<PAGE>
ANNUAL REPORT
TO CONTRACT OWNERS
DECEMBER 31, 1995
PRUCO LIFE'S PRUVIDER-Service Mark-
THE PRUDENTIAL
SERIES FUND, INC.
PRUCO LIFE PRUVIDER VARIABLE
APPRECIABLE ACCOUNT
THE PRUDENTIAL
INSURANCE COMPANY
OF AMERICA
[PRUDENTIAL LOGO]
<PAGE>
TABLE OF CONTENTS
NOTE: **The back inside cover provides important toll-free
telephone numbers for customer service.
PAGE
I. LETTER TO CONTRACT OWNERS
Summarizes the results of The Prudential Series Fund, Inc. and
provides an economic overview..................................... 1
II. THE PRUDENTIAL SERIES FUND, INC.
The Pruco Life PRUvider Variable Appreciable Account is one of
several Accounts investing in The Prudential Series Fund, Inc.
1. FINANCIAL STATEMENTS............................................ A1
2. INVESTMENT OBJECTIVES........................................... B1
3. SCHEDULE OF INVESTMENTS
Lists the holdings in each of the investment options of The
Prudential Series Fund, Inc. ................................... B2
4. NOTES TO THE FINANCIAL STATEMENTS............................... C1
5. INDEPENDENT AUDITORS' REPORT.................................... D1
III. PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT
1. FINANCIAL STATEMENTS
Provides financial data at the product level including
investment results net of certain product related charges....... E1
2. NOTES TO FINANCIAL STATEMENTS................................... F1
3. INDEPENDENT AUDITORS' REPORT.................................... G1
IV. APPENDIX
1. REPORT OF MANAGEMENT............................................ i
2. GLOSSARY........................................................ ii
3. BOARDS OF DIRECTORS............................................. iv
This Report may be used with the public only when preceded or accompanied by
current prospectuses for The Prudential Series Fund, 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, 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 The Prudential. The principal business address of Pruco Securities
is 1111 Durham Avenue, South Plainfield, NJ 07080.
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
DEAR CONTRACT OWNER:
IN 1995, U.S. STOCKS AND BONDS PRODUCED THE KINDS OF TOTAL RETURNS INVESTORS
USUALLY ONLY DREAM ABOUT. STOCKS RETURNED A STARTLING 37% FOR THE YEAR, AS
MEASURED BY THE STANDARD & POOR'S 500 STOCK INDEX, A BROAD MEASURE OF THE U.S.
STOCK MARKET. BONDS PRODUCED A TOTAL RETURN OF OVER 18%, AS MEASURED BY THE
LEHMAN BROTHERS AGGREGATE INDEX, A COMPOSITE INDEX OF CORPORATE AND GOVERNMENT
BONDS. IT WAS FAR FROM A NORMAL YEAR: SINCE 1926, STOCKS HAVE HAD ONLY SIX
BETTER YEARS, AND LONG-TERM GOVERNMENT BONDS HAVE PRODUCED SUCH HIGH RETURNS
ONLY ONCE BEFORE. THESE KINDS OF SUPERB MARKET GAINS WILL BE HARD TO BEAT IN OUR
LIFETIMES--CONGRATULATIONS ON BEING PART OF THIS HISTORIC BULL MARKET.
AND WHAT A DIFFERENCE FROM A YEAR EARLIER. IN 1994, WE REPORTED FLAT RETURNS FOR
STOCKS AND THE LARGEST LOSSES FOR LONG-TERM BONDS IN 75 YEARS. 1995'S RESULTS
REMIND US, ONCE AGAIN, THAT STAYING THE COURSE IS THE KEY TO LONG-TERM
INVESTING.
FURTHER INTO THE REPORT, WE'LL DISCUSS OUR OUTLOOK FOR 1996'S MARKETS. WE THINK
U.S. STOCKS WILL BE VOLATILE THIS YEAR (ALTHOUGH WE FEEL THEY'RE THE ONLY PLACE
TO BE FOR THE LONG HAUL). WE WOULDN'T BE SURPRISED IF IT'S A BUMPY RIDE IN 1996.
IT'S MORE IMPORTANT THAN EVER TO UNDERSTAND THE RISKS AND REWARDS OF THE MARKET,
DETERMINE YOUR TOLERANCE FOR VOLATILITY, AND SET REALISTIC EXPECTATIONS
REGARDING THE INVESTMENTS IN YOUR CONTRACT.
CAN WE HELP?
AFTER THE TERRIFIC YEAR THE STOCK AND BOND MARKETS HAD IN 1995, IT'S IMPORTANT
TO REMEMBER HOW UNUSUALLY HIGH RETURNS WERE COMPARED TO THE HISTORICAL AVERAGES.
OVER THE LONG TERM, STOCKS HAVE AVERAGED RETURNS OF ABOUT 10.5% PER YEAR, WHILE
LONG TERM BONDS HAVE AVERAGED JUST UNDER 6% (SOURCE: IBBOTSON ASSOCIATES).
RECOGNIZING JUST HOW HIGH THE MARKETS WERE IN 1995 CAN HELP YOU BETTER MANAGE
YOUR EXPECTATIONS FOR FUTURE PERFORMANCE, WHICH WILL PROBABLY BE LOWER.
YOUR PRUDENTIAL/PRUCO SECURITIES REPRESENTATIVE STANDS READY TO DISCUSS YOUR
CHANGING FINANCIAL SECURITY NEEDS, AND TO ASSIST YOU IN ANY WAY HE OR SHE CAN.
YOUR REPRESENTATIVE IS A VALUABLE RESOURCE IN TODAY'S OFTEN VOLATILE FINANCIAL
MARKETS.
ALL OF US AT THE PRUDENTIAL THANK YOU FOR YOUR BUSINESS AND LOOK FORWARD TO
HELPING YOU PROVIDE FOR YOUR FUTURE FINANCIAL SECURITY.
/s/ Michael Caulfield
E. MICHAEL CAULFIELD
PRESIDENT
THE PRUDENTIAL SERIES FUND, INC.
/s/ Mendel A. Melzer
MENDEL A. MELZER
CHAIRMAN
THE PRUDENTIAL SERIES FUND, INC.
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. 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 VARIABLE LIFE INSURANCE OR ANNUITY CONTRACT, AND SHOW
YOU A PERSONALIZED HYPOTHETICAL ILLUSTRATION OF HOW INSURANCE CHARGES AFFECT THE
RETURNS YOU EXPERIENCE.
1
<PAGE>
STOCK & BOND MARKETS
REVIEW
U.S. FINANCIAL MARKETS REVIEW
What a year. Throughout 1995, investors simply couldn't buy enough stocks and
bonds. Why the shopping spree? Moderate economic growth, a weak U.S. dollar and
improved efficiency in U.S. businesses allowed companies to earn healthy
profits. Combined with very low inflation and falling interest rates, that
created a robust environment for U.S. stocks and bonds.
While returns from U.S. financial instruments were spectacular, global
stocks, at 21% total return (in dollar terms), as measured by the Morgan Stanley
World Index, were very attractive.
Money market funds finished in last place again with a total return of 5.5%, as
measured by IBC-Donoghue. Money markets generally produce the lowest total
returns, although they attempt to preserve a constant share value.
Falling interest rates were responsible for much of the good market news last
year. Long-term interest rates, typically measured by the 30-year U.S. Treasury
bond, fell to 6.0% from about 7.9%-a drop that triggered many happy returns
for bond investors.
There are a lot of reasons interest rates fell. First of all, inflation was low
(about 2.5% at year end), and there are signs it might remain low. Furthermore,
the economy is growing more slowly. Investors anticipate the Federal Reserve
will reduce short-term rates further in early 1996 to stimulate economic
activity.
U.S. STOCKS
REVIEW
HOW HIGH IS HIGH?
The environment for America's companies could hardly have been better in 1995.
The result of this healthy economy: The Dow Jones Industrial Average, a narrow
but frequently cited market average, set new records of 4000 in February, 4500
in June, and 5000 in November. Those gains were driven largely by corporate
earnings, which grew at a healthy pace last year.
Productivity enhancements of the late 1980s and early 1990s, including staff
reductions and technology use, are finally beginning to bear fruit at many
companies, particularly at banks, airlines and automakers. And the weak dollar
made U.S. exports very competitive in the global marketplace. When the U.S.
dollar is weak, foreign consumers literally get more for
their money--after conversion to their local currency.
- - TECHNOLOGY stocks, including computer hardware, software and
telecommunications companies, were the hands-down winners for much of the
year, although they experienced some setbacks in the fourth quarter.
Computers-and other forms of technology-are behind many of the efficiency
gains that are keeping wages low. And the rest of the world hasn't even
begun to use technology as much as we already do in the United States. As
global economies continue to grow and advance, companies and individuals
are likely to start looking to technology to make their lives easier (and
sometimes more fun, as well).
- - BANK, financial services and insurance stocks were also good performers,
gaining on the strength of falling interest rates. Many of these companies
invest heavily in bonds, and they made money when bond prices rose in 1995.
Mergers were also a big part of this sector's success. The merger craze led
to higher prices, particularly for bank stocks, as investors sought to
anticipate which companies would combine.
WHAT DIDN'T FARE AS WELL?
- - COMPANIES like automakers and retailers had a difficult year. When the
economy slowed in the spring, consumers stopped splurging and started
bargain-hunting. The all-important holiday spending season was
disappointing, as well.
U.S. BONDS
REVIEW
BONDS REBOUND STRONGLY.
In recent years, the bond market has been far from the sleepy asset class
investors traditionally expect. 1993 was terrific; 1994 was awful; 1995 was
terrific again, as moderate growth and low inflation drove bond prices higher.
When investors don't need as much in interest payments to compensate for
inflation, bond prices typically rise.
Long-term Treasury bonds were the asset class of choice in this kind of market.
They're very sensitive to interest rate changes; as rates fell, the average 30-
year Treasury bond returned 29% last year. Corporate bonds also did well,
largely for the same reasons stocks were such good performers, with the Lehman
Corporate Bond Index up 22%. Although mortgage prepayments were not a factor in
1995, investors haven't quite forgotten the pain of 1993, when prepayments
soared and mortgage-backed securities fell dramatically. The Lehman Mortgage
Backed Index was up only 17% in 1995.
2
<PAGE>
CONSERVATIVELY / AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIOS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO AND
THE AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO VS. S&P 500, LEHMAN AGGREGATE INDEX
AND LIPPER VIP FLEX AVERAGE OVER TEN YEARS ENDING DECEMBER 31 1995.
$40,032 S&P 500(2)
$29,771 AGGRESSIVELY MGD FLEX PORTFOLIO
$29,392 LIPPER VIP FLEX AVG(4)
$26,106 CONSERVATIVELY MGD FLEX PORTFOLIO
$25,079 LB AGGREGATE INDEX(3)
[GRAPH]
(SOURCE: THE PRUDENTIAL, UNLESS OTHERWISE INDICATED.)
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
ONE RANK THREE RANK FIVE RANK TEN RANK
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Conservatively Mgd Flex Port 17.3% 62/68 9.2% 46/58 10.7% 48/53 10.1% 11/13
Aggressively Mgd Flex Port 24.1 38/68 11.6 20/58 13.4 15/53 11.9 7/13
Lipper VIP Flex Avg(4) 24.2 10.9 13.0 11.4
S&P 5002 37.6 15.3 16.6 14.9
Lehman Aggregate Index(3) 18.5 8.1 9.5 9.6
</TABLE>
INCEPTION DATE: 5/1/83
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ASSET MIX AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
Large Co. Small Co. Bonds Money
Stocks Stocks Market
<S> <C> <C> <C> <C>
Conservatively Mgd Flex Port 40.5% 0.0% 34.9% 24.6%
Aggressively Mgd Flex Port 61.7% 7.0% 28.0% 3.3%
</TABLE>
(1) Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product charges.
The prospectus carries more information regarding fees and expenses. The
Portfolios 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 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 Portfolios. The securities that
comprise the S&P 500 may differ substantially from the securities in the
Portfolios. The S&P 500 is not the only index that may be used to characterize
performance of this Portfolios and other indexes may portray different
comparative performance.
(3) 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 Portfolios. The
securities that comprise the LAI may differ substantially from the securities in
the Portfolios. 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.
(4) 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 insurance products. These returns are
net of investment fees and fund expenses but not product charges.
[PHOTO]
PORTFOLIO MANAGER MARK STUMPP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Conservatively Managed Flexible Portfolio returned 17.3% for 1995, ranking
62 of 68 flexible portfolios for variable life and annuity contracts. The
Aggressively Managed Flexible Portfolio returned 24.1%, ranking 36 out of 68
flexible portfolios. (SOURCE: LIPPER ANALYTICAL SERVICES)
Research has shown that the allocation to stocks is the primary determinant of a
portfolio's total return. The Aggressively Managed Flexible Portfolio, for
example, has a "normal" stock guideline of 60%, while the Conservatively Managed
Flexible has a 35% guideline. The remaining assets are allocated between bonds
and money market instruments. We attempt to add value through timely shifts
among these asset classes.
For example, in 1995 we boosted returns by holding more than the normal
proportion of assets in stocks --a year in which stock returns outpaced the
corresponding returns on bonds.
Nevertheless, markets are difficult to predict and, over time, the normal
commitment to stocks will be the primary determinant of each Portfolio's return.
