PRUDENTIAL SERIES FUND INC, 485APOS, 1999-02-12

PRUDENTIAL SERIES FUND INC
485APOS, 1999-02-12

Previous: APPLIED MICRO CIRCUITS CORP, SC 13G/A, 1999-02-12

Next: MODERN TECHNOLOGY CORP, 10-Q, 1999-02-12

AS FILED WITH THE SEC ON FEBRUARY 12, 1999. REGISTRATION NO. 2-80896

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

----------

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 35 [x]

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 38 [x]
(Check appropriate box or boxes)

----------

THE PRUDENTIAL SERIES FUND, INC.
(Exact Name of Registrant)

751 BROAD STREET
NEWARK, NEW JERSEY 07102-3777
(800) 437-4016
(Address and telephone number of principal executive offices)

----------

CAREN A. CUNNINGHAM
SECRETARY

THE PRUDENTIAL SERIES FUND, INC.
751 BROAD STREET
NEWARK, NEW JERSEY 07102-3777
(Name and address of agent for service)

Copy to:

CHRISTOPHER E. PALMER
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036

----------

Aproximate Date of Proposed Public Offering:

As soon as practicable after the effective date of the Registration Statement.

It is proposed that this filing will become effective (check appropriate box):

[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[x] 75 days after filing pursuant to paragraph (a)(2)
[ ] on ___________ pursuant to paragraph (a)(2) of rule 485.

If appropriate, check the following box:

[ ]this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE>

THE PRUDENTIAL SERIES FUND, INC.

CONSERVATIVE BALANCED PORTFOLIO

DIVERSIFIED BOND PORTFOLIO

DIVERSIFIED CONSERVATIVE GROWTH PORTFOLIO

EQUITY PORTFOLIO

EQUITY INCOME PORTFOLIO

FLEXIBLE MANAGED PORTFOLIO

GLOBAL PORTFOLIO

GOVERNMENT INCOME PORTFOLIO

HIGH YIELD BOND PORTFOLIO

MONEY MARKET PORTFOLIO

NATURAL RESOURCES PORTFOLIO

PRUDENTIAL JENNISON PORTFOLIO

SMALL CAPITALIZATION STOCK PORTFOLIO

STOCK INDEX PORTFOLIO

20/20 FOCUS PORTFOLIO

ZERO COUPON BOND PORTFOLIO 2000

ZERO COUPON BOND PORTFOLIO 2005

PROSPECTUS: May 1, 1999

As with all mutual funds, filing this prospectus with the SEC does not mean
that the SEC has judged this Fund a good investment, nor has the SEC
determined that this prospectus is complete or accurate. It is a criminal
offense to state otherwise.

PRUDENTIAL
INVESTMENTS
[LOGO]

<PAGE>

- --------------------------------------------------------------------------------

TABLE OF CONTENTS

__ Risk/Return Summary

Conservative Balanced Portfolio
-------------------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Diversified Bond Portfolio
--------------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Diversified Conservative Growth Portfolio
-----------------------------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Equity Portfolio
----------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Equity Income Portfolio
-----------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Flexible Managed Portfolio
--------------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Global Portfolio
----------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Government Income Portfolio
---------------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

<PAGE>

High Yield Bond Portfolio
-------------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Money Market Portfolio
----------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Natural Resources Portfolio
---------------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Prudential Jennison Portfolio
-----------------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Small Capitalization Stock Portfolio
------------------------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Stock Index Portfolio
---------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

20/20 Focus Portfolio
---------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

Zero Coupon Bond Portfolios - 2000 & 2005
-----------------------------------------
__ Investment Objective and Principal Strategies
__ Principal Risks
__ Evaluating Performance

__ HOW THE PORTFOLIOS INVEST
__ Conservative Balanced Portfolio
__ Diversified Bond Portfolio
__ Diversified Conservative Growth Portfolio
__ Equity Portfolio
__ Equity Income Portfolio
__ Flexible Managed Portfolio
__ Global Portfolio

<PAGE>

__ Government Income Portfolio
__ High Yield Bond Portfolio
__ Money Market Portfolio
__ Natural Resources Portfolio
__ Prudential Jennison Portfolio
__ Small Capitalization Portfolio
__ Stock Index Portfolio
__ 20/20 Focus Portfolio
__ Zero Coupon Bond Portfolios 2000 & 2005

__ How the Portfolios are Managed
__ Investment Advisers
__ Sub-investment Advisers
__ Portfolio Managers
__ Distributor
__ Year 2000

__ How to Buy and Sell Shares of the Fund
__ How to Buy and Sell Shares
__ Net Asset Value
__ Distributor

__ other information
__ Federal Income Taxes
__ Year 2000
__ Monitoring for Possible Conflicts

FINANCIAL HIGHLIGHTS

For More Information (Back Cover)

<PAGE>

RISK/RETURN SUMMARY

This prospectus provides information about the Prudential Series Fund, Inc. (the
Fund), which consists of seventeen separate portfolios (each a Portfolio).

The Fund offers two classes of shares in each Portfolio: Class I and Class II.
Class I shares are sold only to separate accounts of The Prudential Insurance
Company of America (Prudential) as investment options under variable life
insurance and variable annuity contracts (the Contracts). (A separate account is
simply an accounting device used to keep the assets invested in certain
insurance contracts separate from the general assets and liabilities of the
insurance company.) Class II is offered only to separate accounts of
non-Prudential insurance companies for the same types of Contracts. NOT EVERY
PORTFOLIO IS AVAILABLE UNDER EACH CONTRACT. The prospectus for each Contract
lists the Portfolios currently available through that Contract.

The following section highlights key information about each Portfolio.
Additional information follows this summary.

- --------------------------------------------------------------------------------
CONSERVATIVE BALANCED PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is A TOTAL INVESTMENT RETURN CONSISTENT WITH A
CONSERVATIVELY MANAGED DIVERSIFIED PORTFOLIO. This Portfolio is appropriate for
an investor desiring diversification with a relatively lower risk of loss than
that associated with the Flexible Managed Portfolio (see below). To achieve our
objective, we invest in a mix of money market instruments, debt obligations and
common stocks. Up to 30% of the Portfolio's total assets may be invested in
foreign securities. While we make every effort to achieve our objective, we
can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Common stocks
are subject to MARKET RISK stemming from factors independent of any particular
security. Investment markets fluctuate. All markets go through cycles and market
risk involves being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and the mood of the
investing public. You can see market risk in action during large drops in the
stock market. If investor sentiment turns gloomy, the price of all stocks may
decline. It may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market is dropping,
the values of all stocks are likely to drop.

Since the Portfolio also invests in debt obligations, there is the risk that the
value of a particular obligation could decrease. Debt obligations may involve
CREDIT RISK--the risk that the borrower will not repay an obligation, and MARKET
RISK--the risk that interest rates may change and affect the value of the
obligation.

The Portfolio's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to regulatory
requirements that U.S. banks and companies are. Foreign political developments
and changes in currency rates may adversely affect the value of foreign
securities.

<PAGE>

There is also risk involved in the investment strategies we may use. Some of our
strategies require us to try to predict whether the price or value of an
underlying investment will go up or down over a certain period of time. There is
always the risk that investments will not perform as we thought they would. Like
any mutual fund, an investment in the Portfolio could lose value, and you could
lose money. For more information about risk, see "Investment Risks."

EVALUATING PERFORMANCE

A number of factors - including risk - affect how the Portfolio performs. The
following bar chart and table show the Portfolio's performance for each full
calendar year of operation for the last 10 years. They demonstrate the risk of
investing in the Portfolio and how returns can change. Past performance does not
mean that the Portfolio will achieve similar results in the future.

- --------------------------------------------------------------------------------
Annual Returns (Class I shares)*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ----- -----

INSERT BAR CHART

Best Quarter: ___% (__ quarter of 19__) Worst Quarter: __% (__ quarter of 19__)
*These annual returns do not include contract charges. If contract charges were
included, the annual returns would be lower than those shown. See the
accompanying Contract prospectus.

- --------------------------------------------------------------------------------
Average Annual Returns (Class I shares)*
<TABLE>
<CAPTION>

1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
(5/13/83)
<S> <C> <C> <C> <C>
Class I shares
S&P 500**
Lipper Average***

</TABLE>

*The Portfolio's returns are after deduction of expenses.

** The Standard & Poor's 500 Stock Index (S&P 500 ) - an unmanaged index of 500
stocks of large U.S. companies - gives a broad look at how stock prices have
performed. These returns do not include the effect of any investment management
expenses. These returns would be lower if they included the effect of these
expenses. S&P 500 return since the inception date of Class I is __%. Source:
Lipper, Inc.

*** The Lipper/Variable Insurance Produces (VIP) Balanced Average is calculated
by Lipper Analytical Services, Inc. and reflects the investment return of
certain portfolios underlying variable life and annuity products. The returns
are net of investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
DIVERSIFIED BOND PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is A HIGH LEVEL OF INCOME OVER A LONGER TERM WHILE
PROVIDING REASONABLE SAFETY OF CAPITAL. This means we look for investments that
we think will provide a high level of current income, but which are not expected
to involve a substantial risk of loss of capital through default. To achieve our
objective, we invest primarily in higher grade debt obligations and high quality
money market investments. While we make every effort to achieve our objective,
we can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Since the
Portfolio invests primarily in debt obligations, there is the risk that the
value of a particular obligation could go down. Debt obligations may involve
CREDIT RISK--the risk that the borrower will not repay an obligation, and MARKET
RISK--the risk that interest rates may change and affect the value of the
obligation.

EVALUATING PERFORMANCE

INSERT BAR CHART

Best Quarter: ___% (__ quarter of 19__) Worst Quarter: __% (__ quarter of 19__)
*These annual returns do not include Contract charges. If Contract charges were
included, the annual returns would be lower than those shown. See the
accompanying Contract prospectus.

<PAGE>

Average Annual Returns (Class I shares)*
<TABLE>
<CAPTION>

- --------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Class I shares
Lehman Aggregate Index**
Lipper Average***
- --------------------------------------------------------------------------------------------------------------
</TABLE>

*The Portfolio's returns are after deduction of expenses.

**The Lehman Aggregate Index (LAI) is comprised of more than 5,000 government
and corporate bonds. These returns do not include the effect of any sales
charges. These returns would be lower if they included the effect of sales
charges. The LAI return since the inception date of Class I is ___%. Source:
Lipper, Inc.

***The Lipper Variable Insurance Products (VIP) Corporate Debt Average is
calculated by Lipper Analytical Services, Inc. and reflects the investment
return of certain portfolios underlying varaible life and annuity products. The
returns are net of investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
DIVERSIFIED CONSERVATIVE GROWTH PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is to provide CURRENT INCOME AND A REASONABLE LEVEL OF
CAPITAL APPRECIATION. This means we look for investments that we think will
provide current income and low to moderate capital appreciation. To achieve our
objective, we select sub-advisers who will invest in a diversified portfolio of
debt and equity securities. While we make every effort to achieve our objective,
we can't guarantee success.

PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since a majority
of the Portfolio's assets are usually invested in debt obligations, there is the
risk that the value of a particular obligation could go down. Debt obligations
may involve CREDIT RISK the risk that the borrower will not repay an obligation,
and MARKET RISK the risk that interest rates may change and affect the value of
the obligation.

A substantial portion of the Portfolio's assets may also be invested in equity
securities. Common stocks are subject to MARKET RISK stemming from factors
independent of any particular security. Investment markets fluctuate. All
markets go through cycles and market risk involves being on the wrong side of a
cycle. Factors affecting market risk include political events, broad economic
and social changes and the mood of the investing public. If investor sentiments
turn gloomy, the price of al stocks may decline. It may not matter that a
particular company has great profits and its stock is selling at a relatively
low price. If the overall market is dropping, the value of all stocks are likely
to drop.

EVALUATING PERFORMANCE
The Portfolio commenced operations in 1999, so there is no performance history
to report.

<PAGE>

- --------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is BOTH CURRENT INCOME AND CAPITAL APPRECIATION. To
achieve our objective, we invest primarily in common stocks and convertible
securities we believe provide good prospects for returns above those of the
Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index) or the NYSE
Composite Index. In addition, the Portfolio may invest up to 35% of its total
assets in foreign securities. While we make every effort to achieve our
objective, we can't guarantee success.

PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Common stocks
are subject to MARKET RISK stemming from factors independent of any particular
security. Investment markets fluctuate. All markets go through cycles and market
risk involves being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and the mood of the
investing public. You can see market risk in action during large drops in the
stock market. If investor sentiments turn gloomy, the price of all stocks may
decline. It may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market is dropping,
the values of all stocks are likely to drop.

Since the Portfolio may also invest in debt obligations, there is the risk that
the value of a particular obligation could decrease. Debt obligations may
involve CREDIT RISK--the risk that the borrower will not repay an obligation,
and MARKET RISK--the risk that interest rates may change and affect the value of
the obligation.

The Portfolio's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to the same types
of regulatory requirements comparable that U.S. banks and companies are. Foreign
political developments and changes in currency rates may adversely affect the
value of foreign securities.

EVALUATING PERFORMANCE
A number of factors - including risk - affect how the Portfolio performs. The
following bar chart and table show the Portfolio's performance for each full
calendar year of operation for the last 10 years. They demonstrate the risk of
investing in the Portfolio and how returns can change. Past performance does not
mean that the Portfolio will achieve similar results in the future.

<PAGE>

INSERT BAR CHART

Average Annual Returns (Class I shares)*
<TABLE>
<CAPTION>

- ---------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Class I shares
S&P 500**
Lipper Average***
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

*The Portfolio's returns are after deduction of expenses.

** The Standard & Poor's 500 Stock Index (S&P 500 ) - an unmanaged index of 500
stocks of large U.S. companies - gives a broad look at how stock prices have
performed. These returns do not include the effect of investment management
expenses. These returns would be lower if they included the effect of these
expenses. S&P 500 return since the inception date of Class I is __%. Source:
Lipper, Inc.

