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Deficient management leads INDITEX on the verge of fail
BUCHAREST,
ROMANIA - Zara wants to cover losses from theft with employees’
money.
The management, theft and losses give headaches to the Spanish
group INDITEX, the owner of the ZARA chain. Only 10 months before, on
July 25th, 2011, the publication Ziarul Financiar
announced the fact that “INDITEX takes the manager from the
Douglas perfumeries” pointing at Paul Cuza, who previously had
the function of General Manager for Parfumerie Douglas SRL.
Currently, the Romanian INDITEX group performs salary and structural
changes without precedent, which the management team from Bucharest doesn’t want to explain.
The problem of the clothes theft is a known phenomenon, especially
when it comes to expensive brands such as ZARA or Massimo Dutti. The
phenomenon was publicly recognized even by the management of the
INDITEX Group Romania, two years before. Probably worried by this
fact, Mihai Cioltea, the development manager of the INDITEX Group
from Romania, also named by the press as “the Zara man”,
stated in 2010 for the economic website InCont the following: “They
steal a lot. Only for the stores in Bucharest we have 10 cases of
stealing per day, which we discover and, depending on the severity,
we call the police”.[...]
Read the rest of the article...
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T H E P R U D E N T I A L I N S U R A N C E C O M P A N Y O F A M E R I C A
LONG TERM
GROWTH
ACCOUNT
COMMITTED TO PROVIDING
SUPERIOR INVESTMENT,
ADMINISTRATIVE AND
RECORDKEEPING SERVICES
TO INSTITUTIONAL CLIENTS
Prudential Defined Contribution Services
30 Scranton Office Park
Moosic, PA 18507-1789
(1) 800-458-6333
J U N E 3 0, 1 9 9 5 R E P O R T T O P A R T I C I P A N T S
This report is for the information of persons participating in The Prudential
Variable Contract Account-2 (VCA-2, Long Term Growth Account, or the Account).
Under contracts entered into in 1968, The Prudential Insurance Company of
America (The Prudential) is responsible for providing administrative and
investment management services to VCA-2. During 1984, The Prudential reorganized
its pension and investment departments and transferred certain of their
personnel to subsidiary companies. As a result, The Prudential now receives,
from The Prudential Asset Management Company, Inc. and The Prudential Investment
Corporation, the administrative and investment management services,
respectively, that The Prudential requires to perform its obligations under
contracts with VCA-2. These changes in no way affect The Prudential's
responsibility to VCA-2 for these services.
INVESTMENT OBJECTIVE
VCA-2 will invest primarily in common stocks selected with the objective of
long-term growth, taking into account both income and capital appreciation.
Investments will be made according to the standards of a prudent investor
concerned primarily with the preservation of capital and the long-term prospects
for its growth in relation to both the growth of the economy and the changing
value of the dollar. There is no assurance that this investment objective will
be attained. There is no guarantee that the amount available to a person for
whom purchase payments have been made will equal or exceed the total purchase
payments made on that person's behalf. The value of the investments held in
VCA-2 fluctuates daily, and is subject to the risks of changing economic
conditions and risks inherent in the selection of investments necessary to meet
the Account's objective.
GP-4402
VCA-2
INVESTMENT ENVIRONMENT
The S&P 500 picked up where it left off in the first quarter, charging ahead
9.5% in the second quarter, resulting in a 20.2% return for the first six months
of 1995. Driving the market higher were good corporate earnings, an economy
which appeared to be slowing just enough, subdued inflation, and falling
interest rates.
Far and away, the best performing sector was Technology, up 24% for the quarter
and 39% for the year-to-date. This reflects the proliferation of technological
integration taking place on both a business and a personal level. Business has
increased spending on technology in its attempt to become more efficient, while
individuals have become more acclimated to and found more uses for home
computers. Also driving the Technology sector was the excitement generated by
Microsoft's new operating system "Windows 95", and company earnings within the
sector showing enough momentum to make it through the economic slowdown
unscathed. The Finance sector was the second best performing sector of the
quarter and year-to-date, as it was helped by both falling interest rates and
merger/takeover activity in the banking industry.