Because these Portfolios are diversified across both stocks and bonds, they will
tend to lag the stock market in bull markets, such as 1995.
However, by blending stocks with bonds, these Portfolios are better equipped to
weather stock market declines.The normal rule is that you can't earn higher
returns without taking on additional risk. Diversification, of course, doesn't
prevent losses, but it can dampen the severity of declines in the stock market.
3
<PAGE>
INVESTMENT ADVISOR'S OUTLOOK:
THIS TIME OF YEAR WE USUALLY ANALYZE THE FINANCIAL INDICATORS, REVIEW LAST
YEAR'S MARKET ACTIVITY AND TRY TO FORECAST NEXT YEAR'S INVESTMENT MARKETS--THE
BEST SECTORS TO CHOOSE AND WHERE WE THINK THERE'S MONEY TO
BE MADE.
THIS YEAR, THERE'S STILL A LOT OF GOOD NEWS. INTEREST RATES ARE FALLING,
INFLATION IS LOW AND ECONOMIC GROWTH REMAINS POSITIVE--A COMBINATION THAT
CREATES A VERY HEALTHY ENVIRONMENT FOR STOCKS AND BONDS. BUT LOOKING BACK AT
1995, THE STOCK AND BOND MARKETS HAVE ALREADY PRODUCED RECORD-BREAKING TOTAL
RETURNS. HISTORY TELLS US THESE RETURNS ARE UNLIKELY TO BE REPEATED ANY TIME
SOON. OVERALL, THOUGH, WE ARE POSITIVE, BUT WE WANT TO MAKE SURE WE'RE NOT
TAKING TOO MUCH RISK.
U.S. BONDS
OUTLOOK
Bonds look good to us. We believe interest rates will fall to 5.75% or even
5.5%--which could produce healthy price appreciation from this normally sleepy
asset class. Inflation in the U.S. remains low, which should allow interest
rates to fall further. We're very positive on Treasury securities and investment
grade corporate bonds. High yield bonds should benefit from lower interest
rates, but we're paying very close attention to credit quality.
U.S. STOCKS
OUTLOOK
The U.S. stock market is the toughest for us to call. Falling interest rates are
positive for the market; but we're concerned about slowing earnings growth. Our
best guess: modest positive returns by year end 1996, but expect a sell-off
sometime during the year.
One last word: judge your risk tolerance carefully this year. There could be
many ups--and some big downs--in 1996. We think long-term investors should be
prepared to weather some turmoil on their way to positive total returns. And
remember to review your financial security objectives with your Registered
Representative in case your needs have changed.
SHORT TAKES
PORTFOLIO MANAGERS
TOM JACKSON,
COMMON STOCK PORTFOLIO:
"The challenge for 1996 is to determine when the prices of the economically
sensitive stocks offer sufficient value to compensate for the risk that earnings
will continue to disappoint if the economy weakens in the near term."
BARBARA KENWORTHY,
BOND PORTFOLIO:
"If 1996 weren't a Presidential election year, I'd expect to see really stunning
gains from the U.S. bond market, with long-term interest rates dipping below
5.5%. But Presidential politicking will bring turmoil to the bond market, so I
believe we'll have a respectable year, with strong price gains and rates testing
their 1993 lows--a record level for investors."
4
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<S> <C>
ASSETS
Investments, at value (cost:
$3,622,931,201).......................... $3,912,781,300
Cash....................................... 44,660
Interest and dividends receivable.......... 30,959,621
Receivable for securities sold............. 2,833,722
Receivable for portfolio shares sold....... 23,400
--------------
Total Assets............................. 3,946,642,703
--------------
LIABILITIES
Accrued expenses........................... 165,851
Payable for securities purchased........... 374,361
Payable to investment adviser.............. 5,328,226
--------------
Total Liabilities........................ 5,868,438
--------------
NET ASSETS................................... $3,940,774,265
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,574,196
Paid-in capital, in excess of par........ 3,629,566,275
--------------
3,632,140,471
Distributions in excess of net investment
income................................... (2,286,857)
Accumulated net realized gains............. 21,070,552
Net unrealized appreciation................ 289,850,099
--------------
Net assets, December 31, 1995.............. $3,940,774,265
--------------
--------------
Net asset value per share of 257,419,587
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 15.3088
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<S> <C>
INVESTMENT INCOME
Dividends (net of $401,184 foreign
withholding tax)......................... $ 23,484,206
Interest................................... 153,295,065
---------------
176,779,271
---------------
EXPENSES
Investment management fee.................. 20,327,574
Shareholders' reports...................... 902,869
Accounting fees............................ 97,831
Custodian expense -- net................... 92,207
Professional fees.......................... 74,702
Miscellaneous expenses..................... 5,573
Directors' expense......................... 4,934
S.E.C. fees................................ (20,409)
---------------
21,485,281
---------------
NET INVESTMENT INCOME........................ 155,293,990
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 167,342,297
Net unrealized gain on investments......... 264,773,974
---------------
NET GAIN ON INVESTMENTS...................... 432,116,271
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 587,410,261
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1995 1994
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 155,293,990 $ 122,670,711
Net realized gain on investments....................................................... 167,342,297 30,751,021
Net unrealized gain(loss) on investments............................................... 264,773,974 (184,854,002)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ 587,410,261 (31,432,270)
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (154,987,434) (120,740,360)
Net realized gain from investment transactions......................................... (133,660,168) (37,214,012)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (288,647,602) (157,954,372)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [5,345,143 and 34,889,459 shares, respectively]..................... 81,026,772 514,344,688
Reinvestment of dividend distributions [19,023,739 and 11,198,868 shares,
respectively]......................................................................... 288,647,602 157,954,372
Capital stock repurchased [(15,343,313) and (5,887,371) shares, respectively].......... (228,767,054) (84,977,146)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 140,907,320 587,321,914
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 439,669,979 397,935,272
NET ASSETS:
Beginning of year...................................................................... 3,501,104,286 3,103,169,014
------------------ -------------------
End of year............................................................................ $ 3,940,774,265 $ 3,501,104,286
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C5.
A1
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<S> <C>
ASSETS
Investments, at value (cost:
$3,687,627,278).......................... $4,228,358,720
Cash....................................... 626
Interest and dividends receivable.......... 25,934,506
Receivable for securities sold............. 59,091,478
Receivable for portfolio shares sold....... 42,700
--------------
Total Assets............................. 4,313,428,030
--------------
LIABILITIES
Accrued expenses........................... 178,423
Payable for securities purchased........... 45,774,778
Payable to investment adviser.............. 6,269,992
--------------
Total Liabilities........................ 52,223,193
--------------
NET ASSETS................................... $4,261,204,837
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,385,984
Paid-in capital, in excess of par........ 3,657,681,610
--------------
3,660,067,594
Distributions in excess of net investment
income................................... (5,751,188)
Accumulated Net Realized Gains............. 66,155,086
Net unrealized appreciation
Securities............................... 540,731,442
Foreign currency translations............ 1,903
--------------
Net assets, December 31, 1995.............. $4,261,204,837
--------------
--------------
Net asset value per share of 238,598,423
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 17.8593
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<S> <C>
INVESTMENT INCOME
Dividends (net of $632,445 foreign
withholding tax)......................... $ 47,779,646
Interest................................... 103,109,112
---------------
150,888,758
---------------
EXPENSES
Investment management fee.................. 22,971,401
Shareholders' reports...................... 933,420
Custodian expense -- net................... 170,999
Professional fees.......................... 86,407
Accounting fees............................ 84,962
Miscellaneous expenses..................... 5,560
Directors' expense......................... 4,806
S.E.C. fees................................ (9,458)
---------------
24,248,097
---------------
NET INVESTMENT INCOME........................ 126,640,661
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on investments and
foreign currencies--
Securities transactions.................. 291,714,860
Foreign currency transactions............ (1,080)
Futures contracts........................ 554,055
---------------
Net realized gain on investments and
foreign currencies....................... 292,267,835
---------------
Net unrealized gain on investments and
foreign currencies--
Securities............................... 410,037,562
Foreign currency translations............ 3,540
---------------
Net unrealized gain on investments and
foreign currencies....................... 410,041,102
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 702,308,937
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 828,949,598
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1995 1994
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 126,640,661 $ 98,878,114
Net realized gain on investments and foreign currency transactions..................... 292,267,835 23,838,273
Net unrealized gain(loss) on investments and foreign currency translations............. 410,041,102 (230,571,359)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ 828,949,598 (107,854,972)
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (124,621,227) (96,126,295)
Net realized gain from investment transactions......................................... (176,844,671) (98,311,584)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (301,465,898) (194,437,879)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [8,486,525 and 22,611,559 shares, respectively]..................... 146,641,074 370,947,414
Reinvestment of dividend distributions [17,050,711 and 12,531,550 shares,
respectively]......................................................................... 301,465,898 194,437,879
Capital stock repurchased [(11,612,102) and (4,617,224) shares, respectively].......... (195,926,134) (73,719,278)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 252,180,838 491,666,015
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 779,664,538 189,373,164
NET ASSETS:
Beginning of year...................................................................... 3,481,540,299 3,292,167,135
------------------ -------------------
End of year............................................................................ $ 4,261,204,837 $ 3,481,540,299
------------------ -------------------
------------------ -------------------
</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
CONSERVATIVELY A favorable total return through investment in a blend of
MANAGED FLEXIBLE money market instruments, fixed income securities and
common stocks managed towards a lower potential risk of
loss than the Aggressively Managed Flexible Portfolio and
correspondingly lower potential for appreciation.
AGGRESSIVELY MANAGED Higher total return through investment in a blend of money
FLEXIBLE market instruments, fixed income securities and common
stocks managed with a higher degree of risk of loss in
order to attain potentially higher results than the
Conservatively Managed Flexible Portfolio.