*** The Lipper Variable Insurance Products (VIP) Equity Income Average is
calculated by Lipper Analytical Services, Inc. and reflects the investment
return of certain portfolios underlying variable life and annuity products. The
returns are net of investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EQUITY PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is CAPITAL APPRECIATION. To achieve our objective, we
invest primarily in common stocks of major established corporations as well as
smaller companies that we believe offer attractive prospects of appreciation. In
addition, the Portfolio may invest up to 35% of its total assets in foreign
securities. While we make every effort to achieve our objective, we can't
guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Common stocks
are subject to MARKET RISK stemming from factors independent of any particular
security. Investment markets fluctuate. All markets go through cycles and market
risk involves being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and the mood of the
investing public. You can see market risk in action during large drops in the
stock market. If investor sentiments turn gloomy, the price of all stocks may
decline. It may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market is dropping,
the values of all stocks are likely to drop.

The Portfolio's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to the same types
of regulatory requirements that U.S. banks and companies are. Foreign political
developments and changes in currency rates may adversely affect the value of
foreign securities.

EVALUATING PERFORMANCE

<PAGE>

INSERT BAR CHART

Best Quarter: ___% (__ quarter of 19__) Worst Quarter: __% (__ quarter of 19__)
* These annual returns do not include contract charges. If Contract charges were
included, the annual returns would be lower than those shown. See the
accompanying Contract prospectus.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Average Annual Returns (Class I shares)*
- ------------------------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Class I shares
S&P 500**
Lipper Average***

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*The Portfolio's returns are after deduction of expenses.

**The Standard & Poor's 500 Stock Index (S&P 500)- an unmanaged index of 500
stocks of large U.S. companies - gives a broad look at how stock prices have
performed. These returns do not include the effect of any investment management
expenses. These returns would be lower if they included the effect of these
expenses. The S&P 500 return since the inception date of Class I is __%.
Source: Lipper, Inc.

***The Lipper Variable Insurance Products (VIP) Growth Fund Average is
calculated by Lipper Analytical Services, Inc. and reflects the investment
return of certain portfolios underlying variable life and annuity products. The
returns are net of investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
FLEXIBLE MANAGED PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is A TOTAL INVESTMENT RETURN CONSISTENT WITH AN
AGGRESSIVELY MANAGED DIVERSIFIED PORTFOLIO. This Portfolio is appropriate for an
investor desiring diversification who is willing to accept a relatively high
level of loss in an effort to achieve greater appreciation. To achieve our
objective, we invest in a mix of money market instruments, debt obligations and
common stocks. Up to 30% of the Portfolio's total assets may be invested in
foreign securities. While we make every effort to achieve our objective, we
can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Since the
Portfolio invests a in debt obligations, there is the risk that the value of a
particular obligation could decrease. Debt obligations may involve CREDIT
RISK--the risk that the borrower will not repay an obligation, and MARKET
RISK--the risk that interest rates may change and affect the value of the
obligation.

A substantial portion of the Portfolio's assets may also be invested in equity
securities. Common stocks are subject to MARKET RISK stemming from factors
independent of any particular security. Investment markets fluctuate. All
markets go through cycles and market risk involves being on the wrong side of a
cycle. Factors affecting market risk include political events, broad economic
and social changes and the mood of the investing public. If investor sentiments
turn gloomy, the price of all stocks may decline. It may not matter that a
particular company has great profits and its stock is selling at a relatively
low price. If the overall market is dropping, the value of all stocks are likely
to drop.

The Portfolio's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to the same types
of regulatory requirements that U.S. banks and companies are. Foreign political
developments and changes in currency rates may adversely affect the value of
foreign securities.

<PAGE>

EVALUATING PERFORMANCE

INSERT BAR CHART

Best Quarter: ___% (__ quarter of 19__) Worst Quarter: __% (__ quarter of 19__)

* These annual returns do not include Contract charges. If Contract charges were
included, the annual returns would be lower than those shown. See the
accompanying Contract prospectus.

- --------------------------------------------------------------------------------

Average Annual Returns (Class I shares)*
<TABLE>
<CAPTION>

- --------------------------------------------------------------------------------------------------------------

1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Class I shares
S&P 500**
Lipper Average***

- --------------------------------------------------------------------------------------------------------------
</TABLE>

*The Portfolio's returns are after deduction of expenses.

** The Standard & Poor's 500 Stock Index (S&P 500) - an unmanaged index of 500
stocks of large U.S. companies - gives a broad look at how stock prices have
performed. These returns do not include the effect of any investment management
expenses. These returns would be lower if they included the effect of these
expenses. S&P 500 return since the inception date of Class I is __%. Source:
Lipper, Inc.

***The Lipper Variable Insurance Products (VIP) Flexible Average is calculated
by Lipper Analytical Services, Inc. and reflects the investment return of
certain portfolios underlying variable life and annuity products. The returns
are net of investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
GLOBAL PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is LONG-TERM GROWTH OF CAPITAL. To achieve this
objective, we invest primarily in common stocks (and their equivalents) of
foreign and U.S. companies. Generally, we invest in at least three countries,
including the U.S., but may invest up to 35% of the Portfolio's assets in
companies located in any one country other than the U.S. While we make every
effort to achieve our objective, we can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Common stocks
are subject to MARKET RISK stemming from factors independent of any particular
security. Investment markets fluctuate. All markets go through cycles and market
risk involves being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and the mood of the
investing public. You can see market risk in action during large drops in the
stock market. If investor sentiments turn gloomy, the price of all stocks may
decline. It may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market is dropping,
the values of all stocks are likely to drop.

Depending on market conditions, the Portfolio may be invested primarily in
foreign securities, which involve additional risks. For example, foreign banks
and companies generally are not subject to the same types of regulatory
requirements that U.S. banks and companies are. Foreign political developments
and changes in currency rates may adversely affect the value of foreign
securities.

<PAGE>

EVALUATING PERFORMANCE

INSERT BAR CHART

- --------------------------------------------------------------------------------

Average Annual Returns (Class I shares)*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Class I shares
Morgan Stanley
World Index**
Lipper Average***

- --------------------------------------------------------------------------------------------------------------
</TABLE>

* The Portfolio's returns are after deduction of expenses.

**The Morgan Stanley World Index (MSWI) is a weighted index comprised of
approximately 1,500 companies listed on the stock exchanges of the U.S.A.,
Europe, Canada, Australia, New Zealand and the Far East. The MSWI return since
the inception date of Class I is ___%. Source: Lipper, Inc.

***The Lipper Variable Insurance Products (VIP) Global Average is calculated by
Lipper Analytical Services, Inc. and reflects the investment return of certain
portfolios underlying variable life and annuity products. The returns are net of
investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
GOVERNMENT INCOME PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is A HIGH LEVEL OF INCOME OVER THE LONGER TERM
CONSISTENT WITH THE PRESERVATION OF CAPITAL. To achieve our objective, we invest
primarily in U.S. Government securities, including intermediate and long term
U.S. Treasury securities and debt obligations issued by agencies or
instrumentalities established by the U.S. Government. While we make every effort
to achieve our objective, we can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Since the
Portfolio invests primarily in debt obligations, there is the risk that the
value of a particular obligation could decrease. Debt obligations may involve
CREDIT RISK--the risk that the borrower will not repay an obligation, and MARKET
RISK--the risk that interest rates may change and affect the value of the
obligation.

An investment in the Portfolio is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

<PAGE>

EVALUATING PERFORMANCE

A number of factors - including risk - affect how the Portfolio performs. The
following bar chart and table show the Portfolio's performance for each full
calendar year of operation for the last 9 years. They demonstrate the risk of
investing in the Portfolio and how returns can change. Past performance does not
mean that the Portfolio will achieve similar results in the future.

INSERT BAR CHART

Average Annual Returns (Class I shares)*
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS SINCE INCEPTION

Class I shares
Lehman Govt. Index**
Lipper Average***

- --------------------------------------------------------------------------------
*The Portfolio's returns are after deduction of expenses.

**[DESCRIPTION OF INDEX - including since inception returns]

***The Lipper Variable Insurance Products (VIP) General U.S. Government Average
is calculated by Lipper Analytical Services, Inc. and reflects the investment
return of certain portfolios underlying variable life and annuity products. The
returns are net of investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is A HIGH TOTAL RETURN. In pursuing our objective, we
invest in high yield/high risk debt securities. Such securities have speculative
characteristics and generally are riskier than higher rated securities. In
addition, the Portfolio may invest up to 20% of its total assets in foreign debt
obligations. While we make every effort to achieve our objective, we can't
guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Since the
Portfolio invests in debt obligations, there is the risk that the value of a
particular obligation could decrease. Debt obligations may involve CREDIT
RISK--the risk that the borrower will not repay an obligation, and MARKET
RISK--the risk that interest rates may change and affect the value of the
obligation.

The Portfolio's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to the same types
of regulatory requirements that U.S. banks and companies are. In addition,
political developments and changes in currency rates may adversely affect the
value of foreign securities.

<PAGE>

EVALUATING PERFORMANCE

- --------------------------------------------------------------------------------
Annual Returns (Class I shares)*

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ----- -----

INSERT BAR CHART

Best Quarter: ___% (__ quarter of 19__) Worst Quarter: __% (__ quarter of 19__)

*These annual returns do not include contract charges. If Contract charges were
included, the annual returns would be lower than those shown. See the
accompanying Contract prospectus.

- --------------------------------------------------------------------------------

Average Annual Returns (Class I shares)*

- --------------------------------------------------------------------------------------------------------------
</TABLE>

*The Portfolio's returns are after deduction of expenses.

** [DESCRIPTION OF INDEX - including since inception returns]

*** The Lipper Variable Insurance Products (VIP) High Current Yield Average is
calculated by Lipper Analytical Services, Inc. and reflects the investment
return of certain portfolios underlying variable life and annuity products. The
returns are net of investment fees and fund expenses but not products charges.

<PAGE>

MONEY MARKET PORTFOLIO

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is MAXIMUM CURRENT INCOME CONSISTENT WITH THE STABILITY
OF CAPITAL AND THE MAINTENANCE OF LIQUIDITY. To achieve our objective, we invest
in short term money market instruments issued by the U.S. Government, as well as
commercial paper, variable rate demand notes, bills, notes and other obligations
issued by banks, corporations and other companies, and obligations issued by
foreign banks, companies or foreign governments. The Portfolio will invest only
in instruments that mature in thirteen months or less, and which are denominated
in U.S. dollars. While we make every effort to achieve our objective, we can't
guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Since the
Portfolio invests only in money market instruments, there is not likely to be an
opportunity for capital appreciation. Debt obligations, including money market
instruments, also involve CREDIT RISK -- the risk that the borrower will not
repay an obligation, and MARKET RISK -- the risk that interest rates may change
and affect the value of the obligation.

The Portfolio's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to the same types
of regulatory requirements that U.S. banks and companies are. In addition,
political developments and changes in currency rates may adversely affect the
value of foreign securities.

AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. ALTHOUGH THE PORTFOLIO SEEKS TO PRESERVE THE VALUE OF AN INVESTMENT AT
$10 PER SHARE, THERE CAN BE NO GUARANTEE THAT IT WILL BE ABLE TO DO SO.

EVALUATING THE PERFORMANCE

A number of factors - including risk - can affect how the Portfolio performs.
The following bar chart and table show the Portfolio's performance over the past
10 years and demonstrates how returns can change from year to year. Past
performance does not assure that the Portfolio will achieve similar results in
the future.

Annual Returns (Class I shares)*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ----- -----

INSERT BAR CHART

Best Quarter: ___% (__ quarter of 19__) Worst Quarter: __% (__ quarter of 19__)

- --------------------------------------------------------------------------------

<PAGE>

- -------------------------------------------------------------------------------

*These annual returns do not include Contract charges. If Contract charges were
included, the annual returns would be lower than those shown. See the
accompanying Contract prospectus.
<TABLE>
<CAPTION>

- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS as of 12-31-98

1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
FUND SHARES _______ _______ _______ _______
LIPPER AVERAGE _______ _______ _______ _______

7-DAY YIELD (AS OF DECEMBER 31, 1998) *

Money Market Portfolio ___%

[APPROPRIATE MONEY MKT INDEX] ** ___%

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* The Portfolio's yield is after deduction of expenses. For the Portfolio's
current 7-day yield, you can call toll-free (800) xxx-xxxx.

** The Lipper Variable Insurance Products (VIP) Money Market Average is
calculated by Lipper Analytical Services, Inc. and reflects the investment
return of certain portfolios underlying variable life and annuity products. The
returns are net of investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is LONG-TERM GROWTH OF CAPITAL. To achieve this goal,
we invest primarily in common stocks and convertible securities of natural
resource companies and securities that are related to the market value of some
natural resource. Up to 30% of the Portfolio's assets may be invested in foreign
securities. While we make every effort to achieve our objective, we can't
guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Common stocks
are subject to MARKET RISK stemming from factors independent of any particular
security. Investment markets fluctuate. All markets go through cycles and market
risk involves being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and the mood of the
investing public. You can see market risk in action during large drops in the
stock market. If investor sentiments turn gloomy, the price of all stocks may
decline. It may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market is dropping,
the values of all stocks are likely to drop.

The Portfolio's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to the same types
of regulatory requirements that U.S. banks and companies are. Foreign political
developments and changes in currency rates may adversely affect the value of
foreign securities.

<PAGE>

EVALUATING PERFORMANCE

INSERT BAR CHART

Average Annual Returns (Class I shares)*
- --------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Class I shares
S&P 500**
Lipper Average***

- --------------------------------------------------------------------------------------------------------------
</TABLE>

*The Portfolio's returns are after deduction of expenses.