Lagging sectors for the quarter included Energy and Consumer Cyclical. Energy
companies were hurt by falling prices, especially in the natural gas area, where
heavy supply adversely affected pricing. In addition, a warm winter and early
summer have held down demand. Poor performance in housing-related stocks dragged
down performance in the Consumer Cyclical sector, as investors were disappointed
with the lack of an expected snapback in housing activity as interest rates
declined.
STOCK MARKET RETURNS
with invested dividends
PERIODS ENDED JUNE 30, 1995
SIX MONTHS ONE YEAR
S&P 500 20.2% 26.1%
Returns by Economic Sector:
Energy 14.7 18.9
Utility 13.3 12.0
Technology 39.0 66.4
Finance 26.8 21.3
Basic Industry 18.4 20.5
Consumer Cyclical 11.9 4.9
Consumer Growth 19.4 35.5
|
INVESTMENT ACTIVITY
During the first half of 1995, VCA-2's significant overweighting in the
Industrial sector was increased while its overweighting in the Financial sector
was reduced. The Account retained its underweighting in Utilities and the
underweightings in Technology and Consumer Growth stocks were increased. The
Account's underweighting in the Energy sector was reduced, while it remains
neutral in the Consumer Cyclical sector.
2
Significant purchases during the first six months of 1995 included several from
the Industrial sector, notably the chemical companies Uniroyal Chemical Corp.
and EI DuPont. Occidental Petroleum, an oil and gas company, was also a major
purchase during the period. Significant sales during the half included the
railroad holding company Chicago & Northwest, which was purchased by Union
Pacific, and Mead, whose price increase dictated some profit-taking. Consumer
Growth stocks such as ATM manufacturer, Diebold Inc. and Caesars World, which
was acquired by ITT Corp., were also sold. In the Technology sector, National
Data was sold, as was Ply Gem Industries from the Consumer Cyclical sector and a
regional bank, Keycorp. In addition, Healthtrust, Inc. was acquired by the
healthcare service provider, Columbia HCA, increasing the Account's holdings in
the latter.
INVESTMENT OUTLOOK
It appears quite possible that, when all is said and done, the Fed will have
steered the economy to a path of sustainable growth and subdued inflation. The
recent easing by the Fed shows its resolve not to let the economy slow too much,
as well as its conviction that inflation is under control.
Market returns are not expected to continue at the pace of the first six months.
Valuations are at fair to slightly overvalued levels and sentiment has become
decidedly positive. Therefore, while a significant downside isn't expected
because the chances of a recession are low, neither is a significant upside
anticipated.
INVESTMENT PERFORMANCE
VCA-2 was up 13.9% during the first six months of 1995, underperforming the S&P
500 index by 6.3%. This was primarily the result of poor relative performance
and an underweighting within the Technology sector, the top performer during the
first half of the year. A lack of computer hardware holdings, underweightings in
the software & services and electronics industries and poor stock selection in
aerospace/defense each contributed. Underperformance in the Consumer Growth
sector also hurt the Account. This was principally a result of underweightings
in several of the sector's strongly performing industries, such as foods,
beverages, drugs & medical supplies and tobacco. Offsetting some of the
Account's relative underperformance was a strong showing in the Consumer
Cyclical sector, especially in the autos & trucks, housing related and
textile/apparel industries.