- --------------------------------------------------------------------------------
B1
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 39.6% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 0.8%
+Coltec Industries, Inc......................... 311,000 $ 3,615,375
GenCorp, Inc.................................... 676,800 8,290,800
Loral Corp...................................... 77,800 2,752,175
Rockwell International Corp..................... 253,100 13,382,661
+UNC, Inc....................................... 289,100 1,734,600
--------------
29,775,611
--------------
AIRLINES -- 0.3%
+AMR Corp....................................... 100,000 7,425,000
+USAir Group, Inc............................... 335,000 4,438,750
--------------
11,863,750
--------------
AUTOS - CARS & TRUCKS -- 3.1%
A.O. Smith Corp................................. 466,800 9,686,100
Chrysler Corp................................... 500,000 27,687,500
Ford Motor Co................................... 318,300 9,230,700
General Motors Corp............................. 500,000 26,437,500
General Motors Corp. (Class 'E' Stock).......... 243,900 12,682,800
General Motors Corp. (Class 'H' Stock).......... 465,900 22,887,337
Titan Wheel International, Inc.................. 748,350 12,160,686
--------------
120,772,623
--------------
BANKS AND SAVINGS & LOANS -- 1.8%
First Bank System, Inc.......................... 366,600 18,192,525
First Interstate Bancorp........................ 120,000 16,380,000
KeyCorp......................................... 502,800 18,226,500
Norwest Corp.................................... 570,400 18,823,200
--------------
71,622,225
--------------
CHEMICALS -- 1.2%
+FMC Corp....................................... 110,800 7,492,850
Imperial Chemical Industries, PLC, ADR.......... 371,300 17,358,275
OM Group, Inc................................... 308,400 10,215,750
W.R. Grace & Co................................. 218,800 12,936,550
--------------
48,003,425
--------------
CHEMICALS - SPECIALTY -- 0.7%
Ferro Corp...................................... 655,200 15,233,400
M.A. Hanna Co................................... 489,700 13,711,600
--------------
28,945,000
--------------
COMPUTER SERVICES -- 0.9%
+Amdahl Corp.................................... 900,000 7,650,000
National Data Corp.............................. 620,100 15,347,475
+Paxar Corp..................................... 1,022,928 13,553,794
--------------
36,551,269
--------------
CONSTRUCTION -- 0.2%
+J. Ray McDermott, SA........................... 500,000 8,937,500
--------------
CONTAINERS -- 0.2%
+Sealed Air Corp................................ 290,400 8,167,500
--------------
DIVERSIFIED GAS -- 0.6%
+Basin Exploration, Inc......................... 148,000 730,750
Sonat Offshore Drilling, Inc.................... 228,100 10,207,475
Tidewater, Inc.................................. 73,600 2,318,400
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Weatherford Enterra, Inc........................ 321,353 $ 9,279,066
Western Gas Resources, Inc...................... 162,100 2,613,863
--------------
25,149,554
--------------
DRUGS AND HOSPITAL SUPPLIES -- 0.2%
United States Surgical Corp..................... 365,500 7,812,563
--------------
ELECTRICAL EQUIPMENT -- 0.5%
+Anixter International, Inc..................... 337,400 6,284,075
Belden, Inc..................................... 524,300 13,500,725
--------------
19,784,800
--------------
ELECTRONICS -- 0.7%
+ADT Ltd........................................ 620,000 9,300,000
+Digital Equipment Corp......................... 200,000 12,825,000
+IMO Industries, Inc............................ 596,900 4,103,686
--------------
26,228,686
--------------
FINANCIAL SERVICES -- 2.2%
American Express Co............................. 319,000 13,198,625
Dean Witter Discover and Company................ 736,500 34,615,500
Lehman Brothers Holdings, Inc................... 400,000 8,500,000
Reinsurance Group of America, Inc............... 487,800 17,865,675
Salomon, Inc.................................... 300,000 10,650,000
--------------
84,829,800
--------------
FOODS -- 0.4%
Philip Morris Companies, Inc.................... 188,000 17,014,000
--------------
FOREST PRODUCTS -- 0.9%
Louisiana-Pacific Corp.......................... 700,000 16,975,000
Mead Corp....................................... 350,800 18,329,300
--------------
35,304,300
--------------
FURNITURE -- 0.2%
Leggett & Platt, Inc............................ 380,200 9,219,850
--------------
GAS PIPELINES -- 0.6%
Enron Oil & Gas Co.............................. 332,700 7,984,800
+Global Marine, Inc............................. 615,800 5,388,250
+Seagull Energy Corp............................ 387,200 8,615,200
--------------
21,988,250
--------------
HOSPITAL MANAGEMENT -- 0.6%
Columbia/HCA Healthcare Corp.................... 161,816 8,212,160
+Tenet Healthcare Corp.......................... 825,000 17,118,750
--------------
25,330,910
--------------
HOUSING RELATED -- 0.9%
+Giant Cement Holdings, Inc..................... 415,200 4,774,800
+Owens-Corning Fiberglas Corp................... 662,800 29,743,150
--------------
34,517,950
--------------
INSURANCE -- 2.9%
Allstate Corp................................... 129,599 5,329,758
Equitable of Iowa Companies..................... 372,700 11,972,987
Financial Security Assurance Holdings, Ltd...... 226,200 5,626,725
National Re Corp................................ 207,600 7,888,800
PennCorp Financial Group, Inc................... 638,400 18,753,000
Provident Companies, Inc........................ 177,200 6,002,650
TIG Holdings, Inc............................... 588,300 16,766,550
Trenwick Group, Inc............................. 276,200 15,536,250
</TABLE>
B2
<PAGE>
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
W.R. Berkley Corp............................... 192,800 $ 10,363,000
Western National Corp........................... 900,000 14,512,500
--------------
112,752,220
--------------
MACHINERY -- 1.2%
Case Corp....................................... 642,800 29,408,100
DT Industries, Inc.............................. 234,500 3,165,750
+Global Industrial Technologies, Inc............ 390,700 7,374,463
Parker-Hannifin Corp............................ 204,750 7,012,688
--------------
46,961,001
--------------
MEDIA -- 2.3%
Central Newspapers, Inc. (Class 'A' Stock)...... 331,700 10,407,088
Comcast Corp. (Class 'A' Stock)................. 362,500 6,389,063
Comcast Corp. (Special Class 'A' Stock)......... 9,600 174,600
+Cox Communications, Inc. (Class 'A' Stock)..... 246,115 4,799,243
Gannett Co., Inc................................ 200,000 12,275,000
Hollinger International, Inc.................... 161,400 1,694,700
Knight-Ridder, Inc.............................. 200,000 12,500,000
Lee Enterprises, Inc............................ 337,400 7,760,200
McGraw-Hill, Inc................................ 96,200 8,381,425
Media General, Inc. (Class 'A' Stock)........... 123,600 3,754,350
+Tele-Communications, Inc. (Series 'A' Stock)... 606,200 12,048,225
Times Mirror Co. (Class 'A' Stock).............. 280,276 9,494,350
--------------
89,678,244
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 3.6%
BW/IP, Inc. (Class 'A' Stock)................... 379,200 6,256,800
Danaher Corp.................................... 455,600 14,465,300
Donaldson Company, Inc.......................... 400,400 10,060,050
+IDEX Corp...................................... 285,600 11,638,200
+Jan Bell Marketing, Inc........................ 1,000,000 2,500,000
+Litton Industries, Inc......................... 259,700 11,556,650
Mark IV Industries, Inc......................... 572,565 11,308,158
Mascotech, Inc.................................. 650,000 7,068,750
Pentair, Inc.................................... 472,950 23,529,263
+SPS Transaction Services, Inc.................. 192,800 5,711,700
Textron, Inc.................................... 96,400 6,507,000
Trinity Industries, Inc......................... 385,500 12,143,250
+Wolverine Tube, Inc............................ 279,500 10,481,250
York International Corp......................... 199,000 9,353,000
--------------
142,579,371
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.3%
Eastman Kodak Co................................ 372,300 24,944,100
Houghton Mifflin Co............................. 132,600 5,701,800
Whitman Corp.................................... 913,400 21,236,550
--------------
51,882,450
--------------
PETROLEUM -- 1.0%
Amerada Hess Corp............................... 100,000 5,300,000
Cabot Oil & Gas Corp. (Class 'A' Stock)......... 594,400 8,693,100
Elf Aquitaine, ADR.............................. 530,100 19,481,175
Parker & Parsley Petroleum Co................... 257,800 5,671,600
--------------
39,145,875
--------------
PETROLEUM SERVICES -- 2.5%
Baker Hughes, Inc............................... 300,000 7,312,500
Coflexip, ADR................................... 500,000 9,437,500
+ENSCO International, Inc....................... 600,000 12,450,000
+Hornbeck Offshore Services, Inc................ 208,000 4,082,000
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
ICO, Inc........................................ 500,000 $ 2,437,500
+Marine Drilling Co., Inc....................... 1,000,000 5,125,000
+Mesa, Inc...................................... 1,008,400 3,781,500
Murphy Oil Corp................................. 190,800 7,918,200
Noble Affiliates, Inc........................... 200,000 5,975,000
+Noble Drilling Corp............................ 800,000 7,200,000
+Oryx Energy Co................................. 849,400 11,360,725
+Pride Petroleum Services, Inc.................. 360,100 3,826,063
+Rowan Companies, Inc........................... 269,400 2,660,325
+Western Atlas, Inc............................. 300,000 15,150,000
--------------
98,716,313
--------------
RAILROADS -- 0.9%
Burlington Northern, Inc........................ 259,000 20,202,000
Illinois Central Corp........................... 440,000 16,885,000
--------------
37,087,000
--------------
REAL ESTATE DEVELOPMENT -- 0.5%
Zeneca Group, PLC, ADR.......................... 357,400 20,863,225
--------------
RETAIL -- 1.7%
+Best Products Company, Inc..................... 1,094,500 5,198,875
+Burlington Coat Factory Warehouse.............. 244,600 2,507,150
Charming Shoppes, Inc........................... 2,000,000 5,750,000
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 500,000 14,250,000
+Filene's Basement Corp......................... 160,000 370,000
K mart Corp..................................... 1,058,700 7,675,575
Rite Aid Corp................................... 6,000 205,500
Sears, Roebuck & Co............................. 139,800 5,452,200
TJX Companies, Inc.............................. 914,900 17,268,738
Woolworth Corp.................................. 600,000 7,800,000
--------------
66,478,038
--------------
RUBBER -- 0.3%
Goodyear Tire & Rubber Co....................... 269,800 12,242,175
--------------
STEEL -- 1.6%
+Bethlehem Steel Corp........................... 1,000,000 14,000,000
+LTV Corp....................................... 1,500,000 20,625,000
+Material Sciences Corp......................... 675,000 10,040,625
+National Steel Corp. (Class 'B' Stock)......... 300,000 3,862,500
USX-U.S. Steel Group............................ 450,000 13,837,500
--------------
62,365,625
--------------
TELECOMMUNICATIONS -- 1.2%
+Airtouch Communications, Inc................... 385,500 10,890,375
Century Telephone Enterprises, Inc.............. 337,300 10,709,275
Frontier Corp................................... 297,700 8,931,000
MCI Communications Corp......................... 331,100 8,649,988
+Nextel Communications, Inc. (Class 'A'
Stock)........................................ 495,400 7,307,150
--------------
46,487,788
--------------
TEXTILES -- 1.2%
+Farah, Inc..................................... 258,500 1,227,874
+Fieldcrest Cannon, Inc......................... 460,000 7,647,500
+Fruit of the Loom, Inc. (Class 'A' Stock)...... 500,000 12,187,500
+Owens-Illinois, Inc............................ 552,700 8,014,150
Phillips-Van Heusen Corp........................ 600,000 5,925,000
+Tultex Corp.................................... 579,000 2,388,375
V.F. Corp....................................... 154,600 8,155,149
--------------
45,545,549
--------------
</TABLE>
B3
<PAGE>
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
TOBACCO -- 0.4%
RJR Nabisco Holdings Corp....................... 500,000 $ 15,437,500
--------------
TOTAL COMMON STOCKS
(Cost $1,308,436,835).......................................... 1,560,041,940
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 0.1% SHARES VALUE
------------- --------------
<S> <C> <C>
MEDIA
Times Mirror Co. (Cum. Conv.), Series B......... 119,724 3,090,376
--------------
(Cost $2,725,059)
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 33.2% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 10.0%
Advanta Corp Mid,
8.180%, 02/09/97, Tranche #TR00028............ $ 10,000,000 $ 10,271,700
Advanta Corp.,
5.125%, 11/15/96.............................. 12,535,000 12,464,303
Allmerica Finance,
7.625%, 10/15/25.............................. 7,200,000 7,564,968
Associates Corp. of North America,
8.375%, 01/15/98.............................. 1,100,000 1,159,191
Banc One Credit Card Master Trust, Series 94-B
7.750%, 12/15/99.............................. 5,100,000 5,292,831
Capital One Bank, M.T.N.,
6.660%, 08/17/98, Tranche #TR00055............ 10,050,000 10,237,734
6.740%, 05/31/99, Tranche #TR00038............ 22,250,000 22,756,410
8.125%, 02/27/98, Tranche #TR00032............ 6,500,000 6,788,860
Chrysler Financial Corp., M.T.N.,
5.390%, 08/27/96, Tranche #TR00041............ 7,300,000 7,287,079
CIGNA Mortgage Securities, Inc.,
Series 88-1
9.400%, 01/15/02.............................. 2,285,774 2,319,878
Discover Card Trust, Series 1991-C, Class B
7.875%, 04/16/98.............................. 10,000,000 10,050,000
**Equitable Life Assurance Society,
6.950%, 12/01/05.............................. 25,000,000 25,359,375
Federal Express Corp., M.T.N.,
10.010%, 06/01/98, Tranche #TR00067........... 3,000,000 3,255,300
10.050%, 06/15/99, Tranche #TR00068........... 500,000 557,650
First Union Corp.,
9.450%, 06/15/99.............................. 4,000,000 4,450,800
Ford Motor Credit Co.,
6.375%, 10/06/00.............................. 26,500,000 26,979,650
Ford Motor Credit, Co., M.T.N.,
6.137%, 10/04/99.............................. 23,750,000 23,808,188
6.850%, 08/15/00.............................. 8,500,000 8,823,255
General Motors Acceptance Corp.,
8.250%, 08/01/96.............................. 5,000,000 5,066,300
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
General Motors Acceptance Corp., M.T.N.,
6.300%, 09/10/97, Tranche #TR00532............ $ 5,000,000 $ 5,058,300
6.700%, 04/30/97, Tranche #TR00319............ 11,000,000 11,158,840
7.375%, 07/20/98, Tranche #TR00667............ 4,650,000 4,837,070
7.850%, 03/05/97, Tranche #TR00187............ 3,300,000 3,384,744
%Marine Midland Bank N.A.,
5.812%, 09/27/96.............................. 6,500,000 6,487,000
Mellon Financial Co.,
6.500%, 12/01/97.............................. 1,650,000 1,676,516
Okobank,
**%7.387%, 10/29/49........................... 3,500,000 3,539,375
%7.387%, 10/29/49............................. 9,000,000 9,101,250
%7.375%, 09/27/49............................. 18,750,000 19,341,563
Salomon Inc., M.T.N.,
5.440%, 01/13/97, Tranche #TR00641............ 5,000,000 4,972,000
5.470%, 08/29/97, Tranche #SR00492............ 10,500,000 10,446,660
5.320%, 09/16/96, Tranche #TR00572............ 10,400,000 10,347,168
5.470%, 09/22/97, Tranche #SR00504............ 12,525,000 12,377,706
Santander Financial Issuances, Inc.,