** The Standard & Poor's 500 Stock Index (S&P 500)- an unmanaged index of 500
stocks of large U.S. companies - gives a broad look at how stock prices have
performed. These returns do not include the effect of any investment management
expenses. These returns would be lower if they included the effect of these
expenses. S&P 500 return since the inception date of Class I is __%. Source:
Lipper, Inc.

***The Lipper Variable Insurance Products (VIP) Natural Resources Average is
calculated by Lipper Analytical Services, Inc. and reflects the investment
return of certain portfolios underlying variable life and annuity products. The
returns are net of investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
PRUDENTIAL JENNISON PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is to achieve LONG-TERM GROWTH OF CAPITAL. To achieve
our objective, we invest primarily in equity securities of major established
corporations that we believe offer above average growth prospects. In addition,
the Portfolio may invest up to 30% of its total assets in foreign securities.
While we make every effort to achieve our objective, we can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Common stocks
are subject to MARKET RISK stemming from factors independent of any particular
security. Investment markets fluctuate. All markets go through cycles and market
risk involves being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and the mood of the
investing public. You can see market risk in action during large drops in the
stock market. If investor sentiments turn gloomy, the price of all stocks may
decline. It may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market is dropping,
the values of all stocks are likely to drop.

The Portfolio's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to the same types
of regulatory requirements that U.S. banks and companies are. Foreign political
developments and changes in currency rates may adversely affect the value of
foreign securities.

<PAGE>

EVALUATING PERFORMANCE

A number of factors - including risk - affect how the Portfolio performs. The
following bar chart and table show the Portfolio's performance for each full
calendar year of operation for the last 4 years. They demonstrate the risk of
investing in the Portfolio and how returns can change. Past performance does not
mean that the Portfolio will achieve similar results in the future.

INSERT BAR CHART

Best Quarter: ___% (__ quarter of 19__) Worst Quarter: __% (__ quarter of 19__)

*These annual returns do not include Contract charges. If Contract charges were
included, the annual returns would be lower than those shown. See the
accompanying Contract prospectus.

- --------------------------------------------------------------------------------

Average Annual Returns (Class I shares)*
- --------------------------------------------------------------------------------------------------------------
I YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Class I shares
S&P 500**
Lipper Average***

- --------------------------------------------------------------------------------------------------------------
</TABLE>

*The Portfolio's returns are after deduction of expenses.

** The Standard & Poor's 500 Stock Index (S&P 500)- an unmanaged index of 500
stocks of large U.S. companies - gives a broad look at how stock prices have
performed. These returns do not include the effect of any investment management
expenses. These returns would be lower if they included the effect of these
expenses. S&P 500 return since the inception date of Class I is __%. Source:
Lipper, Inc.

***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. The returns are net of
investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
SMALL CAPITALIZATION STOCK PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is to achieve LONG-TERM GROWTH OF CAPITAL. To achieve
this objective, we invest primarily in equity securities of publicly-traded
companies with small market capitalization. We attempt to duplicate the price
and yield performance of the Standard & Poor's Small Capitalization Stock Index
(the S&P SmallCap Index). The S&P SmallCap Index stocks have market
capitalization between $18 million and $3.4 billion.

The Portfolio is not "managed" in the traditional sense of using market and
economic analyses to select stocks. Rather, the portfolio manager purchases
stocks to duplicate the stocks and their weighting in the S&P SmallCap Index.
While we make every effort to achieve our objective, we can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Common stocks
are subject to MARKET RISK stemming from factors independent of any particular
security. Investment markets fluctuate. All markets go through cycles and market
risk involves being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and the mood of the
investing public. You can see market risk in action during large drops in the
stock market. If investor sentiments turn gloomy, the price of all stocks may
decline. It may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market is dropping,
the values of all stocks are likely to drop.

Like any mutual fund, an investment in the Portfolio could lose value, and you
could lose money. For more information about risk, see "Investment Risks."

<PAGE>

EVALUATING PERFORMANCE

A number of factors - including risk - affect how the Portfolio performs. The
following bar chart and table show the Portfolio's performance for each full
calendar year of operation for the last four years. They demonstrate the risk of
investing in the Portfolio and how returns can change. Past performance does not
mean that the Portfolio will achieve similar results in the future.

- -

- -
INSERT BAR CHART

Average Annual Returns (Class I shares)*
- --------------------------------------------------------------------------------
1 YEAR SINCE INCEPTION

Class I shares (5/1/95)
S&P SmallCap 600
Index**
Lipper Average***

- -------------------------------------------------------------------------------

*The Portfolio's returns are after deduction of expenses.

**[DESCRIPTION OF INDEX - including since inception returns]

***The Lipper Variable Insurance Products (VIP) Small Cap Average is calculated
by Lipper Analytical Services, Inc. and reflects the investment return of
certain portfolios underlying variable life and annuity products. The returns
are net of investment fees and fund expenses but not product charges.

<PAGE>

- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is AN INVESTMENT RETURN THAT CORRESPONDS TO THE
PERFORMANCE OF PUBLICLY-TRADED COMMON STOCKS GENERALLY. To achieve our
objective, we invest to duplicate the price and yield of the S&P 500 Index. The
S&P 500 Index represents more than 70% of the total market value of all
publicly-traded common stocks and is widely viewed as representative of
publicly-traded common stocks as a whole.

The Portfolio is not "managed" in the traditional sense of using market and
economic analyses to select stocks. Rather, the portfolio manager purchases
stocks in proportion to their weighting in the S&P 500 Index. While we make
every effort to achieve our objective, we can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Common stocks
are subject to MARKET RISK stemming from factors independent of any particular
security. Investment markets fluctuate. All markets go through cycles and market
risk involves being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and the mood of the
investing public. You can see market risk in action during large drops in the
stock market. If investor sentiments turn gloomy, the price of all stocks may
decline. It may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market is dropping,
the values of all stocks are likely to drop.

Like any mutual fund, an investment in the Portfolio could lose value, and you
could lose money. For more information about risk, see "Investment Risks."

<PAGE>

EVALUATING PERFORMANCE

Annual Returns (Class I shares)*
- --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ----- -----

INSERT BAR CHART

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
*The Portfolio's returns are after deduction of expenses.

**The Standard & Poor's 500 Stock Index (S&P 500) - an unmanaged index of 500
stocks of large U.S. companies - gives a broad look at how stock prices have
performed. These returns do not include the effect of any investment management
expenses. These returns would be lower if they included the effect of these
expenses. S&P 500 return since the inception date of Class I is __%. Source:
Lipper, Inc

***The Lipper Variable Insurance Products (VIP) S&P 500 Index Average is
calculated by Lipper Analytical Services, Inc. and reflects the investment
return of certain portfolios underlying variable life and annuity products. The
returns are net of investment fees and fund expenses but not product charges.

- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
20/20 FOCUS PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is LONG-TERM GROWTH OF CAPITAL. We seek to achieve this
goal by investing primarily in up to 40 equity securities of U.S. companies that
are selected by the Portfolio's two portfolio managers (up to 20 by each) as
having strong capital appreciation potential. While we make every effort to
achieve our objective, we can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Common stocks
are subject to MARKET RISK stemming from factors independent of any particular
security. Investment markets fluctuate. All markets go through cycles and market
risk involves being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and the mood of the
investing public. You can see market risk in action during large drops in the
stock market. If investor sentiments turn gloomy, the price of all stocks may
decline. It may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market is dropping,
the values of all stocks are likely to drop.

EVALUATING PERFORMANCE

The Portfolio commenced operations in 1999, so there is no performance history
to report.

<PAGE>

ZERO COUPON BOND PORTFOLIOS - 2000 AND 2005

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

The investment objectives of these two Portfolios is THE HIGHEST PREDICTABLE
COMPOUND INVESTMENT FOR A SPECIFIC PERIOD OF TIME, CONSISTENT WITH THE SAFETY OF
INVESTED CAPITAL. We seek to achieve this objective by investing primarily in
debt obligations of the United States Treasury and corporations that have been
issued without interest coupons or stripped of their interest coupons, or
interest coupons that have been stripped from the debt obligation. The two
Portfolios differ only in their liquidation dates which is November 15, 2000 for
the Zero Coupon Bond Portfolio 2000 and November 15, 2005 for the Zero Coupon
Bond Portfolio 2005. While we make every effort to achieve our objective, we
can't guarantee success.

PRINCIPAL RISKS

There is also risk involved in the investment strategies we may use. Some of our
strategies require us to try to predict whether the price or value of an
underlying investment will go up or down over a certain period of time. There is
always the risk that investments will not perform as we thought they would. Like
any mutual fund, investments in the Portfolios could lose value, and you could
lose money. For more information about risk, see "Investment Risks."

<PAGE>

EVALUATING PERFORMANCE

A number of factors - including risk - affect how the Portfolios perform. The
following bar charts and tables show the Portfolios' performance for each full
calendar year of operation for the last 10 years. They demonstrate the risk of
investing in the Portfolios and how returns can change. Past performance does
not mean that the Portfolios will achieve similar results in the future.

- --------------------------------------------------------------------------------
Zero Coupon Bond Portfolio 2000 - Annual Returns (Class I shares)*
- --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ----- -----

INSERT BAR CHART

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Zero Coupon Bond Portfolio 2005 - Annual Returns (Class I shares)*
- -------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ----- -----

INSERT BAR CHART

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Zero Coupon Bond Portfolio 2000 - Average Annual Returns (Class I shares)*
- ----------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Class I shares
Lehman Government Index**
Lipper Average***

- ----------------------------------------------------------------------------------------------------------------
</TABLE>

*The Portfolio's returns are after deduction of expenses.

** [DESCRIPTION OF INDEX - including since inception returns]

***The Lipper Variable Insurance Products (VIP) Target Maturity Average is
calculated by Lipper Analytical Services, Inc. and reflects the investment
return of certain portfolios underlying variable life and annuity products. The
returns are net of investment fees and fund expenses but not product charges.

<PAGE>

<TABLE>
<CAPTION>
Zero Coupon Bond Portfolio 2005 - Average Annual Returns (Class I shares)*
- ---------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Class I shares
Lehman Government Index**
Lipper Average***

- ---------------------------------------------------------------------------------------------------------------
</TABLE>

*The Portfolio's returns are after deduction of expenses.

** [DESCRIPTION OF INDEX - including since inception returns]

<PAGE>

HOW THE PORTFOLIOS INVEST

While the Portfolios have some common attributes, each one has its own portfolio
managers, investment objective and policies, performance information, and risks.
Therefore, some sections of this prospectus deal with each Portfolio separately,
while other sections address two or more Portfolios at the same time. In
sections that concern one particular Portfolio as identified in the section
heading, "the Portfolio" refers to the particular Portfolio.

- --------------------------------------------------------------------------------
CONSERVATIVE BALANCED PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is to seek A TOTAL INVESTMENT RETURN
CONSISTENT WITH A CONSERVATIVELY MANAGED DIVERSIFIED PORTFOLIO.
<TABLE>
<CAPTION>
- -------------------------------------------------
<S> <C>
BALANCED PORTFOLIO To achieve our objective, we invest in a mix of
We invest in all three types of securities - money market instruments, debt securities and common
equity, debt and money market - in order to stocks. We adjust the percentage of Portfolio
achieve diversification in a single portfolio. assets in each category depending on our
We seek to maintain a conservative blend of expectations regarding the different markets.
investments that will have strong performance While we make every effort to achieve our objective,
in a down market and solid, but not necessarily we can't guarantee success.
outstanding, performance in up markets. This
Portfolio is appropriate for an investor DEBT SECURITIES in general are basically written
looking for diversification with less risk than promises to repay a debt. There are numerous types
that of the Flexible Managed Portfolio while of debt securities which vary as to the terms of
recognizing that this reduces the chances of repayment and the commitment of other parties to
greater appreciation. honor the obligations of the issuer. Most of the
securities in the debt portion of
</TABLE>

- -------------------------------------------------
this Portfolio will be rated "investment grade." This means major rating
services, like Standard & Poor's Ratings Group (S&P) or Moody's Investors
Service, Inc. (Moody's), have rated the securities within one of their four
highest rating categories.

The Portfolio may also invest in lower rated securities, which are riskier and
considered speculative. These securities are sometimes referred to as "junk
bonds" We may also invest in instruments that are not rated, but which we
believe are of comparable quality to the instruments described above.

Up to 20% of the Portfolio's total assets may be invested in debt securities
that are issued outside of the U.S. by foreign or U.S. issuers provided the
securities are denominated in U.S. dollars. The Portfolio may also invest up to
30% of its total assets in FOREIGN EQUITY and DEBT SECURITIES. For these
purposes, we do not consider American Depositary Receipts (ADRs) as foreign
securities. (ADRs are certificates representing the right to receive foreign
securities that have been deposited with a U.S. bank or a foreign branch of a
U.S. bank.)

The stock portion of the Portfolio will be invested mainly in equity securities
of major, established corporations which we believe are in sound financial
condition and offer better total returns than broad based market indexes. The
Portfolio may also invest in EQUITY-RELATED SECURITIES, such as bonds, corporate
notes, warrants and rights, that we can convert into a company's common stock or
some other equity security. The Portfolio may

<PAGE>

also acquire preferred stock - another equity-related security which may be
rated below investment grade.

The money market portion of the Portfolio will be invested in high-quality money
market instruments. We manage this portion of the Portfolio to comply with
specific rules designed for money market mutual funds. We will not acquire any
security with a remaining maturity exceeding thirteen months, and we will
maintain a dollar-weighted average portfolio of 90 days or less. (Weighted
average maturity is calculated by adding the maturities of all the bonds in a
portfolio and dividing by the number of bonds on a weighted basis.)

In addition, with respect to the money market portion of the Portfolio, we will
comply with the diversification, quality and other regulatory requirements. This
means, generally, that the instruments that we purchase present "minimal credit
risk" and are of "eligible quality." "Eligible quality" for this purpose means a
security: (i) rated in one of the two highest short-term rating categories by at
least two major rating services or, if only one major rating service has rated
the security, as rated by that service; or (ii) if unrated, of comparable
quality as we determine.

