<PAGE>
Prudential's Gibraltar Fund, Inc. SEMIANNUAL June 30, 2000
PRUDENTIAL'S FINANCIAL SECURITY PROGRAM
Build
on the Rock
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102-3777
IFS-200007-A051732 [LOGO OF PRUDENTIAL]
<PAGE>
--------------------------------------------------------------------------------
Build on the Rock
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TABLE OF CONTENTS
Letter to Planholder 1
Market Commentary and Outlook 2
Prudential's Gibraltar Fund, Inc. 6
FINANCIAL REPORTS
Financial Statements A1
Schedule of Investments B1
Notes to Financial Statements C1
Financial Highlights D1
Prudential's Financial Security Program is the only account investing in
Prudential's Gibraltar Fund, Inc.
<PAGE>
Letter To Planholder
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Six Months Ended June 30, 2000
--------------------------------------------------------------------------------
[PHOTO]
CHAIRMAN
JOHN R. STRANGFELD
"The first six months of the new century were among the most tumultuous in
recent market history."
Dear Planholder:
This Semiannual Report reviews the investment strategy and performance of
Prudential's Gibraltar Fund, Inc.
Looking back
The first six months of the new century were among the most tumultuous in recent
market history. The seemingly endless upward trajectory of new economy
stocks--those in the technology, media and telecommunications industries--came
to an abrupt halt in late March. Signs that inflation might be rising in the
U.S., continued interest rate hikes, and high stock valuations caused investors
to flee the technology-laden Nasdaq market in droves. A long-anticipated U.S.
market correction was under way, and its impact was felt across the global
marketplace.
Maintain a long-term outlook
In summary, it was an eventful period in the financial markets--one that we
believe magnifies the value of several time-tested investment fundamentals.
First, maintaining a long-term outlook for your investments is vital. Market
fluctuations will occur, and reacting to short-term events is often ill advised.
As a case in point, we've already seen a rebound in several sectors that
performed poorly during the second quarter of the year.
Diversification is key
Second, the financial markets are a moving target. As such, many investors find
themselves buying at market highs when they gravitate to the strongest-
performing sectors. A more sound approach is to diversify your portfolio across
a wide variety of investments and take special care to rebalance your portfolio
should your asset allocation strategy veer from its original course.
Rely on your financial professional
Third, if you find yourself tempted to react to the latest market gyrations,
turn to your financial professional for guidance. He or she can review your
overall goals and determine if changes to your portfolio are necessary. This is
particularly important during periods of extreme market volatility.
Sincerely,
/S/ John R. Strangfeld
John R. Strangfeld
Chairman
Prudential's Gibraltar Fund, Inc.
July 17, 2000
1
<PAGE>
Equity Commentary
--------------------------------------------------------------------------------
June 30, 2000
--------------------------------------------------------------------------------
Turbulence and change in equity market
--------------------------------------------------------------------------------
Not only did the first half of 2000 include some of the most turbulent days in
U.S. stock market history, there were dramatic reversals of fortune at other
time scales as well--by quarter and by month. Many of these reversals canceled
each other out, so that by the end of June the S&P 500 had only a small net loss
and the Russell 2000 Index of small-cap stocks only a modest gain.
The main market stories over this period were the net correction (downward) of
extended telecommunications stocks and the seesaw-like rise of health care,
power utilities and energy stocks. The technology sector skyrocketed up,
corrected, then moved ahead again in a sharp June advance. Cyclical stocks--
basic materials (such as paper and forest products and metals), consumer
cyclicals (such as retail, autos and hotels), and capital goods (such as
engineering and construction)--had steep declines. These trends were global in
scope (except for capital goods, which had a moderately good local currency
return in Europe that translated into a marginally positive return for dollar-
based investors).
The result was a net advantage over the six months for growth over value
investing except among small caps, where the most speculative technology stocks
fell so much in March through May that they couldn't catch up in their June
surge. Small-cap (the Russell 2000 sectors) energy (excluding integrated oil
companies) and healthcare stocks had excellent catch-up returns of 52% and 36%,
respectively. Overall, midcap stocks had the best performance of any market
capitalization class, with mid-cap growth stocks the only equity market
capitalization range with strong returns.
Strong economic growth creates fears and opportunities
--------------------------------------------------------------------------------
This pattern was driven by rapid U.S. economic growth, which led the Federal
Reserve to continue to raise interest rates. Rising interest rates hurt the
stocks of rapidly growing companies whose value lies in their future earnings:
The present value of such future earnings is reduced in a rising interest rate
environment. Moreover, the fear that rising interest rates would cut off
economic growth hurt both growth and cyclical stocks. Moreover, a growing global
imbalance of supply and demand for oil created a turnaround in energy. Oil
service companies performed quite well. A shortage of electricity generating
capacity in the United States, as well as low inventories of the natural gas
that is burned by many new generation plants, strengthened the domestic utility
sector stocks overall, although some companies remained vulnerable to rising
fuel prices.
