<PAGE>
SEMI-ANNUAL REPORT
TO CONTRACT OWNERS
JUNE 30, 1996
THE PRUDENTIAL SERIES FUND, INC.
/ / PRUCO LIFE'S PRUVIDER(SM)
/ / PRUCO LIFE OF NEW JERSEY'S PRUVIDER(SM)
LIVE WELL. MAKE A PLAN. BY YOUR OWN ROCK.
[LOGO] PRUDENTIAL
<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......... 1
1. MARKET REVIEW................................................... 2
2. INDIVIDUAL PORTFOLIOS........................................... 3
3. INVESTMENT ADVISOR'S OUTLOOK.................................... 5
II. THE PRUDENTIAL SERIES FUND, INC.
1. FINANCIAL STATEMENTS............................................ A1
2. INVESTMENT OBJECTIVES........................................... B1
3. SCHEDULE OF INVESTMENTS......................................... B2
4. NOTES TO FINANCIAL STATEMENTS................................... C1
III. APPENDIX
1. GLOSSARY........................................................ i
2. BOARD OF DIRECTORS.............................................. iii
Please note: This Semi-Annual Report includes the financial statements of The
Prudential Series Fund, Inc. It does not include the financial statements for
the separate account that corresponds to your product. Separate account
financial statements will no longer be provided in either the Semi- Annual or
Annual Report. If you would like separate account financial statements as of
June 30, 1996, please call the appropriate number shown inside the back cover of
this Report.
This Report may be used with the public only when preceded or accompanied by
current prospectuses for The Prudential Series Fund, Inc., the applicable
variable life or annuity product, and the current Performance Data Update for
the applicable product. The Performance Data Update shows historical investment
performance after the deduction of investment management fees,
investment-related expenses and the product's Mortality and Expense Risk Charge.
For the variable life insurance products, additional contract charges include
cost of insurance, administrative, sales and any applicable withdrawal or
surrender charges. These charges will reduce the rates of return shown on the
Performance Data Update. For the variable annuity products, the Performance Data
Update provides returns that are net of all contract charges, including
applicable surrender or withdrawal charges. The prospectuses contain more
information concerning charges and expenses, including hypothetical performance
illustrations that show the effects of performance on various assumptions, and
should be read carefully before you invest or send money.
Variable life and annuity products are offered by Pruco Securities Corp., a
subsidiary of Prudential Insurance Company of America. The principal business
address of Pruco Securities is 1111 Durham Avenue, South Plainfield, NJ 07080.
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
SIX MONTHS ENDED JUNE 30, 1996
DEAR CONTRACT OWNER:
WE ARE PLEASED TO REPORT TO YOU ON THE INVESTMENT PERFORMANCE OF THE TWO
PORTFOLIOS OF THE PRUDENTIAL SERIES FUND, INC., WHICH ARE AVAILABLE TO YOU IN
YOUR PRUVIDER(SM) VARIABLE LIFE INSURANCE POLICY.
DURING THE FIRST HALF OF 1996, STRONG ECONOMIC GROWTH AND RECORD INFLOWS TO
U.S. EQUITY FUNDS POWERED THE U.S. STOCK MARKET TO NEW HIGHS. THIS SAME
STRONG U.S. ECONOMY PUSHED INTEREST RATES SHARPLY HIGHER AND BOND PRICES
LOWER. AS A RESULT, THE STOCK MARKET RECORDED STRONG GAINS, WHILE THE BOND
MARKET DISAPPOINTED INVESTORS.
THE PRUDENTIAL SERIES FUND CONSERVATIVE BALANCED AND THE FLEXIBLE MANAGED
PORTFOLIOS FOLLOWED THE SAME PATTERN. THE STOCK PORTIONS OF OUR PORTFOLIOS
PROVIDED VERY GOOD RETURNS. BUT OUR BOND PORTIONS SHOWED LOSSES. WHILE THE
ABSOLUTE RETURNS ON THESE PORTFOLIOS WERE GOOD, THE TWO PORTFOLIOS FINISHED
SLIGHTLY BELOW THEIR PEER AVERAGES DURING THE SIX MONTH PERIOD.
BOTH THE CONSERVATIVE BALANCED AND THE FLEXIBLE MANAGED PORTFOLIOS HOLD A
COMBINATION OF STOCKS, BONDS AND MONEY MARKET SECURITIES. THE CONSERVATIVELY
BALANCED PORTFOLIO HOLDS LESS IN STOCKS, WHICH GENERALLY MAKES IT LESS
VOLATILE, AND MAY ALSO REDUCE RETURNS WHEN STOCKS PRICES ARE RISING. THE
FLEXIBLE MANAGED PORTFOLIO HOLDS MORE IN STOCKS, WHICH MAKES IT GENERALLY
MORE VOLATILE BUT RAISES THE POSSIBILITY OF HIGHER RETURNS WHEN STOCKS ARE
RISING IN PRICE.
YOUR PRUVIDER(SM) VARIABLE LIFE INSURANCE POLICY IS A LONG-TERM HOLDING. SIX
MONTHS, ON THE OTHER HAND, IS ONLY A SMALL SLICE OF A LIFETIME. THROUGHOUT
THIS REPORT, THEREFORE, WE TRY TO KEEP THE LONG TERM IN FOCUS, WHILE UPDATING
YOU ON THE PORTFOLIOS' RECENT PERFORMANCE. OVER THE LONG TERM, YOU'LL FIND
THAT THESE PORTFOLIOS HAVE DELIVERED EXCELLENT ABSOLUTE AND RELATIVE
PERFORMANCE. WHEN YOU CONSIDER THE ALLOCATION OF YOUR ASSETS AMONG THESE
PORTFOLIOS AND THE PERFORMANCE EXPECTATIONS YOU HOLD, PLEASE KEEP THE LONG
TERM IN MIND.
ONLY THE NAMES HAVE CHANGED.
AS YOU READ THIS REPORT, YOU'LL NOTICE THAT THE NAMES OF THE PORTFOLIOS HAVE
CHANGED. THEIR INVESTMENT OBJECTIVES, RISKS AND POTENTIAL REWARDS REMAIN THE
SAME.
WE BELIEVE THAT THE NEW NAMES ARE MORE REFLECTIVE OF THE PORTFOLIOS'
INVESTMENTS AND MANAGEMENT STYLE AND ARE ALSO EASIER TO REMEMBER.
HERE'S HOW THE NAMES HAVE CHANGED:
NEW NAME FORMER NAME
CONSERVATIVE BALANCED CONSERVATIVELY MANAGED FLEXIBLE
FLEXIBLE MANAGED AGGRESSIVELY MANAGED FLEXIBLE
IF YOU HAVE ANY QUESTIONS ABOUT THESE CHANGES OR ABOUT YOUR PRUVIDER(SM)
VARIABLE LIFE INSURANCE POLICY, PLEASE CONTACT YOUR PRUDENTIAL/PRUCO
SECURITIES REPRESENTATIVE.
ALL OF US AT PRUDENTIAL THANK YOU FOR YOUR BUSINESS AND LOOK FORWARD TO
HELPING YOU MAKE A PLAN FOR YOUR FUTURE FINANCIAL SECURITY.
/s/ E. Michael Caulfield /s/ Mendel Melzer
E. MICHAEL CAULFIELD MENDEL MELZER
PRESIDENT CHAIRMAN
IMPORTANT NOTE:
The rates of return quoted on the following pages reflect deduction of
investment management fees and investment-related 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 and when redeemed, may be worth more or less than original cost.
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 the contract. These contract charges effectively reduce the
dollar amount of any net gains and increase the dollar amount of any net
losses. Your Prudential/Pruco Securities Representative can provide you with
actual rates of return for your type of variable life insurance or annuity
contract, and show you a personalized illustration of how insurance charges
affect the returns you experience.
1
<PAGE>
MARKET REVIEW
U.S. STOCKS
UP, UP & AWAY.
U.S. stocks surged higher in the first half of 1996, powered by a growing
economy and record inflows of investments into stock mutual funds.
Employment, consumer spending and housing starts all surged in the first half
of the year. In fact, some economists predicted that economic growth in the
second quarter would be as high as 5% -- the highest since 1988's 5.2% gain
in the fourth quarter.
Small company stocks led the way, just as they did last year. These
companies, generally defined as those whose outstanding stock is valued at
less than $1 billion, typically perform well late in the economic cycle --
about where we are right now.
Some analysts were concerned that stocks continued to rise while bonds were
falling: higher interest rates should theoretically make bonds more
attractive than stocks. But investors shrugged off such warnings, bidding
most stocks higher during the last six months.
/ / COMMODITY-RELATED STOCKS performed the best. Gold hit $415 an ounce in
January for the first time in six years.
Crude oil for future delivery topped $24 a barrel in March, the highest since
the 1990 Gulf War, and gasoline hit $2 a gallon in California and New York by
May. World grain inventories hit a 48-year low in May. Companies that owned
stockpiles of these commodities profited nicely as prices rose.
/ / CONSUMER CYCLICAL STOCKS (companies that produce things that people buy
more of when the economy is good --like cars) advanced smartly when the
economy revived dramatically in the first quarter. Retailers rebounded after
fears of poor holiday sales proved unfounded, and airlines soared as price
cutting in that industry ended.
/ / TECHNOLOGY STOCKS tumbled, then rebounded, finishing the first half of
1996 up 14.5%. Semiconductor stocks had sunk amid fear of rising supply and
declining demand last year. But these shares rebounded this year on signs of
renewed economic growth.
/ / INDUSTRIAL STOCKS, including producers of heavy machinery and
transportation equipment, also surged, on hopes that the economic upturn
would endure.
U.S. BONDS
INTEREST RATES: BACK OVER 7%.
After one of the best years on record in 1995, bonds stumbled in 1996.
Economic reports showed new-found strength in the economy, and investors
feared that faster economic growth would lead to higher inflation. (Inflation
erodes the value of the fixed income that bonds pay.) Prices of the 30-year
U.S. Treasury bond fell enough so that yields rose dramatically, until they
reached 6.88% by June 30, 1996, up by nearly a full percentage point from
December 31, 1995.
What happened? When we last wrote to you in December, it seemed that the
economy might slide into recession. In the ensuing months, though, the
economy instead bounced back smartly. And then commodity prices skyrocketed,
so investors started to worry about inflation.
/ / LONG-TERM U.S. TREASURY BONDS lost the most, with those maturing in more
than 20 years losing 7.6%, as measured by the 20+ Year Lehman Treasury Index.
/ / HIGHER YIELDING BONDS fared much better. High yield corporates performed
the best, advancing 3.5%, according to the Lehman High Yield Index.
/ / ASSET BACKED and MORTGAGE BACKED SECURITIES performed better than U.S.
government bonds, but not as well as high yield corporate "junk bonds". The
higher coupons of these bonds offered some price protection as interest rates
rose.
GLOBAL STOCKS
TRAILING THE U.S.
Stock markets around the world performed well in the first half of 1996, but
continued to trail the U.S., just as they did in 1995.
In the 1990s, economies have been generally growing faster overseas
(particularly in the Pacific Rim countries) than in the U.S., helping
corporate profits and stock prices to rise faster there. But last year and
again this year, the U.S. has been a leader in economic growth. Rising
corporate profits here have pushed stock prices higher than in most other
major industrialized countries around the world.
- --------------------------------------------------------------------------------
TURNAROUND IN JAPAN.
- --------------------------------------------------------------------------------
/ / JAPAN: The Japanese economy grew by an astounding 13% in the first
quarter, the fastest since 1973, energized by the falling Japanese yen. The
recovery lifted Japanese stocks to their highest levels in four years. But
the strong U.S. dollar left U.S. investors in Japanese stocks just slightly
ahead, as the greenback hit a 28-month high against the yen in June. (A
strengthening dollar works against U.S. investors who sell foreign
investments, because the proceeds will buy less when exchanged back into
dollars.)
- --------------------------------------------------------------------------------
IN EUROPE, RATES FELL.
WILL THE ECONOMY NOW GROW?
- --------------------------------------------------------------------------------
/ / EUROPE: Europe's short-lived economic recovery ended last fall.
Unemployment in Europe is now twice that in the U.S., and several countries
teetered on the verge of recession this spring. Despite the gloomy economy,
however, stocks rose in Europe this spring as investors bet that interest
rate reductions would spur economic growth later in 1996.
2
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO
(FORMERLY CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO)
The CONSERVATIVE BALANCED PORTFOLIO rose 5.0% in the six months ended June
30. The Portfolio performed slightly below the average.
Both the Conservative Balanced and the Flexible Managed Portfolios (see next
page) hold a combination of stocks, bonds and money market securities. The
Conservative Balanced Portfolio holds less in stocks -- about 36% of assets,
which generally makes it less volatile and may also reduce returns when stock
prices are rising.