3
CONDENSED FINANCIAL INFORMATION FOR VCA-2
INCOME AND CAPITAL CHANGES PER ACCUMULATION UNIT
(For an Accumulation Unit outstanding throughout the period)
---------------------------------------------------------------------------------
SIX
MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER
1995 31, 1994
---------------------------------------------------------------------------------
INVESTMENT INCOME......................................... $ .1024 $ .1896
---------------------------------------------------------------------------------
EXPENSES
For investment management fee........................... .0079 .0151
For assuming mortality and expense risks................ .0236 .0453
---------------------------------------------------------------------------------
NET INVESTMENT INCOME..................................... .0709 .1292
---------------------------------------------------------------------------------
CAPITAL CHANGES
Net realized gain on investments........................ .3255 1.0028
Net unrealized appreciation/(depreciation) of
investments........................................... 1.2693 (1.2955)
---------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN ACCUMULATION UNIT VALUE........ 1.6657 (.1635)
---------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE
Beginning of period..................................... 11.9932 12.1567
End of period........................................... $13.6589 $11.9932
---------------------------------------------------------------------------------
SUM OF AVERAGE RATIOS for the period of (a) charge for
investment management fee to net assets*, and (b) charge
for assuming mortality and expense risks to net
assets*................................................. .2467% .4991%
---------------------------------------------------------------------------------
AVERAGE RATIO for the period of net investment income to
net assets.............................................. .5550% 1.0664%
---------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE................................... 19.23% 36.85%
---------------------------------------------------------------------------------
NUMBER OF ACCUMULATION UNITS OUTSTANDING for Participants
at end of period (000 omitted).......................... 31,872 32,624
---------------------------------------------------------------------------------
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*These calculations exclude The Prudential's equity in VCA-2.
The above table does not reflect the annual administration charge, which does
not affect the Accumulation Unit Value. This charge is made by reducing
Participants' Accumulation Accounts by a number of Accumulation Units equal in
value to the charge.
While both income and capital changes are shown above, the distinction between
these sources of change in VCA-2 is not particularly significant to
Participants. There is no distinction between income and realized and unrealized
gains and losses on investments in determining the amount of the Participant's
benefits and the taxes payable by the Participant on them.
4
FINANCIAL STATEMENTS OF VCA-2
STATEMENT OF NET ASSETS (UNAUDITED) JUNE 30, 1995
COMMON STOCK
INVESTMENTS [NOTE 2] SHARES MARKET VALUE
--------------------------------------------------------------------
AEROSPACE/DEFENSE (2.7%)
Gen Corp. 218,500 $ 2,348,875
General Motors Corp. (Class 'H' Stock) 107,700 4,254,150
Litton Industries, Inc.+ 126,800 4,675,750
UNC, Inc.+ 213,200 1,145,950
------------
12,424,725
--------------------------------------------------------------------
