<PAGE>
SEMI-ANNUAL REPORT
TO CONTRACT OWNERS
JUNE 30, 1996
PRUDENTIAL'S GIBRALTAR FUND
/ / PRUDENTIAL'S FINANCIAL
SECURITY PROGRAM
LIVE WELL. MAKE A PLAN. BE YOUR OWN ROCK.
[LOGO] PRUDENTIAL
<PAGE>
TABLE OF CONTENTS
NOTE: **The back inside cover provides important
telephone numbers for customer service.
PAGE
I. LETTER TO CONTRACT OWNERS
Summarizes the results of Prudential's Gibraltar Fund with a
market review..................................................... 1
1. PRUDENTIAL'S GIBRALTAR FUND..................................... 2
2. INVESTMENT ADVISOR'S OUTLOOK.................................... 3
II. PRUDENTIAL'S GIBRALTAR FUND
The Prudential's Financial Security Program is the only account
investing in Prudential's Gibraltar Fund.
1. FINANCIAL STATEMENTS............................................ A1
2. SCHEDULE OF INVESTMENTS......................................... A2
3. NOTES TO FINANCIAL STATEMENTS................................... A4
III. APPENDIX
1. GLOSSARY........................................................ i
2. BOARDS OF DIRECTORS............................................. ii
3. NOTICE OF ELECTION.............................................. iii
<PAGE>
PRUDENTIAL'S
GIBRALTAR FUND
SIX MONTHS ENDED JUNE 30, 1996
DEAR PLANHOLDER:
WE ARE PLEASED TO REPORT TO YOU ON THE INVESTMENT PERFORMANCE OF PRUDENTIAL'S
GIBRALTAR FUND.
DURING THE FIRST HALF OF 1996, STRONG ECONOMIC GROWTH AND RECORD INFLOWS TO
U.S. EQUITY FUNDS POWERED THE U.S. STOCK MARKET TO NEW HIGHS. THIS SAME
HEALTHY U.S. ECONOMY PUSHED INTEREST RATES SHARPLY HIGHER AND BOND PRICES
LOWER. AS A RESULT, THE STOCK MARKET RECORDED STRONG GAINS, WHILE THE BOND
MARKET DISAPPOINTED INVESTORS.
IT WAS A GOOD TIME TO PARTICIPATE IN THE STOCK MARKET. PRUDENTIAL'S GIBRALTAR
FUND GAINED 9.6% FOR THE SIX MONTHS ENDED JUNE 30, IN LINE WITH THE LIPPER
(VIP) GROWTH FUND AVERAGE AND THE S&P 500.
YOUR FINANCIAL SECURITY PROGRAM IS A LONG-TERM HOLDING. SIX MONTHS, ON THE
OTHER HAND, IS ONLY A SMALL SLICE OF A LIFETIME. THROUGHOUT THIS REPORT,
THEREFORE, WE TRY TO KEEP THE LONG TERM IN FOCUS, WHILE UPDATING YOU ON THE
FUND'S RECENT PERFORMANCE. OVER THREE- AND FIVE- YEAR PERIODS, YOU'LL FIND
FAVORABLE ABSOLUTE AND RELATIVE PERFORMANCE. WHEN YOU CONSIDER THE
PERFORMANCE EXPECTATIONS YOU HOLD, PLEASE KEEP THE LONG TERM IN MIND.
ON THE FOLLOWING PAGES WE EXPLAIN THE FUND'S INVESTMENT STRATEGY AND PROVIDE
PERFORMANCE IN DETAIL. WE CONCLUDE WITH OUR OUTLOOK FOR THE SECOND HALF OF
1996.
U.S. STOCKS
R E V I E W
UP, UP & AWAY.
U.S. stocks surged higher in the first half of 1996, powered by a growing
economy and record investments in stock mutual funds. Employment, consumer
spending and housing starts all surged in the first half of the year. In
fact, some economists predicted that economic growth in the second quarter
could be as high as 5% -- the highest since 1988's 5.2% gain in the fourth
quarter.
Small company stocks led the way, just as they did last year. (In fact, they
have performed better than larger company stocks in 15 out of the last 24
years.) These companies, generally defined as those whose outstanding stock
is worth less than $1 billion, typically perform well late in the economic
cycle -- about where we are right now.
Some analysts were concerned that stocks continued to rise while bonds were
falling: higher interest rates should theoretically make bonds more
attractive than stocks. But investors shrugged off such warnings, bidding
most stocks higher during the last six months.
/ / COMMODITY-RELATED STOCKS performed the best. Gold hit $415 an ounce in
January for the first time in six years.