In response to adverse market, conditions or when restructuring the Portfolio,
we may temporarily invest up to 100% of the Portfolio's total assets in money
market instruments. Investing heavily in these securities limits our ability to
achieve capital appreciation, but can help to preserve the value of the
Portfolio's assets when the markets are unstable.

We may also invest in loans arranged through private negotiations between a
corporation which is the borrower and one or more financial institutions that
are the lenders. Generally, these types of investments are in the form of LOAN
PARTICIPATIONS. In loan participations, the Portfolio will have a contractual
relationship with the lender but not with the borrower. This means the Portfolio
will only have rights to principal and interest received by the lender. It not
be able to enforce compliance by the borrower with the terms of the loan and may
not have a right to any collateral securing the loan. If the lender becomes
insolvent, the Portfolio may be treated as a general creditor and not benefit
from any set-off between the lender and the borrower.

The Portfolio may also enter into REPURCHASE AGREEMENTS. In a repurchase
transaction, the Portfolio agrees to purchase certain securities and the seller
agrees to repurchase the very same securities at an agreed upon price on a
specified date. This creates a fixed return for the Portfolio. All of the
Portfolios of the Fund, except the Global Portfolio, may participate in a JOINT
REPURCHASE account under an order obtained from the SEC. In a joint repurchase
transaction, uninvested cash balances of the various Portfolios are added
together and invested in one or more repurchase agreements. Each Portfolio
receives a portion of the income earned in the joint account based on the
percentage of its investment.

In general, we will invest within the ranges shown below:

ASSET TYPE MINIMUM NORMAL MAXIMUM
---------- ------- ------ -------
Stocks 15% 35% 50%

Debt obligations 25% 65% 85%
and Money Market
Securities

We will vary how much of the Portfolio's assets are invested in a type of
security depending how we think the different markets will perform. Under normal
conditions, we intend to keep at least 25% of the Portfolio's total assets
invested in senior debt securities.

<PAGE>

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns or protect its assets, although we cannot
guarantee these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money. With derivatives, we try to predict whether the underlying investment - a
security, market index, currency, interest rate or some other benchmark - will
go up or down at some future date. We may use derivatives to try to reduce risk
or to increase return consistent with the Portfolio's overall investment
objective.

We may: purchase and sell OPTIONS on equity securities, debt securities, stock
indexes and foreign currencies; purchase and sell stock index, interest rate and
foreign currency FUTURES CONTRACTS and options on those contracts; enter into
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS; and purchase securities on a
WHEN-ISSUED or DELAYED-DELIVERY basis.

The Portfolio may also enter into SHORT SALES. In a short sale we sell a
security we do not own to take advantage of an anticipated decline in the
stock's price. The Portfolio borrows the stock for delivery and if it can buy
the stock later at a lower price, a profit results. The Portfolio may also enter
into SHORT SALES AGAINST-THE-BOX which means it owns securities identical to
those sold short.

We may also use INTEREST RATE SWAPS in the management of the Portfolio. In an
interest rate swap the Portfolio and another party agree to exchange interest
payments. For example, the Portfolio may wish to exchange a floating rate of
interest for a fixed rate. We would enter into this type of a swap if we think
interest rates are going down.

We will consider other factors (such as cost) in deciding whether to employ any
particular strategy or use any particular instrument. Any derivatives we use may
not match the Portfolio's underlying holdings. For more information about these
strategies, see the SAI, "Description of the Portfolios, their Investments and
Risks - Risk Management and Return Enhancement Strategies."

ADDITIONAL STRATEGIES

The Portfolio also follows certain policies when it BORROWS MONEY (the Portfolio
may borrow up to 5% of the value of its total assets); LENDS ITS SECURITIES; and
holds ILLIQUID SECURITIES (the Portfolio may hold up to 15% of its net assets in
illiquid securities, including securities with legal or contractual
restrictions, those without a readily available market and repurchase agreements
with maturities longer than 7 days). The Portfolio is subject to certain
investment restrictions that are fundamental policies, which means they cannot
be changed without shareholder approval. For more information about these
restrictions, see the SAI.

<PAGE>

DIVERSIFIED BOND PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

Our investment objective is A HIGH LEVEL OF INCOME OVER A LONGER TERM WHILE
PROVIDING REASONABLE SAFETY OF CAPITAL. This means we look for investments that
we think will provide a high level of current income, but which are not expected
to involve a substantial risk of loss of capital through default. To achieve our
objective, we invest primarily in intermediate and long term debt obligations
that are rated investment grade and high quality money market investments. While
we make every effort to achieve our objective, we can't guarantee success.
<TABLE>
<CAPTION>

- ------------------------------------------------------
<S> <C>
STRATEGY Usually at least 80% of the Portfolio's
In general, the value of debt obligations move in total assets will be invested in debt
the opposite direction as interest rates - if a securities that are investment grade. The
bond is purchased and then interest rates go up, Portfolio may continue to hold a debt
newer bonds will be worth more because they will obligation if it is downgraded below
have a higher rate of interest. We will adjust the investment grade after it is purchased or
mix of the Portfolio's short term, intermediate and is no longer rated by a major rating
long term debt obligations in an attempt to benefit service.
from price appreciation when interest rates go down We may also invest in lower rated
and to suffer lesser declines when rates go up. securities which are riskier and considered
speculative. These securities are
sometimes referred to as "junk bonds."
</TABLE>
- ------------------------------------------------------
We may also invest in instruments that are not rated, but which we believe are
of comparable quality to the instruments described above.

The Portfolio may invest without limit in DEBT OBLIGATIONS ISSUED OR GUARANTEED
BY THE U.S. GOVERNMENT AND GOVERNMENT-RELATED ENTITIES. An example of a debt
security that is backed by the full faith and credit of the U.S. Government is
an obligation of the Government National Mortgage Association (GNMA or Ginnie
Mae). In addition, we may invest in U.S. government securities issued by other
government entities, like the Federal National Mortgage Association (FNMA or
Fannie Mae) and the Student Loan Marketing Association (SLMA or Sallie Mae)
which are not backed by the full faith and credit of the U.S. Government.
Instead, these issuers have the right to borrow from the U.S. Treasury to meet
their obligations. The Portfolio may also invest in the debt securities of other
government-related entities, like the Farm Credit System, which depend entirely
upon their own resources to repay their debt.

We may also invest up to 20% of Portfolio's total assets in debt securities
issued outside the U.S. by U.S. or foreign issuers provided the securities are
denominated in U.S. dollars.

The Portfolio may also invest in CONVERTIBLE DEBT SECURITIES and CONVERTIBLE AND
NON-CONVERTIBLE PREFERRED STOCKS of any rating. The Portfolio will not acquire
any common stock except by converting a convertible debt security or exercising
a warrant. No more than 10% of the Portfolio's total assets will be held in
common stocks, and those will usually be sold as soon as a favorable opportunity
arises.

The Portfolio may also invest in LOAN PARTICIPATIONS, REVERSE REPURCHASE
AGREEMENTS and DOLLAR ROLLS. In a reverse repurchase transaction, the Portfolio
sells a security it owns and agrees to buy it back at an agreed price and date.
During the period the security is held by the other party, the Portfolio may
continue to receive principal and interest payments on the

<PAGE>

security. Dollar rolls involve the sale by the Portfolio of a security for
delivery in the current month with a promise to repurchase from the buyer a
substantially similar - but not necessarily the same - security at an agreed
price and date. During the "roll period," the Portfolio does not receive any
principal or interest on the security. Instead it is compensated by the
difference between the current sales price and the price of the future purchase,
as well as any interest earned on the cash proceeds from the original sale. The
Portfolio will not use more than of its net assets in connection with reverse
repurchase transactions and dollar rolls.

Under normal conditions, the Portfolio may invest a portion of its assets in
high-quality MONEY MARKET INSTRUMENTS. In response to adverse market, conditions
or when restructuring the Portfolio, we may temporarily invest up to 100% of the
Portfolio's assets in money market instruments. Investing heavily in these
securities limits our ability to achieve capital appreciation, but can help to
preserve the value of the Portfolio's assets when the markets are unstable.

DERIVATIVES AND OTHER STRATEGIES

We may: enter into REPURCHASE AGREEMENTS; purchase and sell OPTIONS on debt
securities; purchase and sell interest rate FUTURES CONTRACTS and options on
those contracts; purchase securities on a WHEN-ISSUED or DELAYED DELIVERY basis;
and use INTEREST RATE SWAPS. The Portfolio may also enter into SHORT SALES.

ADDITIONAL STRATEGIES

<PAGE>

DIVERSIFIED CONSERVATIVE GROWTH PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

Our investment objective is to provide CURRENT INCOME AND A REASONABLE LEVEL OF
CAPITAL APPRECIATION. This means we look for investments that we think will
provide current income and low to moderate capital appreciation. To achieve our
objective, we select sub-advisers who will invest in a diversified portfolio of
debt and equity securities. While we make every effort to achieve our objective,
we can't guarantee success.
<TABLE>
<CAPTION>
- --------------------------------------------------------
<S> <C>
ASSET ALLOCATION Under normal market conditions, we invest
This Portfolio is designed for investors who want approximately 60% of the Portfolio's
investment professionals to make their asset total assets in debt securities of
allocation decisions for them and are seeking current varying maturities with a dollar-weighted
income and low to moderate capital appreciation. We average portfolio maturity of between
have contracted with four highly regarded sub-advisers four and 15 years. (The maturity of a
who each will manage a portion of the Portfolio's bond is the number of years until the
assets. In this way the Portfolio offers principal is due and payable. Weighted
diversification not only of asset type but also average maturity is calculated by adding
investment style. We will those sub-advisers and make the maturities of all of the bonds in the
changes we believe to be in the best interests of Portfolio and dividing by the number of
Contract owners. bonds on a dollar-weighted basis.)
- --------------------------------------------------------
</TABLE>

These debt securities will generally be investment grade. We may also invest up
to 35% of the Portfolio's total assets in lower rated securities that are
riskier and considered speculative. At the time these high yield or "junk bonds"
are purchased they will have a minimum rating of B by Moody's, S&P or another
major rating service. We may also invest in instruments that are not rated, but
which we believe are of comparable quality to the instruments described above.

Up to 25% of the Portfolio's total assets may be invested in debt obligations
issued or guaranteed by foreign governments, their agencies and
instrumentalities, supranational organizations, and foreign corporations or
financial institutions. Up to 10% of the Portfolio's total assets may be
invested in debt obligations of issuers in emerging markets.

The Portfolio will normally invest approximately 40% of its total assets in
equity and equity related securities issued by U.S. and foreign companies. Up to
15% of the Portfolio's total assets may be invested in FOREIGN EQUITY
SECURITIES, including those of companies in emerging markets.

Generally, the Portfolio's assets will be allocated as shown in the table below.
However, we may rebalance the Portfolio's assets at any time or add or eliminate
portfolio segments, in accordance with the Portfolio's investment objective and
policies. In addition, Prudential and the Fund may hire new sub-advisers,
replace current sub-advisers or change the terms of the subadvisory agreements
without a vote of Contract owners. Contract owners will be notified of any new
advisers or material amendments to subadvisory agreements.
<TABLE>
<CAPTION>

Initial
Allocation
of
Portfolio
Assets Asset Class Sub-adviser Investment style
----------- ----------- ----------- ----------------
<S> <C> <C> <C>

40% Fixed Income Pacific Investment Management Mostly high-quality debt instruments
Company
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
20% Fixed Income The Prudential Investment High yield debt, including junk bonds and
Corporation emerging market debt.

15% Equities Jennison Associates LLC Growth-oriented, focusing on large-cap
stocks

15% Equities The Prudential Investment Value-oriented, focusing on large-cap
Corporation stocks

5% Equities The Dreyfus Corporation Value-oriented, focusing on small-cap and
mid-cap stocks

5% Equities Franklin Advisers, Inc. Growth-oriented, focusing on small-cap
and mid-cap stocks.
</TABLE>

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns or protect its assets, although we cannot
guarantee these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money. With derivatives, we try to predict whether the underlying investment - a
currency or some other benchmark - will go up or down at some future date. We
may use derivatives to try to reduce risk or to increase return consistent with
the Portfolio's overall investment objective.

We may: enter into REPURCHASE AGREEMENTS; engage in FOREIGN CURRENCY EXCHANGE
CONTRACTS; purchase and write PUT AND CALL OPTIONS ON FOREIGN CURRENCIES; and
trade CURRENCIES FUTURE CONTRACTS and options on those contracts.

ADDITIONAL STRATEGIES

The Portfolio also follows certain policies when it BORROWS money (the Portfolio
may borrow up to 5% of the value of its total assets); LENDS ITS SECURITIES; and
holds ILLIQUID SECURITIES (the Portfolio may hold up to 15% of its net assets in
illiquid securities, including securities with legal or contractual
restrictions, those without a readily available market and repurchase agreements
with maturities longer than 7 days). The Portfolio is subject to certain
investment restrictions that are fundamental policies, which means they cannot
be changed without shareholder approval. For more information about these
restrictions, see the SAI.