AUTOS & TRUCKS (2.5%)
A.O. Smith Corp. 120,000 2,820,000
Automotive Industries Holding, Inc.+ 243,600 6,607,650
Modine Manufacturing Co. 63,500 2,333,625
------------
11,761,275
--------------------------------------------------------------------
CHEMICALS (5.2%)
Cytec Industries, Inc.+ 67,100 2,751,100
E.I. Dupont De Nemours & Co. 86,200 5,926,250
Imperial Chemical Industries (ADRs) 100,000 4,875,000
Mississippi Chemical Corp. 118,100 2,354,619
Uniroyal Chemical Corp.+ 446,600 5,080,075
W.R. Grace & Co. 49,800 3,056,475
------------
24,043,519
--------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES (0.7%)
General Motors Corp. (Class 'E' Stock) 72,000 3,132,000
--------------------------------------------------------------------
CONSUMER SERVICES (0.5%)
ADT Ltd.+ 204,300 2,400,525
--------------------------------------------------------------------
CONTAINERS & PACKAGING (0.5%)
Owens Illinois, Inc.+ 191,000 2,483,000
--------------------------------------------------------------------
COSMETICS & SOAPS (0.5%)
Bush Boake Allen, Inc.+ 75,000 2,278,125
--------------------------------------------------------------------
DIVERSIFIED CONSUMER PRODUCTS (2.1%)
Eastman Kodak Co. 41,100 2,491,688
Whitman Corp. 364,400 7,060,250
------------
9,551,938
--------------------------------------------------------------------
DRUGS & MEDICAL SUPPLIES (4.2%)
Gelman Sciences, Inc.+ 268,900 5,075,488
Schering Plough Corp. 104,400 4,606,650
Warner Lambert Co. 57,900 5,001,112
Zeneca Group PLC (ADRs) 89,300 4,576,625
------------
19,259,875
--------------------------------------------------------------------
ELECTRICAL EQUIPMENT (2.5%)
Belden, Inc. 180,900 4,884,300
Cable Design Technologies+ 198,300 4,263,450
Littelfuse, Inc.+ 75,000 2,348,437
------------
11,496,187
--------------------------------------------------------------------
COMMON STOCK
INVESTMENTS [NOTE 2] SHARES MARKET VALUE
--------------------------------------------------------------------
ELECTRONICS (3.8%)
ITEL Corp.+ 131,600 $ 5,132,400
Marshall Industries+ 166,900 5,591,150
Methode Electronics, Inc. 350,000 6,825,000
------------
17,548,550
--------------------------------------------------------------------
ENGINEERING & CONSTRUCTION (0.9%)
Giant Cement Holding, Inc.+ 348,100 4,264,225
--------------------------------------------------------------------
EXPLORATION & PRODUCTION (3.9%)
Basin Exploration, Inc.+ 100,000 593,750
Cabot Oil & Gas Corp. 225,600 3,102,000
Enron Oil & Gas 149,100 3,242,925
Mesa Incorporated+ 303,000 1,439,250
Murphy Oil Corp. 12,500 512,500
Oryx Energy Co.+ 300,000 4,125,000
Parker & Parsley Development Co. 150,000 2,943,750
Seagull Energy+ 121,800 2,009,700
------------
17,968,875
--------------------------------------------------------------------
FINANCIAL SERVICES (3.7%)
American Express Co. 125,000 4,406,250
Dean Witter Discover & Co. 188,300 8,850,100
Financial Security Assurance Holding 94,700 2,367,500
ITT Corp. 10,600 1,245,500
------------
16,869,350
--------------------------------------------------------------------
FOOD/DRUG RETAIL (0.5%)
Rite Aid Corp. 91,000 2,331,875
--------------------------------------------------------------------
FOREST PRODUCTS (0.6%)
Mead Corp. 43,100 2,559,063
--------------------------------------------------------------------
HOSPITAL MANAGEMENT (3.8%)
Columbia HCA Healthcare Corp. 180,188 7,793,131
Community Health Systems+ 87,000 2,947,125
Tenet Healthcare+ 480,000 6,900,000
------------
17,640,256
--------------------------------------------------------------------