The sharp increase in interest rates this year has reduced the prices of
bonds and raised their yields, making them more attractive to buy. As a
result, we sold some of our stocks at a profit and purchased bonds, because
we believe they offer lower risk and higher potential rewards.
- -------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE CONSERVATIVE BALANCED PORTFOLIO VS. LIPPER
(VIP) FLEX. AVERAGE, S&P 500 AND LEHMAN AGGREGATE INDEX OVER TEN YEARS.
[GRAPH]
$45,000
40,000 $36,477 S&P 500(3)
35,000 $26,795 LIPPER (VIP) FLEX. AVG.(2)
30,000 $24,318 CONSERVATIVE BALANCED PORTFOLIO(1)
25,000 $22,720 LEHMAN AGGREGATE INDEX(4)
20,000
15,000
10,000
6/30/86 87 88 89 90 91 92 93 94 95 96
- -------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
SIX ONE THREE FIVE TEN
MOS. YEAR RANK YEARS RANK YEARS RANK YEARS RANK
- --------------------------------------------------------------------------------
Conservative Balanced 5.0% 12.2% 54/67 8.3% 50/56 10.0% 45/51 9.3% 13/15
Lipper (VIP) Flex.
Avg.(2) 5.4 15.2 10.6 12.0 10.4
S&P 500(3) 10.1 26.0 17.2 15.7 13.8
Lehman Aggregate
Index(4) -1.2 5.0 5.3 8.3 8.6
INCEPTION DATE: 5/1/83
(1) Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. The Portfolio may invest in foreign securities. Foreign investments
are subject to the risks of currency fluctuation and the impact of social,
political and economic change.
(2) The Lipper Variable Insurance Products (VIP) Flex Average is calculated
by Lipper Analytical Services, Inc., and reflects the investment return of
certain portfolios underlying variable life and annuity products. These
returns are net of investment fees and fund expenses but not product charges.
(3) 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 indices may
portray different comparative performance.
(4) The Lehman Aggregate Index (LAI) is comprised of approximately 5,000
government and corporate bonds. The LAI is an unmanaged index and includes
the reinvestment of all interest but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Portfolio. The securities that comprise the LAI may differ substantially from
the securities in the Portfolio. The LAI is not the only index that may be
used to characterize performance of income funds, and other indices may
portray different comparative performance.
[PHOTO] DATA BANK
PORTFOLIO MANAGER
MARK STUMPP
- -----------------------------------
WHAT'S IN THE PORTFOLIO?*
6/30/96
/ / Bonds 45%
/ / Large Co. Stocks 36 [GRAPH]
/ / Money Market 19
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
Bonds 35%
Large Co. Stocks 40 [GRAPH]
Money Market 25
- -----------------------------------
FIVE LARGEST INDUSTRIES -- STOCKS.*
6/30/96
Insurance 3.0%
Oil Services 3.0
Misc. Industrial 2.9
Retail 2.4
Autos/Trucks 2.4
- -----------------------------------
FIVE LARGEST SECTORS -- BONDS.*
6/30/96
Financial 13.9%
Industrial 10.6
U.S. Treasury 9.9
Foreign ($ Denominated) 8.8
Agency 0.4
*SOURCE: PRUDENTIAL
3
<PAGE>
FLEXIBLE MANAGED PORTFOLIO
(FORMERLY AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO)
The FLEXIBLE MANAGED PORTFOLIO appreciated 5.1% during the six months ending
June 30. The Portfolio performed slightly below the average.
Both the Flexible Managed and the Conservative Balanced Portfolios hold a
combination of stocks, bonds and money market securities. They differ in the
proportion of assets held in each portfolio, with the Flexible Managed
Portfolio holding more in stocks -- about 60% of assets, which makes it
generally more volatile but raises the possibility of higher returns when
stock prices are rising.
The sharp increase in interest rates this year has reduced the prices of
bonds and raised their yields, making them more attractive to buy. As a
result, we sold some of our stocks at a profit and purchased bonds, because
we believe they offer lower risk and higher potential rewards.
- --------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE FLEXIBLE MANAGED PORTFOLIO VS. LIPPER (VIP)
FLEX. AVERAGE, S&P 500, AND LEHMAN AGGREGATE INDEX OVER TEN YEARS.
[GRAPH]
$45,000
40,000 $36,477 S&P 500(3)
35,000 $26,795 LIPPER (VIP) FLEX. AVG.(2)
30,000 $26,734 FLEXIBLE MANAGED PORTFOLIO(1)
25,000 $22,720 LEHMAN AGGREGATE INDEX(4)
20,000
15,000
10,000
6/30/86 87 88 89 90 91 92 93 94 95 96
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
SIX ONE THREE FIVE TEN
MOS. YEAR RANK YEARS RANK YEARS RANK YEARS RANK
- --------------------------------------------------------------------------------
Flexible Managed 5.1% 16.3% 22/67 10.3% 31/56 12.6% 15/51 10.3% 7/15
Lipper (VIP) Flex.
Avg.(2) 5.4 15.2 10.6 12.0 10.4
S&P 500(3) 10.1 26.0 17.2 15.7 13.8
Lehman Aggregate
Index(4) -1.2 5.0 5.3 8.3 8.6
INCEPTION DATE: 5/1/83
(1) Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. The Portfolio may invest in foreign securities. Foreign investments
are subject to the risks of currency fluctuation and the impact of social,
political and economic change.
(2) The Lipper Variable Insurance Products (VIP) Flex Average is calculated by
Lipper Analytical Services, Inc., and reflects the investment return of
certain portfolios underlying variable life and annuity products. These
returns are net of investment fees and fund expenses but not product charges.
(3) 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 indices may
portray different comparative performance.
(4) The Lehman Aggregate Index (LAI) is comprised of approximately 5,000
government and corporate bonds. The LAI is an unmanaged index and includes
the reinvestment of all interest but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Portfolio. The securities that comprise the LAI may differ substantially from
the securities in the Portfolio. The LAI is not the only index that may be
used to characterize performance of income funds, and other indices may
portray different comparative performance.
[PHOTO] DATA BANK
PORTFOLIO MANAGER
MARK STUMPP
- -----------------------------------
WHAT'S IN THE PORTFOLIO?*
6/30/96
Large Co. Stocks 60%
Bonds 36 [GRAPH]
Money Market 3
Small Co. Stocks 1
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
Large Co. Stocks 62%
Bonds 28
Money Market 3
Small Co. Stocks 7
- -----------------------------------
FIVE LARGEST INDUSTRIES -- STOCKS.*
6/30/96
Drug & Medical Supplies 7.1%
Misc. Industrial 4.9
Computer Software 4.2
Insurance 2.6
Computer Hardware 2.5
- -----------------------------------
FIVE LARGEST SECTORS -- BONDS.*
6/30/96
Industrial 10.1%
Financial 9.2
Foreign ($ Denominated) 7.7
U.S. Treasury 5.7
Asset-Backed 0.5
*SOURCE: PRUDENTIAL
4
<PAGE>
INVESTMENT ADVISOR'S OUTLOOK
TREES DON'T GROW TO THE SKY.
U.S. stocks rose 10.1% in the first half of 1996, confounding many analysts
who had expected a pullback by now.
While we're quite pleased with the unusually high returns that stocks have
provided for our Contract Owners, we realistically know this tremendous
performance can not continue. It's simply the law of averages.
Since 1926, when records started being kept, the U.S. stock market's average
return has been 10.5% a year, as measured by the S&P 500. Yet, in recent
years, returns have been much higher. (See chart below.)
LAST 70 YEARS RECENT BULL MARKET LAST YEAR
1926 - 1995 1982 - 1995 1995
------------- ------------------ ---------
10.5% 16.4% 37.4%
(5.9% OVER AVERAGE) (26.9% OVER AVERAGE)
When the final results are in, we expect 1996's performance may be closer to
average than to 1995's.
SOURCE: PRUDENTIAL
U.S. STOCKS
We're at a bit of a crossroads here. Many analysts now are wary of the U.S.
stock market. It rose at a record pace last year, and this year's advance to
date has been quite handsome. Is there no end in sight?
Should interest rates continue to rise in the second half as they did in the
first half, investors may be tempted to sell stocks to buy bonds. And if the
Federal Reserve feels compelled to raise short-term interest rates, both
stocks and bonds could be vulnerable.
That said, some groups of stocks may offer more opportunity than others.
/ / Some analysts think cyclical stocks (those that benefit from an improving
economy), including technology stocks, may benefit in the months to come.
/ / Some analysts also like retailers. Retail stocks have been marked down
for several years now, and are finally recovering after a holiday season
that was not nearly as bad as predicted.
U.S. BONDS
The first half of this year has been a rough one for bond investors, but we
think the worst may soon be over. We expect today's higher long-term interest
rates will slow the U.S. economy down a bit, and that's always good for bond
investors. We do worry about commodity prices, the possibility of wage
inflation, and more frequent talk about tax cuts -- all warning signals of
increasing inflation. But with stocks at these price levels, we think bonds
provide a strong alternative.
GLOBAL STOCKS
Economic growth overseas has been a lot stronger than in the U.S. in recent
years. And since stronger growth usually means higher corporate profits,
which means higher stock prices, we like non-U.S. stocks. We expect they may
perform better than U.S. stocks during the second half of 1996, considering
how far the U.S. stock market has risen to date.
/ / We expect economic growth in Asia will be the strongest in the world.
Japan's economy grew explosively in the first quarter, heralding the end to
a long downturn. Plus China has been encouraging its citizens to buy
imported goods.
/ / In Europe, we expect stock prices to rebound as the economy there
recovers. Many European stocks are undervalued by U.S. standards.
PLEASE KEEP IN MIND THAT THE FINANCIAL MARKETS COULD BE JUST AS VOLATILE IN
THE SECOND HALF OF 1996 AS THEY WERE IN THE FIRST HALF OF 1996. THERE COULD
BE SOME MAJOR MOVES -- BOTH UP AND DOWN.
IT'S ALWAYS A GOOD IDEA TO TALK THINGS OVER WITH YOUR PRUDENTIAL/PRUCO
SECURITIES REPRESENTATIVE. HE OR SHE CAN HELP YOU DECIDE HOW YOUR NEEDS HAVE
CHANGED AND HOW WE CAN HELP YOU MEET THEM.
CAN WE HELP?
WE HOPE THE FIRST HALF OF THE YEAR HAS BEEN GOOD TO YOU AND WISH YOU
CONTINUED FAVORABLE RETURNS FOR THE REST OF 1996.
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 VALUABLE RESOURCE GIVEN TODAY'S OFTEN
VOLATILE FINANCIAL MARKETS.
WE URGE YOU TO TAKE ADVANTAGE OF YOUR REPRESENTATIVE'S TRAINING AND
EXPERIENCE TO HELP YOU MANAGE YOUR INSURANCE NEEDS IN A MANNER MOST
BENEFICIAL TO YOU AND YOUR FAMILY.
ALL OF US AT PRUDENTIAL THANK YOU FOR YOUR BUSINESS AND LOOK FORWARD TO
HELPING YOU MAKE A PLAN FOR YOUR FUTURE FINANCIAL SECURITY.
S96-0390
5
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$3,902,670,743).......................... $4,175,165,104
Interest and dividends receivable.......... 37,927,708
Receivable for securities sold............. 45,999,404
--------------
Total Assets............................. 4,259,092,216
--------------
LIABILITIES
Bank overdraft............................. 480,081
Accrued expenses and other liabilities..... 307,097
Payable for securities purchased........... 53,823,548
Payable to investment adviser.............. 5,700,984
Payable for portfolio shares redeemed...... 24,177
--------------
Total Liabilities........................ 60,335,887
--------------
NET ASSETS................................... $4,198,756,329
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,653,551
Paid-in capital, in excess of par........ 3,754,657,953
--------------
3,757,311,504
Undistributed net investment income........ 13,448,311
Accumulated net realized gains............. 155,502,153
Net unrealized appreciation................ 272,494,361
--------------
Net assets, June 30, 1996.................. $4,198,756,329
--------------
--------------
Net asset value per share of 265,355,100
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 15.8232
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $387,002 foreign
withholding tax)......................... $ 11,827,753
Interest................................... 82,232,889
---------------
94,060,642
---------------
EXPENSES
Investment management fee.................. 11,142,227
Shareholders' reports...................... 436,236
Custodian expense.......................... 109,688
Accounting fees............................ 63,482
Professional fees.......................... 11,559
Directors' expense......................... 2,516
---------------
Total Expenses........................... 11,765,708
Less: Custodian fee credit................. (37,208)
---------------
Net Expenses............................. 11,728,500
NET INVESTMENT INCOME........................ 82,332,142
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 134,431,601
Net unrealized loss on investments......... (17,355,738)
---------------
NET GAIN ON INVESTMENTS...................... 117,075,863
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 199,408,005
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 82,332,142 $ 155,293,990
Net realized gain on investments....................................................... 134,431,601 167,342,297
Net unrealized gain (loss) on investments.............................................. (17,355,738) 264,773,974
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 199,408,005 587,410,261
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (66,596,974) (154,987,434)
Net realized gain from investment transactions......................................... 0 (133,660,168)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (66,596,974) (288,647,602)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [6,900,567 and 5,345,143 shares, respectively]...................... 61,743,531 81,026,772
Reinvestment of dividend distributions [4,247,406 and 19,023,739 shares,
respectively]......................................................................... 66,596,974 288,647,602
Capital stock repurchased [(3,212,460) and (15,343,313) shares, respectively].......... (3,169,472) (228,767,054)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 125,171,033 140,907,320
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 257,982,064 439,669,979
NET ASSETS:
Beginning of period.................................................................... 3,940,774,265 3,501,104,286
------------------ -------------------
End of period.......................................................................... $ 4,198,756,329 $ 3,940,774,265
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C5.