Crude oil for future delivery topped $24 a barrel in March, the highest since
the 1990 Gulf War, and gasoline hit $2 a gallon in California and New York by
May. World grain inventories hit a 48-year low in May. Companies that owned
stockpiles of these commodities profited nicely as prices rose.
/ / CONSUMER CYCLICAL STOCKS (companies that produce things that people buy
more of when the economy is good -- like cars) advanced smartly when the
economy revived dramatically in the first quarter. Retailers rebounded after
fears of poor holiday sales proved unfounded, and airlines soared as price
cutting in that industry ended.
/ / TECHNOLOGY STOCKS tumbled, then rebounded, finishing the first half of
1996 up 14.5%. Semiconductor stocks had sunk amid fear of rising supply and
declining demand last year. But these shares rebounded this year on signs of
renewed economic growth.
/ / INDUSTRIAL STOCKS, including producers of heavy machinery and
transportation equipment, also surged, on hopes that the economic upturn
would endure.
IMPORTANT NOTE:
THE RATES OF RETURN QUOTED ON THE FOLLOWING PAGE 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
FUND. CHANGES IN CONTRACT VALUES DEPEND NOT ONLY ON THE INVESTMENT
PERFORMANCE OF THE FUND BUT ALSO ON THE INSURANCE AND ADMINISTRATIVE CHARGES,
APPLICABLE SALES CHARGES, AND THE MORTALITY AND EXPENSE RISK CHARGE
APPLICABLE UNDER A CONTRACT. THESE CONTRACT CHARGES EFFECTIVELY REDUCE THE
DOLLAR AMOUNT OF ANY NET GAINS AND INCREASE THE DOLLAR AMOUNT OF ANY NET
LOSSES.
1
<PAGE>
PRUDENTIAL'S GIBRALTAR FUND
The Fund gained 9.6% during the six months ended June 30, in line with the
Lipper (VIP) Growth Fund Average and the S&P 500.
Portfolio Manager Greg Goldberg follows a growth investment strategy,
selecting stocks based on their potential to deliver above-average growth in
revenue and earnings. During the first half of 1996, technology stocks
represented the largest single industry, with 35% of total net assets.
Our strategy to focus on technology stocks generally worked quite well, as a
number of the Fund's largest holdings produced substantial gains. Among them
were Cisco Systems, the leading computer networking company, up 40%;
Microsoft, the computer software company, up 35% and Intel, the
microprocessor manufacturer, up 30%. We also increased our holdings in these
three stocks during the first half.
While overall these stocks performed well during the past six months, they
were hit by severe turbulence in May and June when semiconductor
manufacturers started to predict lower earnings. One measure of growth stock
performance, the NASDAQ Index, fell by more than 8% in these two months. This
downturn eroded some of the Fund's gains, but we expect many of these stocks
to rebound later this year.
We did sell some technology stocks that didn't meet our expectations, such as
Silicon Graphics, the 3-D computer software company. We also reduced our
holdings in the financial services area, locking in some of our gains,
expecting that higher interest rates would crimp profits. For example, we
lightened up on our positions in SunAmerica, the insurance company;
NationsBank, and Dean Witter Discover.
VALUE OF $10,000 INVESTED IN THE GIBRALTAR FUND VS. LIPPER (VIP) GROWTH
AVERAGE AND S&P 500 OVER TEN YEARS.
[GRAPH]
$45,000
40,000
-- $37,174 GIBRALTAR FUND(1)
35,000
-- $36,477 S&P 500(3)
30,000
-- $33,967 LIPPER (VIP) GROWTH AVG(2)
25,000
20,000
15,000
10,000
6/30/86 87 88 89 90 91 92 93 94 95 96
- --------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
SIX ONE THREE FIVE TEN
MOS. YEAR YEARS YEARS YEARS
Gibraltar Fund (1) 9.6% 13.0% 11.2% 16.6% 14.0%
Lipper (VIP) Growth Avg (2) 10.6 24.0 15.9 15.6 12.6
S&P 500 (3) 10.1 26.0 17.2 15.7 13.8
INCEPTION DATE: 3/14/68
(1) Past performance is not predictive of future results. Fund performance
does not reflect Separate Account expenses or other product charges.
(2) The Lipper Variable Insurance Products (VIP) Growth Average is calculated
by Lipper Analytical Services, Inc., and reflects the investment return of
certain portfolios underlying variable life and annuity products. These
returns are net of investment fees and fund expenses but not product charges.