7.250%, 11/01/15.............................. 14,500,000 14,852,060
Sears Roebuck Acceptance Corp.,
6.750%, 09/15/05.............................. 35,050,000 36,351,056
Sears Roebuck Acceptance Corp., M.T.N.,
6.340%, 10/12/00, Tranche #TR00038............ 11,000,000 11,174,790
Standard Credit Card Master Trust,
5.950%, 03/07/96.............................. 4,650,000 4,612,196
Union Bank of Finland, Ltd.,
5.250%, 06/15/96.............................. 16,650,000 16,579,737
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #TR00248............ 2,600,000 2,616,276
--------------
383,407,779
--------------
FOREIGN -- 6.0%
**Banco de Commercio Exterior, SA, M.T.N.,
8.625%, 06/02/00, Tranche #TR00001............ 5,500,000 5,654,000
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 7,300,000 7,482,500
**Cemex, SA, M.T.N.,
9.500%, 09/20/01, Tranche #TR00010............ 12,500,000 11,375,000
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 7,600,000 7,486,000
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 5,190,000 4,567,200
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 8,208,750
Financiera Energetica Nacional,
6.625%, 12/13/96.............................. 5,000,000 5,000,000
</TABLE>
B4
<PAGE>
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Financiera Energetica Nacional, SA, M.T.N.,
9.000%, 11/08/99.............................. $ 2,000,000 $ 2,097,500
**9.000%, 11/08/99............................ 5,375,000 5,637,031
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 5,150,000 5,104,938
**Grupo Condumex, SA, M.T.N.,
6.250%, 07/27/96.............................. 4,300,000 4,165,625
**Grupo Embotellador Mexicana,
10.750%, 11/19/97............................. 8,015,000 7,994,963
Grupo Televisa, SA,
10.000%, 11/09/97............................. 7,250,000 7,105,000
Hydro-Quebec,
8.050%, 07/07/24.............................. 22,100,000 25,232,896
Kansallis-Osake Pankki, N.Y.,
**%8.650%, 12/29/49........................... 10,000,000 10,625,000
9.750%, 12/15/98.............................. 16,950,000 18,736,022
Kansallis-Osake Pankki, N.Y., C.D.,
6.125%, 05/15/98.............................. 6,160,000 6,227,375
Quebec, Province of Canada,
7.500%, 07/15/02.............................. 8,625,000 9,157,766
Republic of Columbia,
7.125%, 05/11/98.............................. 2,775,000 2,795,813
7.250%, 02/23/04.............................. 5,400,000 5,179,896
8.750%, 10/06/99.............................. 4,950,000 5,232,744
Republic of Italy,
6.875%, 09/27/23.............................. 15,000,000 14,648,250
Republic of South Africa,
9.625%, 12/15/99.............................. 22,221,000 23,966,904
**Telekom Malaysia,
7.875%, 08/01/25.............................. 22,000,000 24,159,520
United Mexican States,
5.820%, 06/28/01.............................. 1,375,000 990,000
6.970%, 08/12/00.............................. 2,300,000 1,840,000
8.500%, 09/15/02.............................. 6,850,000 5,959,500
--------------
236,630,193
--------------
INDUSTRIAL -- 13.0%
AMR Corp.,
10.000%, 04/15/21............................. 5,000,000 6,213,250
9.000%, 08/01/12.............................. 10,000,000 11,277,700
9.800%, 10/01/21.............................. 5,000,000 5,944,000
9.880%, 06/15/20.............................. 9,565,000 11,501,913
Arkla, Inc., M.T.N.,
9.250%, 12/18/97, Tranche #TR00027............ 3,000,000 3,151,590
Auburn Hills Trust,
12.000%, 05/01/20............................. 28,670,000 45,119,699
Coca-Cola Enterprises, Inc.,
6.500%, 11/15/97.............................. 3,750,000 3,808,875
Columbia Gas Systems, Inc.,
7.620%, 11/28/25.............................. 6,500,000 6,616,935
Columbia/HCA Healthcare Corp.,
7.050%, 12/01/27.............................. 32,200,000 32,411,554
7.580%, 09/15/25, M.T.N., Tranche #TR00015.... 16,000,000 17,157,120
Delta Air Lines, Inc.,
9.750%, 05/15/21.............................. 5,000,000 6,168,650
Federated Dept Stores,
8.125%, 10/15/02.............................. 10,500,000 10,552,500
Hanson Overseas Corp.,
5.500%, 01/15/96.............................. 2,000,000 1,999,840
Nabisco, Inc.,
6.850%, 06/15/05.............................. 20,000,000 20,312,000
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
News America Holdings, Inc.,
7.750%, 12/01/45.............................. $ 51,000,000 $ 51,659,940
9.125%, 10/15/99.............................. 15,000,000 16,580,700
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 8,950,000 10,031,070
RJR Nabisco, Inc.,
8.750%, 08/15/05.............................. 4,000,000 4,097,240
Sears, Roebuck & Co., M.T.N.,
9.420%, 04/01/96.............................. 1,000,000 1,014,375
Sears, Roebuck Acceptance Corp.,
9.000%, 09/15/96.............................. 2,000,000 2,043,760
Service Corp. International,
7.000%, 06/01/15.............................. 2,500,000 2,785,575
TCI Communications, Inc.,
8.750%, 08/01/15.............................. 27,175,000 30,128,107
Tele-Communications, Inc.,
7.875%, 08/01/13.............................. 5,250,000 5,399,678
9.250%, 04/15/02.............................. 5,000,000 5,680,900
9.800%, 02/01/12.............................. 18,000,000 21,585,060
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23-07/15/33..................... 33,740,000 36,131,467
9.625%, 05/01/02.............................. 14,140,000 16,379,352
Time Warner, Inc.,
7.750%, 06/15/05.............................. 10,000,000 10,410,300
United Air Lines, Inc.,
9.750%, 08/15/21.............................. 15,000,000 17,993,550
10.670%, 05/01/04............................. 21,750,000 26,236,590
11.210%, 05/01/14............................. 2,500,000 3,309,125
Viacom, Inc.,
7.625%, 01/15/16.............................. 16,000,000 16,190,000
7.750%, 06/01/05.............................. 45,175,000 47,974,494
Westinghouse Electric Corp., M.T.N.,
8.700%, 06/20/96, Tranche #TR00029............ 2,950,000 2,970,680
--------------
510,837,589
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 4.2%
Federal National Mortgage Association,
9.050%, 04/10/00.............................. 14,000,000 15,837,500
United States Treasury Bonds,
7.625%, 02/15/25.............................. 200,000 244,562
12.000%, 08/15/13............................. 5,400,000 8,320,212
United States Treasury Notes,
6.125%, 07/31/00.............................. 3,350,000 3,448,390
6.500%, 04/30/97.............................. 61,000,000 61,981,490
5.875%, 08/15/98-11/15/05..................... 32,200,000 32,850,580
6.125%, 09/30/00.............................. 13,500,000 13,905,000
6.375%, 08/15/02.............................. 26,500,000 27,787,635
6.500%, 05/15/05.............................. 2,900,000 3,085,339
--------------
167,460,708
--------------
TOTAL LONG-TERM BONDS
(Cost $1,260,456,592).......................................... 1,298,336,269
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 26.4% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK-RELATED INSTRUMENTS -- 3.4%
Abbey National Treasury Services, C.D. PLC,
5.850%, 01/03/96.............................. 48,000,000 48,000,012
Advanta National Bank, C.D.
6.260%, 09/01/97.............................. 10,500,000 10,594,500
</TABLE>
B5
<PAGE>
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Bayerische Hypotheken, C.D.,
5.800%, 01/16/96.............................. $ 12,000,000 $ 11,999,970
5.830%, 01/16/96.............................. 23,000,000 23,000,176
Berliner Handels, C.D.,
5.830%, 01/16/96.............................. 12,000,000 12,000,046
National Westminister Bank, C.D. PLC,
5.810%, 01/12/96.............................. 36,000,000 36,000,000
Societe Generale Bank, C.D.,
7.650%, 01/08/96.............................. 3,000,000 3,000,472
--------------
144,595,176
--------------
COMMERCIAL PAPER -- 16.1%
American Express Credit Corp.,
5.590%, 03/15/96.............................. 14,000,000 13,841,306
American Home Products Corp.,
5.680%, 03/07/96.............................. 13,000,000 12,866,678
American Honda Finance Corp.,
5.750%, 02/08/96.............................. 6,000,000 5,964,542
5.850%, 01/12/96-01/22/96..................... 9,000,000 8,978,875
Aristar Inc.,
5.800%, 02/02/96.............................. 2,000,000 1,990,011
Asset Securitization Cooperative Corp.,
5.660%, 02/20/96.............................. 28,000,000 27,784,291
Associates Corp. of North America,
5.680%, 02/08/96-02/12/96..................... 43,300,000 43,026,208
Banque Nationale De Paris,
5.780%, 01/22/96.............................. 11,000,000 10,999,845
Bradford & Bingley Building Society,
5.680%, 02/06/96.............................. 22,000,000 21,878,511
Caterpillar Financial Services Corp.,
5.660%, 02/21/96.............................. 3,000,000 2,976,417
5.670%, 02/27/96.............................. 3,000,000 2,973,540
Chase Manhattan Corp.,
5.670%, 02/12/96.............................. 8,000,000 7,948,340
CIT Group Holdings, Inc.,
5.670%, 02/05/96.............................. 8,000,000 7,957,160
5.680%, 02/07/96.............................. 17,000,000 16,903,440
5.780%, 01/25/96.............................. 16,981,000 16,918,293
Cogentrix of Richmond, Inc.,
5.950%, 01/24/96.............................. 18,457,000 18,389,888
Corporate Receivables Corp.,
5.750%, 01/16/96-01/18/96..................... 8,000,000 7,980,514
Countrywide Funding Corp.,
5.830%, 01/16/96.............................. 2,000,000 1,995,466
5.840%, 01/18/96.............................. 8,000,000 7,979,236
5.870%, 01/22/96.............................. 3,000,000 2,990,217
6.000%, 01/22/96.............................. 8,000,000 7,973,333
Dean Witter Discover and Company,
5.700%, 02/14/96.............................. 4,000,000 3,972,767
Finova Capital Corp.,
5.970%, 01/05/96-01/25/96..................... 19,360,000 19,324,797
First Union Corp.,
5.710%, 02/09/96.............................. 15,000,000 14,909,592
Fleet Mortgage Group, Inc.,
5.800%, 01/16/96.............................. 6,000,000 5,986,467
Ford Motor Credit Co.,
5.530%, 03/04/96.............................. 20,800,000 20,601,903
6.070%, 01/05/96.............................. 14,300,000 14,292,767
General Electric Capital Corp.,
5.580%, 04/08/96-04/09/96..................... 10,000,000 9,848,565
5.660%, 02/08/96.............................. 36,000,000 35,790,580
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
General Motors Acceptance Corp.,
5.650%, 02/09/96.............................. $ 4,261,000 $ 4,235,588
5.750%, 02/20/96.............................. 9,000,000 8,929,563
5.800%, 02/09/96.............................. 20,000,000 19,877,556
Goldman Sachs Group L.P,
6.050%, 01/11/96-01/12/96..................... 22,000,000 21,964,540
GTE Corp.,
5.870%, 01/19/96.............................. 4,000,000 3,988,912
5.950%, 01/29/96.............................. 4,544,000 4,523,722
5.970%, 01/30/96-01/31/96..................... 7,491,000 7,455,719
Hanson Finance, PLC,
5.650%, 02/29/96.............................. 8,000,000 7,927,178
5.700%, 01/26/96-02/08/96..................... 19,389,000 19,296,480
McKenna Triangle National Corp.,
5.750%, 01/16/96.............................. 3,831,000 3,822,433
Merrill Lynch & Co., Inc.,
5.750%, 01/26/96.............................. 21,000,000 20,919,500
Mitsubishi International Corp.,
5.780%, 01/29/96.............................. 2,500,000 2,489,163
5.810%, 01/23/96.............................. 4,200,000 4,185,766
Morgan Stanley Group, Inc.,
5.750%, 01/25/96.............................. 34,000,000 33,875,097
NYNEX Corporation,
5.800%, 01/19/96.............................. 2,000,000 1,994,522
5.820%, 01/09/96-01/16/96..................... 6,000,000 5,990,947
PHH Corporation,
5.830%, 01/23/96.............................. 3,000,000 2,989,798
PNC Funding Corp,
5.730%, 02/08/96.............................. 2,000,000 1,988,222
Preferred Receivables Funding Corp.,
5.680%, 02/07/96.............................. 7,150,000 7,109,388
5.850%, 01/17/96.............................. 15,000,000 14,963,438
Riverwood Funding Corp.,
5.680%, 02/16/96.............................. 4,000,000 3,971,600
Sears Roebuck Acceptance Corp.,
5.720%, 02/26/96.............................. 11,000,000 10,903,872
Special Purpose A/R Cooperative Corp.,
5.750%, 01/24/96.............................. 4,000,000 3,985,944
5.780%, 01/24/96.............................. 3,000,000 2,989,403
Transamerica Corp.,
5.780%, 01/19/96.............................. 16,072,000 16,028,132
Whirlpool Corp.,
5.800%, 01/23/96.............................. 2,000,000 1,993,233
Whirlpool Financial Corp.,
5.710%, 03/04/96.............................. 18,972,000 18,785,431
5.800%, 02/02/96.............................. 1,300,000 1,293,507
--------------
633,522,203
--------------
TERM NOTES -- 5.6%
Associates Corp. of North America,
8.800%, 03/01/96.............................. 2,000,000 2,007,278
Bank of America,
5.79%, 01/16/96, Tranche #TR00034............. 2,000,000 1,999,992
Bank One Indianapolis N.A.,
7.180%, 02/05/96, Tranche #TR00002............ 6,000,000 6,002,187
Bayerische Hypotheken,
5.770%, 01/23/96.............................. 4,000,000 3,999,789
Beneficial Corp.,
5.25%, 01/23/96, Tranche #TR00776............. 5,000,000 4,999,220
</TABLE>
B6
<PAGE>
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Exxon Capital Corp.,
7.875%, 04/15/96.............................. $ 5,500,000 $ 5,527,256
First Union National Bank of North Carolina,
5.800%, 01/31/96.............................. 13,000,000 13,000,000
Ford Motor Credit Co.,
5.000%, 03/25/96.............................. 4,000,000 3,991,407
8.900%, 04/08/96.............................. 4,300,000 4,332,346
9.850%, 02/27/96.............................. 5,000,000 5,024,368
General Motors Acceptance Corp.,
%5.70%, 10/20/97.............................. 8,000,000 7,996,425
6.300%, 02/02/96, Tranche #TR00646............ 2,000,000 2,000,418
8.250%, 08/01/96.............................. 2,000,000 2,024,935
%Merrill Lynch & Co., Inc.,
5.929%, 09/13/96, Tranche #TR00197............ 27,000,000 26,994,526
NationsBank of Texas, N.A.,
7.000%, 02/06/96, Tranche #TR00037............ 40,000,000 40,002,205
7.300%, 01/26/96, Tranche #TR00043............ 4,000,000 4,001,092
7.550%, 01/09/96, Tranche #TR00050............ 8,500,000 8,501,291
%Norwest Corp.,
5.929%, 05/23/96, Tranche #TR00176............ 5,500,000 5,499,923
%Salomon, Inc.,
6.725%, 02/14/96.............................. 25,000,000 25,000,000
%SMM Trust,
5.937%, 12/16/96.............................. 27,000,000 26,997,556
Society National Bank,
6.000%, 04/25/96, Tranche #TR00010............ 1,940,000 1,940,000
Student Loan Marketing Association,
%5.20%, 08/09/96.............................. 7,650,000 7,641,227
%5.22%, 02/08/96.............................. 3,000,000 2,999,276
USX Corp.,
6.562%, 02/15/96.............................. 7,500,000 7,502,619
--------------
219,985,336
--------------
PROMISSORY NOTES -- 0.3%
%Lehman Brothers Holdings, Inc.,
6.142%, 05/29/96.............................. 10,000,000 10,000,000
--------------
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 1.0%
Joint Repurchase Agreement Account,
5.839%, 01/02/96.............................. $ 43,210,000 $ 43,210,000
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 1,051,312,715
--------------
OTHER ASSETS -- 0.7%
(net of liabilities)........................................... 27,992,965
--------------
TOTAL NET ASSETS -- 100.0%....................................... $3,940,774,265
--------------
--------------
<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
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $96,403,735. The aggregate value, $96,894,639 is
approximately 2.5% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending December
31, 1995.