A global downturn
--------------------------------------------------------------------------------
Only the Nordic region provided moderately good returns, led by Sweden. Other
than that, the picture was generally bleak except for a few scattered individual
countries with good returns: Canada, France, Malaysia, Israel, Venezuela and the
Czech Republic.
--------------------------------------------------------------------------------
Performance of Key Stock Market Indexes
Through June 30, 2000
--------------------------------------------------------------------------------
[GRAPH]
S&P/ S&P/ Russell Russell MSCI MSCI MSCI
S&P BARRA BARRA 2000 2000 World Free Europa Japan
.500 Value Growth Value Growth Index* Index* Index*
--------------------------------------------------------------------------------
-0.43% -4.07% 2.63% 5.85% 1.23% -2.56% -3.08% -5.37%
*In U.S. currency.
Sources: Morgan Stanley Capital International, Standard & Poor's, Frank Russell
Company, and Prudential as of June 30, 2000. All indexes are unmanaged and
provide an indication of stock price movements. Past performance is not
indicative of future results. Investors cannot invest directly in an index.
Standard & Poor's 500 Index comprises 500 large, established, publicly traded
stocks. Morgan Stanley Capital International Europe Index comprises
approximately 620 European companies. Morgan Stanley Capital International
Europe, Australia, Far East Index is a weighted, unmanaged index of performance
that reflects stock price movements in Europe, Australasia, and the Far East.
S&P/Barra Value Index contains companies within the S&P 500 with lower
price-to-book ratios. S&P/Barra Growth Index contains companies within the S&P
500 with higher price-to-book ratios. Russell 2000 Value Index measures the
performance of those Russell 2000 companies with lower price-to-book ratios.
Russell 2000 Growth Index measures the performance of those Russell 2000
companies with higher price-to-book ratios. Morgan Stanley Capital International
World Free Index contains those companies in the MSCI World Index that reflect
actual buyable opportunities for the nondomestic investor by taking into
account local market restrictions on share ownership by foreigners. These
indexes are calculated in U.S. dollars, without dividends reinvested. Morgan
Stanley Capital International Japan Index measures the performance of Japan's
stock market.
The views expressed are as of July 17, 2000, and are subject to change based on
market and other conditions.
2
<PAGE>
Equity Outlook
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June 30, 2000
--------------------------------------------------------------------------------
Stocks are at a fair value
--------------------------------------------------------------------------------
Our models show that overall stock prices are at about fair value on the basis
of today's earnings growth and interest rates. That means the markets should be
able to sustain ordinary rates of equity return (not the historically abnormal
returns of recent years) as long as earnings continue to grow and if interest
rates stabilize. One good sign is that downward revisions of earnings estimates
are less common this year than usual. Value investors are benefiting from the
recent trends toward stocks that are more defensive than most, but that also
have good growth prospects--such as drugs and utilities. Growth investors are
focused on long-term structural changes in the economy: wireless and broadband
telecommunications and the growth of the Internet companies. They tend to avoid
companies whose earnings are tied to the business cycle.
Internationally, the European economic recovery is also creating opportunities.
Moreover, the signs that China is serious about opening its economy bode well
for the industrialized countries in northern Asia that can export there: Korea,
Japan, Hong Kong, and Taiwan.
Stock selection key
--------------------------------------------------------------------------------
The discrepancies in pricing between value and growth stocks are smaller than
previously, and stock selection is likely to become more important than sector
differences. Technology companies will find investment capital more expensive.
Companies with strong balance sheets, positive cash flows, or access to cash
should still be able to grow. In sectors dependent upon commodity prices, there
may be substantial differences between firms exposed to rising prices and those
whose supplies are locked in. Investment opportunities generally are likely to
be more scattered than in the sector-focused markets we have had recently.
Note: Past performance is not a guarantee of future results. There is no
assurance that any of the forecasts discussed will be attained.