(3) The S&P 500 is a capital weighted index representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the
reinvestment of all dividends, but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Fund. The securities that comprise the S&P 500 may differ substantially from
the securities in the Fund. The S&P 500 is not the only index that may be
used to characterize performance of this Fund, and other indices may portray
different comparative performance.
DATA
BANK
[PHOTO]
PORTFOLIO MANAGER
GREG GOLDBERG
- -----------------------------
WHAT'S IN THE PORTFOLIO?*
6/30/96
/ / Technology 35%
/ / Industrial 19
/ / Finance 18
/ / Consumer Growth 14 [GRAPH]
/ / CASH 12
/ / Energy 2
/ / Utility 0
/ / Consumer Cyclical 0
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
/ / Technology 34%
/ / Industrial 19
/ / Finance 24
/ / Consumer Growth 10 [GRAPH]
/ / CASH 5
/ / Energy 4
/ / Utility 2
/ / Consumer Cyclical 2
- -----------------------------
FIVE LARGEST HOLDINGS.*
6/30/96
Cisco Syst. 5.3%
FNMA 4.2
Intel Corp. 3.3
Travelers Group Inc. 3.0
Microsoft Corp. 3.0
*SOURCE: PRUDENTIAL
2
<PAGE>
INVESTMENT ADVISOR'S OUTLOOK
TREES DON'T GROW TO THE SKY.
U.S. stocks rose 10.1% in the first half of 1996, confounding many analysts
who had expected a pullback by now.
While we're quite pleased with the unusually high returns that stocks have
provided for our Planholders, we realistically know this tremendous
performance cannot continue. It's simply the law of averages.
Since 1926, when records started being kept, the U.S. stock market's average
return has been 10.5% a year, as measured by the S&P 500. Yet, in recent
years, returns have been much higher. (See chart below.)
LAST 70 YEARS RECENT BULL MARKET LAST YEAR
1926 - 1995 1982 - 1995 1995
----------- ----------- ----
10.5% 16.4% 37.4%
(5.9% OVER AVERAGE) (26.9% OVER AVERAGE)
When the final results are in, we expect 1996's performance may be closer to
average than to 1995's.
SOURCE: PRUDENTIAL
U.S.STOCKS OUTLOOK
We're at a bit of a crossroads here. Many analysts now are wary of the U.S.
stock market. It rose at a record pace last year, and this year's advance to
date has been quite handsome. Is there no end in sight?
Should interest rates continue to rise in the second half as they did in the
first half, investors may be tempted to sell stocks to buy bonds. And if the
Federal Reserve feels compelled to raise short-term interest rates, both
stocks and bonds could be vulnerable.
That said, some groups of stocks may offer more opportunity than others.
/ / Some analysts think cyclical stocks (those that benefit from an improving
economy), including technology stocks, may benefit in the months to come.
/ / Some analysts also like retailers. Retail stocks have been marked down
for several years now, and are finally recovering after a holiday season
that was not nearly as bad as predicted.
[GRAPH]
HOW THE MARKETS COMPARED
MONEY 5.0% / / RETURN OVER PAST 12 MONTHS
MARKET 7.7% / / AVERAGE RETURN OVER PAST 20 YEARS
(ANNUALIZED)
BONDS 4.7%
9.7%
GLOBAL STOCKS 13.6%
15.3%
U.S. STOCKS 26.0%
14.2%
0 5 10 15 20 25%
THIS CHART COMPARES THE MOST RECENT 12-MONTH RETURN FOR VARIOUS CATEGORIES OF
INVESTMENTS WITH THE AVERAGE ANNUAL TOTAL RETURN OVER 20 YEARS FOR THE SAME
INVESTMENT. AS YOU CAN SEE, STOCK AND BOND MARKET RETURNS CAN VARY
CONSIDERABLY FROM YEAR TO YEAR. AN INVESTMENT'S PAST PERFORMANCE SHOULD NEVER
BE USED TO PREDICT FUTURE RESULTS. THERE ARE DIFFERENT RISKS ASSOCIATED WITH
EACH INVESTMENT SECTOR, WHICH SHOULD BE CAREFULLY CONSIDERED BEFORE INVESTING.
CAN WE HELP?
WE HOPE THE FIRST HALF OF THE YEAR HAS BEEN GOOD TO YOU AND WISH YOU
CONTINUED FAVORABLE RETURNS FOR THE REST OF 1996.
YOUR PRUDENTIAL/PRUCO SECURITIES REPRESENTATIVE STANDS READY TO DISCUSS THESE
ISSUES AND TO ASSIST YOU IN ANY WAY HE OR SHE CAN. WE BELIEVE THAT YOUR
PERSONAL FINANCIAL REPRESENTATIVE -- THE ONE WHO UNDERSTANDS YOU AND YOUR
LONG-TERM INVESTMENT NEEDS -- IS A VALUABLE RESOURCE GIVEN TODAY'S OFTEN
VOLATILE FINANCIAL MARKETS.