HOUSING RELATED (3.2%)
Interco, Inc.+ 450,000 2,643,750
Leggett & Platt, Inc. 27,500 1,210,000
Mueller Industries, Inc.+ 120,000 5,910,000
Owens Corning Fiberglas Corp.+ 135,300 4,989,187
------------
14,752,937
--------------------------------------------------------------------
|
5
FINANCIAL STATEMENTS OF VCA-2
STATEMENT OF NET ASSETS (UNAUDITED) JUNE 30, 1995
COMMON STOCK
INVESTMENTS [NOTE 2] SHARES MARKET VALUE
--------------------------------------------------------------------
INSURANCE (6.6%)
Emphesys Financial Group 86,600 $ 2,045,925
Equitable of Iowa Companies 240,000 7,890,000
NAC Re Corp. 40,000 1,245,000
National Re Corp. 103,000 3,450,500
Reinsurance Group of America 144,100 4,124,863
TIG Holdings, Inc. 150,000 3,450,000
Trenwick Group, Inc. 60,000 2,550,000
Western National Corp. 359,900 4,453,762
W.R. Berkley Corp. 42,000 1,491,000
------------
30,701,050
--------------------------------------------------------------------
INTEGRATED PRODUCERS (1.9%)
Elf Aquitaine (ADRs) 125,000 4,656,250
Occidental Petroleum Corp. 188,200 4,305,075
------------
8,961,325
--------------------------------------------------------------------
MACHINERY (6.8%)
Applied Power Co. (Class 'A' Stock) 264,000 7,623,000
Bearings, Inc. Ohio 35,900 1,099,437
Donaldson, Inc. 220,000 5,747,500
Idex Corp. 135,000 4,522,500
Indresco, Inc.+ 314,200 4,870,100
Parker Hannifan Corp. 77,100 2,794,875
Regal Beloit Corp. 307,900 4,772,450
------------
31,429,862
--------------------------------------------------------------------
MEDIA (10.1%)
American Publishing Co. (Class 'A'
Stock) 218,300 2,346,725
Central Newspapers (Class 'A' Stock) 65,300 1,934,512
Comcast Corp. (Class 'A' Stock) 180,000 3,273,750
Comcast Corp. Special (Class 'A' Stock) 90,000 1,670,625
Cox Communication (Class 'A' Stock)+ 173,687 3,365,186
E.W. Scripps Co. (Class 'A' Stock) 100,000 3,225,000
Harcourt General, Inc. 68,800 2,924,000
Lee Enterprises 114,500 4,365,313
Pulitzer Publishing Co. 55,750 2,376,344
T C A Cable TV, Inc. 120,000 3,240,000
Telecommunication (New) (Class 'A'
Stock)+ 240,000 5,625,000
Time-Warner, Inc. 206,900 8,534,625
Times Mirror Co. (Series A) 155,694 3,717,194
------------
46,598,274
--------------------------------------------------------------------
COMMON STOCK
INVESTMENTS [NOTE 2] SHARES MARKET VALUE
--------------------------------------------------------------------
MISCELLANEOUS-INDUSTRIAL (10.8%)
Alltrista Corp.+ 132,900 $ 2,558,325
Ametek, Inc. 190,000 3,420,000
Coltec Industries, Inc.+ 107,400 1,852,650
Crane Co. 60,600 2,196,750
Danaher Corp. 131,000 3,995,500
Figgie International Holdings, Inc.
(Class 'A' Stock)+ 450,000 3,881,250
Honeywell, Inc. 52,100 2,246,813
Jason, Inc.+ 310,800 3,185,700
Mark IV Industries, Inc. 224,200 4,848,325
Material Sciences Corp.+ 178,500 3,636,938
Pentair, Inc. 124,300 5,407,050
Rockwell International Corp. 49,800 2,278,350
United Technologies, Inc. 30,000 2,343,750
Varlen Corp. 147,950 3,476,825
Wolverine Tube, Inc.+ 138,500 4,449,312
------------
49,777,538
--------------------------------------------------------------------
MONEY CENTER BANKS (1.3%)
First Interstate Bancorp 75,000 6,018,750
--------------------------------------------------------------------
RAILROADS (1.9%)
Greenbrier Companies, Inc. 358,800 4,709,250
Illinois Central Corp. 124,500 4,295,250
------------
9,004,500
--------------------------------------------------------------------
REGIONAL BANKS (6.6%)
Bank of Boston Corp. 91,900 3,446,250
Cullen Frost Bankers, Inc. 150,000 6,075,000