--------------------------------------------------------------------------------
Performance of U.S. Market Sectors Through June 30, 2000
--------------------------------------------------------------------------------
Year to date
[GRAPH]
<TABLE>
<CAPTION>
Capital Communication Basic Consumer Consumer
Technology Energy Goods Utilities Services Materials Cyclicals Healthcare Staples Financials Transportation
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.0% 4.7% -1.2% 15.3% -15.1% -24.8% -18.9% 23.7% -2.4% -0.5% 5.0%
</TABLE>
--------------------------------------------------------------------------------
S&P 500 Index Sector Weightings
--------------------------------------------------------------------------------
[GRAPH]
Technology 32.8%
Financials 12.7%
Healthcare 11.6%
Consumer Staples 10.3%
Consumer Cyclicals 7.4%
Capital Goods 8.0%
Communication Services 6.8%
Energy 5.4%
Basic Materials 1.9%
Utilities 2.5%
Transportation 0.6%
Source: Standard & Poor's as of June 30, 2000. The S&P 500 Index is an unmanaged
index of stocks that provides an indication of stock price movements. Past
performance is not indicative of future results. Investors cannot invest
directly in an index.
3
<PAGE>
Bond Commentary
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June 30, 2000
--------------------------------------------------------------------------------
A good first half for U.S. Treasuries
--------------------------------------------------------------------------------
Prices of most U.S. Treasury securities climbed during the first half of 2000,
leaving prices of other U.S. fixed-income securities far behind. Favorable
technical factors and moderating economic growth sparked a rally primarily in
longer-term Treasuries.
Initially, though, Treasuries began 2000 on a weak note. The U.S. economy had
expanded rapidly in late 1999. Investors therefore feared the Federal Reserve
might repeatedly increase short-term interest rates to prevent the economy from
exceeding what the central bank believes to be its speed limit. In anticipation,
investors required higher bond yields, which forced bond prices lower.
However, the sell-off soon turned into a rally, at least for longer-term
Treasuries. The U.S. Treasury Department cut back issuance of its securities
because a growing federal budget surplus has reduced its borrowing needs. It
also commenced a program to buy back up to $30 billion of older, mostly longer-
term Treasuries by the end of 2000. Taken together, these two developments set
off a stampede to buy longer-term Treasuries.
The enthusiasm for longer-term Treasuries faded as it became clear the Fed's
quarter-point rate hikes in February and March would be followed by a half-point
increase in mid May. Some investors worried the Fed might prove too heavy handed
and trigger an economic downturn that would sap corporate earnings. Not
surprisingly, prices of investment-grade and high-yield U.S. corporate bonds got
hit even harder than Treasuries during this time. High-yield (junk) bonds also
suffered, because a growing number of companies failed to make interest and
principal payments on their junk bonds in May.
Not until reports began to show that the economy was gradually losing steam did
prices of U.S. fixed-income securities once again turn higher. Signs of
moderating economic growth might mean the Fed would soon be finished increasing
rates. Amid this change in market sentiment, prices in U.S. debt securities
markets gained in June. Nevertheless, among U.S. bond markets, the Treasury
market finished in first place for the six-month period, helped by the strong
performance of its longer-term securities earlier in the year.
But an even better first half for emerging market bonds
--------------------------------------------------------------------------------
Although Treasuries performed impressively, the top fixed-income market for the
first half of 2000 was emerging market bonds, based on Lehman Brothers indexes.
They returned a solid 7.59% as economic fundamentals in several developing
countries proved stronger than expected. Rising prices of oil, gas, and other
natural resources strengthened the economies of some developing nations that
export these commodities. Improving economic conditions in turn boosted their
foreign currency reserves. Moreover, some countries cut their financing costs by
swapping new bonds for older debt securities. These positive developments and
others attracted investors to emerging market bonds.
Among nations with developed economies, the government bond markets of
Australia, Canada and the United Kingdom posted attractive returns on a local
currency basis but lower returns when expressed in U.S. dollars. Their central
banks, which have repeatedly increased short-term rates to keep their respective
economies from overheating, are widely believed to be near the end of their
current tightening cycles.
--------------------------------------------------------------------------------
Performance of Fixed-Income Market Indexes Through June 30, 2000
--------------------------------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
Global U.S. Mortgage Emerging U.S. U.S. Aggregate U.S. Corp. U.S. U.S.
(U.S. dollar) Backed Markets Treasuries Index Invest Municipals Corporate
Index Securities Grade High Yield
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-0.8% 3.67% 7.59% 5.37% 3.99% 2.68% 4.48% -1.21%
</TABLE>
Source: Lehman Brothers as of June 30, 2000. The Lehman Brothers indexes are
unmanaged indexes of bonds that provide an indication of bond price movements.
Past performance is not indicative of future results. Investors cannot invest
directly in an index.
4
<PAGE>
Bond Outlook 2000
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June 30, 2000
--------------------------------------------------------------------------------
Current cycle of Fed rate hikes may be nearly over
--------------------------------------------------------------------------------
The commonly accepted wisdom holds that increases in short-term interest rates
hurt bonds. However, the Federal Reserve's unusually large half-point rate hike
in May 2000 might benefit U.S. fixed-income markets--at least in the long run.