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C5.
B7
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 60.3% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 1.9%
Boeing Co....................................... 582,600 $ 45,661,275
+Coltec Industries, Inc......................... 503,800 5,856,675
United Technologies Corp........................ 300,000 28,462,500
--------------
79,980,450
--------------
AUTOS - CARS & TRUCKS -- 1.8%
Chrysler Corp................................... 870,000 48,176,250
General Motors Corp. (Class 'E' Stock).......... 542,400 28,204,800
--------------
76,381,050
--------------
BANKS AND SAVINGS & LOANS -- 3.9%
Bank of New York Company, Inc................... 1,000,000 48,750,000
J.P. Morgan & Co., Inc.......................... 550,000 44,137,500
NationsBank Corp................................ 568,800 39,602,700
Norwest Corp.................................... 997,800 32,927,400
UJB Financial Company........................... 120,200 4,297,150
--------------
169,714,750
--------------
CHEMICALS -- 2.4%
Agrium, Inc..................................... 907,300 40,828,500
Arcadian Corp................................... 694,200 13,450,125
E.I. Du Pont de Nemours & Co.................... 600,000 41,925,000
+McWhorter Technologies, Inc.................... 35,000 516,250
+Mississippi Chemical Corp...................... 324,700 7,549,275
--------------
104,269,150
--------------
CHEMICALS - SPECIALTY -- 0.7%
IMC Global, Inc................................. 703,500 28,755,563
--------------
COMMUNICATIONS -- 0.1%
Infinity Broadcasting Corp. (Class 'A' Stock)... 86,400 3,218,400
--------------
COMPUTER SERVICES -- 3.1%
Automatic Data Processing, Inc.................. 740,400 54,974,700
+Bay Networks, Inc.............................. 400,000 16,450,000
+Cisco Systems, Inc............................. 202,700 15,126,488
First Data Corp................................. 422,500 28,254,687
+Sun Microsystems, Inc.......................... 350,000 15,968,750
--------------
130,774,625
--------------
COSMETICS & SOAPS -- 0.6%
Procter & Gamble Co............................. 325,000 26,975,000
--------------
DIVERSIFIED GAS -- 0.4%
Cross Timbers Oil Co............................ 1,010,000 17,801,250
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.6%
International Business Machines Corp............ 290,500 26,653,375
--------------
DRUGS AND HOSPITAL SUPPLIES -- 3.5%
American Home Products Corp..................... 448,100 43,465,700
Baxter International, Inc....................... 725,000 30,359,375
Genzyme Corp.................................... 168,700 10,522,664
Pharmacia & Upjohn, Inc......................... 1,100,000 42,625,000
Schering-Plough Corp............................ 400,000 21,900,000
--------------
148,872,739
--------------
ELECTRICAL EQUIPMENT -- 0.6%
Baldor Electric Co.............................. 602,460 12,124,508
Belden, Inc..................................... 519,900 13,387,425
--------------
25,511,933
--------------
ELECTRONICS -- 2.6%
+ADT Ltd........................................ 1,641,200 24,618,000
Emerson Electric Co............................. 600,000 49,050,000
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Hewlett-Packard Co.............................. 175,000 $ 14,656,250
Teleflex, Inc................................... 500,000 20,500,000
--------------
108,824,250
--------------
FINANCIAL SERVICES -- 3.6%
Dean Witter, Discover and Co.................... 800,000 37,600,000
Federal Home Loan Mortgage Corp................. 684,700 57,172,450
Manufactured Home Communities, Inc.............. 59,300 1,037,750
MBNA Corp....................................... 981,100 36,178,063
Morgan Stanley Group, Inc....................... 300,000 24,187,500
--------------
156,175,763
--------------
FOODS -- 2.8%
Nabisco Holdings Corporation (Class 'A'
Stock)........................................ 564,000 18,400,500
Philip Morris Companies, Inc.................... 600,000 54,300,000
Pioneer Hi-Bred International, Inc.............. 808,400 44,967,250
--------------
117,667,750
--------------
FOREST PRODUCTS -- 1.4%
Kimberly-Clark Corp............................. 277,800 22,987,950
Willamette Industries, Inc...................... 686,000 38,587,500
--------------
61,575,450
--------------
HEALTHCARE -- 0.3%
+Sybron International Corp...................... 520,400 12,359,500
--------------
HOSPITAL MANAGEMENT -- 1.7%
Columbia/HCA Healthcare Corp.................... 498,362 25,291,872
Guidant Corp.................................... 307,486 12,991,284
+Health Care and Retirement Corp................ 590,800 20,678,000
+Tenet Healthcare Corp.......................... 583,600 12,109,700
--------------
71,070,856
--------------
INSURANCE -- 4.2%
American International Group, Inc............... 657,700 60,837,250
CIGNA Corp...................................... 125,000 12,906,250
General Re Corp................................. 215,000 33,325,000
Mid Ocean Ltd Ordinary Shares................... 525,000 19,490,625
NAC Re Corp..................................... 277,400 9,986,400
TIG Holdings, Inc............................... 268,500 7,652,250
W.R. Berkley Corp............................... 610,000 32,787,500
--------------
176,985,275
--------------
LEISURE -- 2.3%
+Argosy Gaming Co............................... 30,500 232,563
+Bally Entertainment Corp....................... 1,946,000 27,244,000
Carnival Corp. (Class 'A' Stock)................ 1,100,000 26,812,500
Hasbro, Inc..................................... 500,000 15,500,000
+Mirage Resorts, Inc............................ 632,200 21,810,900
Royal Caribbean Cruise, Ltd..................... 233,800 5,143,600
--------------
96,743,563
--------------
MACHINERY -- 0.7%
+Thermo Fibertek, Inc........................... 149,350 3,379,044
+Varity Corp.................................... 658,400 24,443,100
--------------
27,822,144
--------------
MEDIA -- 2.8%
Comcast Corp. (Class 'A' Stock)................. 830,400 14,635,800
Shaw Communications, Inc. (Class 'B' Stock)..... 703,700 4,448,072
+Tele-Communications, Inc. (Series 'A' Stock)... 1,934,400 38,446,200
</TABLE>
B8
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Tele-Communications, Inc. (Series 'A' Stock).... 483,600 $ 12,996,750
+Viacom, Inc. (Class 'B' Stock)................. 994,500 47,114,438
--------------
117,641,260
--------------
MINERAL RESOURCES -- 2.3%
Pittston Services Group......................... 350,000 10,981,250
Potash Corp. of Saskatchewan, Inc............... 608,300 43,113,263
+Sante Fe Pacific Gold Corp..................... 974,000 11,809,750
Vigoro Corp..................................... 533,100 32,918,925
--------------
98,823,188
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 4.2%
+American Business Information, Inc............. 510,150 9,884,156
General Electric Co............................. 327,300 23,565,600
Illinois Tool Works, Inc........................ 710,000 41,890,000
Libbey, Inc..................................... 521,700 11,738,250
Martin Marietta Materials, Inc.................. 647,600 13,356,750
Modine Manufacturing Co......................... 289,100 6,938,400
Pentair, Inc.................................... 263,200 13,094,200
TJ International, Inc........................... 539,700 9,984,450
Tyco International Ltd.......................... 687,600 24,495,750
York International Corp......................... 500,000 23,500,000
--------------
178,447,556
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.3%
+DeVRY, Inc..................................... 529,200 14,288,400
--------------
PETROLEUM -- 1.8%
Exxon Corp...................................... 410,000 32,851,250
Royal Dutch Petroleum Co., ADR.................. 300,000 42,337,500
--------------
75,188,750
--------------
PETROLEUM SERVICES -- 1.3%
Baker Hughes, Inc............................... 581,700 14,178,938
Halliburton Co.................................. 267,200 13,527,000
Total SA, ADR................................... 757,500 25,755,000
--------------
53,460,938
--------------
RAILROADS -- 1.6%
Illinois Central Corp........................... 682,000 26,171,750
Norfolk Southern Corp........................... 549,400 43,608,625
--------------
69,780,375
--------------
REAL ESTATE DEVELOPMENT -- 0.7%
Crescent Real Estate Equities, Inc.............. 492,600 16,809,975
Duke Realty Investments, Inc.................... 444,800 13,955,600
--------------
30,765,575
--------------
RETAIL -- 2.2%
Dollar General Corporation...................... 600,000 12,450,000
+Federated Department Stores, Inc............... 1,500,000 41,250,000
Harcourt General, Inc........................... 320,500 13,420,938
Nine West Group................................. 350,000 13,125,000
Office Depot, Inc............................... 700,000 13,825,000
--------------
94,070,938
--------------
TELECOMMUNICATIONS -- 2.5%
+Airtouch Communications, Inc................... 641,100 18,111,075
AT&T Corp....................................... 350,000 22,662,500
MCI Communications Corp......................... 1,000,000 26,125,000
SBC Communications, Inc......................... 475,000 27,312,500
TCA Cable TV, Inc............................... 494,300 13,655,038
--------------
107,866,113
--------------
TEXTILES -- 0.0%
Unifi, Inc...................................... 90,000 1,991,250
--------------
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
TOBACCO -- 1.4%
RJR Nabisco Holdings Corp....................... 1,905,000 $ 58,816,875
--------------
TOTAL COMMON STOCKS
(Cost $2,074,306,562).......................................... 2,569,274,054
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 0.7% SHARES VALUE
------------- --------------
<S> <C> <C>
LEISURE -- 0.2%
Bally Entertainment Corporation (Conv.)......... 600,000 8,175,000
--------------
MEDIA -- 0.5%
News Corp., Ltd., ADR........................... 1,140,000 21,945,000
--------------
TOTAL PREFERRED STOCKS
(Cost $24,005,010)............................................. 30,120,000
--------------
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 26.3% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 7.0%
Advanta Corp.,
5.125%, 11/15/96.............................. $ 9,000,000 $ 8,949,240
Advanta National Bank, CD,
6.140%, 02/28/97.............................. 17,000,000 17,174,760
Allmerica Financial Corp.,
7.625%, 10/15/25.............................. 7,200,000 7,564,968
Banc One Credit Card Master Trust,
7.750%, 12/15/99, Series 94-B Class B......... 5,000,000 5,189,050
Capital One Bank, M.T.N.,
6.740%, 05/31/99, Tranche #TR00038............ 22,250,000 22,756,410
8.125%, 02/27/98, Tranche #TR00032............ 6,500,000 6,788,860
Chase Manhattan Credit Card Master Trust,
7.400%, 05/15/00, Series 1992-1............... 5,000,000 5,096,850
Equitable Life Assurance Society,
**6.950%, 12/01/05............................ 10,000,000 10,143,750
First USA Bank, M.T.N.,
%6.237%, 10/16/97............................. 20,000,000 19,970,000
Ford Motor Credit Co.,
6.375%, 10/06/00.............................. 13,500,000 13,744,350
Ford Motor Credit, Co., M.T.N.,
6.137%, 10/04/99.............................. 6,250,000 6,265,313
6.850%, 08/15/00.............................. 8,500,000 8,823,255
General Motors Acceptance Corp., M.T.N.,
7.000%, 05/19/97, Tranche #TR00041............ 10,000,000 10,189,300
7.000%, 06/02/97, Tranche #TR00476............ 6,000,000 6,116,460
7.375%, 07/20/98, Tranche #TR00667............ 4,500,000 4,681,035
7.850%, 03/05/97, Tranche #TR00187............ 3,200,000 3,282,176
7.875%, 03/15/00.............................. 5,000,000 5,366,600
Marine Midland Bank N.A.,
%5.812%, 09/27/96............................. 6,500,000 6,487,000
MBNA Master Credit Card Trust,
%6.370%, 01/15/02, Series 1994-1 Class A...... 7,500,000 7,509,375
</TABLE>
B9
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Okobank,
**%7.387%, 10/29/49........................... $ 3,500,000 $ 3,539,375
%7.387%, 10/29/49............................. 9,000,000 9,101,250
%7.375%, 09/27/49............................. 18,750,000 19,341,563
Salomon, Inc., M.T.N.,
5.470%, 09/22/97, Tranche #SR00504............ 15,000,000 14,823,600
5.790%, 11/26/97, Tranche #TR00571............ 6,700,000 6,647,338
5.880%, 07/29/97, Tranche #SR00456............ 5,650,000 5,626,101
Santander Financial Issuances, LTD.,
7.250%, 11/01/15.............................. 11,000,000 11,267,080
Sears Roebuck Acceptance Corp.,
6.750%, 09/15/05.............................. 34,950,000 36,247,344
Sears Roebuck Acceptance Corp., M.T.N.,
6.340%, 10/12/00, Tranche #TR00038............ 10,000,000 10,158,900
Standard Credit Card Master Trust,
5.950%, 10/07/04, Series 1993-2A.............. 4,500,000 4,463,415
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #TR00248............ 3,330,000 3,350,846
--------------
300,665,564
--------------
FOREIGN -- 5.1%
Banco de Commercio Exterior de Columbia, SA,
M.T.N.,
**8.625%, 06/02/00, Tranche #TR00001.......... 5,500,000 5,654,000
Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99.............................. 2,300,000 2,357,500
**9.750%, 08/26/99, Tranche #TR00001.......... 5,000,000 5,125,000
Banco Nacional de Comercio Exterior,
7.500%, 07/01/00.............................. 5,000,000 4,350,000
Cemex, SA, M.T.N.,