<PAGE>

EQUITY INCOME PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is to seek BOTH CURRENT INCOME AND
CAPITAL APPRECIATION. This means we seek investments whose price will increase
as well as pay dividends and other income. To achieve this objective, we look
for securities we believe will provide investment returns above those of the
Standard & Poor's 500 Composite Stock Price Index (the S&P 500 Index) or the
NYSE Composite Index. While we make every effort to achieve this objective, we
can't guarantee success.
<TABLE>
<CAPTION>
- -------------------------------------------------
<S> <C>
CONTRARIAN APPROACH We will normally invest at least 65% of the
To achieve our value investment strategy, we Portfolio's total assets in COMMON STOCKS and
generally take a strong contrarian approach to CONVERTIBLE SECURITIES. We buy common stock of
investing. In other words, we usually buy companies of every size - small, medium and large
securities that are out of favor and that many capitalization. When deciding which stocks to buy,
other investors are selling, and we attempt to we look at a company's earnings, balance sheet and
invest in companies and industries before other cash flow and then at how these factors impact the
investors recognize their true value. Using stock's price and return.
these guidelines, we focus on long-term We also buy CONVERTIBLE SECURITIES - like bonds,
performance, not short-term gain. corporate notes and preferred stock - that can be
converted into a company's common stock or other
equity security.
</TABLE>

- -------------------------------------------------
Up to 35% of the Portfolio's total assets may be invested in other DEBT
OBLIGATIONS. When acquiring these types of securities, we usually invest in
obligations rated A or better by Moody's or S&P. We may also invest in
obligations rated as low as CC by Moody's or Ca by S&P. These securities are
considered speculative and are sometimes referred to as "junk bonds." We may
also invest in instruments that are not rated, but which we believe are of
comparable quality to the instruments described above.

Up to 30% of the Portfolio's total assets may be invested in FOREIGN SECURITIES,
including money market instruments, equity securities and debt obligations. (For
these purposes, we do not consider ADRs and other similar receipts or shares to
be foreign securities.)

Under normal circumstances, the Portfolio may invest up to 35% of its total
assets in high quality MONEY MARKET INSTRUMENTS. In response to adverse market
conditions or when we are restructuring the Portfolio, we may temporarily invest
up to 100% of the Portfolio's assets in MONEY MARKET INSTRUMENTS. Investing
heavily in these securities limits our ability to achieve capital appreciation,
but can help to preserve the Portfolio's assets when the markets are unstable.

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns or protect its assets, although we cannot
guarantee these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money. With derivatives, we try to predict whether the underlying investment - a
security, market index, currency or some other benchmark - will go up or down at
some future date. We may use derivatives to try to reduce risk or to increase
return consistent with the Portfolio's overall investment objective.

<PAGE>

We may: enter into REPURCHASE agreements; purchase and sell OPTIONS on equity
securities, stock indexes and foreign currencies; purchase and sell stock index
and foreign currency FUTURES CONTRACTS and options on these futures contracts;
enter into FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS; and purchase securities
on a WHEN-ISSUED or DELAYED DELIVERY basis. The Portfolio may also enter into
SHORT SALES AGAINST-THE BOX.

We will consider factors such as cost and volatility in deciding whether to
employ any particular strategy or use any particular instrument. Any derivatives
we use may not match the Portfolio's underlying holdings. For more information
about these strategies, see the SAI, "Description of the Portfolios, their
Investments and Risks - Risk Management and Return Enhancement Strategies."

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
EQUITY PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is CAPITAL APPRECIATION. This means
we seek investments that we believe will provide investment returns above
broadly based market indexes. While we make every effort to achieve this
objective, we can't guarantee success.
<TABLE>
<CAPTION>

- -------------------------------------------------
VALUE APPROACH
<S> <C>
We use a value approach to investing which means we look for To achieve our investment objective, we invest primarily in
companies whose stock is selling below the price we believe common stocks of major established corporations as well as
reflects its true worth based on earnings, book value and smaller companies. We attempt to keep a flexible approach to
other financial measures. stock and selection - for example, we may invest in
companies that are expected to have higher earnings growth
than the market because they have new products or an
To achieve our value investment strategy, we usually buy expanding user base. Or we may invest in companies with
securities that are out of favor and that many other sales and earning trends that are expected to improve in the
investors are selling. We attempt to invest in companies and near future.
industries before other investors recognize their true
value. This effort to achieve returns that are better than broadly
based stock indexes involves accepting a value. greater risk
of declining values.
- ------------------------------------------------
</TABLE>

A portion of the Portfolio's assets may be invested in short, intermediate or
long term DEBT OBLIGATIONS, including convertible and nonconvertible PREFERRED
STOCK and OTHER EQUITY-RELATED SECURITIES. Up to 5% of these holdings may be
rated below investment grade. These securities are considered speculative and
are sometimes referred to as "junk bonds."

Under normal circumstances, the Portfolio may invest a portion of its assets in
MONEY MARKET INSTRUMENTS. In addition, we may temporarily invest up to 100% of
the Portfolio's assets in money market instruments in response to adverse market
conditions or when we are restructuring the portfolio. Investing heavily in
these securities limits our ability to achieve capital appreciation, but can
help to preserve the Portfolio's assets when the markets are unstable.

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns or protect its assets, although we cannot
guarantee these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money. With derivatives, we try to predict whether the underlying investment - a
security, market index, currency or some other benchmark - will go up or down at
some future date. We may use derivatives to try to reduce risk or to increase
return consistent with the Portfolio's overall investment objective.

<PAGE>

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
FLEXIBLE MANAGED PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is to seek A HIGH TOTAL RETURN
CONSISTENT WITH AN AGGRESSIVELY MANAGED DIVERSIFIED PORTFOLIO.
<TABLE>
<CAPTION>
- -----------------------------------------------------
<S> <C>
BALANCED PORTFOLIO To achieve our objective, we invest
We invest in all three types of securities - in a mix of money market instruments,
equity, debt and money market - in order to achieve debt securities and common stocks.
diversification in a single portfolio. We seek to We adjust the percentage of Portfolio
maintain a more aggressive mix of investments than assets in each category depending on
the Conservative Balanced Portfolio. This our expectations regarding the
Portfolio is appropriate for an investor looking different markets. While we make
for diversification who is willing to accept a every effort to achieve our
relatively high level of loss in an effort to objective, we can't guarantee success.
achieve greater appreciation.
</TABLE>

- -----------------------------------------------------

Generally, we will invest within the ranges shown below:

ASSET TYPE MINIMUM NORMAL MAXIMUM
---------- ------- ------ -------
Stocks 25% 60% 100%
Fixed Income Securities 0% 40% 75%
Money Market Securities 0% 0% 75%

Most of the securities in the debt portion of this Portfolio will be investment
grade, however, we may also invest up to 25% of this portion of the Portfolio in
debt securities rated as low as BB, Ba or lower by a major rating service at the
time they are purchased. These high-yield or "junk bonds" are riskier and
considered speculative. We may also invest in instruments that are not rated,
but which we believe are of comparable quality to the instruments described
above.

Up to 20% of the Portfolio's total assets may be invested in debt securities
that are issued outside the U.S. by foreign or U.S. issuers provided the
securities are denominated in U.S. dollars. The Portfolio may also invest up to
30% of its total assets in FOREIGN EQUITY AND DEBT SECURITIES. For these
purposes, we do not consider ADR as foreign securities.

The stock portion of the Portfolio will be invested mainly in equity securities
of smaller capitalization companies and major corporations which we believe are
in sound financial condition. In determining which small capitalization
securities to acquire we will look for those that have above-average
profitability with modest price/earnings ratios or whose worth is undervalued
relative to other stocks in the market.

The Portfolio may also invest in EQUITY-RELATED SECURITIES, such as bonds,
corporate notes, warrants and rights, that we can convert into a company's
common stock or some other equity security. The Portfolio may also acquire
preferred stock - another equity-related security - which may be rated below
investment grade.

The Portfolio may also invest in LOAN PARTICIPATIONS.

<PAGE>

The money market portion of the Portfolio will be invested in high-quality money
market instruments. In response to adverse market conditions or when we are
restructuring the Portfolio, we may temporarily invest up to 100% of the
Portfolio's assets in money market instruments. Investing heavily in these
securities limits our ability to achieve capital appreciation, but can help to
preserve the Portfolio's assets when the markets are unstable.

DERIVATIVES AND OTHER STRATEGIES

We may: enter into REPURCHASE agreements; purchase and sell OPTIONS on equity
securities, debt securities, stock indexes, and foreign currencies; purchase and
sell stock index, interest rate and foreign currency FUTURES CONTRACTS and
options on those contracts; enter into FORWARD FOREIGN CURRENCY EXCHANGE
CONTRACTS; purchase securities on a WHEN-ISSUED or DELAY-DELIVERY basis; and use
INTEREST RATE SWAPS. The Portfolio may also enter into SHORT SALES
AGAINST-THE-BOX.

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
GLOBAL PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is LONG TERM GROWTH OF CAPITAL. To
achieve this objective, we invest primarily in common stocks (and their
equivalents) of foreign and U.S. companies. While we make every effort to
achieve this objective, we can't guarantee success.
<TABLE>
<CAPTION>
- -------------------------------------------------
<S> <C>
GLOBAL INVESTING When selecting stocks,
we look for companies that
have prospects for:

This Portfolio is intended to provide investors above-average earnings growth (on a per
with the opportunity to invest in companies share basis) and/or a high return on
located throughout the world. invested capital; a healthy balance
Although we are not required to invest in a sheet; sound financial and accounting
minimum number of countries, we intend normally policies and overall financial strength;
to invest in at least three countries, strong competitive advantages; effective
including the U.S. However, in response to research and product development; pricing
market conditions, we can invest up to 35% of flexibility; strong management; and
the Portfolio's total assets in any one country competitive operating characteristics.
other than the U.S.
</TABLE>
- -------------------------------------------------

The Portfolio may invest up to 100% of its assets in MONEY MARKET INSTRUMENTS in
response to adverse market conditions or when we are restructuring the
Portfolio. Investing heavily in these securities limits our ability to achieve
capital appreciation, but can help to preserve the Portfolio's assets when the
markets are unstable.

DERIVATIVES AND OTHER STRATEGIES

We may: enter into REPURCHASE agreements; purchase and sell OPTIONS on equity
securities, stock indexes and foreign currencies; purchase and sell stock index
and foreign currency FUTURES contracts and options on these futures contracts;
enter into FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS; and purchase securities
on a WHEN-ISSUED or DELAYED DELIVERY basis. The Portfolio may also enter into
SHORT SALES AGAINST-THE-BOX.

45
<PAGE>

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
GOVERNMENT INCOME PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is A HIGH LEVEL OF INCOME OVER THE
LONGER TERM CONSISTENT WITH THE PRESERVATION OF CAPITAL. In pursuing our
objective, we invest primarily in intermediate and long-term U.S. Treasury
securities and debt obligations issued by agencies or instrumentalities
established, sponsored or guaranteed by the U.S. government. While we make every
effort to achieve this objective, we can't guarantee success.
<TABLE>
<CAPTION>
- ------------------------------------------------
<S> <C>
U.S. GOVERNMENT SECURITIES Normally, we will invest at least 65% of the
U.S. Government Securities are considered Portfolio's total assets in U.S. GOVERNMENT
among the most creditworthy of debt SECURITIES, which include TREASURY
securities. Because they are generally SECURITIES, OBLIGATIONS ISSUED OR GUARANTEED
considered less risky, their yields tend to be BY U.S. GOVERNMENT AGENCIES AND
lower than the yields from corporate debt. INSTRUMENTALITIES and MORTGAGE-RELATED
Like all debt securities, the values of U.S. SECURITIES issued by U.S. government
Government securities will change as interest instrumentalities or non-governmental
rates change. corporations.
- ------------------------------------------------
</TABLE>

MORTGAGE-RELATED SECURITIES are usually pass-through instruments that pay
investors a share of all interest and principal payments from an underlying pool
of fixed or adjustable rate mortgages. Mortgage-related securities issued by
U.S. government agencies include debt securities issued by Fannie Mae or Freddie
Mae or guaranteed by Ginnie Mae. The U.S. Government or the issuing agency
guarantees the payment of interest and principal on these securities. Private
mortgage-elated securities that are not guaranteed by U.S. governmental entities
generally have one or more types of credit enhancement to ensure timely receipt
of payments and to protect against default.

Mortgage-related securities include COLLATERALIZED MORTGAGE OBLIGATIONS,
MULTI-CLASS PASS THROUGH SECURITIES and STRIPPED MORTGAGE-BACKED SECURITIES. A
collateralized mortgage backed obligation (CMO) is a security backed by an
underlying portfolio of mortgages or mortgage-backed securities that may be
issued or guaranteed by a bank or by U.S. governmental entities. A multi-class
pass-through security is any equity interest in a trust composed of underlying
mortgage assets. Payments of principal and interest on the mortgage assets and
any reinvestment income provide the money to pay debt service on the CMO or to
make scheduled distributions on the multi-class pass-through security. A
stripped mortgage-backed security (MBS strip) may be issued by U.S. governmental
entities or by private institutions. MBS strips take the pieces of a debt
security (principal and interest) and break them apart. The resulting securities
may be sold separately and may perform differently. MBS strips are highly
sensitive to changes in prepayment and interest rates.

The Portfolio may invest up to 35% of its total assets in MONEY MARKET
INSTRUMENTS, FOREIGN GOVERNMENT SECURITIES (including those issued by
supranational organizations) denominated in U.S. dollars, ASSET-BACKED
SECURITIES rated in one of the top two ratings categories by Moody's or S&P (or
if unrated, of comparable quality in our judgment) and SECURITIES OF ISSUERS
(INCLUDING FOREIGN GOVERNMENTS) OTHER THAN THE U.S. GOVERNMENT AND RELATED

<PAGE>

ENTITIES, where the principal and interest are substantially guaranteed by U.S.
Government agencies whose guarantee is backed by the full faith and credit of
the U.S. and where an assurance of payment on the unguaranteed portion is
provided for in a comparable way.

The Portfolio may use up to 30% of its net assets in connection with REVERSE
REPURCHASE AGREEMENTS and DOLLAR ROLLS.

The Portfolio may invest up to 100% of its assets in MONEY MARKET INSTRUMENTS in
response to adverse market conditions or when restructuring the Portfolio.
Investing heavily in these securities limits our ability to achieve capital
appreciation, but can help to preserve the Portfolio's assets when the markets
are unstable.

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns or protect its assets, although we cannot
guarantee these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money. With derivatives, we try to predict whether the underlying investment - a
security, interest rate or some other benchmark - will go up or down at some
future date. We may use derivatives to try to reduce risk or to increase return
consistent with the Portfolio's overall investment objective.