A1
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FLEXIBLE MANAGED PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$4,171,361,917).......................... $4,534,558,702
Cash....................................... 3,242,910
Interest and dividends receivable.......... 30,608,157
Receivable for securities sold............. 57,978,331
--------------
Total Assets............................. 4,626,388,100
--------------
LIABILITIES
Accrued expenses and other liabilities..... 361,169
Payable for securities purchased........... 79,103,914
Payable to investment adviser.............. 6,650,119
Payable for portfolio shares redeemed...... 78,099
--------------
Total Liabilities........................ 86,193,301
--------------
NET ASSETS................................... $4,540,194,799
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,448,883
Paid-in capital, in excess of par........ 3,773,098,454
--------------
3,775,547,337
Undistributed net investment income........ 6,347,631
Accumulated net realized gains............. 395,103,046
Net unrealized appreciation................ 363,196,785
--------------
Net assets, June 30, 1996.................. $4,540,194,799
--------------
--------------
Net asset value per share of 244,888,364
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 18.5399
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $305,599 foreign
withholding tax)......................... $ 20,178,105
Interest................................... 60,742,218
---------------
80,920,323
---------------
EXPENSES
Investment management fee.................. 13,077,649
Shareholders' reports...................... 449,618
Custodian expense.......................... 155,543
Accounting fees............................ 63,578
Professional fees.......................... 11,658
Directors' expense......................... 2,356
Miscellaneous expenses..................... 160
---------------
Total Expenses........................... 13,760,562
Less: Custodian fee credit................. (28,843)
---------------
Net Expenses............................. 13,731,719
NET INVESTMENT INCOME........................ 67,188,604
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on investments and
foreign currencies--
Securities transactions.................. 329,017,502
Foreign currency transactions............ (69,542)
---------------
Net realized gain on investments and
foreign currencies....................... 328,947,960
---------------
Net unrealized loss on investments and
foreign currencies--
Securities............................... (177,534,657)
Foreign currency translations............ (1,903)
---------------
Net unrealized loss on investments and
foreign currencies....................... (177,536,560)
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 151,411,400
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 218,600,004
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 67,188,604 $ 126,640,661
Net realized gain on investments and foreign currency transactions..................... 328,947,960 292,267,835
Net unrealized gain (loss) on investments and foreign currency translations............ (177,536,560) 410,041,102
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 218,600,004 828,949,598
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (55,089,785) (124,621,227)
Net realized gain from investment transactions......................................... 0 (176,844,671)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (55,089,785) (301,465,898)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [5,585,954 and 8,486,525 shares, respectively]...................... 102,930,223 146,641,074
Reinvestment of dividend distributions [3,016,416 and 17,050,711 shares,
respectively]......................................................................... 55,089,785 301,465,898
Capital stock repurchased [(2,312,429) and (11,612,102) shares, respectively].......... (42,540,265) (195,926,134)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 115,479,743 252,180,838
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 278,989,962 779,664,538
NET ASSETS:
Beginning of period.................................................................... 4,261,204,837 3,481,540,299
------------------ -------------------
End of period.......................................................................... $ 4,540,194,799 $ 4,261,204,837
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C5.
A2
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
INVESTMENT OBJECTIVES
(Schedule of Investments appear on the following pages)
- --------------------------------------------------------------------------------
BALANCED PORTFOLIOS
CONSERVATIVE A favorable total return through investment in a blend of
BALANCED money market instruments, fixed income securities and
common stocks managed towards a lower potential risk of
loss than the Flexible Managed Portfolio and
correspondingly lower potential for appreciation.
FLEXIBLE MANAGED Higher total return through investment in a blend of money
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
Conservative Balanced Portfolio.
- --------------------------------------------------------------------------------
B1
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
CONSERVATIVE BALANCED PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 35.6% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 0.4%
+Coltec Industries, Inc......................... 311,000 $ 4,431,750
GenCorp, Inc.................................... 676,800 10,236,600
+UNC, Inc....................................... 289,100 2,421,212
--------------
17,089,562
--------------
AIRLINES -- 0.8%
+AMR Corp....................................... 200,000 18,200,000
+USAir Group, Inc............................... 835,000 15,030,000
--------------
33,230,000
--------------
ALUMINUM -- 0.6%
Aluminum Co. of America......................... 400,000 22,950,000
--------------
AUTOS - CARS & TRUCKS -- 2.3%
A.O. Smith Corp................................. 466,800 11,670,000
Chrysler Corp................................... 500,000 31,000,000
Ford Motor Co................................... 318,300 10,304,962
General Motors Corp............................. 500,000 26,187,500
General Motors Corp. (Class 'H' Stock).......... 107,600 6,469,450
Titan Wheel International, Inc.................. 748,350 11,973,600
--------------
97,605,512
--------------
CHEMICALS -- 0.7%
Imperial Chemical Industries, PLC, ADR.......... 371,300 18,240,112
OM Group, Inc................................... 308,400 12,104,700
--------------
30,344,812
--------------
CHEMICALS - SPECIALTY -- 0.8%
Ferro Corp...................................... 655,200 17,362,800
M.A. Hanna Co................................... 734,550 15,333,731
--------------
32,696,531
--------------
COMPUTER SERVICES -- 0.9%
+Amdahl Corp.................................... 900,000 9,675,000
National Data Corp.............................. 320,100 10,963,425
+Paxar Corp..................................... 1,022,928 17,901,240
--------------
38,539,665
--------------
CONSTRUCTION -- 1.0%
J. Ray McDermott, SA............................ 511,600 12,790,000
Owens Corning................................... 662,800 28,500,400
--------------
41,290,400
--------------
CONTAINERS -- 0.2%
+Sealed Air Corp................................ 290,400 9,764,700
--------------
DIVERSIFIED GAS -- 0.7%
+Basin Exploration, Inc......................... 148,000 962,000
Sonat Offshore Drilling, Inc.................... 173,100 8,741,550
Tidewater, Inc.................................. 204,224 8,960,328
+Weatherford Enterra, Inc....................... 321,353 9,640,590
Western Gas Resources, Inc...................... 162,100 2,634,125
--------------
30,938,593
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.3%
International Business Machines Corp............ 134,000 13,266,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 0.3%
United States Surgical Corp..................... 365,500 11,330,500
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
ELECTRICAL EQUIPMENT -- 1.0%
+Anixter International, Inc..................... 337,400 $ 5,018,825
Belden, Inc..................................... 492,300 14,769,000
Westinghouse Electric Corp...................... 1,200,000 22,500,000
--------------
42,287,825
--------------
ELECTRONICS -- 1.1%
+ADT Ltd........................................ 620,000 11,702,500
+Digital Equipment Corp......................... 262,000 11,790,000
+IMO Industries, Inc............................ 596,900 3,432,175
Texas Instruments, Inc.......................... 400,000 19,950,000
--------------
46,874,675
--------------
FINANCIAL SERVICES -- 1.2%
American Express Co............................. 159,000 7,095,375
Lehman Brothers Holdings, Inc................... 400,000 9,900,000
Reinsurance Group of America, Inc............... 487,800 18,414,450
Salomon, Inc.................................... 300,000 13,200,000
--------------
48,609,825
--------------
FOODS -- 0.2%
Philip Morris Companies, Inc.................... 94,000 9,776,000
--------------
FOREST PRODUCTS -- 0.8%
Louisiana-Pacific Corp.......................... 700,000 15,487,500
Mead Corp....................................... 350,800 18,197,750
--------------
33,685,250
--------------
FURNITURE -- 0.2%
Leggett & Platt, Inc............................ 380,200 10,550,550
--------------
GAS PIPELINES -- 0.7%
Enron Oil & Gas Co.............................. 332,700 9,274,012
+Global Marine, Inc............................. 615,800 8,544,225
+Seagull Energy Corp............................ 387,200 9,680,000
--------------
27,498,237
--------------
HOLDINGS -- 0.2%
Hanson, PLC, ADR................................ 700,000 9,975,000
--------------
HOUSING RELATED -- 0.1%
+Giant Cement Holdings, Inc..................... 415,200 5,241,900
--------------
INSURANCE -- 2.7%
Allstate Corp................................... 129,599 5,912,954
Equitable of Iowa Companies..................... 372,700 13,230,850
Financial Security Assurance Holdings, Ltd...... 226,200 6,192,225
National Re Corp................................ 207,600 7,836,900
PennCorp Financial Group, Inc................... 544,200 17,278,350
Provident Companies, Inc........................ 177,200 6,556,400
TIG Holdings, Inc............................... 588,300 17,060,700
Trenwick Group, Inc............................. 276,200 13,810,000
W.R. Berkley Corp............................... 192,800 8,049,400
Western National Corp........................... 900,000 16,537,500
--------------
112,465,279
--------------
MACHINERY -- 1.2%
Case Corp....................................... 642,800 30,854,400
DT Industries, Inc.............................. 234,500 4,279,625
+Global Industrial Technologies, Inc............ 390,700 6,251,200
Parker-Hannifin Corp............................ 204,750 8,676,281
--------------
50,061,506
--------------
</TABLE>
B2
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
MEDIA -- 1.8%
Central Newspapers, Inc. (Class 'A' Stock)...... 331,700 $ 12,438,750
Comcast Corp. (Special Class 'A' Stock)......... 9,600 177,600
Gannett Co., Inc................................ 200,000 14,150,000
Hollinger International, Inc.................... 161,400 1,835,925
Knight-Ridder, Inc.............................. 200,000 14,500,000
Lee Enterprises, Inc............................ 337,400 7,971,075
McGraw-Hill, Inc................................ 192,400 8,802,300
Media General, Inc. (Class 'A' Stock)........... 123,600 4,604,100
Times Mirror Co. (Class 'A' Stock).............. 280,276 12,192,006
--------------
76,671,756
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 2.9%
BW/IP, Inc. (Class 'A' Stock)................... 379,200 7,204,800
Danaher Corp.................................... 455,600 19,818,600
Donaldson Company, Inc.......................... 400,400 10,310,300
+IDEX Corp...................................... 285,600 10,852,800
+Jan Bell Marketing, Inc........................ 1,000,000 2,625,000
+Litton Industries, Inc......................... 259,700 11,296,950
Mark IV Industries, Inc......................... 601,193 13,601,992
Mascotech, Inc.................................. 650,000 9,587,500
+SPS Transaction Services, Inc.................. 192,800 3,470,400
Trinity Industries, Inc......................... 385,500 13,107,000
+Wolverine Tube, Inc............................ 279,500 9,782,500
York International Corp......................... 199,000 10,298,250
--------------
121,956,092
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.0%
Eastman Kodak Co................................ 138,600 10,776,150
Houghton Mifflin Co............................. 200,000 9,950,000
Whitman Corp.................................... 913,400 22,035,775
--------------
42,761,925
--------------
PETROLEUM -- 1.7%
Amerada Hess Corp............................... 100,000 5,362,500
Cabot Oil & Gas Corp. (Class 'A' Stock)......... 594,400 10,327,700
Elf Aquitaine, ADR.............................. 1,290,100 47,411,175
Parker & Parsley Petroleum Co................... 257,800 7,153,950
--------------
70,255,325
--------------
PETROLEUM SERVICES -- 3.1%
Baker Hughes, Inc............................... 300,000 9,862,500
Coflexip, ADR................................... 700,000 12,162,500
+ENSCO International, Inc....................... 600,000 19,500,000
ICO, Inc........................................ 500,000 2,812,500
+Marine Drilling Co., Inc....................... 1,000,000 10,125,000
+Mesa, Inc...................................... 1,008,400 5,546,200
Murphy Oil Corp................................. 190,800 8,657,550
Noble Affiliates, Inc........................... 400,000 15,100,000
+Noble Drilling Corp............................ 800,000 11,100,000
+Oryx Energy Co................................. 849,400 13,802,750
+Pride Petroleum Services, Inc.................. 360,100 5,131,425
+Western Atlas, Inc............................. 300,000 17,475,000
--------------
131,275,425
--------------
RAILROADS -- 0.5%
Burlington Northern, Inc........................ 246,800 19,959,950
--------------
RETAIL -- 2.6%
+Best Products Company, Inc..................... 1,094,500 1,812,766
+Bombay Company, Inc............................ 923,300 5,770,625
+Burlington Coat Factory Warehouse.............. 244,600 2,568,300
Charming Shoppes, Inc........................... 2,435,000 17,197,188
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 227,900 $ 8,318,350
+Filene's Basement Corp......................... 160,000 780,000
K mart Corp..................................... 2,058,700 25,476,413
Rite Aid Corp................................... 6,000 178,500
TJX Companies, Inc.............................. 464,900 15,690,375
+Toys 'R' Us, Inc............................... 600,000 17,100,000
Woolworth Corp.................................. 600,000 13,500,000
--------------
108,392,517
--------------
RUBBER -- 0.3%
Goodyear Tire & Rubber Co....................... 269,800 13,017,850
--------------
STEEL -- 1.4%
+Bethlehem Steel Corp........................... 1,000,000 11,875,000
LTV Corp........................................ 1,515,000 17,233,125
+Material Sciences Corp......................... 675,000 11,643,750
+National Steel Corp. (Class 'B' Stock)......... 300,000 3,262,500
USX-U.S. Steel Group............................ 450,000 12,768,750
--------------
56,783,125
--------------
TELECOMMUNICATIONS -- 0.4%
Century Telephone Enterprises, Inc.............. 227,300 7,245,188
Frontier Corp................................... 297,700 9,117,063
--------------
16,362,251
--------------
TEXTILES -- 1.2%
+Farah, Inc..................................... 258,500 1,906,438
+Fieldcrest Cannon, Inc......................... 460,000 9,027,500
+Fruit of the Loom, Inc. (Class 'A' Stock)...... 500,000 12,750,000
+Owens-Illinois, Inc............................ 552,700 8,843,200
Phillips-Van Heusen Corp........................ 600,000 7,650,000
+Tultex Corp.................................... 579,000 2,750,250
V.F. Corp....................................... 154,600 9,218,025
--------------
52,145,413
--------------
TOBACCO -- 0.1%
RJR Nabisco Holdings Corp....................... 144,000 4,464,000
--------------
TRUCKING/SHIPPING -- 0.2%
Yellow Corp..................................... 500,000 6,625,000
--------------
TOTAL COMMON STOCKS
(Cost $1,219,180,944).......................................... 1,496,742,951
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 0.3% SHARES VALUE
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- 0.2%
Salomon Inc..................................... 400,000 10,050,000
--------------
MEDIA -- 0.1%
Times Mirror Co. (Cum. Conv.), Series B......... 119,724 3,217,582
--------------
TOTAL PREFERRED STOCKS
(Cost $12,725,059)............................................. 13,267,582
--------------
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 38.9% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 13.8%
Advanta National Bank, C.D.,
6.260%, 09/01/97.............................. $ 10,500,000 10,484,250
Associates Corp. of North America,
6.625%, 05/15/01.............................. 44,500,000 43,983,800
8.375%, 01/15/98.............................. 1,100,000 1,131,339
</TABLE>
B3
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Banc One Credit Card Master Trust,
7.750%, 12/15/99.............................. $ 5,100,000 $ 5,192,412
BCH Cayman Islands, Ltd.,
6.500%, 02/15/06.............................. 6,100,000 5,624,688
Capital One Bank, M.T.N.