WE URGE YOU TO TAKE ADVANTAGE OF YOUR REPRESENTATIVE'S TRAINING AND
EXPERIENCE TO HELP YOU MANAGE YOUR INSURANCE NEEDS IN A MANNER MOST
BENEFICIAL TO YOU AND YOUR FAMILY.
ALL OF US AT PRUDENTIAL THANK YOU FOR YOUR BUSINESS AND LOOK FORWARD TO
HELPING YOU MAKE A PLAN FOR YOUR FUTURE FINANCIAL SECURITY.
/s/ E. MICHAEL CAULFIELD
E. MICHAEL CAULFIELD
PRESIDENT
/s/ MENDEL MELZER
MENDEL MELZER
CHAIRMAN
3
<PAGE>
FINANCIAL STATEMENTS OF
PRUDENTIAL'S GIBRALTAR FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$238,261,896)............................ $ 268,110,931
Cash....................................... 2,835
Interest and dividends receivable.......... 150,500
Receivable for securities sold............. 4,903,543
--------------
Total Assets............................. 273,167,809
--------------
LIABILITIES
Accrued expenses........................... 44,378
Payable for securities purchased........... 103,246
Payable to investment adviser.............. 87,020
--------------
Total Liabilities........................ 234,644
--------------
NET ASSETS................................... $ 272,933,165
--------------
--------------
Net assets were comprised of:
Common stock, at $1 par value.............. $ 24,556,343
Paid-in capital, in excess of par.......... 198,742,284
--------------
223,298,627
Undistributed net investment income.......... 1,825,793
Accumulated net realized gains............... 17,959,710
Net unrealized appreciation.................. 29,849,035
--------------
Net assets, June 30, 1996.................. $ 272,933,165
--------------
--------------
Net asset value per share of 24,556,343
outstanding shares of common stock
(authorized 75,000,000 shares)........... $ 11.1146
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Dividends (net of $6,523 foreign
withholding tax)......................... $ 1,501,879
Interest................................... 470,509
---------------
1,972,388
---------------
EXPENSES
Investment management fee.................. 169,335
State franchise tax expense................ 30,408
Directors' expense......................... 4,223
Custodian expense.......................... 2,480
---------------
206,446
---------------
NET INVESTMENT INCOME........................ 1,765,942
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 10,158,560
Net unrealized gain on investments......... 12,920,548
---------------
NET GAIN ON INVESTMENTS...................... 23,079,108
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 24,845,050
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 1,765,942 $ 4,381,133
Net realized gain on investments....................................................... 10,158,560 31,242,770
Net unrealized gain on investments..................................................... 12,920,548 9,457,438
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................................... 24,845,050 45,081,341
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. 0 (4,026,639)
Net realized gain from investment transactions......................................... 0 (21,543,401)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS.......................................................... 0 (25,570,040)
------------------ -------------------
CAPITAL TRANSACTIONS:
Reinvestment of dividend distributions [-0- and 2,396,099 shares, respectively]........ 0 24,867,217
Capital stock repurchased [(1,212,785) and (2,430,032) shares, respectively]........... (13,135,293) (25,659,420)
------------------ -------------------
NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS........................... (13,135,293) (792,203)
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 11,709,757 18,719,098
NET ASSETS:
Beginning of period.................................................................... 261,223,408 242,504,310
------------------ -------------------
End of period.......................................................................... $ 272,933,165 $ 261,223,408
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 AND A5.