We may: enter into REPURCHASE AGREEMENTS; purchase and sell OPTIONS on debt
securities; purchase and sell interest rate FUTURES contracts and options on
these futures contracts; purchase securities on a WHEN-ISSUED or DELAYED
DELIVERY basis; and use INTEREST RATE SWAPS. The Portfolio may also enter into
SHORT SALES AGAINST-THE-BOX.

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is A HIGH TOTAL RETURN. In pursuing
our objective, we invest in high yield/high risk debt securities. While we make
every effort to achieve this objective, we can't guarantee success.
<TABLE>
<CAPTION>
- -----------------------------------------------------
HIGH YIELD/HIGH RISK
<S> <C>
Lower rated and comparable non-rated securities tend to Normally, we will invest at least 80% of the Portfolio's
offer better yields than higher rated securities with the total assets in medium to lower rated debt securities. Thes
same maturities because the issuer's past financial high-yield or "junk bonds" are riskier than higher than
condition may not have been as strong as that of higher higher rataed bonds and are considered speculative.
rated issuers. Changes rated bonds and are considered in
perception of the creditworthiness of the issuers of lower The Portfolio may also invest up to 20% of its total assets
rated securities tend to occur more frequently and in a more in U.S. dollar denominated DEBT SECURITIES issued
pronounced manner than for issuers of higher rated
securities.
- -----------------------------------------------------
</TABLE>

outside the U.S. by foreign and U.S. issuers. The Portfolio may also acquire
convertible and non-convertible debt securities and preferred stock. The
Portfolio will not invest in common stocks, except when they are included as
part of a debt security. The Portfolio may also invest in LOAN PARTICIPATIONS.

The Portfolio may use up to 30% of its net assets in connection with REVERSE
REPURCHASE AGREEMENTS and DOLLAR ROLLS.

Under normal circumstances, the Portfolio may invest in MONEY MARKET INSTRUMENTS
and COMMERCIAL PAPER OF DOMESTIC CORPORATIONS. In response to adverse market
conditions or when we are restructuring the Portfolio, we may temporarily invest
up to 100% of the Portfolio's assets in money market instruments. Investing
heavily in these securities limits our ability to achieve capital appreciation,
but can help to preserve the Portfolio's assets when the markets are unstable.

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns or protect its assets, although we cannot
guarantee these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money. With derivatives, we try to predict whether the underlying investment - a
security, interest rate or some other benchmark - will go up or down at some
future date. We may use derivatives to try to reduce risk or to increase return
consistent with the Portfolio's overall investment objective.

We may: enter into REPURCHASE agreements; purchase and sell OPTIONS on debt
securities; purchase and sell interest rate FUTURES contracts and options on
these futures contracts; purchase securities on a WHEN-ISSUED or DELAYED
DELIVERY basis; and use INTEREST RATE SWAPS. The Portfolio may also enter into
SHORT SALES and SHORT SALES AGAINST-THE-BOX.

<PAGE>

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

The investment objective of this Portfolio is to seek THE MAXIMUM CURRENT INCOME
THAT IS CONSISTENT WITH STABILITY OF CAPITAL AND MAINTENANCE OF LIQUIDITY. This
means we seek investments that we think will provide a high level of current
income. While we make every effort to achieve our objective, we can't guarantee
success.
<TABLE>
<CAPTION>

- -------------------------------------------------
STEADY NET ASSET VALUE
<S> <C>
The net asset value for the Portfolio will ordinarily remain We invest in a diversified portfolio of short-term debt
at $10 per share because dividends are declared and obligations issued by the U.S. Government, its agencies and
reinvested daily. The price of each share remains the same instrumentalities, as well as commercial paper, variable
but you will have more shares when dividends are declared. rate demand notes, bills, notes and other obligations issued
by banks, corporations and other companies (including trust
structures), and obligations issued by foreign banks,
companies or foreign governments
</TABLE>
- -------------------------------------------------

The Portfolio in high-quality money market instruments to try to provide
investors with current income while maintaining a stable net asset value of $10
per share. We make investments that meet specific rules designed for money
market mutual funds, such as the requirements of Investment Company Act Rule
2a-7. As such, we will not acquire any security with a remaining maturity
exceeding thirteen months, and we will maintain a dollar-weighted average
portfolio of 90 days or less. In addition, we will comply with the
diversification, quality and other requirements of Rule 2a-7. This means,
generally, that the instruments that we purchase present "minimal credit risk"
and are of "eligible quality." "Eligible quality" for this purpose means a
security: (i) rated in one of the two highest short-term rating categories by at
least two major rating services (or if only one major rating service has rated
the security, as rated by that service); or (ii) if unrated, of comparable
quality in our judgment. All securities that we purchase will be denominated in
U.S. dollars.

COMMERCIAL PAPER is short-term debt obligations of banks, corporations and
other borrowers. The obligations are usually issued by financially strong
businesses and often include a line of credit to protect purchasers of the
obligations. An ASSET-BACKED SECURITY is a loan or note that pays interest based
upon the cash flow of a pool of assets, such as mortgages, loans and credit card
receivables. CERTIFICATES OF DEPOSIT, TIME DEPOSITS and BANKERS' ACCEPTANCES are
obligations issued by or through a bank. These instruments depend upon the
strength of the bank involved in the borrowing to give investors comfort that
the borrowing will be repaid when promised.

We may purchase DEBT SECURITIES that include DEMAND FEATURES, which allow
us to demand repayment of a debt obligation before the obligation is due or
"matures". This means that longer term securities can be purchased because of
our expectation that we can demand repayment of the obligation at an agreed
price within a relatively short period of time, in compliance with the rules
applicable to money market mutual funds.

The securities that we may purchase may change over time as new types of
money market instruments are developed. We will purchase these new instruments,
however, only if their characteristics and features follow the rules governing
money market mutual funds.

<PAGE>

OTHER STRATEGIES

We may also use alternative investment strategies to try to improve the
Portfolio's returns or protect its assets, although we cannot guarantee these
strategies will work, that the instruments necessary to implement these
strategies will be available or that the Portfolio will not lose money.

We may: enter into REPURCHASE AGREEMENTS; enter into REVERSE REPURCHASE
AGREEMENTS; and purchase securities on a WHEN-ISSUED or DELAYED-DELIVERY basis.

We will consider other factors (such as cost) in deciding whether to employ any
particular strategy or use any particular instrument. For more information about
these strategies, see the SAI, "Description of the Portfolios, their Investments
and Risks - Risk Management and Return Enhancement Strategies."

ADDITIONAL STRATEGIES

The Portfolio also follows certain policies when it BORROWS MONEY (the Portfolio
may borrow up to 5% of the value of its total assets); LENDS ITS SECURITIES; and
holds ILLIQUID SECURITIES (the Portfolio may hold up to 10% of its net assets in
illiquid securities, including securities with legal or contractual
restrictions, those without a readily available market and repurchase agreements
with maturities longer than 7 days). The Portfolio is subject to certain
investment restrictions that are fundamental policies, which means they cannot
be changed without shareholder approval. For more information about these
restrictions, see the SAI.

52
<PAGE>

- --------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is LONG TERM GROWTH OF CAPITAL. This
means we seek investments whose price will increase over several years. While we
make every effort to achieve this objective, we can't guarantee success.
<TABLE>
<CAPTION>

- -----------------------------------------------------
<S> <C>
NATURAL RESOURCES COMPANIES
are companies that primarily own, explore, mine, process or In pursuing our objective, we normally invest 65% of the
otherwise develop natural resources, or supply goods and Portfolio's total assets in common stocks and convertible
services to such companies. Natural resources include securities of natural resource companies and in securities
such as gold, silver and platinum, FERROUS METALS, such as which are related to the market value of some natural
PRECIOUS METALS, iron, aluminum and copper, STRATEGIC METALS resources (asset-indexed securities).
such asuranium and titanium, HYDROCARBONS such as coal and oil,
TIMBERLAND, undeveloped REAL PROPERTY and AGRICULTURAL We seek securities that are attractively priced
COMMODITIES. as compared to the intrinsic value of the
underlying natural resource or securities of
companies in a position to benefit

</TABLE>
- -----------------------------------------------------

from current or expected economic conditions. Depending on prevailing trends, we
may shift the Portfolio's focus from one natural resource to another, however,
we will not invest more than 25% of the Portfolio's total assets in a single
natural resource industry.

When acquiring ASSET-INDEXED SECURITIES, we usually will invest in obligations
rated at least BBB by Moody's or Baa by S&P or, if unrated securities of
comparable quality in our judgment. However, we may invest in asset-indexed
securities rated as low as CC by Moody's or Ca by S&P or in unrated securities
of comparable quality. These high risk or "junk" are considered speculative.

The Portfolio may also acquire asset-indexed securities issued in the form of
COMMERCIAL PAPER provided it is rated at least A-2 by S&P or P-2 by Moody's (or
if unrated, of comparable quality in our judgment).

The Portfolio may invest up to 35% of its total assets in securities that are
not asset-indexed or natural resource related. These holdings may include common
stocks, convertible stock, debt securities and money market instruments. When
acquiring debt securities, we usually will invest in obligations rated A or
better by S&P or Moody's (or if unrated, of comparable quality in our judgment).
However, we may invest in debt securities rated as low as CC by Moody's or Ca by
S&P or in unrated securities of comparable quality.

Under normal circumstances, the Portfolio may invest up to 35% of its total
assets in MONEY MARKET INSTRUMENTS. In response to adverse market conditions or
when restructuring the Portfolio, we may invest up to 100% of the Portfolio's
assets in money market instruments. Investing heavily in these securities limits
our ability to achieve capital appreciation, but can help to preserve the
Portfolio's assets when the markets are unstable.

Up to 30% of the Portfolio's total assets may be invested in FOREIGN EQUITY AND
EQUITY-RELATED SECURITIES. For these purposes, we do not consider ADRs and other
similar receipts or shares to be foreign securities.

<PAGE>

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns or protect its assets, although we cannot
guarantee these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money. With derivatives, we try to predict whether the underlying investment - a
security, market index, currency or some other benchmark - will go up or down at
some future date. We may use derivatives to try to reduce risk or to increase
return consistent with the Portfolio's overall investment objective. The
Portfolio may also enter into SHORT SALES AGAINST-THE-BOX.

We may: purchase and sell OPTIONS on equity securities, stock indexes and
foreign currencies; purchase and sell stock index and foreign currency FUTURES
contracts and options on these futures contracts; enter into FORWARD FOREIGN
CURRENCY EXCHANGE CONTRACTS; and purchase securities on a WHEN-ISSUED or DELAYED
DELIVERY basis.

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
PRUDENTIAL JENNISON PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is to achieve LONG TERM GROWTH OF
CAPITAL. This means we seek investments whose price will increase over several
years. While we make every effort to achieve this objective, we can't guarantee
success.
<TABLE>
<CAPTION>
- -------------------------------------------------
<S> <C>
INVESTMENT STRATEGY In pursuing our objective, we normally invest 65% of
We seek to invest in equity securities of the Portfolio's total assets in common stocks and
established companies with above-average growth preferred stocks of companies with capitalization in
prospects. We select stocks on a excess of $1 billion.
company-by-company basis using fundamental
analysis. In making our stock picks, we look For the balance of the Portfolio, we may invest in
for companies that have had growth in earnings COMMON STOCKS, PREFERRED STOCKS and OTHER
and sales, high returns on equity and assets or EQUITY-RELATED SECURITIES of companies that are
other strong financial characteristics. Often, undergoing changes in management, product and/or
the companies we chose have superior marketing dynamics which we believe have not yet
management, a unique market niche or a strong been reflected in reported earnings or recognized by
new product. investors. In addition, we may invest in DEBT
SECURITIES and MORTGAGE-RELATED SECURITIES. These
</TABLE>
- -------------------------------------------------
securities may be rated as low as Baa by Moody's or BBB by S&P (or if unrated,
of comparable quality in our judgment).

The Portfolio may also invest in OBLIGATIONS ISSUED OR GUARANTEED BY THE U.S.
GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES. In addition, up to 30% of the
Portfolio's assets may be invested in FOREIGN EQUITY and EQUITY-RELATED
SECURITIES. For these purposes, we do not consider ADRs and other similar
receipts or shares to be foreign securities.

In response to adverse market conditions or when restructuring the Portfolio, we
may invest up to 100% of the Portfolio's assets IN MONEY MARKET INSTRUMENTS.
Investing heavily in these securities limits our ability to achieve capital
appreciation, but can help to preserve the Portfolio's assets when the markets
are unstable.

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns or protect its assets, although we cannot
guarantee these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money. With derivatives, we try to predict whether the underlying investment - a
security, market index, currency or some other benchmark - will go up or down at
some future date. We may use derivatives to try to reduce risk or to increase
return consistent with the Portfolio's overall investment objective.

We may: enter into REPURCHASE AGREEMENTS; purchase and sell OPTIONS on equity
securities, stock indexes and foreign currencies; purchase and sell stock index
and foreign currency FUTURES contracts and options on these futures contracts;
enter into FORWARD FOREIGN

<PAGE>

CURRENCY EXCHANGE CONTRACTS; and purchase securities on a WHEN-ISSUED or DELAYED
DELIVERY basis. The Portfolio may also enter into SHORT SALES AGAINST-THE-BOX.