**9.500%, 09/20/01, Tranche #TR00010.......... 12,500,000 11,375,000
Compania Sud Americana de Vapores, SA,
**7.375%, 12/08/03............................ 5,650,000 5,565,250
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 15,100,000 13,288,000
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 8,208,750
Empresas La Moderna, SA,
10.250%, 11/12/97............................. 2,000,000 1,980,000
Financiera Energetica Nacional,
6.625%, 12/13/96.............................. 5,100,000 5,100,000
Financiera Energetica Nacional, M.T.N.,
9.000%, 11/08/99.............................. 2,000,000 2,097,500
**9.000%, 11/08/99............................ 5,375,000 5,637,031
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 6,300,000 6,244,875
Grupo Embotellador Mexicana,
**10.750%, 11/19/97........................... 8,020,000 7,999,950
Grupo Televisa, SA,
10.000%, 11/09/97............................. 4,000,000 3,920,000
Hydro-Quebec,
8.050%, 07/07/24.............................. 17,100,000 19,524,096
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Kansallis-Osake Pankki, N.Y.,
**%8.650%, 12/29/49........................... $ 9,000,000 $ 9,562,500
9.750%, 12/15/98.............................. 16,760,000 18,526,001
New Zealand Government,
9.875%, 01/15/11.............................. 7,300,000 9,746,814
Quebec, Province of Canada,
7.500%, 07/15/02.............................. 8,500,000 9,025,045
Republic of Columbia,
7.125%, 05/11/98.............................. 2,700,000 2,720,250
7.250%, 02/23/04.............................. 4,100,000 3,932,884
8.750%, 10/06/99.............................. 4,925,000 5,206,316
Republic of Italy,
6.875%, 09/27/23.............................. 15,000,000 14,648,250
Republic of South Africa,
9.625%, 12/15/99.............................. 21,750,000 23,458,898
Telekom Malaysia,
**7.875%, 08/01/25............................ 3,000,000 3,294,480
United Mexican States,
5.820%, 06/28/01.............................. 1,375,000 990,000
6.970%, 08/12/00.............................. 2,300,000 1,840,000
8.500%, 09/15/02.............................. 6,925,000 6,024,750
--------------
217,403,140
--------------
INDUSTRIAL -- 13.3%
AMR Corp.,
9.000%, 08/01/12.............................. 5,000,000 5,638,850
9.800%, 10/01/21.............................. 5,000,000 5,944,000
Auburn Hills Trust,
12.000%, 05/01/20............................. 26,300,000 41,389,888
Columbia Gas Systems,
7.620%, 11/28/25.............................. 6,500,000 6,616,935
Columbia/HCA Healthcare Corp.,
7.050%, 12/01/27.............................. 21,200,000 21,339,284
7.580%, 09/15/25, M.T.N., Tranche #TR00015.... 10,000,000 10,723,200
Comdisco, Inc.,
7.250%, 04/15/98.............................. 10,000,000 10,296,800
Continental Cablevision, Inc.,
**8.300%, 05/15/06............................ 5,000,000 5,018,750
Delta Air Lines, Inc.,
9.250%, 03/15/22.............................. 8,709,000 10,287,506
9.750%, 05/15/21.............................. 34,956,000 43,126,266
9.875%, 01/01/98.............................. 6,000,000 6,400,080
Federated Dept Stores,
8.125%, 10/15/02.............................. 30,600,000 30,753,000
Fleming Companies, Inc, M.T.N.,
9.125%, 02/27/98, Tranche #TR00018............ 6,000,000 6,259,800
9.240%, 02/28/00, Tranche #TR00019............ 5,000,000 5,367,700
Fleming Companies, Inc.,
10.625%, 12/15/01............................. 22,750,000 22,067,500
Nabisco, Inc.,
6.850%, 06/15/05.............................. 10,000,000 10,156,000
News America Holdings, Inc.,
7.750%, 12/01/45.............................. 53,000,000 53,685,820
9.125%, 10/15/99.............................. 5,000,000 5,526,900
Oryx Energy Co.,
9.300%, 05/01/96.............................. 2,350,000 2,372,866
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013............ 10,500,000 10,496,850
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 7,600,000 8,518,004
</TABLE>
B10
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
RJR Nabisco, Inc.,
8.750%, 08/15/05.............................. $ 3,000,000 $ 3,072,930
Rogers Cablesystems Ltd.,
10.000%, 03/15/05, Series B................... 2,000,000 2,150,000
Service Corp. International,
7.000%, 06/01/15.............................. 2,500,000 2,785,575
TCI Communications, Inc.,
8.750%, 08/01/15.............................. 27,050,000 29,989,524
Tele-Communications, Inc.,
7.875%, 08/01/13.............................. 5,250,000 5,399,678
9.250%, 04/15/02.............................. 5,000,000 5,680,900
9.800%, 02/01/12.............................. 13,000,000 15,589,210
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23-07/15/33..................... 28,250,000 30,234,433
Time Warner Entertainment Co., L.P.,
9.625%, 05/01/02.............................. 14,140,000 16,379,352
Time Warner, Inc.,
7.750%, 06/15/05.............................. 10,000,000 10,410,300
Transco Energy Co.,
9.125%, 05/01/98.............................. 14,000,000 14,958,440
United Air Lines, Inc.,
9.750%, 08/15/21.............................. 13,000,000 15,594,410
10.670%, 05/01/04, Series A................... 21,750,000 26,236,590
11.210%, 05/01/14, Series B................... 2,500,000 3,309,125
Viacom, Inc.,
7.625%, 01/15/16.............................. 15,500,000 15,684,063
7.750%, 06/01/05.............................. 40,675,000 43,195,630
Woolworth Corp,
7.000%, 06/01/00.............................. 2,084,000 2,120,637
--------------
564,776,796
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.9%
Federal National Mortgage Association,
Zero Coupon, 10/09/19......................... 11,800,000 2,546,204
United States Treasury Notes,
5.875%, 08/15/98-11/15/05, Series Y 1998...... 14,200,000 14,445,580
6.125%, 09/30/00.............................. 3,500,000 3,605,000
6.375%, 08/15/02, Series 2002................. 17,000,000 17,826,030
6.500%, 05/15/05.............................. 1,450,000 1,542,670
--------------
39,965,484
--------------
TOTAL LONG-TERM BONDS
(Cost $1,083,162,024).......................................... 1,122,810,984
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 11.9% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK-RELATED INSTRUMENTS -- 0.5%
Abbey National Treasury Services, C.D. PLC,
5.850%, 01/03/96.............................. $ 5,000,000 $ 5,000,001
Abn-Amro Bank North America, C.D.,
5.770%, 02/01/96.............................. 1,000,000 999,969
Banque Nationale De Paris, C.D.,
5.780%, 01/17/96.............................. 2,000,000 1,999,978
Barclays Bank PLC, C.D.,
5.700%, 02/13/96.............................. 1,000,000 999,872
Bayerische Hypotheken, C.D.,
5.780%, 01/16/96.............................. 1,000,000 999,983
5.800%, 01/16/96.............................. 2,000,000 1,999,995
5.830%, 01/16/96.............................. 3,000,000 3,000,023
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Berliner Handels, C.D.,
5.830%, 01/16/96.............................. $ 2,000,000 $ 2,000,008
National Westminister Bank, C.D. PLC,
5.810%, 01/12/96.............................. 4,000,000 4,000,000
--------------
20,999,829
--------------
COMMERCIAL PAPER -- 1.8%
American Express Credit Corp.,
5.590%, 03/15/96.............................. 1,000,000 988,665
American Home Products Corp.,
5.680%, 03/07/96.............................. 2,000,000 1,979,489
American Honda Finance Corp.,
5.750%, 02/08/96.............................. 1,000,000 994,090
5.850%, 01/12/96.............................. 1,000,000 998,375
5.900%, 01/29/96.............................. 1,000,000 995,575
Aristar, Inc.,
5.770%, 02/05/96.............................. 1,000,000 994,551
Asset Securitization Cooperative Corp.,
5.660%, 02/20/96.............................. 3,000,000 2,976,888
Associates Corp. of North America,
5.680%, 02/12/96.............................. 1,700,000 1,689,003
Bradford & Bingley Building Society,
5.680%, 02/06/96.............................. 1,000,000 994,478
Caterpillar Financial Services Corp.,
5.670%, 02/27/96.............................. 1,000,000 991,180
Chase Manhattan Corp.,
5.670%, 02/12/96.............................. 1,000,000 993,543
CIT Group Holdings, Inc.,
5.670%, 02/05/96.............................. 4,000,000 3,978,580
5.780%, 01/25/96.............................. 2,019,000 2,011,544
Cogentrix of Richmond, Inc.,
5.950%, 01/24/96.............................. 1,869,000 1,862,204
Countrywide Funding Corp.,
5.870%, 01/22/96.............................. 1,000,000 996,739
6.000%, 01/22/96.............................. 1,182,000 1,178,060
Dean Witter Discover and Company,
5.700%, 02/14/96.............................. 1,000,000 993,192
Finova Capital Corp.,
5.970%, 01/25/96-01/26/96..................... 1,640,000 1,633,575
First Union Corp.,
5.710%, 02/09/96.............................. 2,000,000 1,987,946
Fleet Mortgage Group, Inc.,
5.800%, 01/16/96.............................. 1,000,000 997,744
Ford Motor Credit Corp.,
5.530%, 03/04/96.............................. 1,600,000 1,584,762
General Electric Capital Corp.,
5.580%, 04/08/96-04/09/96..................... 2,000,000 1,969,775
5.660%, 02/08/96.............................. 4,000,000 3,976,731
General Motors Acceptance Corp.,
5.650%, 02/09/96.............................. 1,232,000 1,224,652
5.750%, 02/20/96.............................. 1,000,000 992,174
5.800%, 02/09/96.............................. 2,000,000 1,987,756
Goldman Sachs Group L.P,
6.050%, 01/11/96-01/12/96..................... 2,000,000 1,996,807
GTE Corp.,
5.870%, 01/19/96.............................. 1,000,000 997,228
5.970%, 01/30/96.............................. 1,009,000 1,004,315
Hanson Finance, PLC,
5.650%, 02/29/96.............................. 1,565,000 1,550,754
5.700%, 01/26/96-02/08/96..................... 3,265,000 3,249,110
Merrill Lynch & Co. Inc,
5.760%, 01/31/96.............................. 2,000,000 1,990,720
</TABLE>
B11
<PAGE>
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Mitsubishi International Corp.,
5.780%, 01/31/96.............................. $ 1,000,000 $ 995,344
Morgan Stanley Group, Inc.,
5.750%, 01/25/96.............................. 5,000,000 4,981,632
National Westminister Bank, PLC,
5.800%, 01/31/96.............................. 1,000,000 1,000,000
Nynex Corp,
5.820%, 01/10/96-01/16/96..................... 1,847,000 1,843,790
PNC Funding Corp,
5.730%, 02/08/96.............................. 1,000,000 994,111
Preferred Receivables Funding Corp.,
5.650%, 02/06/96.............................. 5,000,000 4,972,535
5.700%, 02/12/96.............................. 1,650,000 1,639,289
Riverwoods Funding Corp,
5.750%, 02/15/96.............................. 1,000,000 992,972
Sears Roebuck Acceptance Corp.,
5.720%, 02/26/96.............................. 4,000,000 3,965,044
Special Purpose A/R Cooperative Corp,
5.750%, 01/24/96.............................. 1,000,000 996,486
Transamerica Finance Group, Inc.,
5.700%, 02/05/96.............................. 1,000,000 994,617
Whirlpool Corp.,
5.710%, 03/04/96.............................. 1,028,000 1,017,891
--------------
77,153,916
--------------
TERM NOTES -- 1.6%
Associates Corp. of North America,
4.500%, 02/15/96.............................. 3,200,000 3,191,504
8.800%, 03/01/96.............................. 2,000,000 2,007,278
Bank One Indianapolis N.A.,
7.180%, 02/05/96, Tranche #TR00002............ 1,000,000 1,000,365
First Union National Bank of North Carolina,
5.800%, 01/31/96, Tranche #TR00037............ 2,000,000 2,000,000
Ford Motor Credit Co.,
5.150%, 03/15/96, Tranche #TR00690............ 2,000,000 1,994,761
%6.082%, 06/17/96, Tranche #TR00826........... 1,000,000 1,001,128
8.250%, 05/15/96.............................. 2,300,000 2,320,274
General Motors Acceptance Corp.,
5.300%, 07/12/96, Tranche #TR00760............ 1,500,000 1,495,485
%5.700%, 10/20/97, Tranche #TR00065........... 1,000,000 999,553
Merrill Lynch & Co., Inc.,
%5.929%, 09/13/96, Tranche #TR00197........... 4,000,000 3,999,189
NationsBank of Texas N.A.,
7.000%, 02/06/96, Tranche #TR00050............ 9,000,000 9,000,391
Salomon, Inc.,
%6.725%, 02/14/96............................. 25,000,000 25,000,000
SMM Trust,
%5.937%, 12/16/96............................. 6,375,000 6,374,423
USX Corp.,
6.562%, 02/15/96.............................. 7,500,000 7,502,619
--------------
67,886,970
--------------
</TABLE>
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
PROMISSORY NOTES -- 0.0%
Lehman Brothers Holdings, Inc.,
6.142%, 05/29/96.............................. $ 1,000,000 $ 1,000,000
--------------
REPURCHASE AGREEMENTS -- 7.9%
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (See Note 4)................. 335,658,000 335,658,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
Student Loan Marketing Association,
%5.400%, 03/20/96............................. 3,455,000 3,454,967
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 506,153,682
--------------
OTHER ASSETS -- 0.8%
(net of liabilities)........................................... 32,846,117
--------------
TOTAL NET ASSETS -- 100.0%....................................... $4,261,204,837
--------------
--------------
<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
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $72,616,786. The aggregate value, $72,915,086 is
approximately 1.7% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending December
31, 1995.