A1
<PAGE>
SCHEDULE OF INVESTMENTS
PRUDENTIAL'S GIBRALTAR FUND
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 87.6% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 5.0%
Boeing Co....................................... 70,000 $ 6,098,750
+Coltec Industries, Inc......................... 225,000 3,206,250
Precision Castparts Corp........................ 100,000 4,300,000
--------------
13,605,000
--------------
ALUMINUM -- 1.6%
Aluminum Co. of America......................... 75,000 4,303,125
--------------
BANKS AND SAVINGS & LOANS -- 2.4%
Citicorp........................................ 80,000 6,610,000
--------------
CHEMICALS -- 1.8%
+Polymer Group, Inc............................. 108,300 1,895,250
Union Carbide Corp.............................. 75,000 2,981,250
--------------
4,876,500
--------------
COMMERCIAL SERVICES -- 0.8%
+Primark Corp................................... 65,700 2,143,462
--------------
COMPUTER SERVICES -- 16.8%
+Bay Networks, Inc.............................. 160,000 4,120,000
+Cisco Systems, Inc............................. 257,000 14,552,625
+Comverse Technology, Inc....................... 69,500 2,119,750
+Engineering Animation, Inc..................... 42,300 803,700
+Microsoft Corp................................. 68,000 8,160,000
+Oracle Corp.................................... 130,000 5,118,750
+Pixar, Inc..................................... 18,200 350,350
+ROSS Technology, Inc........................... 43,200 486,000
+Softkey International, Inc..................... 155,300 2,931,287
+Sun Microsystems, Inc.......................... 33,000 1,938,750
+Western Digital Corp........................... 199,100 5,201,488
--------------
45,782,700
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 1.7%
International Business Machines Corp............ 46,000 4,554,000
--------------
DRUGS, HOSPITALS AND SUPPLIES -- 6.7%
+Amgen, Inc..................................... 85,000 4,568,750
C.R. Bard, Inc.................................. 47,900 1,628,600
Ciba-Geigy AG, ADR.............................. 78,000 4,728,750
St. Jude Medical, Inc........................... 89,200 2,965,900
United States Surgical Corp..................... 142,500 4,417,500
--------------
18,309,500
--------------
ELECTRICAL EQUIPMENT -- 2.9%
+Applied Materials, Inc......................... 80,000 2,430,000
+UCAR International, Inc........................ 129,600 5,394,600
--------------
7,824,600
--------------
ELECTRONICS -- 10.0%
+Burr-Brown Corp................................ 66,000 1,122,000
+DuPont Photomasks, Inc......................... 27,400 561,700
Intel Corp...................................... 122,000 8,951,750
+LSI Logic Corp................................. 189,800 4,934,800
Macromedia Inc.................................. 73,500 1,607,812
Methode Electronics, Inc. (Class 'A' Stock)..... 168,750 2,868,750
Sundstrand Corp................................. 78,000 2,856,750
+Tencor Instruments............................. 93,500 1,741,438
+Ultratech Stepper, Inc......................... 143,600 2,674,550
--------------
27,319,550
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- 11.2%
Advanta Corp. (Class 'B' Stock)................. 98,100 $ 4,439,025
Federal National Mortgage Association........... 340,000 11,390,000
+Imperial Credit Industries, Inc................ 96,900 2,931,225
Student Loan Marketing Association.............. 51,100 3,781,400
Sunamerica, Inc................................. 67,000 3,785,500
The Money Store, Inc............................ 200,100 4,352,175
--------------
30,679,325
--------------
FOODS -- 1.6%
Dole Food Co., Inc.............................. 100,000 4,300,000
--------------
FOREST PRODUCTS -- 4.4%
Stone Container Corp............................ 255,000 3,506,250
Weyerhaeuser Co................................. 60,000 2,550,000
Willamette Industries, Inc...................... 100,000 5,925,000
--------------
11,981,250
--------------
INSURANCE -- 4.9%
Aetna Life & Casualty Co........................ 48,000 3,432,000
+Amerin Corp.................................... 31,400 832,100
Equitable of Iowa Companies..................... 23,600 837,800
Travelers Group, Inc............................ 180,000 8,212,500
--------------
13,314,400
--------------
MACHINERY -- 1.6%
+Varity Corp.................................... 90,000 4,331,250
--------------
OTHER TECHNOLOGY -- 2.5%
+Uniphase Corp.................................. 199,200 6,922,200
--------------
PETROLEUM SERVICES -- 2.1%
+B.J. Services Co............................... 100,300 3,523,038
+Smith International, Inc....................... 77,800 2,343,725
--------------
5,866,763
--------------
RESTAURANTS -- 2.7%
+Lone Star Steakhouse & Saloon, Inc............. 81,900 3,081,488
McDonald's Corp................................. 90,000 4,207,500
--------------
7,288,988
--------------
STEEL -- 0.5%
AK Steel Holding Corp........................... 38,000 1,486,749
--------------
TELECOMMUNICATIONS -- 2.8%
+ADC Telecommunications, Inc.................... 115,000 5,117,500
+Westell Technologies, Inc...................... 61,300 2,390,700
--------------
7,508,200
--------------
TOBACCO -- 2.6%
RJR Nabisco Holdings Corp....................... 230,000 7,130,000
--------------
TRUCKING/SHIPPING -- 1.0%
Interpool, Inc.................................. 155,000 2,828,750
--------------
TOTAL COMMON STOCK
(Cost $209,330,177)............................................ 238,966,312
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 0.6% SHARES VALUE
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- 0.6%
Advanta Corp. (Class 'B' Stock)................. 40,000 1,780,000
--------------
(Cost $1,567,100)
</TABLE>
A2
<PAGE>
PRUDENTIAL'S GIBRALTAR FUND (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 10.0% AMOUNT VALUE
------------- --------------
<S> <C> <C>
COMMERCIAL PAPER -- 5.9%
Duracell Inc.,
5.600%, 07/01/96.............................. $ 6,145,000 $ 6,145,000
IBM Credit Corp.,
5.470%, 07/08/96.............................. 1,425,000 1,423,485
Smith Barney, Inc.