First Bank System, Inc. 187,310 7,679,710
Norwest Corp. 328,500 9,444,375
Summit Bancorp 173,360 3,683,900
------------
30,329,235
--------------------------------------------------------------------
RESTAURANTS (1.6%)
Morrison Restaurants, Inc. 66,600 1,598,400
Sbarro, Inc. 187,500 4,359,375
Shoney's, Inc.+ 125,800 1,478,150
------------
7,435,925
--------------------------------------------------------------------
RETAIL (0.5%)
Ethan Allen Interiors, Inc.+ 70,800 1,256,700
Haverty Furniture, Inc. 100,500 1,030,125
------------
2,286,825
--------------------------------------------------------------------
SPECIALTY CHEMICALS (3.1%)
Ferro Corp. 227,400 6,026,100
M.A. Hanna Co. 148,500 3,861,000
OM Group, Inc. 151,000 4,303,500
------------
14,190,600
--------------------------------------------------------------------
|
6
FINANCIAL STATEMENTS OF VCA-2
STATEMENT OF NET ASSETS (UNAUDITED) JUNE 30, 1995
COMMON STOCK
INVESTMENTS [NOTE 2] SHARES MARKET VALUE
--------------------------------------------------------------------
TELECOMMUNICATION SERVICES (3.2%)
Airtouch Communication, Inc.+ 65,000 $ 1,852,500
Century Telephone Enterprises, Inc. 125,000 3,546,875
Frontier Corporation 200,000 4,775,000
MCI Communications Corp. 217,700 4,789,400
------------
14,963,775
--------------------------------------------------------------------
TEXTILES/APPAREL (1.9%)
Fieldcrest Cannon, Inc.+ 185,900 4,020,087
Paxar Corp.+ 256,200 4,579,575
------------
8,599,662
--------------------------------------------------------------------
TOTAL COMMON STOCK INVESTMENTS (98.1%)
(Cost: $361,588,938) $453,063,621
--------------------------------------------------------------------
PREFERRED STOCK
INVESTMENTS [NOTE 2]
--------------------------------------------------------------------
MEDIA (0.3%)
Times Mirror CV 66,506 $ 1,587,831
--------------------------------------------------------------------
TOTAL PREFERRED STOCK INVESTMENTS (0.3%)
(Cost: $1,381,515) 1,587,831
--------------------------------------------------------------------
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
--------------------------------------------------------------------
Mitsubishi Bank Ltd., 6.4375%, Euro Time
Deposit, Due 07/03/95 $ 8,988,000 $ 8,988,000
--------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (1.9%)
(Cost: $8,988,000) 8,988,000
--------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(Cost: $371,958,453) $463,639,452
--------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES
Bank Overdraft (2,238,966)
Dividends and Interest Receivable 442,110
Receivable for Investments Sold 578,013
Pending Transfers (389,106)
--------------------------------------------------------------------
TOTAL OTHER ASSETS, LESS LIABILITIES
(-0.3%) (1,607,949)
--------------------------------------------------------------------
NET ASSETS (100%) $462,031,503
--------------------------------------------------------------------
NET ASSETS, REPRESENTING:
Equity of Participants (other than Annuitants)
31,871,514 Accumulation Units at an Accumulation
Unit Value of $13.6589 (rounded) 435,331,189
Equity of Annuitants 22,403,578
Equity of The Prudential Insurance Company of
America 4,296,736
------------
$462,031,503
--------------------------------------------------------------------
--------------------------------------------------------------------
|
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipts
PLC Public Limited Company
+No cash dividend was paid on these securities during the twelve month period
from July 1, 1994 through June 30, 1995.