6.660%, 08/17/98, Tranche #TR00055............ 10,050,000 10,029,800
6.730%, 06/04/98, Tranche #TR00001............ 16,000,000 15,976,000
6.900%, 04/15/99, Tranche #TR00064............ 22,250,000 22,250,000
CIGNA Mortgage Securities, Inc.,
9.400%, 01/15/02.............................. 1,219,404 1,208,277
CIT Group Holdings, M.T.N.,
5.850%, 03/16/98, Tranche #SR00010............ 25,000,000 24,847,500
6.200%, 04/15/98, Tranche #SR00011............ 10,000,000 9,983,600
Discover Credit Corp., M.T.N.,
9.000%, 04/01/98.............................. 16,000,000 16,595,840
Erac USA Finance Co.,
6.350%, 01/15/01, Tranche #TR00005............ 6,500,000 6,262,344
7.000%, 06/15/00.............................. 25,000,000 24,992,187
Federal Express Corp., M.T.N.,
10.010%, 06/01/98, Tranche #SR00067........... 3,000,000 3,161,520
10.050%, 06/15/99, Tranche #SR00068........... 500,000 536,710
First Union Corp.,
9.450%, 06/15/99.............................. 4,000,000 4,288,600
First USA Bank,
8.200%, 02/15/98.............................. 14,575,000 14,916,929
Ford Motor Credit Co., M.T.N.,
5.668%, 10/04/99, Tranche #TR00537............ 23,750,000 23,733,137
7.060%, 06/06/01, Tranche #TR00675............ 37,000,000 37,092,500
General Motors Acceptance Corp.,
7.125%, 05/01/03.............................. 38,700,000 38,681,424
General Motors Acceptance Corp., M.T.N.,
5.395%, 02/02/99, Tranche #TR00100............ 2,000,000 1,999,782
6.300%, 09/10/97.............................. 5,000,000 5,012,600
7.375%, 07/20/98, Tranche #TR00067............ 4,650,000 4,732,723
Mellon Financial Co.,
6.500%, 12/01/97.............................. 1,650,000 1,652,425
NationsBank Corp.,
7.000%, 05/15/03.............................. 24,500,000 24,364,515
Norwest Corp., M.T.N.,
6.250%, 03/15/01.............................. 16,800,000 16,359,840
Okobank,
%6.968%, 09/27/49............................. 18,750,000 19,125,000
**%7.387%, 10/29/49........................... 12,500,000 12,806,250
RHG Finance Corp.,
8.875%, 10/01/05.............................. 8,000,000 8,260,000
Salomon, Inc.,
7.000%, 05/15/99.............................. 42,000,000 42,021,420
Salomon, Inc., M.T.N.,
5.980%, 02/02/98, Tranche #SR00027............ 35,000,000 34,616,400
7.250%, 05/01/01.............................. 8,625,000 8,603,610
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Santander Financial Issuances, Inc.,
7.875%, 04/15/05.............................. $ 3,250,000 $ 3,344,055
Sears Roebuck Acceptance Corp., M.T.N.,
6.380%, 02/16/99.............................. 70,000,000 69,688,500
Standard Credit Card Master Trust,
5.950%, 09/07/03.............................. 4,650,000 4,365,187
Wells Fargo & Co,
6.875%, 04/01/06.............................. 500,000 481,670
--------------
578,406,834
--------------
FOREIGN -- 6.7%
Banco de Commercio Exterior de Columbia, SA,
M.T.N.,
**8.625%, 06/02/00, Tranche #TR00001.......... 5,500,000 5,596,250
Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 7,300,000 7,582,875
Compania Sud Americana de Vapores, SA,
**7.375%, 12/08/03............................ 7,600,000 7,201,000
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 5,190,000 5,073,225
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 8,229,375
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 5,150,000 5,227,250
Grupo Embotellador Mexicana,
**10.750%, 11/19/97........................... 8,015,000 8,255,450
Grupo Televisa, SA,
10.000%, 11/09/97............................. 7,250,000 7,512,812
Kansallis-Osake Pankki, N.Y.,
**%8.650%, 01/01/49........................... 10,000,000 10,368,900
9.750%, 12/15/98.............................. 16,950,000 18,097,176
Kansallis-Osake Pankki, N.Y., C.D.,
6.125%, 05/15/98.............................. 6,160,000 6,120,453
Quebec, Province of Canada,
7.125%, 02/09/24.............................. 22,155,000 20,244,574
7.500%, 07/15/23.............................. 31,250,000 29,908,125
Republic of Argentina,
9.250%, 02/23/01.............................. 4,300,000 4,138,750
Republic of Columbia,
7.125%, 05/11/98.............................. 2,775,000 2,761,125
7.250%, 02/15/03-02/23/04..................... 27,900,000 26,021,510
8.000%, 06/14/01, Tranche #TR00001............ 20,750,000 20,559,723
8.750%, 10/06/99.............................. 12,325,000 12,586,906
Republic of Italy,
6.875%, 09/27/23.............................. 69,150,000 62,353,938
Telekom Malaysia,
**7.875%, 08/01/25............................ 14,150,000 14,207,449
--------------
282,046,866
--------------
INDUSTRIAL -- 8.8%
Agco Corp.,
8.500%, 03/15/06.............................. 6,500,000 6,370,000
Arkla, Inc., M.T.N.,
9.250%, 12/18/97, Tranche #TR00027............ 3,000,000 3,108,390
Auburn Hills Trust,
12.000%, 05/01/20............................. 10,150,000 14,660,660
B.J. Services Co.,
7.000%, 02/01/06.............................. 4,000,000 3,646,000
</TABLE>
B4
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Coca-Cola Enterprises, Inc.,
6.500%, 11/15/97.............................. $ 3,750,000 $ 3,758,625
Digital Equipment Corp.,
7.125%, 10/15/02.............................. 10,000,000 9,701,000
7.750%, 04/01/23.............................. 5,000,000 4,520,400
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. 3,500,000 3,430,000
8.500%, 06/15/03.............................. 18,000,000 17,820,000
10.000%, 02/15/01............................. 2,500,000 2,631,250
Lockheed Martin,
7.700%, 06/15/08.............................. 25,500,000 25,912,463
Lumbermens Mutual Casualty Co.,
9.150%, 07/01/26.............................. 21,500,000 22,243,900
News America Holdings, Inc.,
7.750%, 12/01/45.............................. 73,500,000 65,764,860
9.250%, 02/01/13.............................. 10,000,000 10,868,900
Noble Drilling Corp.,
9.125%, 07/01/06.............................. 3,500,000 3,508,750
Norcen Energy Resources,
7.375%, 05/15/06.............................. 8,000,000 7,898,400
Paramount Communications, Inc.,
7.500%, 01/15/02.............................. 5,425,000 5,351,437
Parker & Parsley Petroleum Co.,
8.250%, 08/15/07.............................. 3,000,000 3,128,640
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 8,950,000 9,410,030
RJR Nabisco, Inc.,
8.750%, 08/15/05.............................. 4,000,000 3,958,000
Service Corp. International,
7.000%, 06/01/15.............................. 2,500,000 2,498,050
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23-07/15/33..................... 44,040,000 42,350,384
Time Warner, Inc.,
7.750%, 06/15/05.............................. 10,000,000 9,762,200
9.125%, 01/15/13.............................. 12,930,000 13,503,833
9.150%, 02/01/23.............................. 8,000,000 8,271,520
Viacom, Inc.,
6.750%, 01/15/03.............................. 19,345,000 18,252,201
7.750%, 06/01/05.............................. 44,675,000 43,559,019
Weatherford Enterra, Inc.,
7.250%, 05/15/06.............................. 4,000,000 3,958,840
--------------
369,847,752
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 9.6%
Federal National Mortgage Association,
9.050%, 04/10/00.............................. 14,000,000 15,139,740
United States Treasury Notes,
5.000%, 02/15/99.............................. 17,000,000 16,492,720
5.125%, 02/28/98.............................. 12,800,000 12,611,968
5.625%, 11/30/00.............................. 59,800,000 57,921,682
5.875%, 04/30/98.............................. 8,000,000 7,968,720
6.125%, 07/31/00-09/30/00..................... 10,350,000 10,230,809
6.250%, 04/30/01.............................. 14,200,000 14,064,674
6.500%, 04/30/97-05/31/01..................... 19,500,000 19,587,845
6.750%, 04/30/00.............................. 8,000,000 8,083,760
6.875%, 05/15/06-08/15/25..................... 240,200,000 240,708,006
--------------
402,809,924
--------------
TOTAL LONG-TERM BONDS
(Cost $1,638,721,545).......................................... 1,633,111,376
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 24.6% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK-RELATED INSTRUMENTS -- 6.8%
Abn-Amro Bank North America,, C.D.,
5.030%, 08/20/96.............................. $ 28,000,000 $ 28,000,353
Advanta Corp.,
5.125%, 11/15/96.............................. 12,535,000 12,491,504
Advanta National Bank, C.D.,
5.800%, 03/19/97, Tranche #SR00009............ 25,000,000 25,071,875
5.840%, 03/14/97, Tranche #SR00007............ 21,500,000 21,373,150
Banque Nationale De Paris, C.D.,
5.400%, 07/11/96.............................. 11,000,000 11,000,092
Barnett Banks, Inc., C.D.,
5.390%, 07/08/96.............................. 19,058,000 19,057,729
Bayerische Hypotheken, C.D.,
5.340%, 09/18/96.............................. 4,000,000 3,999,460
Bayerische Landesbank, C.D.,
5.100%, 07/05/96.............................. 3,000,000 2,999,885
Bayerische Vereinsbank,
5.410%, 10/02/96.............................. 3,000,000 3,000,069
Canadian Imperial Bank, C.D.,
5.520%, 09/09/96.............................. 25,000,000 25,000,000
Capital One Bank,
8.625%, 01/15/97, Tranche #TR00005............ 32,425,000 32,837,770
Commerzbank,
5.310%, 09/23/96.............................. 7,000,000 6,997,074
Commonwealth Bank of Australia,
5.320%, 08/12/96-08/14/96..................... 5,500,000 5,465,272
Deutsche Bank, C.D.,
5.090%, 08/23/96.............................. 23,000,000 23,000,000
Dresdner U.S. Finance, C.D.,
5.690%, 07/16/96.............................. 2,000,000 2,000,076
Engelhard Corp.,
5.428%, 07/08/96.............................. 5,000,000 5,000,000
Lowes Co.,
5.650%, 07/01/96.............................. 920,000 920,000