5.380%, 07/11/96.............................. 8,609,000 8,596,134
--------------
16,164,619
--------------
TERM NOTE -- 4.1%
Associates Corp. of North America,
8.800%, 07/01/96.............................. 11,200,000 11,200,000
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 27,364,619
--------------
OTHER ASSETS -- 1.8%
(net of liabilities)........................................... 4,822,234
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 272,933,165
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
+No dividend was paid on this security during the 12 months ending June 30,
1996.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 AND A5.
A3
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUDENTIAL'S GIBRALTAR FUND
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND THE YEAR ENDED DECEMBER
31, 1995
NOTE 1: GENERAL
The Fund is registered as an open-end, diversified management investment company
under the Investment Company Act of 1940, as amended.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SECURITIES VALUATION: Securities traded on a national securities exchange are
valued at the last sales price (or the last bid price if there were no sales of
the security that day) on the New York Stock Exchange, or if not traded on such
exchange, such last sales or bid price at the time of close of the New York
Stock Exchange on the principal exchange on which such securities are traded on
the last business day of the year. For any securities not traded on a national
securities exchange but traded in the over-the-counter market, the value is the
last bid price available, 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
closing best bid price on the date of valuation provided by a pricing service
which utilizes NASDAQ quotations. 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.
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.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Dividend income is recorded on
the ex-dividend date. Interest income is accrued daily on short-term
investments. Interest income also includes net amortization from the purchase of
fixed-income securities. Security 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 day. Transactions in
short-term debt securities are recorded on the trade date. Realized gains and
losses from securities transactions are determined and accounted for on the
basis of identified cost.
DISTRIBUTIONS AND TAXES: As in prior years, the Fund intends to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code. As
a result, by distributing substantially all of its net investment income and net
realized capital gains, the Fund will not be subject to federal income tax on
the investment income and capital gains so distributed. Dividend distributions
to stockholders are recorded on the ex-dividend date.
NOTE 3: INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGEMENT FEE: The investment management fee, which is computed
daily at an effective annual rate of 0.125% of the net assets of the Fund, is
payable to The Prudential Insurance Company of America (The Prudential) as
required by the investment advisory agreement. Under the terms of the investment
advisory agreement and a separate contract which remains in force as long as The
Prudential, or its separate accounts, or organizations approved by it are the
only purchasers of Fund shares, The Prudential pays all expenses of the Fund
except for fees and expenses of those members of the Fund's Board of Directors
who are not officers or employees of The Prudential and its affiliates; transfer
and any other local, state or federal taxes; and brokers' commissions and other
fees and charges attributable to investment transactions.
NOTE 4: DISTRIBUTIONS
Dividends from net investment income and net realized capital gains of the Fund
will normally be declared and reinvested in additional full and fractional
shares twice a year.
A4
<PAGE>
NOTE 5: PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and the proceeds from sales of securities
(excluding short-term investments) for the six months ended June 30, 1996 was
$129,077,153 and $159,169,861, respectively.
The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments were as follows:
<TABLE>
<S> <C>
Gross Unrealized Appreciation: $ 44,658,309
Gross Unrealized Depreciation: (14,809,274)
Net Unrealized Appreciation/Depreciation: 29,849,035
Tax Basis: 238,261,896
</TABLE>
NOTE 6: FINANCIAL HIGHLIGHTS
The following average per share data, ratios and supplemental information have
been derived from information provided in the financial statements.