%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
CONSERVATIVELY MANAGED FLEXIBLE AND AGGRESSIVELY MANAGED FLEXIBLE
PORTFOLIOS OF THE PRUDENTIAL SERIES FUND, INC.
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
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 sixteen 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
Conservatively Managed Flexible and the Aggressively Managed Flexible
Portfolios.
The shareholders of Pruco Life Series Fund, Inc. ("Pruco Fund") and the Series
Fund approved the merger of the Pruco Fund into the Series Fund as of November
1, 1986. The merger combined five portfolios with identical investment
strategies (including the Conservatively Managed Flexible and Aggressively
Managed Flexible 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 Conservatively Managed Flexible and Aggressively
Managed Flexible Portfolios may each invest up to 20% of their assets in United
States currency denominated debt securities issued outside the United States by
foreign or domestic issuers. Further, the Aggressively Managed Flexible
Portfolio may invest up to 30% of its total assets in debt and equity securities
denominated in a foreign currency and issued by foreign or domestic issuers.
Net realized gains and losses on foreign currency transactions represent net
foreign exchange gains and losses from holding of foreign currencies; currency
gains or losses realized between the trade and settlement dates on security
transactions; and the difference between the amounts of the dividends and
foreign taxes
C2
<PAGE>
recorded on the Series Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net currency gains and losses from valuing foreign
currency denominated assets and liabilities at fiscal period end exchange rates
are reflected as a component of unrealized loss on foreign currencies.
FORWARD FOREIGN EXCHANGE CONTRACTS: The Series Fund is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Series Fund's records. However, the effect on operations is recorded from the
date the Series Fund enters into such contracts. Premium or discount is
amortized over the life of the contracts.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Dividend income is recorded on
the ex-dividend date. Interest income is accrued daily on both long-term bonds
and short-term investments. Interest income also includes net amortization from
the purchase of fixed-income securities. Long-term security and option
transactions are recorded on the first business day following the trade date,
except that transactions on the last business day of the reporting cycle are
recorded on that date. Short-term security and futures transactions are recorded
on trade date. Realized gains and losses from security transactions are
determined and accounted for on the basis of identified cost.
DISTRIBUTIONS AND TAXES: The Portfolios of the Series Fund intend to continue
to qualify for and elect the special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code, thereby relieving the
Series Fund of Federal income taxes. To so qualify, the Series Fund intends to
distribute substantially all of its net investment income and net realized
capital gains, if any, less any available capital loss carry forward.
EXPENSES: Each Portfolio pays for certain expenses incurred in its individual
operation, and also pays a portion of the Series Fund's general administrative
expenses allocated on the basis of the asset size of the respective Portfolios.
The Series Fund has an arrangement with Chemical Banking Corporation, a
custodian bank. On a daily basis, cash funds which are not invested earn a
credit which is used to offset custody charges on a Portfolio basis. For the
year ended December 31, 1995, the total of the credit used was:
<TABLE>
<S> <C>
Aggressively Managed Flexible Portfolio....................... $ 3,202
</TABLE>
NOTE 3: INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGEMENT AND ACCOUNTING FEES: Pursuant to an investment advisory
agreement (the "Agreement"), The Prudential receives an investment management
fee, calculated daily, at an effective annual rate of 0.55% of the average daily
net assets of the Conservatively Managed Flexible Portfolio and 0.60% of the
average daily net assets of the Aggressively Managed Flexible Portfolio. Under
the Agreement, The Prudential has agreed to refund to a portfolio the portion of
the management fee for that Portfolio equal to the amount that the aggregate
annual ordinary operating expenses (excluding interest, taxes and brokerage
commissions) exceeds 0.75% of the Portfolio's average daily net assets.
DIRECTORS' EXPENSES: The Series Fund pays for the fees and expenses of those
members of the Series Fund's Board of Directors who are not officers or
employees of The Prudential or its affiliates.
BROKERAGE COMMISSIONS: For the year ended December 31, 1995, Prudential
Securities Inc., an indirect, wholly-owned subsidiary of The Prudential, earned
$899,739 in brokerage commissions from Portfolio transactions executed on behalf
of the Series Fund.
NOTE 4: JOINT REPURCHASE AGREEMENT ACCOUNT
The Portfolios of the Series Fund transfer uninvested cash balances into a
single joint account, the daily aggregate balance of which is invested in one or
more repurchase agreements collateralized by U.S. Government obligations. The
Series Fund's undivided investment in the joint repurchase agreement account
represented, in principal, $1,312,614,000 as of December 31, 1995. The
Portfolios of the Series Fund with cash invested in the joint account had the
following percentage participation in the account:
<TABLE>
<S> <C>
Conservatively Managed Flexible Portfolio..................... 3.29%
Aggressively Managed Flexible Portfolio....................... 25.57%
All other portfolios (currently not available to PRUvider).... 71.14%
----------
100.00%
</TABLE>
C3
<PAGE>
As of such date, each repurchase agreement in the joint account and the
collateral thereof were as follows:
Bear Stearns Repurchase Agreement, dated 12/29/95, in the principal amount of
$43,000,000, repurchase price $43,027,710, due 1/2/96; collateralized by
$5,190,000 U.S. Treasury Notes, 6.25%, due 8/31/00; $38,036,000 U.S. Treasury
Notes, 5.50%, due 4/30/96.
Goldman Sachs Repurchase Agreement, dated 12/29/95, in the principal amount of
$418,000,000, repurchase price $418,270,770, due 1/2/96; collateralized by
$339,980,000 U.S. Treasury Bonds, 7.875%, due 2/15/21.
J.P. Morgan Securities Repurchase Agreement, dated 12/29/95, in the principal
amount of $300,000,000, repurchase price $300,193,333, due 1/2/96;
collateralized by $50,000,000 U.S. Treasury Notes, 7.625%, due 4/30/96;
$53,212,000 U.S. Treasury Notes, 7.0%, due 4/15/99; $51,060,000 U.S. Treasury
Notes, 5.125%, due 11/30/98; $49,755,000 U.S. Treasury Notes, 6.875%, due
7/31/99; $37,947,000 U.S. Treasury Notes, 6.125%, due 5/31/00; $52,695,000 U.S.
Treasury Notes, 6.0%, due 8/31/97.
Morgan Stanley and Company Repurchase Agreement, dated 12/29/95, in the
principal amount of $418,000,000, repurchase price $418,273,552, due 1/2/96;
collateralized by $300,000,000 U.S. Treasury Notes, 6.75%, due 4/30/00;
$108,300,000 U.S. Treasury Notes, 5.125%, due 11/30/98.
Salomon Brothers Repurchase Agreement, dated 12/29/95, in the principal amount
of $75,000,000, repurchase price $75,048,748, due 1/2/96; collateralized by
$8,717,000 U.S. Treasury Notes, 7.25%, due 11/30/96; $26,000,000 U.S. Treasury
Notes, 6.125%, due 5/15/98; $40,000,000 U.S. Treasury Notes, 5.75%, due 9/30/97.
Smith Barney Repurchase Agreement, dated 12/29/95, in the principal amount of
$58,614,000, repurchase price $58,651,447, due 1/2/96; collateralized by
$62,440,000 U.S. Treasury Bills, 5.75%, due 10/17/96.
NOTE 5: PURCHASE AND SALE OF SECURITIES
The aggregate cost of purchase and the proceeds from the sales of securities
(excluding short-term issues) for the year ended December 31, 1995 were as
follows:
Cost of Purchases:
<TABLE>
<CAPTION>
CONSERVATIVELY AGGRESSIVELY
MANAGED MANAGED
FLEXIBLE FLEXIBLE
-------------- --------------
<S> <C> <C>
Debt Securities................. $4,882,722,531 $4,212,735,834
Equity Securities............... $ 480,812,048 $1,827,087,395
</TABLE>
Proceeds From Sales:
<TABLE>
<CAPTION>
CONSERVATIVELY AGGRESSIVELY
MANAGED MANAGED
FLEXIBLE FLEXIBLE
-------------- --------------
<S> <C> <C>
Debt Securities................. $4,679,687,138 $4,084,931,841
Equity Securities............... $ 428,286,138 $1,842,532,499
</TABLE>
The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
CONSERVATIVELY AGGRESSIVELY
MANAGED MANAGED
FLEXIBLE FLEXIBLE
-------------- --------------
<S> <C> <C>
Gross Unrealized Appreciation... $ 378,149,704 $ 568,373,680
Gross Unrealized Depreciation... (88,299,605 ) (27,642,238 )
Total Net Unrealized............ 289,850,099 540,731,442
Tax Basis....................... 3,622,931,201 3,687,627,278
</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>
CONSERVATIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------------------
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 01/01/86
TO TO TO TO TO TO TO TO TO TO
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 12/31/86*
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of year...... $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $11.889 $ 12.571 $ 12.173
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.635 0.528 0.486 0.558 0.687 0.821 0.891 0.773 0.656 0.652
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investmentss........... 1.775 (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424 (0.399) 1.046
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 2.410 (0.151) 1.715 0.968 2.425 0.678 2.046 1.197 0.257 1.698
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.643) (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791) (0.709) (0.517)
Distributions from net
realized gains......... (0.553) (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0.000 (0.230) (0.783)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (1.196) (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791) (0.939) (1.300)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 1.214 (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406 (0.682) 0.398
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $15.309 $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $ 11.889 $ 12.571
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 17.27 % (0.97 %) 12.20 % 6.95 % 19.07 % 5.27 % 16.99 % 10.19 % 1.54 % 14.17 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $3,940.8 $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6 $803.9 $375.4
Ratio of expenses net of
reimbursement to
average net assets..... 0.58 % 0.61 % 0.60 % 0.62 % 0.63 % 0.65 % 0.64 % 0.65 % 0.66 % 0.64 %
Ratio of net investment
income to average net
assets................. 4.19 % 3.61 % 3.22 % 3.88 % 4.89 % 6.21 % 6.81 % 6.22 % 5.05 % 5.10 %
Portfolio turnover
rate................... 200.68 % 125.18 % 79.46 % 62.07 % 115.35 % 44.04 % 153.92 % 110.67 % 140.69 % 207.78 %
Number of shares
outstanding at end of
period (in millions)... 257.4 248.4 208.2 148.4 104.8 84.2 73.0 66.3 67.6 29.9
<CAPTION>
AGGRESSIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------------------
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 01/01/86
TO TO TO TO TO TO TO TO TO TO
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 12/31/86*
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of year...... $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $ 13.555 $ 12.810
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.564 0.473 0.566 0.583 0.650 0.715 0.813 0.724 0.577 0.611
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 3.149 (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840 (0.753) 1.342
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 3.713 (0.548) 2.448 1.190 3.459 0.249 2.802 1.564 (0.176) 1.953
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.560) (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767) (0.673) (0.456)
Distributions from net
realized gains......... (0.790) (0.462) (0.929) (0.914) (0.513) 0.000 (0.666) 0.000 (0.380) (0.752)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (1.350) (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767) (1.053) (1.208)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 2.363 (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797 (1.229) 0.745
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $17.859 $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $ 12.326 $ 13.555
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 24.13 % (3.16 %) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83 % (1.83 %) 15.48 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $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 $593.6
Ratio of expenses net of
reimbursement to
average net assets..... 0.63 % 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70 % 0.71 % 0.67 %
Ratio of net investment
income to average net
assets................. 3.30 % 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52 % 4.09 % 4.43 %
Portfolio turnover
rate................... 173.30 % 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45 % 123.83 % 133.76 %
Number of shares
outstanding at end of
period (in millions)... 238.6 224.7 194.1 152.2 122.2 107.7 96.0 84.1 86.2 43.8
</TABLE>
All calculations are based on average month-end shares outstanding, where
applicable.