This could prove true if the Fed's largest rate increase in more than five years
proves to be a signal that it has nearly completed its current round of
tightening monetary policy.
Since June 1999, the U.S. central bank has raised rates six times. The first
five were quarter-point rate hikes and the sixth was for half of a percentage
point. Taken together, these moves lifted the federal funds rate (the rate U.S.
banks charge each other for overnight loans) to 6.50%, its highest level since
January 1991.
While rates remained unchanged after its latest meeting in June 2000, the U.S.
central bank warned more rate hikes could follow, because it is not convinced
that recent indications of an economic slowdown will last. The implied yield on
federal funds futures contracts indicates the Fed is expected to raise short-
term rates by another quarter of a percentage point later this year.
We too believe the central bank's current series of rate hikes is just about
over. We expect inflation to taper off as U.S. economic activity continues to
moderate in coming months, lessening the need for further moves by the Fed.
We see good value in the U.S. high-yield bond market
--------------------------------------------------------------------------------
Historically, bond returns have been strong in the 12-month period following the
completion of a Fed tightening cycle. An examination of 12-month returns as
measured by the Lehman Aggregate Index shows U.S. bonds posted double-digit
returns after the end of each of the last six Fed tightening cycles Although we
do not expect U.S. bond markets to perform as strongly this time around, we
nonetheless see room for improvement, particularly in the market for high-yield
(junk) corporate bonds.
Compared with the yield on 10-year U.S. Treasuries, junk bond yields earlier in
the year rose to their highest levels in nearly a decade. The huge difference in
yields partly reflects the scarcity value of Treasuries. The supply of
Treasuries is shrinking because growing federal budget surpluses have reduced
the government's need to borrow.
But the large gap in yields also occurred because volatile stock prices and an
increase in the junk bond default rate hurt demand for high-yield bonds.
Bond investors were more cautious about lending money to companies whose market
values were fluctuating wildly. Like stock investors, they were concerned about
the impact of a slowdown on corporate earnings. However, the economy is not
expected to slip into a recession, and investor cash flows into junk bond mutual
funds turned positive in the last two weeks of June. This may herald a change in
trend.
The trend had been downhill as net flows into bond mutual funds turned strongly
negative early in the year. Looking back, retail investors left bond funds in
droves in 1987 and 1994 before substantial bull markets began, according to data
by International Strategy and Investment (ISI) and Lehman Brothers. In the same
vein, an ISI survey showed institutional investors have not been this bearish on
bonds since the end of the 1994 and 1996 bear markets.
Investors that return to the junk bond market will find yields at very
attractive levels. Both the nominal yield and the real yield (yield minus the
inflation rate) have been at such high levels only once or twice in the past ten
years, based on data from Lehman Brothers.
Municipal bond yields are also attractive. Thirty-year insured munis rated AAA
are yielding roughly 97% as much as 30-year Treasury bonds. Although prices of
municipal bonds have already gained this year, we believe they will rise further
if a continued light supply of tax-exempt securities meets with strong demand
from investors.
Note: Past performance is not a guarantee of future results. There
is no assurance that any of the forecasts discussed will be
attained.
5
<PAGE>
Prudential's
Gibraltar Fund, Inc.
June 30, 2000
INVESTMENT GOAL
Growth of capital to an extent compatible with a concern for preservation of
principal. Current income is a secondary consideration.
TYPES OF INVESTMENTS
Primarily stocks of a diversified group of companies in a variety of industries.
INVESTMENT STYLE
The Fund uses a "growth" investment style to select stocks based on their
potential to deliver above-average growth in revenue and earnings.
$10,000 Invested Over Ten Years
[GRAPH]
Gibraltar Lipper (VIP) S&P 500
Portfolio1 Global Avg.2 Index3
June 90 10,000 10,000 10,000
9,529 9,354 9,400
June 91 11,142 10,642 10,737
12,803 12,297 12,257
June 92 12,796 12,036 12,175
15,054 13,172 13,190
June 93 17,484 13,753 13,831
18,634 14,635 14,516
June 94 18,211 14,034 14,025
18,387 14,498 14,707
June 95 21,261 17,074 17,676
21,909 19,059 20,227
June 96 24,022 20,871 22,268
27,853 23,001 24,868
June 97 30,968 26,983 29,990
33,112 29,361 33,162
June 98 37,628 34,051 39,039
41,686 36,760 42,646
June 99 47,742 40,632 47,925
57,911 44,451 51,616
June 2000 65,037 45,492 51,395
1 Past performance is not predictive of future performance. Fund performance is
net of investment fees and fund expenses, but not product charges. Source:
Prudential. Six-month returns are not annualized.