Marine Midland Bank N.A.,
5.687%, 09/27/96.............................. 6,500,000 6,483,750
NBD Bank, N.A.,
5.050%, 08/01/96, Tranche #TR00280............ 5,000,000 4,998,338
Rabobank Nederland C.D.,
5.020%, 08/22/96.............................. 5,000,000 5,000,000
Societe Generale Bank,
5.400%, 07/12/96.............................. 27,000,000 27,000,133
Societe Generale Bank C.D.,
5.340%, 07/02/96.............................. 5,000,000 5,000,002
Union Bank of Switzerland C.D.,
5.050%, 07/08/96.............................. 2,000,000 1,999,846
United States National Bank of Oregon,
5.320%, 07/30/96, Tranche #TR00029............ 5,000,000 4,999,791
--------------
283,696,169
--------------
COMMERCIAL PAPER -- 10.8%
Allied-Signal Corp.,
5.400%, 07/12/96.............................. 7,850,000 7,837,047
American Honda Finance Corp.,
5.400%, 07/11/96.............................. 7,115,000 7,104,327
5.480%, 08/26/96.............................. 2,000,000 1,982,951
5.500%, 07/09/96.............................. 2,000,000 1,997,556
</TABLE>
B5
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Associates Corp. of North America,
5.400%, 07/29/96.............................. $ 15,502,000 $ 15,436,892
Bank of New York Co.,
5.320%, 07/02/96.............................. 3,000,000 2,999,557
Barnett Banks, Inc.,
5.420%, 07/09/96.............................. 2,000,000 1,997,591
5.500%, 07/01/96.............................. 12,600,000 12,600,000
Bell Atlantic Network,
5.400%, 07/10/96.............................. 6,250,000 6,241,562
Beneficial Corp.,
5.380%, 08/21/96.............................. 9,000,000 8,931,405
Bradford & Bingley Building Society,
5.350%, 07/12/96.............................. 2,000,000 1,996,731
Caterpillar Financial Services Corp.,
5.250%, 09/19/96.............................. 2,000,000 1,976,667
Ciesco, L.P.,
5.350%, 07/26/96.............................. 5,000,000 4,981,424
5.380%, 08/08/96.............................. 2,000,000 1,988,642
CIT Group Holdings, Inc.,
5.330%, 08/12/96-08/13/96..................... 19,000,000 18,880,075
Coca Cola Enterprises, Inc.,
5.400%, 07/16/96.............................. 2,179,000 2,174,097
5.450%, 08/19/96.............................. 3,000,000 2,977,746
Cooper Industries, Inc.,
5.600%, 07/01/96.............................. 15,328,000 15,328,000
Corporate Receivables Corp.,
5.400%, 07/23/96-08/12/96..................... 3,711,000 3,690,621
Countrywide Home Loan,
5.400%, 07/15/96.............................. 3,000,000 2,993,700
5.420%, 07/22/96.............................. 2,000,000 1,993,677
5.430%, 08/20/96-08/22/96..................... 6,000,000 5,953,845
Duracell Inc.,
5.400%, 07/09/96-07/22/96..................... 6,575,000 6,559,310
Enterprise Funding Corp,
5.400%, 07/24/96-08/01/96..................... 7,029,000 6,998,412
5.410%, 08/12/96.............................. 3,821,000 3,796,883
Financiera Energetica Nacional,
6.625%, 12/13/96.............................. 5,000,000 5,001,250
Finova Capital Corp.,
5.420%, 07/11/96.............................. 3,000,000 2,995,483
5.460%, 08/12/96.............................. 11,000,000 10,929,930
First Data Corp.,
5.450%, 07/23/96-07/30/96..................... 13,231,000 13,178,211
Ford Motor Credit Co.,
5.370%, 07/10/96.............................. 22,000,000 21,970,465
General Electric Capital Corp.,
5.330%, 08/12/96.............................. 10,000,000 9,937,817
General Motors Acceptance Corp.,
6.700%, 04/30/97, Tranche #TR00319............ 11,000,000 11,048,290
7.850%, 03/05/97, Tranche #TR00187............ 3,300,000 3,338,280
General Signal Corp.,
5.400%, 07/10/96.............................. 5,200,000 5,192,980
GTE Corp.,
5.430%, 07/22/96.............................. 8,000,000 7,974,660
Honeywell Inc.,
5.400%, 07/02/96.............................. 20,000,000 19,997,000
Household Finance Corp.,
5.380%, 08/20/96.............................. 5,000,000 4,962,639
Lehman Brothers Holdings, Inc.,
5.550%, 07/08/96.............................. 21,678,000 21,654,606
Merrill Lynch & Co. Inc,
5.400%, 07/12/96.............................. 12,000,000 11,980,200
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Mitsubishi Intl. Corp.,
5.330%, 07/08/96.............................. $ 7,512,000 $ 7,504,215
Morgan Stanley Group, Inc.,
5.600%, 07/01/96.............................. 7,000,000 7,000,000
Nomura Holdings America, Inc.,
5.670%, 07/01/96.............................. 9,000,000 9,000,000
NYNEX Corporation,
5.340%, 07/22/96.............................. 2,000,000 1,993,770
5.420%, 08/16/96.............................. 3,000,000 2,979,223
PHH Corporation,
5.450%, 07/11/96.............................. 4,000,000 3,993,944
Philip Morris Companies, Inc.,
5.300%, 07/19/96.............................. 2,000,000 1,994,700
5.390%, 07/25/96.............................. 10,000,000 9,964,067
PNC Funding Corp.,
5.430%, 07/08/96.............................. 5,000,000 4,994,721
Preferred Receivables Funding Corp.,
5.330%, 07/17/96.............................. 4,000,000 3,990,524
5.370%, 07/24/96.............................. 17,625,000 17,564,532
Rank Xerox Capital,
5.300%, 07/18/96.............................. 13,700,000 13,665,712
Sears Roebuck Acceptance Corp.,
5.400%, 07/25/96.............................. 2,000,000 1,992,800
Smith Barney Inc.,
5.360%, 07/02/96.............................. 2,000,000 1,999,702
5.380%, 07/18/96.............................. 5,000,000 4,987,297
Special Purpose A/R Cooperative Corp.,
5.430%, 07/08/96.............................. 3,000,000 2,996,832
Transamerica Corp.,
5.310%, 10/15/96.............................. 10,130,000 9,971,617
Union Electric Company,
5.350%, 07/01/96.............................. 4,000,000 4,000,000
United States West Commerce, Inc.,
5.450%, 07/15/96.............................. 2,000,000 1,995,761
USL Capital Corp.,
5.400%, 07/01/96.............................. 12,000,000 12,000,000
5.420%, 07/01/96.............................. 5,000,000 5,000,000
WCP Funding, Inc.,
5.400%, 07/25/96.............................. 5,000,000 4,982,000
Westpac Capital Corp.,
5.350%, 07/02/96.............................. 5,000,000 4,999,257
Whirlpool Financial Corp.,
5.400%, 07/25/96.............................. 7,000,000 6,974,800
Xerox Corp.,
5.320%, 07/08/96.............................. 8,000,000 7,991,724
--------------
454,117,727
--------------
MEDIUM TERM NOTES -- 3.8%
Advanta Corp Mid,
8.180%, 02/09/97, Tranche #TR00028............ 10,000,000 10,175,000
American General Financial Credit,
7.750%, 01/15/97.............................. 3,700,000 3,739,748
Associates Corp. of North America,
4.750%, 08/01/96.............................. 2,000,000 1,998,614
7.730%, 10/31/96.............................. 2,000,000 2,013,938
Beneficial Corp.,
9.350%, 02/03/97, Tranche #TR00156............ 3,500,000 3,573,420
Chrysler Financial Corp.,
5.390%, 08/27/96, Tranche #TR00041............ 7,300,000 7,295,620
</TABLE>
B6
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
First National Bank of Chicago,
5.500%, 10/03/96, Tranche #TR00217............ $ 7,000,000 $ 7,000,000
General Electric Capital,
7.780%, 12/30/96.............................. 2,000,000 2,021,660
General Motors Acceptance Corp.,
6.260%, 10/21/97, Tranche #TR00065............ 8,000,000 7,997,409
7.600%, 02/10/97, Tranche #TR00137............ 2,000,000 2,026,675
8.250%, 08/01/96, Tranche #TR00674............ 7,000,000 7,003,992
8.750%, 08/01/96.............................. 1,000,000 1,002,547
Grupo Condumex, SA,
**6.250%, 07/27/96............................ 4,300,000 4,300,000
Huntington National Bank,
4.480%, 10/14/96.............................. 1,000,000 996,289
Mellon Bank N.A.,
6.200%, 11/01/95, Tranche #TR00029............ 10,000,000 10,005,716
Merrill Lynch & Co., Inc.,
%5.875%, 09/13/96, Tranche #TR00197........... 27,000,000 26,998,411
NationsBank of Texas N.A.,
6.820%, 07/10/96, Tranche #TR00112............ 6,000,000 6,000,038
Norwest Corp.,
7.875%, 01/30/97, Tranche #TR00188............ 2,000,000 2,023,808
Sears Roebuck Acceptance Corp.,
9.000%, 09/15/96.............................. 2,000,000 2,012,300
SMM Trust,
5.313%, 12/16/96.............................. 15,790,000 15,789,256
%5.938%, 12/16/96............................. 27,000,000 26,998,823
Student Loan Marketing Association,
%5.600%, 08/09/96............................. 7,650,000 7,648,445
--------------
158,621,709
--------------
PROMISSORY NOTE -- 0.1%
Philip Morris Companies, Inc.,
8.875%, 07/01/96.............................. 4,600,000 4,600,000
--------------
REPURCHASE AGREEMENT -- 2.1%
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. 90,569,000 90,569,000
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 1.0%
United States Treasury Note,
7.500%, 01/31/97.............................. $ 22,000,000 $ 22,290,550
US Treasury Bill,
5.611%, 05/01/97.............................. 19,000,000 18,148,040
--------------
40,438,590
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 1,032,043,195
--------------
OTHER ASSETS -- 0.6%
(net of liabilities)........................................... 23,591,225
--------------
TOTAL NET ASSETS -- 100.0%....................................... $4,198,756,329
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
C.D. Certificates of Deposit
L.P. Limited Partnership
M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $62,386,210.90. The aggregate value, $62,735,299 is
approximately 1.5% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending June 30,
1996.
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C5.