SEE NOTES TO FINANCIAL STATEMENTS
7
FINANCIAL STATEMENTS OF VCA-2
STATEMENT OF OPERATIONS (UNAUDITED)
------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30 1995
------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME [NOTE 2]
Dividends $ 3,310,309
Interest 279,048
------------------------------------------------------------------------------------------------------------
3,589,357
EXPENSES [NOTE 3]
Fees Charged to Participants for Investment Management Services 280,508
Fees Charged to Participants (other than Annuitants) for Assuming Mortality and Expense Risks 798,272
------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME--NET 2,510,577
------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--NET
Realized Gain on Investments--Net 11,402,577
Unrealized Increase in Value of Investments--Net 43,289,480
------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 54,692,057
------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $57,202,634
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
|
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
-------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER
JUNE 30, 1995 31, 1994
-------------------------------------------------------------------------------------------------------
OPERATIONS
Investment Income--Net $ 2,510,577 $ 4,721,118
Realized Gain on Investments--Net 11,402,577 35,115,467
Unrealized Increase/(Decrease) in Value of
Investments--Net 43,289,480 (45,435,899)
-------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 57,202,634 (5,599,314)
-------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Purchase Payments and Transfers In [Note 3] 11,297,183 18,494,103
Withdrawals and Transfers Out (20,922,288) (22,143,730)
Annual Administration Charges Deducted From Participants'
Accumulation Accounts [Note 3] (910) (42,008)
Mortality & Expense Risk Charges Deducted From Annuitants'
Accounts [Note 3] (43,250) (92,130)
Variable Annuity Payments (1,375,095) (2,855,584)
-------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS (11,044,360) (6,639,349)
-------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM SURPLUS TRANSFERS [NOTE 6] (6,007) (13,605)
-------------------------------------------------------------------------------------------------------
TOTAL INCREASE/(DECREASE) IN NET ASSETS 46,152,267 (12,252,268)
NET ASSETS
Beginning of Period 415,879,236 428,131,504
-------------------------------------------------------------------------------------------------------
End of Period $ 462,031,503 $ 415,879,236
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
|
SEE NOTES TO FINANCIAL STATEMENTS
8
NOTES TO FINANCIAL STATEMENTS OF VCA-2 (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND YEAR ENDED DECEMBER 31, 1994
NOTE 1: GENERAL
The Prudential Variable Contract Account-2 (VCA-2 or the Account) was
established by The Prudential Insurance Company of America (The
Prudential) under the laws of the State of New Jersey and is registered
as an open-end, diversified management investment company under the
Investment Company Act of 1940, as amended. VCA-2 has been designed for
use by public school systems and certain tax-exempt organizations to
provide for the purchase and payment of tax-deferred variable
annuities. Its investments are composed primarily of common stocks. All
contractual and other obligations arising under contracts participating
in VCA-2 are general corporate obligations of The Prudential, although
Participants' payments from the Account will depend upon the investment
experience of the Account.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. INVESTMENTS
EQUITY SECURITIES
The value of securities (except fixed income securities including
convertible bonds) held in VCA-2 will be determined once daily as of
5:00 P.M., New York time ("Valuation Time") using composite pricing
which reflects prices as of the close of business on all major
exchanges, on each day on which the New York Stock Exchange ("NYSE") is
open for trading and, as provided below, on any other day in which
there is sufficient trading in VCA-2's portfolio securities to result
in a material change in the value of the Account. A security that is
traded on a national securities exchange will be valued at the last
sale price for such security on any major exchange on which such
security is traded as of Valuation Time, or, in the absence of recorded
sales on such exchange on the valuation date, at the average of readily
available bid and asked prices on such exchange at the Valuation Time.
Any security not traded on a national securities exchange but traded in
the over-the-counter market for which quotations are furnished through
the nationwide automated quotation system approved by the National
Association of Securities Dealers, Inc. ("NASDAQ") will be valued based
on the last sale price as of the Valuation Time on each day on which
the NYSE is open for trading, or, in the absence of recorded sales on
such day, at the average of readily available bid and asked prices, as
established by NASDAQ at the Valuation Time. Unlisted securities not
quoted on NASDAQ are valued at the average of the quoted bid and asked
prices in the over-the-counter market at the Valuation Time. Portfolio
securities for which market quotations are not readily available will
be valued at fair value as determined in good faith under the direction
of the Account's Committee.
FIXED INCOME SECURITIES
Fixed income securities including convertible bonds are valued based on
prices provided by an industry-recognized pricing service when such
prices are believed to reflect the fair market value of such
securities. Fixed income securities including convertible bonds not
priced in this manner are valued at the mean of the last reported bid
and asked prices provided by principal market makers and recognized
securities dealers in such securities.
SHORT-TERM INVESTMENTS
Short-term investments having maturities of sixty days or less are
valued at amortized cost, which approximates market value. Amortized
cost is computed using the cost on the date of purchase, adjusted for
constant accrual of discount or amortization of premium to maturity.
B. INCOME RECOGNITION
Income and realized and unrealized gains and losses on investments are
allocated to the Participants (including Annuitants) and The Prudential
on a daily basis in proportion to their respective equities in VCA-2.