2 The Lipper Variable Insurance Products (VIP) Large-Cap Core Funds Average is
calculated by Lipper, 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. Investors cannot invest directly in a market
index or average.
Performance Summary
-------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
Gibraltar Fund/1/ 12.30% 36.22% 28.06% 25.06% 20.59%
------------------------------------------------------------------------------------------------------------------------------------
Lipper (VIP) Large-Cap Core Funds 1.27% 11.37% 18.89% 21.79% 16.17%
Avg.2
------------------------------------------------------------------------------------------------------------------------------------
S&P 5003 -0.43% 7.24% 19.67% 23.80% 17.79%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Gibraltar Fund inception date: 3/14/68
Your Fund returned 12.30%, 11 percentage points above the 1.27% Lipper (VIP)
Large-Cap Core Funds Average, and even farther above the unmanaged S&P 500
Index. Despite the mediocre performance of the technology sector as a whole, our
holdings performed very well because they were established technology companies
with positive and growing current earnings. We also benefited from our energy-
related stocks, which rose with the price of oil and natural gas. Viacom (media)
and American International Group (insurance) also made substantial contributions
to our large margin of outperformance in the first half of 2000.
Performance Review
--------------------------------------------------------------------------------
Successful stock selection in the technology sector accounted for most of our
superior performance. Companies focused on optical computing and fiber optic
telecommunications--JDS Uniphase and Corning--had very large gains despite the
erratic markets. We also had sizable positions in a number of semiconductor
companies with strong performance over the period, including Intel, Altera, and
LSI Logic. EMC, which makes software to improve the efficiency and reliability
of computer information storage devices, continued to appreciate rapidly, as did
Oracle, which is adapting its enterprise data software systems for Internet
compatibility. Our technology performance was hurt by our holdings of Microsoft,
America Online, and Motorola.
The shortages of oil and natural gas supplies have improved the fortunes of
companies that explore for additional sources. For example, our holdings of
Anadarko Petroleum and Noble Affiliates moved up 45% and 74%, respectively. Our
gas pipeline companies, Enron and Williams Companies, also had substantial
gains.
6
<PAGE>
Strategy Session
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The turbulence in this year's stock market appears to reflect a greater focus on
reliable earnings growth. Although we have focused our holdings on companies
with stable earnings, we will continue to monitor those that have the highest
price/earnings multiples. These companies are still expensive compared to the
overall market, and may suffer if their earnings growth is called into question.
We may reduce or eliminate such holdings if their business strength does not
continue to support their premium share prices.
Although election year rhetoric will put occasional pressure on healthcare
stocks, we believe some stocks will make good investments for patient investors.
Pricing of their products and services is improving, and their potential market
increases as the average age of the population in the United States and Japan
continues to rise. In addition, we will probably increase our financial services
holdings once we're convinced that most investors have decided that the Federal
Reserve is not likely to raise interest rates further.
Outlook
--------------------------------------------------------------------------------
Technology stocks have been bouncing up and down with dizzying speed. We expect
this volatility to continue over the next six months or so. We think investors
will continue to be more discriminating than they were last year, rewarding
technology companies with sound businesses and shunning companies that
disappoint. We have tried to focus the Fund's holdings on companies where the
sources and amounts of future income are clear.
Portfolio Composition
as of 6/30/2000
---------------
Technology 39.5%
Consumer Growth & Staples 30.6%
Utilities 7.7%
Financials 7.3%
Industrials 6.8%
Energy 4.8%
Cash & Equivalents 3.3%
Top Ten Holdings
as of 6/30/2000
---------------
JDS Uniphase Corp. 4.6%
Intel Corp. 4.1%
Cisco Systems, Inc. 3.7%
Oracle Corp. 3.6%
Enron Corp. 3.5%
Viacom, Inc., Class B 3.4%
Tyco International, Ltd. 2.9%
AES Corp. 2.8%
General Electric Co. 2.7%
American Int'l Group, Inc. 2.7%
Source: Prudential. Holdings are subject to change.
7
<PAGE> 1
PRUDENTIAL'S GIBRALTAR FUND, INC.