<TABLE>
<CAPTION>
PRUDENTIAL'S GIBRALTAR FUND
------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89
TO TO TO TO TO TO TO TO
06/30/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of year...... $ 10.137 $ 9.398 $ 11.287 $ 11.133 $ 11.390 $ 9.400 $ 10.590 $ 10.290
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income.... 0.072 0.177 0.214 0.180 0.184 0.220 0.340 0.360
Net realized and
unrealized gains
(losses) on
investments............ 0.906 1.649 (0.405) 2.426 1.771 2.900 (0.640) 1.920
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations........... 0.978 1.826 (0.191) 2.606 1.955 3.120 (0.300) 2.280
Distributions to
Shareholders:
Distributions from net
investment income...... -- (0.171) (0.216) (0.188) (0.193) (0.260) (0.370) (0.370)
Distributions from
realized gains......... -- (0.916) (1.482) (2.264) (2.019) (0.870) (0.520) (1.610)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total
distributions........ -- (1.087) (1.698) (2.452) (2.212) (1.130) (0.890) (1.980)
Net increase (decrease)
in Net Asset Value..... 0.978 0.739 (1.889) 0.154 (0.257) 1.990 (1.190) 0.300
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
year................... $ 11.115 $ 10.137 $ 9.398 $ 11.287 $ 11.133 $ 11.390 $ 9.400 $ 10.590
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**.............. 9.64% 19.13% (1.33%) 23.79 % 17.60 % 34.40 % (2.80 %) 22.30%
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $272.9 $261.2 $242.5 $264.3 $230.1 $214.2 $174.4 $197.0
Ratio of expenses net of
reimbursement to
average net assets..... 0.15 %* 0.14 % 0.15 % 0.16 % 0.19 % 0.19 % 0.21 % 0.16%
Ratio of net investment
income to average net
assets................. 1.30 %* 1.68 % 1.98 % 1.45 % 1.58 % 1.98 % 3.38 % 3.19%
Portfolio turnover
rate................... 51.18 % 104.82 % 92.49 % 91.83 % 72.82 % 76.35 % 108.08 % 66.79%
Number of shares
outstanding at end of
period (in millions)... 24.6 25.8 25.8 23.4 20.7 18.8 18.6 18.6
Average commission rate
paid per share......... $ 0.0543 N/A N/A N/A N/A N/A N/A N/A
<CAPTION>
01/01/88 01/01/87
TO TO
12/31/88 12/31/87
----------- -----------
<S> <C> <C>
Net Asset Value at
beginning of year...... $ 9.190 $ 12.440
----------- -----------
Income From Investment
Operations:
Net investment income.... 0.310 0.400
Net realized and
unrealized gains
(losses) on
investments............ 2.000 0.230
----------- -----------
Total from investment
operations........... 2.310 0.630
Distributions to
Shareholders:
Distributions from net
investment income...... (0.370) (0.650)
Distributions from
realized gains......... (0.840) (3.230)
----------- -----------
Total
distributions........ (1.210) (3.880)
Net increase (decrease)
in Net Asset Value..... 1.100 (3.250)
----------- -----------
Net Asset Value at end of
year................... $ 10.290 $ 9.190
----------- -----------
----------- -----------
Total Investment Rate of
Return:**.............. 25.60 % 2.53 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $183.3 $170.0
Ratio of expenses net of
reimbursement to
average net assets..... 0.16 % 0.15 %
Ratio of net investment
income to average net
assets................. 2.95 % 3.11 %
Portfolio turnover
rate................... 31.69 % 31.53 %
Number of shares
outstanding at end of
period (in millions)... 17.8 18.5
Average commission rate
paid per share......... N/A N/A
</TABLE>
*Annualized.
**Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns.
Calculations prior to 1996 are based on average month-end shares outstanding,
where applicable.
A5
<PAGE>
GLOSSARY OF TERMS FOR THE REPORT TO PLANHOLDERS
(NOTE: ADDITIONAL EXPLANATIONS WILL BE FOUND IN NOTES TO FINANCIAL STATEMENTS)
ACCUMULATION UNIT -- The measure for determining the Planholder's share in the
separate account of a deferred variable annuity during the accumulation period
before annuity benefits begin to be paid. Planholder transactions such as
purchase payments, transfers, and withdrawals result in changes to the number of
accumulation units credited to the Planholder. 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.
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.
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.
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.
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.
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.