Realized gains and losses from equity transactions are determined and
accounted for on the basis of average cost. Realized gains and losses
from convertible bond transactions are determined and accounted for on
the basis of identified cost. Dividend income is recorded on the
ex-dividend date at the declared value. Interest income is accrued
daily. Equity and long-term bond transactions are recorded on the first
business day following the trade date, except that transactions on the
last business day of the year are recorded on that date. Short-term
security transactions are recorded on trade date.
9
NOTES TO FINANCIAL STATEMENTS OF VCA-2 (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND YEAR ENDED DECEMBER 31, 1994
C. TAXES
The operations of VCA-2 are part of, and are taxed with, the operations
of The Prudential. Under the current provisions of the Internal Revenue
Code, The Prudential does not expect to incur federal income taxes on
earnings of VCA-2 to the extent the earnings are credited under the
Contracts. As a result, the Unit Value of VCA-2 has not been reduced by
federal income taxes.
D. EQUITY OF ANNUITANTS
Reserves are computed for purchased annuities using The Prudential 1950
Group Annuity Valuation (GAV) Table, adjusted, and a valuation interest
rate related to the Assumed Investment Result (AIR). The valuation
interest rate is equal to the AIR less .5% which is a charge defined in
Note 3A. The AIRs are selected by each Contract-holder and are
described in the prospectus.
NOTE 3: CHARGES
A. The expenses charged to VCA-2 consist of the following contract
charges which are paid to The Prudential:
(i) An investment management fee is calculated daily at an
effective annual rate of 0.125% of the current value of the
accounts of Participants (other than Annuitants). An
equivalent charge is made monthly in determining the amount
of Annuitants' payments.
(ii) A daily charge for assuming mortality and expense risks is
calculated at an effective annual rate of 0.375% of the
current value of the accounts of Participants (other than
Annuitants). A one-time equivalent charge is deducted when
the initial Annuity Units for Annuitants are determined.
Thus, the first and subsequent annuity payments reflect the
reduced number of Annuity Units.
B. An annual administration charge is deducted from the accumulation
account of each Participant at the time of withdrawal of the value
of all of the Participant's accounts or at the end of the
accounting year by cancelling Accumulation Units. This deduction
may be made from a fixed-dollar annuity contract if the Participant
is enrolled under such a contract. The charge is not greater than
$60 in a Participant's first year of coverage and not greater than
$30 annually thereafter.
C. A deduction of 2.5% for sales and other marketing expenses is made
from each Participant's purchase payments.
NOTE 4: PURCHASES AND SALES OF PORTFOLIO SECURITIES
For the six months ended June 30, 1995, excluding short-term
investments and U.S. government securities, the aggregate cost of
purchases and the proceeds from sales of securities were $82,428,614
and $96,564,187, respectively.
NOTE 5: UNIT TRANSACTIONS
The number of Accumulation Units issued and redeemed for the six months
ended June 30, 1995 and the year ended December 31, 1994 is as follows:
1995 1994
--------------------------------------------
Units issued 898,104 1,540,899
--------------------------------------------
Units redeemed 1,650,270 1,885,478
--------------------------------------------
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NOTE 6: NET DECREASE IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
The decrease in net assets resulting from surplus transfers represents
the net withdrawals from the Equity of The Prudential from VCA-2.
NOTE 7: RELATED PARTY TRANSACTIONS
For the six months ended June 30, 1995, Prudential Securities
Incorporated, an indirect, wholly-owned subsidiary of The Prudential,
earned $0 in brokerage commissions from portfolio transactions executed
on behalf of VCA-2.
10
The Prudential Insurance Company of America BULK RATE
c/o Prudential Defined Contribution Services U.S. POSTAGE
30 Scranton Office Park PAID
Moosic, Pennsylvania 18507-1789 PERMIT No. 2145
Newark, N.J.
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FORWARDING AND
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