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost:
$298,163,181)............................ $ 479,827,653
Cash....................................... 1,636
Receivable for investments sold............ 9,240,535
Interest and dividends receivable.......... 133,877
--------------
Total Assets............................. 489,203,701
--------------
LIABILITIES
Payable for investments purchased.......... 7,011,221
Payable to investment adviser.............. 141,603
Accrued expenses........................... 42,681
--------------
Total Liabilities........................ 7,195,505
--------------
NET ASSETS................................... $ 482,008,196
==============
Net assets were comprised of:
Common stock, at $1 par value............ $ 27,396,268
Paid-in capital, in excess of par........ 214,224,304
--------------
241,620,572
Undistributed net investment income........ 1,152,018
Accumulated net realized gain on
investments.............................. 57,571,134
Net unrealized appreciation on
investments.............................. 181,664,472
--------------
Net assets, June 30, 2000.................. $ 482,008,196
==============
Net asset value and redemption price per
share, 27,396,268 outstanding shares of
common stock (authorized 75,000,000
shares).................................... $ 17.59
==============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Dividends.................................. $ 1,030,199
Interest................................... 416,604
--------------
1,446,803
--------------
EXPENSES
Investment advisory fee.................... 289,346
Directors' fees............................ 1,850
Custodian's fees and expenses.............. 1,300
Miscellaneous expenses..................... 2,289
--------------
Total expenses........................... 294,785
--------------
NET INVESTMENT INCOME........................ 1,152,018
--------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 38,680,707
Net change in unrealized appreciation on
investments.............................. 15,338,675
--------------
NET GAIN ON INVESTMENTS...................... 54,019,382
--------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 55,171,400
==============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income................................... $ 1,152,018 $ 2,410,250
Net realized gain on investments........................ 38,680,707 48,396,443
Net change in unrealized appreciation on investments.... 15,338,675 79,517,050
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... 55,171,400 130,323,743
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income.................. -- (2,491,343)
Distributions from net realized capital gains......... -- (35,800,340)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS..................... -- (38,291,683)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Capital stock issued in reinvestment of dividends and
distributions [-0- and 2,578,010 shares,
respectively].......................................... -- 36,911,543
Capital stock repurchased [(1,410,043) and (2,927,759)
shares, respectively].................................. (24,452,655) (40,160,866)
------------ ------------
NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK
TRANSACTIONS........................................... (24,452,655) (3,249,323)
------------ ------------
TOTAL INCREASE IN NET ASSETS.............................. 30,718,745 88,782,737
NET ASSETS:
Beginning of period..................................... 451,289,451 362,506,714
------------ ------------
End of period (a)....................................... $482,008,196 $451,289,451
============ ============
(a) Includes undistributed net investment income of:.... $ 1,152,018 $ --
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A1
<PAGE> 2
PRUDENTIAL'S GIBRALTAR FUND, INC.
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 96.7% VALUE
SHARES (NOTE 1)
COMMON STOCKS ---------- --------------
<S> <C> <C>
ADVERTISING -- 2.0%
Young & Rubicam, Inc. ............. 169,000 $ 9,664,688
--------------
BANKS AND SAVINGS & LOANS -- 3.1%
Chase Manhattan Corp. ............. 102,150 4,705,284
Citigroup, Inc. ................... 113,000 7,011,221
Wells Fargo & Co. ................. 79,300 3,072,875
--------------
14,789,380
--------------
BROADCASTING SERVICES -- 1.8%
Infinity Broadcasting Corp. (Class
"A" Stock)(a).................... 234,300 8,537,306
--------------
COMPUTER SERVICES -- 15.7%
America Online, Inc. (a)........... 157,200 8,292,300
Cisco Systems, Inc. (a)............ 279,700 17,778,431
Comverse Technology, Inc. (a)...... 83,100 7,728,300
EMC Corp. (a)...................... 158,200 12,171,513
Microsoft Corp. (a)................ 151,400 12,112,000
Oracle Corp. (a)................... 208,900 17,560,656
--------------
75,643,200
--------------
COSMETICS & SOAPS -- 2.8%
Colgate-Palmolive Co. ............. 123,300 7,382,587
Gillette Co. ...................... 64,800 2,263,950
Procter & Gamble Co. .............. 70,300 4,024,675
--------------
13,671,212
--------------
DIVERSIFIED OPERATIONS -- 2.7%
General Electric Co. .............. 244,000 12,932,000
--------------
DRUGS & MEDICAL SUPPLIES -- 10.2%
Abbott Laboratories................ 177,500 7,909,844
Bristol-Myers Squibb Co. .......... 186,500 10,863,625
Cardinal Health, Inc. ............. 66,750 4,939,500