I
<PAGE>
BOARD OF
DIRECTORS PRUDENTIAL'S GIBRALTAR FUND
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 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
FRANKLIN E. AGNEW ROGER A. ENRICO ARTHUR F. RYAN
BUSINESS CONSULTANT VICE CHAIRMAN AND CEO, CHAIRMAN OF THE BOARD,
FREDERIC K. BECKER PEPSICO WORLDWIDE CEO,
PRESIDENT, RESTAURANTS AND PRESIDENT,
WILENTZ, GOLDMAN, & ALLAN D. GILMOUR THE PRUDENTIAL
SPITZER FORMER VICE CHAIRMAN, CHARLES R. SITTER
WILLIAM W. BOESCHENSTEIN FORD MOTOR COMPANY RETIRED PRESIDENT,
RETIRED CHAIRMAN, WILLIAM H. GRAY III EXXON CORPORATION
OWENS-CORNING PRESIDENT AND CEO, DONALD L. STAHELI
FIBERGLAS CORPORATION THE COLLEGE FUND/UNCF CHAIRMAN AND CEO,
LISLE C. CARTER, JR. JON F. HANSON CONTINENTAL GRAIN
FORMER SENIOR VICE CHAIRMAN, HAMPSHIRE COMPANY
PRESIDENT MANAGEMENT COMPANY RICHARD M. THOMSON
AND GENERAL COUNSEL, CONSTANCE J. HORNER CHAIRMAN AND CEO,
UNITED WAY OF AMERICA GUEST SCHOLAR, THE TORONTO-DOMINION
JAMES G. CULLEN THE BROOKINGS BANK
VICE CHAIRMAN, INSTITUTION JAMES A. UNRUH
BELL ATLANTIC ALLEN F. JACOBSON CHAIRMAN AND CEO,
CORPORATION RETIRED CHAIRMAN AND UNISYS CORPORATION
CAROLYNE K. DAVIS, PhD. CEO, P. ROY VAGELOS, M.D.
NATIONAL AND MINNESOTA MINING AND FORMER CHAIRMAN AND
INTERNATIONAL MANUFACTURING (3M) CEO,
HEALTH CARE ADVISOR, GARNETT L. KEITH, JR. MERCK & CO., INC.
ERNST & YOUNG, LLP VICE CHAIRMAN, STANLEY C. VAN NESS
THE PRUDENTIAL COUNSELOR AT LAW
BURTON G. MALKIEL PICCO HERBERT KENNEDY
PROFESSOR, PAUL A. VOLCKER
PRINCETON UNIVERSITY CONSULTANT
JOSEPH H. WILLIAMS
DIRECTOR,
THE WILLIAMS COMPANIES,
INC.
II
<PAGE>
"NOTICE OF ELECTION"
The Prudential Insurance Company of America is a mutual life insurance company.
Our principal office is in Newark, New Jersey, and we are incorporated in that
state. By law, we have 24 directors. This includes 16 elected by our
policyholders (four each year for four-year terms), two of our officers, and six
public directors named by New Jersey's Chief Justice. The election is held on
the first Tuesday in April from 10:00 A.M. to 2:00 P.M. in our office at the
Secretary's address shown here. After your plan has been in force for one year,
you may vote either in person or by mail. We will send you a ballot if you ask
for one. Just write to our Secretary at Prudential Plaza, Newark, New Jersey
07102-3777, at least 60 days before the election date. By law, your request must
show your name, address, plan number and date of birth. If you are an
individual, you must be at least 18 years old to vote. (The election covered by
this notice is not to be confused with the election of the directors of
Prudential's Gibraltar Fund, for which planholders receive a voting instruction
statement and form each year.)
III
<PAGE>
This report is authorized for use with prospective investors only when
preceded or accompanied by current prospectuses for Systematic Investment
Plan Contracts, Variable Annuity Contracts and Prudential's Gibraltar Fund.
These prospectuses contain more information concerning sales charges and
other material facts and should be read carefully before you invest or send
money.
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
following telephone numbers should be used to request any additional copies.
Proxy material and tax information will continue to be sent to each account
of record.
(612) 553-6929
(612) 553-6913
<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]
FSP SAR 6/96 Printed in the U.S.A. on recycled
paper using soybean ink
<PAGE>
Graph Write-Ups for 6/30/96 Prudential Gibraltar Fund Book
Graph 1: (Prudential's Gibraltar Fund)
Graph represents the growth of $10,000 invested in Prudential Gibraltar Fund
compared with the S&P 500 and the Lipper VIP Growth Average. In the ten years
ended June 30, 1996, an investment of $10,000 would have a value of $37,174,
$36,477, and $33,967 respectively.
graph 2: (How the Markets Compared)
Graph represents comparison of markets for 1 year total return and 20 year
average annual return for the period ending June 30, 1996. Investment Total
Returns for the one year ending June 30, 1996: U.S. Money Markets - 5.0%;
U.S. Bonds - 4.7%; Global Stocks - 13.6%; U.S. Stocks - 26.0%; Investment
Total Returns for the twenty years ending June 30, 1996: U.S. Money Markets -
7.7%; U.S. Bonds - 9.7%; Global Stocks - 15.3%; U.S. Stocks - 14.2%.