B7
<PAGE>
FLEXIBLE MANAGED PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 58.0% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 2.7%
Boeing Co....................................... 582,600 $ 50,759,025
Lockheed Martin Corp............................ 350,000 29,400,000
United Technologies Corp........................ 375,000 43,125,000
--------------
123,284,025
--------------
AIRLINES -- 0.6%
+AMR Corp....................................... 300,000 27,300,000
--------------
AUTOS - CARS & TRUCKS -- 0.9%
Chrysler Corp................................... 650,000 40,300,000
--------------
BANKS AND SAVINGS & LOANS -- 2.7%
Banc One Corp................................... 750,000 25,500,000
BankAmerica Corp................................ 300,000 22,725,000
Chase Manhattan Corp............................ 279,248 19,721,890
Citicorp........................................ 335,000 27,679,375
State Street Boston Corp........................ 500,000 25,500,000
--------------
121,126,265
--------------
BEVERAGES -- 0.4%
Anheuser-Busch Companies, Inc................... 250,000 18,750,000
--------------
CHEMICALS -- 1.1%
Agrium, Inc..................................... 400,000 5,243,750
E.I. du Pont de Nemours & Co.................... 400,000 31,650,000
W.R. Grace & Co................................. 200,000 14,175,000
--------------
51,068,750
--------------
CHEMICALS - SPECIALTY -- 0.4%
Praxair, Inc.................................... 413,900 17,487,275
--------------
COMMERCIAL SERVICES -- 0.4%
+CUC International, Inc......................... 500,000 17,750,000
--------------
COMPUTER SERVICES -- 6.6%
3Com Corp....................................... 600,000 27,450,000
+America Online, Inc............................ 600,000 26,250,000
+Bay Networks, Inc.............................. 525,000 13,518,750
+Cisco Systems, Inc............................. 1,000,000 56,625,000
Computer Associates International, Inc.......... 500,000 35,625,000
+Computer Sciences Corp......................... 225,000 16,818,750
Electronic Data Systems Corp.................... 542,400 29,154,000
First Data Corp................................. 422,500 33,641,562
+Gateway 2000, Inc.............................. 392,700 13,351,800
HBO & Co........................................ 300,000 20,325,000
+Microsoft Corp................................. 125,000 15,015,625
+Sun Microsystems, Inc.......................... 215,000 12,658,125
--------------
300,433,612
--------------
CONSTRUCTION -- 0.4%
Fluor Corp...................................... 250,000 16,343,750
--------------
COSMETICS & SOAPS -- 0.8%
Procter & Gamble Co............................. 400,000 36,250,000
--------------
DIVERSIFIED GAS -- 0.4%
Cross Timbers Oil Co............................ 700,000 17,325,000
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.7%
Alco Standard Corp.............................. 300,000 13,575,000
International Business Machines Corp............ 200,000 19,800,000
--------------
33,375,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 6.5%
American Home Products Corp..................... 800,000 48,100,000
Becton, Dickinson & Co.......................... 400,000 32,100,000
+Boston Scientific Corp......................... 600,000 27,000,000
Ciba-Geigy AG, ADR.............................. 750,000 45,703,125
Genzyme Corp.................................... 100,000 5,025,000
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Johnson & Johnson............................... 450,000 $ 22,275,000
Pfizer, Inc..................................... 700,000 49,962,500
Pharmacia & Upjohn, Inc......................... 1,500,000 66,562,500
--------------
296,728,125
--------------
ELECTRICAL EQUIPMENT -- 1.9%
+Applied Materials, Inc......................... 725,000 22,112,500
Baldor Electric Co.............................. 1 22
Belden, Inc..................................... 510,000 15,300,000
+FORE Systems, Inc.............................. 400,000 14,450,000
Westinghouse Electric Corp...................... 1,900,000 35,625,000
--------------
87,487,522
--------------
ELECTRONICS -- 2.4%
+ADT Ltd........................................ 1,200,000 22,650,000
Hewlett-Packard Co.............................. 225,000 22,415,625
Intel Corp...................................... 500,000 36,718,750
+Maxim Integrated Products, Inc................. 900,000 24,581,250
--------------
106,365,625
--------------
FINANCIAL SERVICES -- 1.5%
MBNA Corp....................................... 1,300,000 37,050,000
Morgan Stanley Group, Inc....................... 600,000 29,475,000
--------------
66,525,000
--------------
FOODS -- 0.8%
Nabisco Holdings Corporation (Class 'A'
Stock)........................................ 1,080,000 38,205,000
--------------
FOREST PRODUCTS -- 1.3%
Kimberly-Clark Corp............................. 400,000 30,900,000
Willamette Industries, Inc...................... 480,000 28,560,000
--------------
59,460,000
--------------
HOSPITAL MANAGEMENT -- 1.2%
Columbia/HCA Healthcare Corp.................... 500,000 26,687,500
Guidant Corp.................................... 250,000 12,312,500
+Tenet Healthcare Corp.......................... 800,000 17,100,000
--------------
56,100,000
--------------
INSURANCE -- 3.7%
Aetna Life & Casualty Co........................ 650,000 46,475,000
Allstate Corp................................... 568,000 25,915,000
American International Group, Inc............... 250,000 24,656,250
CIGNA Corp...................................... 250,000 29,468,750
Travelers Group, Inc............................ 847,500 38,667,188
W.R. Berkley Corp............................... 48,300 2,016,525
--------------
167,198,713
--------------
LEISURE -- 1.5%
+Bally Entertainment Corporation................ 700,000 19,250,000
Carnival Corp. (Class 'A' Stock)................ 1,100,000 31,762,500
+Mirage Resorts, Inc............................ 350,000 18,900,000
--------------
69,912,500
--------------
MACHINERY -- 0.6%
Case Corp....................................... 600,000 28,800,000
--------------
MEDIA -- 1.3%
Comcast Corp. (Class 'A' Stock)................. 1,000,000 18,375,000
+Tele-Communications, Inc. (Series 'A' Stock)... 1,500,000 27,187,500
Tele-Communications, Inc. (Series 'A' Stock).... 431,900 11,445,350
--------------
57,007,850
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 3.7%
General Electric Co............................. 700,000 60,550,000
Illinois Tool Works, Inc........................ 450,000 30,431,250
</TABLE>
B8
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Pentair, Inc.................................... 400,000 $ 12,000,000
Tyco International, Ltd......................... 1,000,000 40,750,000
York International Corp......................... 500,000 25,875,000
--------------
169,606,250
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.3%
+DeVRY, Inc..................................... 292,300 13,153,500
--------------
PETROLEUM -- 1.9%
Mobil Corp...................................... 375,000 42,046,875
Royal Dutch Petroleum Co., ADR.................. 300,000 46,125,000
--------------
88,171,875
--------------
PETROLEUM SERVICES -- 1.9%
Baker Hughes, Inc............................... 581,700 19,123,388
Halliburton Co.................................. 700,000 38,850,000
Total SA, ADR................................... 700,000 25,987,500
--------------
83,960,888
--------------
RESTAURANTS -- 0.3%
+Outback Steakhouse, Inc........................ 400,000 13,793,750
--------------
RETAIL -- 4.6%
+Federated Department Stores, Inc............... 1,250,000 42,656,250
+General Nutrition Companies, Inc............... 500,000 8,750,000
Home Depot, Inc................................. 400,000 21,600,000
Nike, Inc. (Class 'B' Stock).................... 275,000 28,256,250
Nine West Group................................. 600,000 30,675,000
Office Depot, Inc............................... 900,000 18,337,500
+Price/Costco, Inc.............................. 780,000 16,867,500
+Safeway, Inc................................... 680,000 22,440,000
+Staples, Inc................................... 1,051,500 20,504,250
--------------
210,086,750
--------------
TELECOMMUNICATIONS -- 3.6%
AT&T Corp....................................... 800,000 49,600,000
Frontier Corp................................... 800,000 24,500,000
+Glenayre Technologies, Inc..................... 300,000 15,000,000
Lucent Technologies, Inc........................ 500,000 18,937,500
MCI Communications Corp......................... 1,000,000 25,625,000
+Newbridge Networks Corp........................ 450,000 29,475,000
--------------
163,137,500
--------------
TOBACCO -- 0.9%
RJR Nabisco Holdings Corp....................... 1,250,000 38,750,000
--------------
TOTAL COMMON STOCKS
(Cost $2,271,775,720).......................................... 2,635,244,525
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 0.6% SHARES VALUE
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- 0.2%
Salomon, Inc.................................... 400,000 10,050,000
--------------
LEISURE -- 0.4%
Bally Entertainment Corporation (Conv.)......... 600,000 15,675,000
--------------
TOTAL PREFERRED STOCKS
(Cost $22,630,000)............................................. 25,725,000
--------------
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS -- 0.2% VALUE VALUE
------------- --------------
<S> <C> <C>
RESTAURANTS -- 0.0%
+Boston Chicken, Inc.,
Zero Coupon, 06/01/15......................... $ 2,500,000 734,375
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
RETAIL -- 0.2%
+Federated Department Stores, Inc.,
5.000%, 10/01/03.............................. $ 8,000,000 $ 9,120,000
--------------
TOTAL CONVERTIBLE BONDS
(Cost $9,774,598).............................................. 9,854,375
--------------
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 31.2% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 11.1%
Associates Corp. of North America,
6.625%, 05/15/01.............................. 15,500,000 15,320,200
Banc One Credit Card Master Trust,
7.750%, 12/15/99, Series 1994-B, Class B...... 5,000,000 5,090,600
BCH Cayman Islands, Ltd.,
6.500%, 02/15/06.............................. 6,000,000 5,532,480
Capital One Bank,
6.730%, 06/04/98, Tranche #TR00001............ 26,000,000 25,961,000
Capital One Bank, M.T.N.
6.660%, 08/17/98, Tranche #TR00055............ 11,175,000 11,152,538
6.900%, 04/15/99, Tranche #TR00064............ 22,250,000 22,250,000
Chase Manhattan Credit Card Master Trust,
7.400%, 05/15/00, Series 1992-1............... 5,000,000 5,039,050
CIT Group Holdings, M.T.N.,
5.850%, 03/16/98, Tranche #SR00010............ 25,000,000 24,847,500
6.200%, 04/15/98, Tranche #SR00011............ 19,100,000 19,068,676
Discover Credit Corp., M.T.N.,
9.000%, 04/01/98.............................. 10,000,000 10,372,400
Erac USA Finance Co., M.T.N.,
6.350%, 01/15/01.............................. 3,500,000 3,372,031
7.000%, 06/15/00, Tranche #TR00005............ 13,500,000 13,495,781
First USA Bank,
8.200%, 02/15/98.............................. 13,000,000 13,304,980
First USA Bank, M.T.N.,
6.238%, 10/16/97.............................. 20,000,000 20,000,000
Ford Motor Credit Corp., M.T.N.,
5.668%, 10/04/99, Tranche #TR00537............ 6,250,000 6,245,562
7.060%, 06/06/01, Tranche #TR00675............ 13,000,000 13,032,500
General Motors Acceptance Corp.,
7.125%, 05/01/03.............................. 22,300,000 22,289,296
General Motors Acceptance Corp., M.T.N.,
7.375%, 07/20/98, Tranche #TR00667............ 4,500,000 4,580,055
7.875%, 03/15/00.............................. 5,000,000 5,180,550
Lumbermens Mutual Casualty Co.,
**9.150%, 07/01/26............................ 19,500,000 20,174,700
MBNA Master Credit Card Trust,
%5.745%, 01/15/02, Series 1994-1, Class A..... 7,500,000 7,516,350
NationsBank Corp.,
7.000%, 05/15/03.............................. 22,000,000 21,878,340
Norwest Corp., M.T.N.,
6.250%, 03/15/01.............................. 16,000,000 15,580,800
</TABLE>
B9
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Okobank,
%6.968%, 09/27/49............................. $ 18,750,000 $ 19,125,000
**%7.387%, 10/29/49........................... 3,500,000 3,539,375
%7.387%, 10/29/49............................. 9,000,000 9,101,250
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 7,600,000 7,990,640
RHG Finance Corp.,
8.875%, 10/01/05.............................. 7,000,000 7,227,500
Salomon, Inc.,
7.000%, 05/15/99.............................. 34,600,000 34,617,646
7.250%, 05/01/01.............................. 8,625,000 8,603,610
Salomon, Inc., M.T.N.,
5.980%, 02/02/98, Tranche #SR00027............ 23,500,000 23,242,440
Santander Financial Issuances, Inc.,
7.875%, 04/15/05.............................. 3,000,000 3,086,820
Sears Roebuck Acceptance Corp., M.T.N.,
6.380%, 02/16/99.............................. 72,000,000 71,679,600
Standard Credit Card Master Trust,
5.950%, 09/07/03, Series 1993-2A.............. 4,500,000 4,224,375
Wells Fargo & Co,
6.875%, 04/01/06.............................. 500,000 481,670
--------------
504,370,940
--------------
FOREIGN -- 6.1%
Banco de Commercio Exterior de Columbia, SA,
M.T.N.,
**8.625%, 06/02/00, Tranche #TR00001.......... 5,500,000 5,596,250
Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 2,300,000 2,389,125
**9.750%, 08/26/99............................ 5,000,000 5,193,750
Compania Sud Americana de Vapores, SA,
**7.375%, 12/08/03............................ 5,650,000 5,353,375
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 15,100,000 14,760,250
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 8,229,375
Empresas La Moderna, SA,