Merck & Co., Inc. ................. 107,700 8,252,513
Pfizer, Inc. ...................... 192,000 9,216,000
Pharmacia Corp. ................... 159,859 8,262,712
--------------
49,444,194
--------------
ELECTRONICS -- 17.3%
Altera Corp. (a)................... 112,600 11,478,162
Applied Materials, Inc. (a)........ 104,100 9,434,063
Intel Corp. ....................... 149,200 19,946,175
JDS Uniphase Corp. (a)............. 183,200 21,961,100
LSI Logic Corp. (a)................ 200,500 10,852,062
Motorola, Inc. .................... 332,700 9,669,094
--------------
83,340,656
--------------
FINANCIAL SERVICES -- 4.2%
MBNA Corp. ........................ 371,000 10,063,375
Providian Financial Corp. ......... 114,750 10,327,500
--------------
20,390,875
--------------
FOOD & BEVERAGE -- 2.3%
PepsiCo, Inc. ..................... 249,200 11,073,825
--------------
GAS PIPELINES -- 4.9%
Enron Corp. ....................... 262,700 16,944,150
Williams Companies, Inc. .......... 162,300 6,765,881
--------------
23,710,031
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
(CONTINUED) ---------- --------------
<S> <C> <C>
HOSPITALS/HEALTHCARE -- 0.6%
IMS Health, Inc. .................. 167,000 $ 3,006,000
--------------
INSURANCE -- 2.7%
American International Group,
Inc. ............................ 108,927 12,798,922
--------------
MANUFACTURING -- 4.1%
Illinois Tool Works, Inc. ......... 102,500 5,842,500
Tyco International, Ltd. .......... 295,600 14,004,050
--------------
19,846,550
--------------
MEDIA -- 5.8%
Clear Channel Communications,
Inc. (a)......................... 93,900 7,042,500
Interpublic Group of Companies,
Inc. ............................ 105,400 4,532,200
Viacom, Inc. (Class "B" Stock)
(a).............................. 243,386 16,595,883
--------------
28,170,583
--------------
MISCELLANEOUS BASIC INDUSTRY -- 2.8%
AES Corp. (a)...................... 296,000 13,505,000
--------------
OIL & GAS -- 3.8%
Anadarko Petroleum Corp. .......... 177,600 8,757,900
Burlington Resources, Inc. ........ 116,200 4,444,650
Noble Affiliates, Inc. ............ 132,200 4,924,450
--------------
18,127,000
--------------
OIL & GAS SERVICES -- 1.0%
Baker Hughes, Inc. ................ 149,900 4,796,800
--------------
RESTAURANTS -- 1.2%
McDonald's Corp. .................. 176,600 5,816,763
--------------
RETAIL -- 1.2%
CVS Corp. ......................... 138,900 5,556,000
--------------
TELECOMMUNICATIONS -- 6.5%
Corning, Inc. ..................... 46,200 12,468,225
Lucent Technologies, Inc. ......... 137,000 8,117,250
WorldCom, Inc. (a)................. 234,300 10,748,512
--------------
31,333,987
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $284,490,500)............................ 466,154,972
--------------
<CAPTION>
PRINCIPAL
AMOUNT
SHORT-TERM (000)
INVESTMENT -- 2.8% ----------
<S> <C> <C>
COMMERCIAL PAPER
Barton Capital Corp.,
7.00%, 07/03/00 (cost
$13,672,681)..................... $ 13,673 13,672,681
--------------
TOTAL INVESTMENTS -- 99.5%
(cost $298,163,181; Note 3).................... 479,827,653
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.5%............................ 2,180,543
--------------
NET ASSETS -- 100.0%............................. $ 482,008,196
==============
</TABLE>
(a) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS.
B1
<PAGE> 3
NOTES TO THE FINANCIAL STATEMENTS OF
PRUDENTIAL'S GIBRALTAR FUND, INC.
GENERAL
Prudential's Gibraltar Fund, Inc. (the "Fund") was originally
incorporated in the State of Delaware on March 14, 1968 and was
reincorporated in the State of Maryland effective May 1, 1997. It is
registered as an open-end, diversified management investment company
under the Investment Company Act of 1940, as amended. The investment
objective of the fund is growth of capital to the extent compatible with
a concern for preservation of principal by investing in common stocks
and other securities convertible into common stock. The Fund was
organized by The Prudential Insurance Company of America (The
Prudential) to serve as the investment medium for the variable contract
accounts of The Prudential Financial Security Program. The Fund does not
sell its shares to the public. The accounts will redeem shares of the
Fund to the extent necessary to provide benefits under the contracts or
for such other purposes as may be consistent with the contracts.
NOTE 1: ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
by the fund in the preparation of its financial statements.
Securities Valuation: NASDAQ National Market System equity securities
and securities for which the primary market is an exchange are generally
valued at the last sale price on such system or exchange on that day or,
in the absence of recorded sales, at the mean between the most recently
quoted bid and asked prices on that day or at the bid price on such day
in the absence of an asked price. Other over-the-counter equity
securities are valued by an independent pricing agent or principal
market maker. Debt securities with maturities of more than 60 days are
valued using an independent pricing service and debt securities with
maturities of less than 60 days are valued at amortized cost. Portfolio
securities or assets for which market quotations are not readily
available will be valued at fair value as determined in good faith by or
under authority of the Fund's Board of Directors.