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
SMALL CAPITALIZATION STOCK PORTFOLIO

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is LONG-TERM GROWTH OF CAPITAL. This
means we seek investments whose price will increase over several years. While we
make every effort to achieve this objective, we can't guarantee success.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
S&P SMALLCAP INDEX
<S> <C>
We attempt to duplicate the performance of the Standard & To achieve this objective, we attempt to duplicate the
Poor's Small Capitalization Stock Index, a market weighted performance of the S&P SmallCap Index. Normally we do this
index which consists of 600 smaller capitalization U.S. by investing in all or a representative sample of the STOCKS
stocks. Stocks in the Index have market capitalizations of in the S&P Index. Thus, the Portfolio is not "managed" in
between $18 million and $3.4 billion and are selected for the traditional sense of using market and economic
market size, liquidity and industry group. The S&P Small Cap analyses to select stocks.
Index has above average risk and may fluctuate more than the
S&P 500 Index. Inclusion in this index in no way implies The Portfolio may also hold CASH or EQUIVALENTS, in which
S&P's opinion as to the stock's attractiveness as an case its performance will differ from the Index's. We
investment. The Portfolio is not sponsored, endorsed, sold attempt to minimize these differences by using
or promoted by S&P. S&P makes no representations regarding
the advisability of investing in the Portfolio. "Standard &
Poor's," "Standard & Poor's Small Capitalization Stock
Index" and "Standard & Poor's SmallCap 600" are trademarks
of McGraw Hill.

</TABLE>
- ----------------------------------------------------------------

stock index FUTURES contracts, OPTIONS on stock indexes and options on stock
index futures contracts (see below).

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns or protect its assets, although we cannot
guarantee these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money. With derivatives, we try to predict whether the underlying investment - a
security, market index or some other benchmark - will go up or down at some
future date. We may use derivatives to try to reduce risk or to increase return
consistent with the Portfolio's overall investment objective.

We may: purchase and sell OPTIONS on equity securities and stock indexes;
purchase and sell stock index FUTURES contracts and options on those futures
contracts; and purchase securities on a WHEN-ISSUED or DELAYED DELIVERY basis.
The Portfolio may also enter into SHORT SALES AGAINST-THE-BOX.

<PAGE>

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is to achieve an INVESTMENT RETURN
THAT CORRESPONDS TO THE PERFORMANCE OF PUBLICLY-TRADED COMMON STOCKS GENERALLY.
To achieve this goal, we attempt to duplicate the performance of the S&P 500
Index. While we make every effort to achieve this objective, we can't guarantee
success.
<TABLE>
<CAPTION>

- ------------------------------------------------------
S&P 500 INDEX
<S> <C>
We attempt to duplicate the performance of the S&P all 500 Under normal conditions, we attempt to invest in all
Index, a market weighted index which represents more than 500 stocks represented in the S&P 500 Index in proportion
70% of the market value of all publicly-traded common to their weighting in the Index. We will attempt to remain
stocks. as fully invested in the S&P 500 stocks as possible in light
of cash flow into and from the Portfolio.
Inclusion in the Index in no way implies S&P's opinion as to
the stock's attractiveness as an investment. The Portfolio is not To manage subscriptions and redemptions in the Portfolio, we
sponsored, endorsed, sold or promoted by S&P. S&P makes no may temporarily hold cash or invest in high quality MONEY
representations regarding the advisability of investing in the MARKET INSTRUMENTS. To the extent we do so, the Portfolio's
Portfolio. "Standard & Poor's," "Standard & Poor's 500" and performance will differ from that of the Index. We attempt
"500" are trademarks of McGraw Hill. to minimize differences in the

</TABLE>
- ------------------------------------------------------

performance of the Portfolio and the Index by using stock index FUTURES
contracts, options on stock indexes and OPTIONS on stock index futures contracts
(see below). The Portfolio will not use these derivative securities for
speculative purposes or to hedge against a decline in the value of the
Portfolio's holdings.

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns or protect its assets, although we cannot
guarantee these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money. With derivatives, we may try to predict whether the underlying investment
- - a security, market index or some other benchmark - will go up or down at some
future date. We may use derivatives to try to reduce risk or to increase return
consistent with the Portfolio's overall investment objective.

We may: enter into REPURCHASE agreements; purchase and sell OPTIONS on equity
securities and stock indexes; purchase and sell stock index FUTURES contracts
and options on those futures contracts. The Portfolio may also enter into SHORT
SALES AGAINST-THE-BOX.

<PAGE>

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
20/20 FOCUS PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES

- -------------------------------------------------
<S> <C>
VALUE & GROWTH APPROACHES To achieve this objective, the Portfolio will
Our strategy is to combine the efforts of two invest in up to 40 equity securities of U.S.
outstanding portfolio managers, each with a companies that are selected by the Portfolio's two
different investment style and to invest in portfolio managers as having strong capital
only the favorite stock picks of each manager. appreciation potential. Each portfolio manager will
One manager will invest using a VALUE approach, manage his own portion of the Portfolio's assets,
which means he will attempt to identify strong which will usually include a maximum of 20
companies selling at a discount from their securities. Because the Portfolio will be investing
perceived true value. The other manager will in 40 or fewer securities, an investment in this
use a GROWTH approach, which means he seeks Portfolio may be riskier than an investment in a
companies that have higher-than-average more widely diversified fund. We intend to be fully
earnings. invested, holding less than 5% in cash, under normal
market conditions.
</TABLE>
- -------------------------------------------------

The Portfolio may invest in common stocks and equity-related securities such as
PREFERRED STOCKS, CONVERTIBLE STOCKS, ADRS, and equity interests in
PARTNERSHIPS, JOINT VENTURES and OTHER NON-CORPORATE ENTITIES. We may also
invest in WARRANTS and similar rights that can be exercised for equity
securities, but will not invest more than 5% of the Portfolio's total assets in
unattached warrants or rights. The Portfolio may invest up to 20% of its total
assets in CASH, OBLIGATIONS ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT, ITS
AGENCIES AND INSTRUMENTALITIES and DERIVATIVES (see below). Up to 20% of the
Portfolio's total assets may be invested in FOREIGN SECURITIES, which for this
purpose does not included ADRs.

The Portfolio may also invest in REAL ESTATE INVESTMENT TRUSTS (REITs). A REIT
is a company that manages a portfolio of real estate to earn profits for its
shareholders. Some REITs acquire equity interests in real estate and then
receive income from rents and capital gains when the buildings are sold. Other
REITs lend money to real estate developers and receive interest income from the
mortgages. Some REITs invest in both types of interests.

We may invest in high quality MONEY MARKET INSTRUMENTS. In response to adverse
market conditions or when restructuring the Portfolio, we may invest up to 100%
of the Portfolio's assets in money market instruments. Investing heavily in
these securities limits our ability to achieve capital appreciation, but can
help to preserve the Portfolio's assets when the markets are unstable.

DERIVATIVES AND OTHER STRATEGIES

<PAGE>

that the Portfolio will not lose money. With derivatives, we try to predict
whether the underlying investment - a market index, currency or some other
benchmark - will go up or down at some future date. We may use derivatives to
try to reduce risk or to increase return consistent with the Portfolio's overall
investment objective.

We may: enter into REPURCHASE AGREEMENTS and purchase OPTIONS and sell "covered"
options on financial indexes that are traded on U.S or foreign securities
exchanges or in the over-the-counter market. (A covered option simply means that
the Portfolio either owns the securities or has the right to acquire the
securities underlying the option or has segregated cash or other liquid assets
equal in amount to its obligation under the option.)

The Portfolio may also purchase and sell FUTURES contracts on stock indexes and
foreign currencies and options on those futures contracts. The Portfolio may
enter into SHORT SALES but no more than 25% of its net assets may be used as
collateral for short sales or set aside in connection with short sales. (Short
sales against the box are not subject to these percentage limitations.) We may
also use up to 25% of the Portfolio's net assets for SHORT SALES
AGAINST-THE-BOX.

ADDITIONAL STRATEGIES

<PAGE>

- --------------------------------------------------------------------------------
ZERO COUPON BOND PORTFOLIOS - 2000 AND 2005
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objectives of these two Portfolios is THE HIGHEST PREDICTABLE
COMPOUND INVESTMENT FOR A SPECIFIC PERIOD OF TIME, CONSISTENT WITH THE SAFETY OF
INVESTED CAPITAL. We seek to achieve this objective by investing primarily in
debt securities of the U.S. Treasury and corporations that have been issued
without interest coupons or stripped of their interest coupons, or interest
coupons that have been stripped from the debt obligation (stripped securities).
The two Portfolios differ only in their liquidation dates which is November 15,
2000 for the Zero Coupon Bond Portfolio 2000 and November 15, 2005 for the Zero
Coupon Bond Portfolio 2005. On the liquidation date of a Portfolio, all of the
securities held by the Portfolio will be sold and all outstanding shares of the
Portfolio will be redeemed. While we will try to achieve our objective, we can't
guarantee success.
<TABLE>

- -------------------------------------------------
<S> <C>
ACTIVE MANAGEMENT
Each Portfolio seeks a higher yield than would be realized In pursuing their objective, each Portfolio invests only in
by just holding the Portfolio's initial investments. We debt securities that do not involve substantial risk of loss
actively manage the Portfolios to take advantage of trading of capital through default and that can be readily sold.
opportunities that may arise from supply and demand dynamics Although these securities are not high risk, their value
or perceived differences in the quality or liquidity of does vary because of changes in interest rates.
securities. Of course, by pursuing this strategy, the
Portfolios have the risk that they will not realize the Generally, we try to invest at least 70% of each
yield of their initial investments. Portfolio's total assets in STRIPPED SECURITIES that
are obligations of the U.S. Government and which
mature within 2 years of the Portfolio's liquidation
date.
</TABLE>
- -------------------------------------------------

Up to 30% of the Portfolio's total assets may be invested in either stripped
securities of corporations or interest bearing corporate debt securities rated
no lower than Baa by a major rating service (or if unrated, of comparable
quality in our judgment).

Under normal conditions, no more than 20% of a Portfolio's total assets may be
invested in interest-bearing securities. However, as the liquidation date of a
Portfolio draws near, we may invest more than 20% in interest bearing securities
as a defensive measure.

The Portfolio may also enter into REPURCHASE AGREEMENTS.

Under normal circumstances, each Portfolio may invest in MONEY MARKET
INSTRUMENTS for cash management purposes. In response to adverse market
conditions or when we are restructuring a Portfolio, we may temporarily invest
up to 100% of the Portfolio's assets in MONEY MARKET INSTRUMENTS. Investing
heavily in these securities limits our ability to achieve capital appreciation,
but can help to preserve the Portfolio's assets when the markets are unstable.

ADDITIONAL STRATEGIES

Each Portfolio also follows certain policies when it BORROWS MONEY (the
Portfolio may borrow up to 5% of the value of its total assets); LENDS ITS
SECURITIES; and holds ILLIQUID SECURITIES (the Portfolio may hold up to 15% of
its net assets in illiquid securities, including

<PAGE>

securities with legal or contractual restrictions, those without a readily
available market and repurchase agreements with maturities longer than 7 days).
The Portfolios are subject to certain investment restrictions that are
fundamental policies, which means they cannot be changed without shareholder
approval. For more information about these restrictions, see the SAI.

<PAGE>

Investment Risks

As noted, all investments involve risk, and investing in the Portfolios is no
exception. This chart outlines the key risks and potential rewards of the
principal investments each Portfolio may make.
<TABLE>
<CAPTION>

INVESTMENT TYPE PORTFOLIO & % OF ASSETS RISKS POTENTIAL REWARDS
- --------------------- -------------------------- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
HIGH-QUALITY MONEY All Portfolios o Credit risk-the risk that the borrower o Regular interest income
MARKET OBLIGATIONS can't pay back the money borrowed
OF ALL TYPES Up to 100%
o Market risk - the risk that the o May be more secure than equity
obligations may lose value securities since corporate issuers
because interest rates change or must pay their debts before they
there is a lack of confidence pay their dividends
in the borrower

- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY AND Equity securities: o Individual stocks could lose value o Historically, stocks have outper
EQUITY-RELATED All Portfolios formedother investments over the
SECURITIES except Government o The equity markets could go down, long term
Income, Money resulting in a decline in value of o Generally, economic growth means
Market, Zero Coupon the Portfolio's investments higher corporate profits, which
2000 & 2005 leads to an increase in stock
prices, known as
(% varies) o Companies that pay dividends may
not do so capital appreciation o May be a source of dividend income
if they don't have profits or
adequate cash

Equity-related securities:
-------------------------
Conservative o Changes in economic or political
Balanced, conditions, both U.S. and
Diversified Bond, international, may result in a
Diversified decline in the value of the
Conservative Growth, Portfolio's investments
Equity Income,
Equity, Flexible
Managed, High Yield
Bond, Prudential
Jennison, Small
Capitalization,
Global, Natural

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Resources

(% varies)

- ------------------------------------------------------------------------------------------------------------------------------------

INVESTMENT GRADE All Portfolios except Small o The Portfolio's holdings, share price, o Bonds have generally outperformed
DEBT SECURITIES Capitalization, Stock Index, yield, and total return may fluctuate in money market instruments over the
Money Market response to bond market movements long term with less risk than
stocks

(% varies) o Credit risk - the default of an issuer o Most bonds will rise in value when
would leave the Portfolio with unpaid interest rates fall
interest or principal. The lower a bond's
quality, the higher its potential for o Regular interest income
volatility

o Market risk - the risk that the o Investment grade bonds have a
market value of an investment ower risk of default
may move up or down, sometimes rapidly
or unpredictably. Market risk may o Generally more secure than stock
affect an industry, sector, or the since companies must pay their
market as a whole debts before paying stockholders

o Interest rate risk - the value of
most bonds will fall when interest
rates rise; the longer a bond's
maturity and the lower its credit
quality, the more its value
typically falls. It can lead to
price volatility

- ------------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD DEBT Conservative o Higher market risk o May offer higher interest income
SECURITIES Balanced, than higher quality debt
(JUNK BONDS) Diversified Bond, o Higher credit risk securities
Diversified
Conservative Growth, o May be more illiquid (harder to
Equity Income, value and sell), in which case
Equity, Flexible valuation would depend more on the
Managed, High Yield investment adviser's judgment than
Bond, Natural Resources is generally the case with higher rated
securities