10.250%, 11/12/97............................. 2,000,000 2,045,000
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 6,300,000 6,394,500
Grupo Embotellador Mexicana,
**10.750%, 11/19/97........................... 8,020,000 8,260,600
Grupo Televisa, SA, M.T.N.,
10.000%, 11/09/97............................. 4,000,000 4,145,000
Kansallis-Osake Pankki, N.Y.,
**%8.650%, 01/01/49........................... 9,000,000 9,332,010
9.750%, 12/15/98.............................. 16,760,000 17,894,317
National Bank of Romania,
**9.750%, 06/25/99............................ 9,000,000 9,049,500
Quebec, Province of Canada,
7.125%, 02/09/24.............................. 22,150,000 20,240,005
7.500%, 07/15/23.............................. 31,250,000 29,908,125
Republic of Argentina,
9.250%, 02/23/01.............................. 5,200,000 5,005,000
Republic of Columbia,
7.125%, 05/11/98.............................. 2,700,000 2,686,500
7.250%, 02/15/03-02/23/04..................... 23,300,000 21,675,718
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
**8.000%, 06/14/01, M.T.N., Tranche
#TR00001.................................... $ 16,500,000 $ 16,348,695
8.750%, 10/06/99.............................. 12,300,000 12,561,375
Republic of Italy,
6.875%, 09/27/23.............................. 66,850,000 60,279,982
Rogers Cablesystems Ltd.,
10.000%, 03/15/05, Series B................... 2,000,000 1,970,000
Telekom Malaysia,
**7.875%, 08/01/25............................ 8,370,000 8,403,982
--------------
277,722,434
--------------
INDUSTRIAL -- 8.8%
Agco Corp.,
**8.500%, 03/15/06............................ 6,500,000 6,370,000
Auburn Hills Trust,
12.000%, 05/01/20............................. 9,650,000 13,938,460
B.J. Services Co.,
7.000%, 02/01/06.............................. 4,000,000 3,646,000
Bally's Grand, Inc.,
10.375%, 12/15/03............................. 5,000,000 5,487,500
Comdisco, Inc.,
7.250%, 04/15/98.............................. 10,000,000 10,120,500
Delta Air Lines, Inc.,
9.875%, 01/01/98.............................. 6,000,000 6,271,080
Digital Equipment Corp.,
7.125%, 10/15/02.............................. 10,300,000 9,992,030
7.750%, 04/01/23.............................. 30,380,000 27,465,950
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. 6,600,000 6,468,000
8.500%, 06/15/03.............................. 66,000,000 65,340,000
10.000%, 02/15/01............................. 2,500,000 2,631,250
Lockheed Martin,
7.700%, 06/15/08.............................. 18,500,000 18,799,238
News America Holdings, Inc.,
7.750%, 12/01/45.............................. 60,500,000 54,132,980
9.250%, 02/01/13.............................. 10,000,000 10,868,900
Noble Drilling Corp.,
9.125%, 07/01/06.............................. 3,500,000 3,508,750
Norcen Energy Resources,
7.375%, 05/15/06.............................. 10,750,000 10,613,475
Paramount Communications, Inc.,
7.500%, 01/15/02.............................. 5,400,000 5,326,776
Parker & Parsley Petroleum Co.,
8.250%, 08/15/07.............................. 3,000,000 3,128,640
RJR Nabisco, Inc.,
8.750%, 08/15/05.............................. 3,000,000 2,968,500
Service Corp. International,
7.000%, 06/01/15.............................. 2,500,000 2,498,050
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23-07/15/33..................... 38,250,000 36,771,996
Time Warner, Inc.,
7.750%, 06/15/05.............................. 10,000,000 9,762,200
9.125%, 01/15/13.............................. 8,790,000 9,180,100
9.150%, 02/01/23.............................. 8,000,000 8,271,520
Transco Energy Co.,
9.125%, 05/01/98.............................. 14,000,000 14,548,660
Viacom, Inc.,
6.750%, 01/15/03.............................. 13,750,000 12,973,263
7.750%, 06/01/05.............................. 40,175,000 39,171,429
--------------
400,255,247
--------------
</TABLE>
B10
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 5.2%
Federal National Mortgage Association,
Zero Coupon, 10/09/19......................... $ 11,800,000 $ 2,142,408
United States Treasury Notes,
5.125%, 02/28/98, Series 1998................. 39,100,000 38,525,621
6.250%, 04/30/01.............................. 5,850,000 5,794,250
6.500%, 05/31/01.............................. 3,200,000 3,201,504
6.875%, 05/15/06-08/15/25..................... 173,250,000 173,202,530
7.500%, 05/15/02, Series 2002................. 4,000,000 4,187,480
7.750%, 12/31/99, Series 1999................. 6,750,000 7,032,623
--------------
234,086,416
--------------
TOTAL LONG-TERM BONDS
(Cost $1,420,442,225).......................................... 1,416,435,037
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 9.9% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK/FINANCES INSTRUMENTS -- 2.0%
Abn-Amro Bank North America, C.D.,
5.030%, 08/20/96.............................. 5,000,000 5,000,063
Advanta Corp.,
5.125%, 11/15/96.............................. 9,000,000 8,968,770
Advanta National Bank, C.D.,
6.140%, 02/28/97.............................. 17,000,000 17,128,138
American Express Centurian Bank,
%5.470%, 11/29/96, Tranche #TR000128.......... 573,000 572,919
Associates Corp. of North America,
4.625%, 11/30/96.............................. 1,000,000 995,984
Banque Nationale de Paris,
5.350%, 08/05/96.............................. 1,000,000 999,964
5.420%, 07/11/96, C.D......................... 4,000,000 4,000,054
Barnett Banks, Inc., C.D.,
5.390%, 07/08/96.............................. 3,242,000 3,241,954
Canadian Imperial Bank, C.D.,
5.520%, 09/09/96.............................. 3,000,000 3,000,000
Capital One Bank, M.T.N.
8.625%, 01/15/97, Tranche #TR00005............ 19,000,000 19,241,870
Comerica Bank of Detroit,, M.T.N.,
%5.418%, 02/14/97, Tranche #TR00006........... 569,000 568,725
Commerzbank, C.D.,
5.310%, 09/23/96.............................. 1,000,000 999,582
Deutsche Bank, C.D.,
5.000%, 08/12/96.............................. 1,000,000 999,434
Engelhard Corp.,
5.428%, 07/08/96.............................. 1,000,000 1,000,000
Ford Motor Credit Corp.,
8.000%, 10/01/96.............................. 1,000,000 1,005,648
General Electric Capital Corp.,
8.000%, 02/01/97.............................. 1,500,000 1,522,125
General Motors Acceptance Corp.,
8.000%, 10/01/96.............................. 500,000 502,765
8.250%, 08/01/96.............................. 1,000,000 1,002,070
7.750%, 04/15/97.............................. 575,000 582,779
Gillette Co.,
4.750%, 08/15/96.............................. 600,000 599,358
Household Finance Corp.,
7.625%, 12/15/96.............................. 1,500,000 1,512,586
International Lease Finance Corp.,
6.375%, 11/01/96.............................. 2,000,000 2,004,580
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Marine Midland Bank N.A.,
%5.687%, 09/27/96............................. $ 6,500,000 $ 6,483,750
Societe Generale NA, C.D.,
5.340%, 07/02/96.............................. 1,000,000 1,000,001
5.400%, 07/12/96.............................. 5,000,000 5,000,027
Suntrust Banks, Inc.,
5.350%, 08/12/96.............................. 1,000,000 993,758
U.S. National Bank of Oregon,
5.320%, 07/30/96, Tranche #TR00029............ 1,000,000 999,958
--------------
89,926,862
--------------
COMMERCIAL PAPER -- 1.8%
American Express Credit Corp.,
4.900%, 08/16/96.............................. 2,000,000 1,987,478
American Honda Finance Corp.,
5.400%, 07/25/96.............................. 1,000,000 996,400
5.480%, 08/26/96.............................. 1,000,000 991,476
5.500%, 07/09/96.............................. 1,000,000 998,778
Associates Corp. of North America,
5.400%, 07/29/96.............................. 4,631,000 4,611,550
Bank of New York,
5.320%, 07/02/96.............................. 1,000,000 999,852
Bell Atlantic Financial Services, Inc.
5.380%, 07/16/96.............................. 1,900,000 1,895,741
Beneficial Corp.,
5.380%, 08/21/96.............................. 2,000,000 1,984,757
Chubb Capital Corp.,
5.330%, 07/11/96.............................. 1,000,000 998,519
Ciesco, L.P.,
5.300%, 07/12/96.............................. 1,000,000 998,381
CIT Group Holdings, Inc.,
5.330%, 08/13/96.............................. 4,000,000 3,974,534
Commonwealth Bank of Australia,
5.320%, 08/14/96.............................. 1,000,000 993,498
Cooper Industries, Inc.,
5.600%, 07/01/96.............................. 1,642,000 1,642,000
Countrywide Funding Corp.,
5.400%, 07/23/96.............................. 1,000,000 996,700
5.430%, 08/22/96.............................. 1,000,000 992,157
Deutsche Bank
5.090%, 08/23/96.............................. 2,000,000 2,000,000
Enterprise Funding Corp,
5.400%, 07/24/96.............................. 1,000,000 996,550
Financiera Energetica Nacional,
6.625%, 12/13/96.............................. 5,100,000 5,101,275
Finova Capital Corp.,
5.450%, 07/16/96.............................. 1,400,000 1,396,821
5.470%, 07/22/96.............................. 1,000,000 996,809
First Data Corp.,
5.450%, 07/23/96.............................. 2,571,000 2,562,437
Ford Motor Credit Corp.,
5.370%, 07/10/96.............................. 1,000,000 998,658
General Signal Corp,
5.400%, 07/09/96.............................. 800,000 799,040
GTE Corp.,
5.430%, 07/30/96.............................. 1,000,000 995,626
Honeywell Inc.,
5.400%, 07/02/96.............................. 2,866,000 2,865,570
IBM Credit Corp.,
5.370%, 07/23/96.............................. 1,500,000 1,495,078
Lehman Brothers Holdings, Inc.,
5.550%, 07/08/96.............................. 4,220,000 4,215,446
Merrill Lynch & Co., Inc.,
5.400%, 07/12/96.............................. 3,000,000 2,995,050
</TABLE>
B11
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Morgan Stanley Group, Inc.,
5.290%, 07/09/96.............................. $ 1,137,000 $ 1,135,663
5.330%, 07/10/96.............................. 2,000,000 1,997,335
Nomura Holdings America, Inc.,
5.670%, 07/01/96.............................. 2,000,000 2,000,000
NYNEX Corp.,
5.420%, 07/22/96.............................. 1,000,000 996,838
Philip Morris Companies, Inc.,
5.390%, 07/25/96.............................. 5,000,000 4,982,033
PNC Funding Corp.,
5.430%, 07/08/96.............................. 1,000,000 998,944
Preferred Receivables Funding Corp.,
5.300%, 08/22/96.............................. 2,000,000 1,984,689
5.370%, 07/15/96.............................. 2,000,000 1,995,823
Rank Xerox Capital,
5.300%, 07/18/96.............................. 2,000,000 1,994,994
Signal Capital Corp.,
5.400%, 07/10/96.............................. 2,000,000 1,997,300
Smith Barney, Inc.,
5.380%, 07/18/96.............................. 1,000,000 997,460
Transamerica Corp.,
5.310%, 10/15/96.............................. 2,741,000 2,698,145
USL Capital Corp.,
5.400%, 07/01/96.............................. 2,000,000 2,000,000
Westpac Capital Corp.,
5.350%, 07/02/96.............................. 1,000,000 999,851
Whirlpool Financial Corp.,
5.400%, 07/25/96.............................. 1,500,000 1,494,600
Xerox Corp.,
5.320%, 07/08/96.............................. 2,200,000 2,197,724
--------------
82,951,580
--------------
TERM NOTES -- 1.0%
American Express Centurian Bank,
%5.484%, 01/13/97, Tranche #TR00099........... 1,000,000 1,000,023
Associates Corp. of North America,
7.730%, 10/31/96, Tranche #SR00324............ 1,000,000 1,006,969
Ford Motor Credit Corp,
5.750%, 11/04/96, Tranche #TR00095............ 1,000,000 1,000,864
7.950%, 03/27/97.............................. 465,000 472,243
General Motors Acceptance Corp.,
5.300%, 07/12/96, Tranche #TR00760............ 1,500,000 1,499,739
%5.440%, 10/21/96, Tranche #TR00065........... 1,000,000 999,676
7.000%, 06/02/97, Tranche #TR00476............ 6,000,000 6,042,000
**7.750%, 02/20/97, Tranche #TR00162.......... 250,000 253,065
7.850%, 03/05/97, Tranche #TR00187............ 4,350,000 4,403,205
7.900%, 03/13/97, Tranche #TR00205............ 500,000 506,402
**7.000%, 05/19/97, Tranche #TR00041.......... 10,000,000 10,070,204
Merrill Lynch & Co., Inc.,
%5.875%, 09/13/96, Tranche #TR00197........... 4,000,000 3,999,765
National Australia Bank, Ltd.,
5.750%, 10/02/96, Tranche #TR00003............ 2,000,000 2,000,034
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Nationsbank Corp.,
%5.500%, 11/18/96, Tranche #TR00026........... $ 500,000 $ 500,115
NBD Bank, N.A.,
5.320%, 07/29/96, Tranche #TR00287............ 2,000,000 1,999,914
Rabobank Nederland,
4.800%, 12/26/96, Tranche #TR00203............ 1,600,000 1,594,828
SMM Trust,
%5.938%, 12/16/96............................. 6,375,000 6,374,722
Wells Fargo & Company,
%5.438%, 08/16/96, Tranche #TR00201........... 175,000 174,999
--------------
43,898,763
--------------
PROMISSORY NOTES -- 0.0%
Philip Morris Companies, Inc.,
8.875%, 07/01/96.............................. 1,000,000 1,000,000
--------------
REPURCHASE AGREEMENTS -- 5.0%
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. 226,483,000 226,483,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
United States Treasury Notes,
7.500%, 01/31/97.............................. 3,000,000 3,039,560
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 447,299,765
--------------
OTHER ASSETS -- 0.1%
(net of liabilities)........................................... 5,636,097
--------------
TOTAL NET ASSETS -- 100.0%....................................... $4,540,194,799
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
C.D. Certificates of Deposit
M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $91,448,870. The aggregate value, $92,512,735 is
approximately 2.0% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending June 30,
1996.