Repurchase Agreements: In connection with transactions in repurchase
agreements with U.S. financial institutions. It is the Fund's policy
that its custodian or designated subcustodians, as the case may be under
triparty repurchase agreements, take possession of the underlying
collateral securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. If the seller
defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Securities Transactions and Net Investment Income: Securities
transactions are recorded on the trade date. Realized gains and losses
on sales of investments are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date and interest income
is recorded on the accrual basis. Expenses are recorded on the accrual
basis which may require the use of certain estimates by management.
Dividends and Distributions: Dividends from net investment income are
declared and paid semi-annually. The Fund will distribute at least
annually net capital gains in excess of capital loss carryforwards, if
any. Dividends and distributions are recorded on the ex-dividend date.
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. Some dividends may be paid in cash.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles.
Taxes: It is the Fund's policy to continue to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable net income to its shareholders.
Therefore, no federal income tax provision is required.
Withholding taxes on foreign dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax
rules and rates.
C1
<PAGE> 4
NOTE 2: INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Advisory Fee: The investment advisory fee, which is computed
daily at an effective annual rate of 0.125% of the average net assets of
the Fund, is payable quarterly to The Prudential Insurance Company of
America ("The Prudential") as required under the investment advisory
agreement.
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 including
custodian fees.
During the six months ended June 30, 2000, Prudential Securities
Incorporated, an affiliate of The Prudential, earned approximately
$4,700 in brokerage commissions as a result of executing transactions in
portfolio securities on behalf of the Fund.
NOTE 3: PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term
investments, for the six months ended June 30, 2000 aggregated
$55,089,997 and $80,028,938, respectively.
The federal income tax basis of the Fund's investments as of June 30,
2000 was $298,179,573 and, accordingly, net unrealized appreciation for
federal income tax purposes was $181,648,080 (gross unrealized
appreciation -- $187,992,535; gross unrealized
depreciation -- $6,344,455).
C2
<PAGE> 5
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
PRUDENTIAL'S GIBRALTAR FUND, INC.
--------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, -------------------------------------------
2000 1999 1998 1997 1996 1995(A)
---------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period...... $15.67 $12.43 $10.95 $11.43 $10.14 $ 9.40
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.04 0.10 0.12 0.22 0.16 0.18
Net realized and unrealized gains (losses)
on investments.......................... 1.88 4.57 2.61 1.84 2.56 1.65
------ ------ ------ ------ ------ ------
Total from investment operations...... 1.92 4.67 2.73 2.06 2.72 1.83
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income...... -- (0.09) (0.12) (0.21) (0.15) (0.17)
Distributions from net realized gains..... -- (1.34) (1.13) (2.33) (1.28) (0.92)
------ ------ ------ ------ ------ ------
Total distributions................... -- (1.43) (1.25) (2.54) (1.43) (1.09)
------ ------ ------ ------ ------ ------
Net Asset Value, end of period............ $17.59 $15.67 $12.43 $10.95 $11.43 $10.14
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(B)................ 12.30% 38.92% 25.89% 18.88% 27.13% 19.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)... $482.0 $451.3 $362.5 $325.9 $301.3 $261.2
Ratios to average net assets:
Expenses................................ 0.13%(c) 0.13% 0.13% 0.15% 0.16% 0.14%
Net investment income................... 0.50%(c) 0.63% 0.96% 1.56% 1.38% 1.68%
Portfolio turnover rate................... 12% 39% 105% 101% 97% 105%
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
D1
<PAGE>
--------------------------------------------------------------------------------
Prudential's Gibraltar Fund, Inc.
Board of Directors
--------------------------------------------------------------------------------
John R. Strangfeld
Chairman,
Prudential's Gibraltar Fund, Inc.
Saul K. Fenster, Ph.D.
President,
New Jersey Institute of Technology
W. Scott McDonald, Jr., Ph.D.
Vice President,
Kaludis Consulting Group
Joseph Weber, Ph.D.
Vice President,
Interclass (international corporate learning)
<PAGE>
This report is not authorized for distribution unless preceded or accompanied by
a current prospectus. Additional information is contained in the prospectuses
for Systematic Investment Plan Contracts, Variable Annuity Contracts and
Prudential's Gibraltar Fund, Inc. These prospectuses contain specific
information concerning sales charges and other material facts and should be read
carefully before you invest or send money.
For service related questions, please contact the Financial Security Program
service area at:
(215) 784-3805
[LOGO OF PRUDENTIAL]
Prudential
P.O. Box 645
Fort Washington, PA 19034-0645
------------
Presorted
Standard
U.S.Postage
PAID
Prudential
------------
