trademark- and Critical Care
Access, Prudential people have always been able to
deliver something more: personal service, quality,
attention to detail, and the financial strength of
The Rock.
If you have questions regarding your contract(s),
please contact your Prudential/Pruco Securities
representative or your local office.
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<PAGE>
Graph 1: (Conservatively Managed Flexible Portfolio)
Graph represents the growth of $10,000 invested in the 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 2: (Aggressively Managed Flexible Portfolio)
Graph represents the growth of $10,000 invested in the 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.