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C5.
B12
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF THE
CONSERVATIVE BALANCED AND FLEXIBLE MANAGED
PORTFOLIOS OF THE PRUDENTIAL SERIES FUND, INC.
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
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 fifteen 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
Conservative Balanced (formerly Conservatively Managed Flexible Portfolio) and
the Flexible Managed Portfolios (formerly Aggressively Managed Flexible
Portfolio).
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 (including the Conservative Balanced and Flexible Managed Portfolios)
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.
Each portfolio, other than the Money Market Portfolio, may invest up to 15% of
its net assets in securities which are subject to legal or contractual
restrictions on resale or for which no readily available market exists
("restricted securities"). The Money Market Portfolio may invest up to 10% of
its net assets in restricted securities. Restricted securities are valued
pursuant to the valuation procedure noted above.
ACCOUNTING ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
C1
<PAGE>
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 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 Conservative Balanced and Flexible Managed 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 Flexible Managed 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.
C2
<PAGE>
FORWARD FOREIGN EXCHANGE CONTRACTS: The Series Fund is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Series Fund's records. However, the effect on operations is recorded from the
date the Series Fund enters into such contracts. Premium or discount is
amortized over the life of the contracts.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Dividend income is recorded on
the ex-dividend date. Interest income is accrued daily on both long-term bonds
and short-term investments. Interest income also includes net amortization from
the purchase of fixed-income securities. Long-term security and option
transactions are recorded on the first business day following the trade date,
except that transactions on the last business day of the reporting cycle are
recorded on that date. Short-term security and futures transactions are recorded
on trade date. Realized gains and losses from security transactions are
determined and accounted for on the basis of identified cost.
DISTRIBUTIONS AND TAXES: The Portfolios of the Series Fund intend to continue
to qualify for and elect the special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code, thereby relieving the
Series Fund of Federal income taxes. To so qualify, the Series Fund intends to
distribute substantially all of its net investment income and net realized
capital gains, if any, less any available capital loss carry forward.
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.
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 Conservative Balanced Portfolio and 0.60% of the average daily
net assets of the Flexible Managed 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.
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 six months ended June 30, 1996, Prudential
Securities Inc., an indirect, wholly-owned subsidiary of The Prudential, earned
$109,165 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 (excluding Global Portfolio) transfer
uninvested cash balances into a single joint repurchase 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
investment in the joint repurchase agreement account represented, in principal,
$1,065,000,000 as of June 30, 1996. The Portfolios of the Series Fund with cash
invested in the joint account had the following percentage participation in the
account:
<TABLE>
<S> <C>
Conservative Balanced Portfolio............................... 8.50%
Flexible Managed Portfolio.................................... 21.27%
All other portfolios (currently not available to PRUvider).... 70.23%
----------
100.00%
</TABLE>
As of such date, each repurchase agreement in the joint account and the
collateral thereof were as follows:
Bear Stearns Repurchase Agreement, 5.40%, in the principal amount of
$205,000,000, repurchase price $205,092,250, due 7/1/96. The value of the
collateral including accrued interest was $208,116,237.
C3
<PAGE>
J.P. Morgan Securities Repurchase Agreement, 5.45%, in the principal amount of
$350,000,000, repurchase price $350,158,958, due 7/1/96. The value of the
collateral including accrued interest was $357,218,750.
SBC Warburg Repurchase Agreement, 5.45%, in the principal amount of
$250,000,000, repurchase price $250,113,542, due 7/1/96. The value of the
collateral including accrued interest was $253,951,870.
UBS Securities Repurchase Agreement, 5.46%, in the principal amount of
$260,000,000, repurchase price $260,118,300, due 7/1/96. The value of the
collateral including accrued interest was $265,281,250.
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 six months ended June 30, 1996 were as
follows:
Cost of Purchases:
<TABLE>
<CAPTION>
CONSERVATIVE FLEXIBLE
BALANCED MANAGED
-------------- --------------
<S> <C> <C>
Debt Securities................. $5,029,271,853 $4,110,547,138
Equity Securities............... $ 192,122,829 $1,586,427,147
</TABLE>
Proceeds From Sales:
<TABLE>
<CAPTION>
CONSERVATIVE FLEXIBLE
BALANCED MANAGED
-------------- --------------
<S> <C> <C>
Debt Securities................. $4,551,462,546 $3,669,119,487
Equity Securities............... $ 281,380,348 $1,737,698,635
</TABLE>
The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of June 30, 1996 were as follows:
<TABLE>
<CAPTION>
CONSERVATIVE FLEXIBLE
BALANCED MANAGED
-------------- --------------
<S> <C> <C>
Gross Unrealized Appreciation... $ 347,292,563 $ 425,312,892
Gross Unrealized Depreciation... 74,798,202 62,116,107
Total Net Unrealized............ 272,494,361 363,196,785
Tax Basis....................... 3,902,670,743 4,171,361,918
</TABLE>
C4
<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>
CONSERVATIVE BALANCED
-----------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+ 12/31/87+
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $15.309 $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $ 11.889 $ 12.571
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.315 0.635 0.528 0.486 0.558 0.687 0.821 0.891 0.773 0.656
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0.454 1.775 (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424 (0.399)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 0.769 2.410 (0.151) 1.715 0.968 2.425 0.678 2.046 1.197 0.257
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.255) (0.643) (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791) (0.709)
Distributions from net
realized gains......... 0.000 (0.553) (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0.000 (0.230)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.255) (1.196) (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791) (0.939)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 0.514 1.214 (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406 (0.682)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $15.823 $15.309 $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $ 12.295 $ 11.889
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:*............... 5.04 % 17.27 % (0.97 %) 12.20 % 6.95 % 19.07 % 5.27 % 16.99 % 10.19 % 1.54 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $4,198.8 $3,940.8 $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6 $803.9
Ratio of expenses net of
reimbursement to
average net assets..... 0.58 %** 0.58 % 0.61 % 0.60 % 0.62 % 0.63 % 0.65 % 0.64 % 0.65 % 0.66 %
Ratio of net investment
income to average net
assets................. 4.04 %** 4.19 % 3.61 % 3.22 % 3.88 % 4.89 % 6.21 % 6.81 % 6.22 % 5.05 %
Portfolio turnover
rate................... 160.94 % 200.68 % 125.18 % 79.46 % 62.07 % 115.35 % 44.04 % 153.92 % 110.67 % 140.69 %
Number of shares
outstanding at end of
period (in millions)... 265.4 257.4 248.4 208.2 148.4 104.8 84.2 73.0 66.3 67.6
Average commission rate
paid per share......... $0.0598 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE MANAGED
-----------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+ 12/31/87+
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $17.859 $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $ 12.326 $ 13.555
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.279 0.564 0.473 0.566 0.583 0.650 0.715 0.813 0.724 0.577
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0.630 3.149 (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840 (0.753)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 0.909 3.713 (0.548) 2.448 1.190 3.459 0.249 2.802 1.564 (0.176)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.228) (0.560) (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767) (0.673)
Distributions from net
realized gains......... 0.000 (0.790) (0.462) (0.929) (0.914) (0.513) 0.000 (0.666) 0.000 (0.380)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.228) (1.350) (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767) (1.053)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 0.681 2.363 (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797 (1.229)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $18.540 $17.859 $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $ 13.123 $ 12.326
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:*............... 5.11 % 24.13 % (3.16 %) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83 % (1.83 %)
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $4,540.2 $4,261.2 $3,481.5 $3,292.2 $2,435.6 $1,990.7 $1,507.8 $1,386.5 $1,103.9 $1,062.4
Ratio of expenses net of
reimbursement to
average net assets..... 0.63 %** 0.63 % 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70 % 0.71 %
Ratio of net investment
income to average net
assets................. 3.06 %** 3.30 % 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52 % 4.09 %
Portfolio turnover
rate................... 136.33 % 173.30 % 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45 % 123.83 %
Number of shares
outstanding at end of
period (in millions)... 244.9 238.6 224.7 194.1 152.2 122.2 107.7 96.0 84.1 86.2
Average commission rate
paid per share......... $0.0564 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
+Calculations are based on average month-end shares outstanding, where
applicable.
*Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns. Total investment return for
periods of less than a full year are not annualized.
**Annualized.
C5
<PAGE>
GLOSSARY OF TERMS FOR THE REPORT TO CONTRACT OWNERS
(NOTE: ADDITIONAL EXPLANATIONS 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.
I
<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.
II
<PAGE>
BOARD OF
DIRECTORS THE PRUDENTIAL SERIES FUND, INC.
MENDEL A. MELZER W. SCOTT McDONALD, JR., E. MICHAEL CAULFIELD
CHAIRMAN, PhD. CEO,
THE PRUDENTIAL SERIES EXECUTIVE VICE PRUDENTIAL PREFERRED
FUND, INC. PRESIDENT, FINANCIAL SERVICES;
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
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
E. MICHAEL CAULFIELD GARNETT L. KEITH, JR. I. EDWARD PRICE
CEO, VICE CHAIRMAN, CEO,
PRUDENTIAL PREFERRED THE PRUDENTIAL PRUDENTIAL
FINANCIAL SERVICES INSURANCE COMPANY OF INTERNATIONAL INSURANCE
AMERICA WILLIAM F. YELVERTON
IRA J. KLEINMAN CEO,
PRESIDENT, INDIVIDUAL INSURANCE
PRUDENTIAL SELECT GROUP
MARKETING COMPANY
ESTHER H. MILNES
SENIOR VICE PRESIDENT,
PRUDENTIAL INSURANCE
AND
FINANCIAL SERVICES;
PRESIDENT, PRUCO LIFE
AND
PRUCO LIFE OF NEW
JERSEY
III
<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.
-
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.
<PAGE>
LIVE WELL. MAKE A PLAN. BE YOUR OWN 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 any questions regarding your contract(s), please contact your
Prudential/Pruco Securities representative or your local office.
P.O. Box 197
Minneapolis, MN 55440-0197 BULK RATE
U.S. Postage
PAID
Jersey City, N.J.
Forwarding and Return Postage Guaranteed Permit No. 60
Address Correction Requested
[RECYCLE LOGO]
PRUvider SAR 6/96 Printed in the U.S.A. on recycled
SIMS Cat. No. 646778F paper using soybean ink
<PAGE>
Graph Write-Ups for 6/30/96 PSF PruVider Book
Graph 1: (Conservative Balanced Portfolio)
Graph represents the growth of $10,000 invested in the Conservative Balanced
Portfolio compared with the S&P 500, Lipper VIP Flexible Average, and the Lehman
Aggregate Index. In the ten years ended June 30, 1996, an investment of
$10,000 would have a value of $24,318, $36,477, $26,795, and $22,720
respectively.
Graph 2: (Flexible Managed Portfolio)
Graph represents the growth of $10,000 invested in the Flexible Managed
Portfolio compared with the S&P 500, Lipper VIP Flexible Average, and the Lehman
Aggregate, and the Lehman Aggregate Index. In the ten years ended June 30,
1996, an investment of $10,000 would have a value of $26,734, $36,477, $26,795,
and $22,720 respectively.