*The per share information of the Portfolios of The Prudential Series Fund,
Inc. has not been restated to reflect the operations of the Pruco Life Series
Fund, Inc. prior to the November 1, 1986 merger.
**Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns.
C5
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors of The Prudential Series Fund, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Aggressively Managed Flexible and
Conservatively Managed Flexible Portfolios (two of the portfolios comprising The
Prudential Series Fund, Inc.), as of December 31, 1995, the related statements
of operations for the year then ended and the statements of changes in net
assets for each of the two years in the period then ended. These financial
statements are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the respective portfolios of The
Prudential Series Fund, Inc. as of December 31, 1995, the results of their
operations for the year then ended and the changes in their net assets for each
of the two years in the period then ended in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996
D1
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------
AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
TOTAL FLEXIBLE FLEXIBLE
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 133,332,152 $ 62,315,462 $ 71,016,690
-------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 1,252,693 610,140 642,553
-------------- -------------- --------------
NET ASSETS........................................ $ 132,079,459 $ 61,705,322 $ 70,374,137
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 132,070,650 $ 61,705,322 $ 70,365,328
Equity of Pruco Life Insurance Company.......... 8,809 0 8,809
-------------- -------------- --------------
$ 132,079,459 $ 61,705,322 $ 70,374,137
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------
AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
TOTAL FLEXIBLE FLEXIBLE
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 4,403,550 $ 1,728,237 $ 2,675,313
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 976,867 441,801 535,066
-------------- -------------- --------------
NET INVESTMENT INCOME............................. 3,426,683 1,286,436 2,140,247
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Capital gains distributions received............ 4,905,965 2,529,393 2,376,572
Net unrealized gain on investments.............. 10,873,078 6,464,304 4,408,774
-------------- -------------- --------------
NET GAIN ON INVESTMENTS........................... 15,779,043 8,993,697 6,785,346
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 19,205,726 $ 10,280,133 $ 8,925,593
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F1.
E1
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
TOTAL FLEXIBLE FLEXIBLE
------------------------------ ------------------------------ ------------------------------
1995 1994 1995 1994 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income............ $ 3,426,683 $ 1,869,327 $ 1,286,436 $ 690,992 $ 2,140,247 $ 1,178,335
Capital gains distributions
received....................... 4,905,965 1,439,356 2,529,393 951,248 2,376,572 488,108
Realized loss on shares redeemed
[average cost basis]........... 0 (2,077) 0 (1,569) 0 (508)
Net unrealized gain (loss) on
investments.................... 10,873,078 (4,745,569) 6,464,304 (2,528,354) 4,408,774 (2,217,215)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 19,205,726 (1,438,963) 10,280,133 (887,683) 8,925,593 (551,280)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 27,226,200 48,924,502 13,702,273 21,856,622 13,523,927 27,067,880
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (1,873,938) 638,522 (910,613) 327,110 (963,325) 311,412
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE IN NET ASSETS....... 44,557,988 48,124,061 23,071,793 21,296,049 21,486,195 26,828,012
NET ASSETS:
Beginning of year................ 87,521,471 39,397,410 38,633,529 17,337,480 48,887,942 22,059,930
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 132,079,459 $ 87,521,471 $ 61,705,322 $ 38,633,529 $ 70,374,137 $ 48,887,942
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F1.
E2
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
NOTE 1: GENERAL
Pruco Life PRUvider Variable Appreciable Account (the "Account") was established
on July 10, 1992 under Arizona law as a separate investment account of Pruco
Life Insurance Company ("Pruco Life") which is a wholly-owned subsidiary of The
Prudential Insurance Company of America ("The Prudential"). The assets of the
Account are segregated from Pruco Life's other assets.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. There are two subaccounts within the Account, each
of which invests only in a corresponding portfolio of The Prudential Series
Fund, Inc. (the "Series Fund"). The Series Fund is a diversified open-end
management investment company, and is managed by The Prudential.
NOTE 2: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share for each portfolio of the Series Fund, the number
of shares of each portfolio held by the subaccounts of the Account and the
aggregate cost of investments in such shares at December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
PORTFOLIOS
-------------------------------
AGGRESSIVELY CONSERVATIVELY
PORTFOLIO MANAGED MANAGED
INFORMATION FLEXIBLE FLEXIBLE
- ------------------------------- -------------- ---------------
<S> <C> <C>
Number of shares: 3,489,240 4,638,958
Net asset value per share: $ 17.8593 $ 15.3088
Cost: $ 58,735,222 $ 69,246,171
</TABLE>
NOTE 3: CHARGES AND EXPENSES
A. Mortality Risk and Expense Risk Charges
The mortality risk and expense risk charges at an effective annual rate of
0.90% are applied daily against the net assets representing equity of
Contract owners held in each subaccount.
B. Deferred Sales Charge
A deferred sales charge is imposed upon the surrender of certain variable
life insurance contracts to compensate Pruco Life for sales and other
marketing expenses. The amount of any sales charge will depend on the number
of years that have elapsed since the Contract was issued. No sales charge
will be imposed after the tenth year of the Contract. No sales charge will
be imposed on death benefits.
C. Partial Withdrawal Charge
The partial withdrawal of the cash surrender value from certain variable
life insurance contracts invokes a charge of $15.
NOTE 4: TAXES
The operations of the subaccounts form a part of, and are taxed with, the
operations of Pruco Life. Under the Internal Revenue Code, all ordinary income
and capital gains allocated to the Contract owners are not taxed to Pruco Life.
As a result, the net asset values of the subaccounts are not affected by federal
income taxes on distributions received by the subaccounts.
NOTE 5: NET INCREASE IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
The increase in net assets resulting from surplus transfers represents the net
contributions (withdrawals) of Pruco Life to the Account.
F1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners of
Pruco Life PRUvider Variable Appreciable
Account and the Board of Directors
of Pruco Life Insurance Company
Newark, New Jersey
We have audited the accompanying statements of net assets of Pruco Life PRUvider
Variable Appreciable Account of Pruco Life Insurance Company (comprising,
respectively, the Aggressively Managed Flexible and Conservatively Managed
Flexible subaccounts) as of December 31, 1995, and the related statements of
operations for the year then ended, and the statement of changes in net assets
for each of the two years in the period then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the respective subaccounts
constituting the Pruco Life PRUvider Variable Appreciable Account as of December
31, 1995, and the results of their operations for the year then ended, and the
changes in their net assets for each of the two years in the period then ended
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996
G1
<PAGE>
REPORT OF MANAGEMENT
The accompanying financial statements and all information in the annual
report are the responsibility of management of Pruco Life Insurance Company (the
Company) and the Prudential Series Fund Inc. (the Series Fund). They have been
prepared in conformity with generally accepted accounting principles. The
statements necessarily include amounts based on management's best estimates and
judgments. Information presented in one section of the annual report is
consistent with information dealing with the same or substantially similar
subject matter presented elsewhere in the annual report.
The systems of internal controls for the Series Fund and the Company's
Variable Insurance and Annuity Accounts under Variable Life Insurance and
Variable Annuity products are integral parts of those for the Company. As such,
management depends upon the Company's systems of internal controls in meeting
its responsibilities for reliable financial statements. These systems are
designed to provide reasonable assurance that assets are safeguarded and that
transactions are properly recorded and executed in accordance with management's
authorization. The concept of reasonable assurance is based on the premise that
the cost of internal controls should not exceed the benefits derived. The
control environment is enhanced by the selection and training of competent
management, a business ethics policy demanding the highest standards of conduct
by employees in carrying out the Company's affairs, organizational arrangements
that provide for segregation of duties and delegation of authority, and the
communication of accounting and operating policies and procedures throughout the
organization. In addition, the Company uses the services of The Prudential's
professional staff of internal auditors who monitor the control structure
through periodic reviews and tests of the control aspects of accounting,
financial and operating activities. The internal auditors coordinate their
program with that of the independent certified public accountants.
The financial statements have been audited by Deloitte & Touche, independent
auditors. The independent auditor's reports, which appear in this annual report,
each express an independent professional opinion on the fairness of presentation
of management's financial statements. The auditors review the Plan's financial
and accounting controls and conduct such tests and procedures as they deem
necessary under generally accepted auditing standards.
The Company's Board of Directors, and the Series Fund's Board of Directors
monitor management's fulfillment of its responsibilities for accurate
accounting, statement preparation and protection of assets. The Series Fund's
Board of Directors has a majority of outside directors and these outside
directors constitute an informal auditing committee. They meet with the
independent certified public accountants, management and internal auditors
periodically to evaluate the discharge by each of their respective
responsibilities, and each has free and separate access to the Series Fund's
Board of Directors to discuss accounting, financial reporting, internal control
and auditing matters.
<TABLE>
<S> <C>
Mendel A. Melzer Stephen P. Tooley
Chairman Vice President and Comptroller
The Prudential Series Fund, Inc. Pruco Life Insurance Company
</TABLE>
I
<PAGE>
GLOSSARY OF TERMS FOR THE REPORT TO CONTRACT OWNERS
(NOTE: ADDITIONAL 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.
II
<PAGE>
REPURCHASE AGREEMENT -- An agreement where an investor loans cash to a bank in
exchange for a Treasury security held as collateral and interest on the loan.
The agreement indicates that the cash and collateral are exchanged back the
following day. These securities are used to invest idle cash.
RESTRICTED SECURITY -- A security which is sold privately because it is not
registered with the SEC.
RIGHT -- Privilege granted to stockholders of a company to buy shares of a new
issue of common stock (at a price below the public offering price) before it is
offered to the public.
STOCK -- Unit of ownership in a public corporation. The value of a share of
stock varies, according to how buyers and sellers of the stock view the
corporation's future success. Shareholders generally receive dividend payments,
which are their part of the corporation's earnings. (see also Common Stock;
Preferred Stock)
TIME DEPOSIT (TD) -- A non-negotiable short-term, interest bearing bond issued
by a bank or savings & loan. The maturity period can be from 1 day to 6 months.
UNREALIZED GAIN/LOSS -- The increase or decrease in the value of a security,
based on its daily market price and its original purchase price. A gain or loss
is "unrealized" until the sale of the security.
VARIATION MARGIN -- A term used in the daily valuation of futures contracts. It
refers to the difference between the current and previous day's settling price.
WARRANT -- A security which entitles the holder to buy additional shares of
common stock at a specified price (usually higher than the market price at the
time of issuance), over a period of years.
III
<PAGE>
BOARD OF
DIRECTORS THE PRUDENTIAL SERIES FUND, INC.
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
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
IV
<PAGE>
The toll-free numbers shown below can be used to make transfers and
reallocations. Unit values for each investment option are available to all
contract owners from the 800 number.
However, you must be enrolled to allocate premiums, transfer funds or get the
following information by telephone:
- How your premiums are being allocated
- Current investment option values in your contract.
The phone lines are open each business day during the hours shown.
Please be sure to have your contract number available when you call.
[MAP]
-
1-800-634-7879
-
8am-4pm Central Time
1-800-356-4050
8am-4pm Eastern Time
-
1-800-635-9587
8am-4pm Eastern Time
- --------------------------------------------------------------------------------
In the past, contract owners who held several contracts of the same type, at the
same address,
received multiple copies of Annual Reports and Semi-Annual Reports. In an effort
to lessen waste
and to reduce your Fund's expense of postage and printing, we will now mail only
one copy of each
contract owner report for your related contracts at the same address. No action
on your part is
necessary. Upon request, we will furnish you with additional reports. The above
toll-free numbers
should be used to request any additional copies. Proxy material and tax
information will continue to
be sent to each account of record.
This annual report is authorized for use with prospective investors only when
preceded or accompanied by a current
prospectus for The Prudential Series Fund, Inc. and for the applicable variable
life insurance or annuity contract. These
products are available through Pruco Securities Corp., Newark, NJ, a subsidiary
of The Prudential. These prospectuses
contain more information concerning charges and expenses and should be read
carefully before you invest or send money.
<PAGE>
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 AR 12/95 Printed in the U.S.A. on recycled
SIMS Cat. No. 646778F paper using soybean ink
<PAGE>
Graph 1: (Conservatively / Aggressively Managed Flexible Portfolio)
Graph represents the growth of $10,000 invested in the Conservatively Managed
Flexible Portfolio and the growth of $10,000 invested in the Aggressively
Managed Flexible Portfolio compared with the S&P 500, Lehman Aggregate Index,
and the Lipper VIP Flexible Average. In the ten years ended 12/31/95, an
investment of $10,000 would have a value of $26,106, $29,771, $40,032,
$25,079, and $29,392 respectively.