(% varies)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> x
FOREIGN Conservative o Foreign markets, economies and political o Investors can participate in the
SECURITIES Balanced, systems may not be as stable as the U.S. growth of foreign markets and
Diversified Bond, companies operating in those
Diversified o Currency risk - changing values of foreign markets
Conservative Growth, currencies
Equity, Equity o Changing value of foreign
Income, Flexible o May be less liquid than U.S. stocks and currencies
Managed, Global, bonds
Government Income, o Opportunities for diversification
High Yield Bond,
Prudential Jennison, o Differences in foreign laws, accounting
Natural Resources, standards and public information, custody
20/20 Focus and settlement practices

(% varies) o Year 2000 conversion may be more of a
problem for some foreign issuers

Options on Foreign Currencies:

Conservative Balanced, Equity,
Equity Income, Flexible Managed,
Global, Natural Resources,
Prudential Jennison

Futures on Foreign Currencies:
Conservative Balanced, Diversified
Conservative Growth, Equity
Income, Equity, Flexible
Managed, Global, Prudential
Jennison, Natural Resources,
20/20 Focus

(% varies)

- ------------------------------------------------------------------------------------------------------------------------------------
DERIVATIVES Options on Equity Securities: o Derivatives , such as futures, options and o The Portfolio could make money
and
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> x
Conservative Balanced, Equity foreign currency forward contracts, may not protect against losses if the
Income, Equity, Flexible Managed, fully offset the underlying positions and investment analysis proves
Global, Natural Resources, this could result in losses to the Portfolio correct
Prudential Jennison, Small that would not have otherwise occurred
Capitalization, Stock Index o Derivatives that involve
leverage could generate
o Derivatives used for risk management may substantial gains at low
not have the intended effects and cost
(% varies) may result in losses or missed opportunities
o One way to manage the
Portfolio's risk/return
balance is to lock in the
value of an investment ahead
Options on Debt Securities: of time

Diversified Bond, Government o The other party to a derivatives contract
Income, Conservative Balanced, could default
Flexible Managed, High Yield
Bond
o Derivatives that involve leverage could
magnify losses
(% varies)

Options on Stock Indexes: o Certain types of derivatives involve costs
Conservative Balanced, Flexible to the Portfolio that can reduce returns
Managed, Equity, Equity Income,
Global, Natural Resources,
Prudential Jennison, Small
Capitalization, Stock Index,
20/20 Focus

(% varies)

Futures Contracts on stock indexes:
Conservative Balanced, Equity
Income, Flexible Managed, Global,
Natural Resources, Prudential

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

(% varies)

Futures on debt securities and
interest rate indexes:
Conservative Balanced, Diversified
Bond, Flexible Managed, Government
Income, High Yield Bond

(% varies)

Interest Rate Swaps:
Conservative Balanced, Diversified
Bond, Government Income, High
Yield Bond

(% varies)

- ------------------------------------------------------------------------------------------------------------------------------------

MORTGAGE BACKED & Government Income, Money Market, o Prepayment risk - the risk that o Regular interest income
ASSET BACKED Prudential Jennison the underlying mortgage or other
SECURITIES debt may be prepaid partially or o Pass-through instruments provide
completely, generally during greater diversification than direct
periods of falling interest rates, ownership of loans
which could adversely affect yield
to maturity and require the
Portfolio to reinvest in
lower-yielding securities o Certain mortgage-backed securities
may benefit from security interest in
real estate collateral
o Credit risk - that the underlying
mortgages or receivables will not
be paid by debtors or by credit
insurers or guarantors and thus may
involve greater risk

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
o Market risk

- ------------------------------------------------------------------------------------------------------------------------------------
ZERO COUPON BONDS Zero Coupon Portfolios 2000 o Typically subject to greater o Value rises when interest rates fall
& 2005 volatility and less liquidity
in adverse markets than other
debt securities

o Credit risk

o Market risk

- ------------------------------------------------------------------------------------------------------------------------------------

REAL ESTATE 20/20 Focus o Performance depends on the strength o Real estate holdings can generate
INVESTMENT TRUSTS of real estate markets, REIT good returns from rents, rising
management and property market values, etc.
management which can be affected
by many factors, including national o Greater diversification than direct
and regional economic conditions ownership

- ------------------------------------------------------------------------------------------------------------------------------------
ILLIQUID SECURITIES All Portfolios except Money o May be difficult to value and sell; o May offer a more attractive yield
Market (15%) could result in losses than liquid securities

Money Market Portfolio (10%)

- ------------------------------------------------------------------------------------------------------------------------------------
LOAN PARTICIPATIONS Conservative Balanced, o Credit risk o May offer right to receive
Diversified Bond, Flexible principal, interest and fees without
Managed, High Yield Bond o Market risk as much risk as lender

o Portfolio has no rights against the
borrower in the event borrower does
not pay loan back

- ------------------------------------------------------------------------------------------------------------------------------------
WHEN-ISSUED AND When-issued and delayed- o Use of such instruments and o Use of instruments may magnify
DELAYED delivery securities: strategies may magnify underlying investment gains
underlying investment losses
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

DELIVERY Conservative Balanced, o Investment costs may exceed potential
SECURITIES, Diversified Bond, Equity Income, underlying investment gains
REVERSE REPURCHASE Equity, Flexible Managed,
AGREEMENTS, DOLLAR Government Income, High Yield
ROLLS AND SHORT Bond, Global, Money Market,
SALES Natural Resources, Prudential
Jennison, Small Capitalization

Reverse Repurchase Agreements:
Diversified Bond, Government
Income, High Yield Bond, Money
Market and the money market
portion of any Portfolio

Dollar Rolls:
Diversified Bond, Government
Income, High Yield Bond

Short Sales:
Conservative Balanced, Diversified
Bond, High Yield Bond, 20/20 Focus

Short Sales Against the Box:
All Portfolios except the Money
Market and Zero Coupon Bond
Portfolios

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

HOW THE PORTFOLIOS ARE MANAGED

INVESTMENT ADVISER

Prudential serves as the overall investment adviser for the Fund. Founded in
1875, it is responsible for the management of the Fund and provides investment
advice and related services to each Portfolio. As of December 31, 1998,
Prudential had total assets under management of $_________ of which over $____
___ were owned by Prudential and $_______ were external assets. Prudential is
located at 751 Broad Street, Newark, New Jersey 07102-3777.

The following chart lists the total investment advisory fees paid in 1998 as a
percentage of the Portfolio's average net assets. For the two new Portfolios,
the following chart describes the fee arrangement.

1998
- --------------------------------------------------------------------------------
TOTAL ADVISORY FEES AS % OF
PORTFOLIO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Conservative Balanced
Diversified Bond
Diversified Conservative Growth
Equity
Equity Income
Flexible Managed
Global
Government Income
High Yield Bond
Money Market
Natural Resources
Prudential Jennison
Small Capitalization Stock
Stock Index
20/20 Focus
Zero Coupon Bond 2000
Zero Coupon Bond 2005

INVESTMENT SUB-ADVISERS

For each Portfolio, a sub-adviser provides day-to-day investment management.
Prudential pays the sub-adviser out of the fee Prudential receives from the
Fund.

Prudential Investment Corporation (PIC), a wholly owned subsidiary of
Prudential, provides substantially all of the investment advisory services for
the Portfolios except the services provided by the sub-advisers listed below.
PIC's address is Prudential Plaza, 751 Broad Street, Newark, New Jersey 07102.

Jennison Associates LLC (Jennison), a wholly owned subsidiary of Prudential,
provides substantially all of the investment advisory services for the
Prudential Jennison Portfolio and a portion of the assets for the 20/20 Focus
Portfolio. Jennison's address is 466 Lexington Avenue,

<PAGE>

New York, New York 10017. As of December 31, 1998, Jennison had over $46.4
billion in assets under management for institutional and mutual fund clients.

For the Diversified Conservative Growth Portfolio, Prudential serves as overall
investment manager and is responsible for selecting sub-advisers to handle the
day-to-day investment management and monitoring their performance. With Board
approval, Prudential is permitted to change or add sub-advisers or enter into a
new agreement with a current sub-adviser without shareholder approval. The Fund
will notify shareholders of any new sub-adviser. Listed below are the current
sub-advisers.

Jennison. (See above.)

Prudential Investment Corporation. (See above.)

Franklin Advisers, Inc. (Franklin) is located at 777 Mariners Island
Blvd., San Mateo, California 94404 and is a wholly owned subsidiary of
Franklin Resources, Inc. As of December 31, 1998, Franklin and its
affiliates managed over $____ in assets.

The Dreyfus Corporation (Dreyfus) is located at 200 Park Avenue, New
York, New York, 10266 and is a subsidiary of Mellon Bank corporation.
As of December 31, 1998, Dreyfus managed over $____ in assets.

Pacific Investment Management Company (PIMCO) is located at 840 Newport
Center Drive, Newport Beach, California 92660 and is a subsidiary of
PIMCO Advisors L.P. As of December 31, 1998, PIMCO managed over $______
in assets.

PORTFOLIO MANAGERS

CONSERVATIVE BALANCED PORTFOLIO & FLEXIBLE MANAGED PORTFOLIO

These Portfolios are managed by a team of portfolio managers. Mark Stumpp,
Senior Managing Director of Prudential Investments, a division of Prudential,
has been the lead portfolio manager of the Portfolios since 1994 and is
responsible for the overall asset allocation decisions. Mr. Stumpp has
supervisory responsibility of the portfolio management team.

Warren Spitz, Managing Director of Prudential Investments, has been a portfolio
manager of the Portfolios since 1995 and manages a portion of each Portfolio's
equity holdings.

Tony Rodriguez, Managing Director of Prudential Investments, has been a
portfolio manager of the Portfolios since 1993 and is responsible for the debt
portion of the Portfolios.

John Moschberger, CFA and Vice President of Prudential Investments, manages the
portions of each Portfolio designed to duplicate the performance of the S&P 500
Index. Mr. Moschberger joined Prudential in 1980 and has been a portfolio
manager since 1986.

DIVERSIFIED BOND PORTFOLIO, GOVERNMENT INCOME PORTFOLIO AND ZERO COUPON BOND
PORTFOLIOS 2000 & 2005

These Portfolios are managed by Ms. Barbara Kenworthy who has been the manager
of each since 1995. Ms. Kenworthy is a Managing Director of Prudential
Investments.

DIVERSIFIED CONSERVATIVE GROWTH PORTFOLIO

David Poiesz, CFA, manages the portion of the Portfolio assigned to Jennison.
Mr. Poiesz is a Director and Executive Vice President of Jennison, which he
joined in 1983 as an equity research analyst. Mr. Poiesz has been an equity
portfolio manager for Jennison since 1991.

Thomas R. Jackson manages the equity portion of the Portfolio assigned to PIC.
Mr. Jackson, a Managing Director of PIC, joined PIC in 1990 and has over 30
years of professional equity

<PAGE>

investment management experience. He was formerly co-chief investment officer of
Red Oak Advisers and Century Capital Associates, each a private money management
firm, where he managed pension and other accounts for institutions and
individuals. Mr. Jackson was also with The Dreyfus Corporation where he managed
and served as president of the Dreyfus Fund. Mr. Jackson also managed an equity
pension investment group at Chase Manhattan Bank.

George Edwards, CFA, manages the fixed income portion of the Portfolio assigned
to PIC. Mr. Edwards is a Managing Director of Prudential Investments. Before
joining the Prudential mutual fund group, Mr. Edwards worked in Prudential's
investment grade bond unit. He was previously an analyst at McCarthy, Crisanti &
Maffei (now MCM-Duff & Phelps).

Edward B. Jamieson, Michael McCarthy and Aidan O'Connell manage the portion of
the Portfolio assigned to Franklin. Mr. Jamieson is an Executive Vice President
of Franklin and Managing Director of Franklin's equity and high yield groups. He
has been with Franklin since 1987. Mr. McCarthy joined Franklin in 1992 and is a
vice president and portfolio manager specializing in research analysis of
several technology groups. Mr. O'Connell joined Franklin in 1998 and is a
research analyst specializing in research analysis of the semiconductor and
semiconductor capital equipment industries. Prior to joining Franklin, Mr.
O'Connell was a research associate and corporate finance associate with
Hambrecht & Quist.

William R. Rydell, CFA and Mark W. Sikorski, CFA, manage the portion of the
Portfolio assigned to Dreyfus. Mr. Rydell is a portfolio manager of Dreyfus and
is the President and Chief Executive Officer of Mellon Equity Associates LLP.
Mr. Rydell has been in the Mellon organization since 1973. Mr. Sikorski is a
portfolio manager of Dreyfus and a Vice President of Mellon Equity Associates
LLP. Mr. Sikorski has been in the Mellon organization since 1996. Prior to
joining Mellon, he managed various corporation treasury projects for Northeast
Utilities, including bond refinancing and investment evaluations.

John Hague manages the portion of the Portfolio assigned to PIMCO. Mr. Hague is
a Managing Director of PIMCO and has managed fixed income assets for PIMCO and
its predecessor since 1989.

EQUITY PORTFOLIO

Thomas Jackson, Managing Director of Prudential Investments, has managed this
Portfolio since 1990.

EQUITY INCOME PORTFOLIO

Warren Spitz, Managing Director of Prudential Investments, has managed this
Portfolio since 1988.

GLOBAL PORTFOLIO

Daniel Duane, Managing Director of Prudential Investments, Ingrid Holm, Vice
President of Prudential Investments and Michelle Picker, Vice President of
Prudential Investments, have been co-managers of this Portfolio since 1997. Mr.
Duane has managed the Portfolio since 1990. Ms. Holm has assisted in the
management of Prudential mutual funds since 1994 and has managed a portion of
Prudential's general account. Prior to 1994, Ms. Holm headed the high yield
research group for Prudential's general account. Ms. Picker has been an analyst
in Prudential's global equity investments groups since 1992 and has managed a
portion of Prudential's general account.

HIGH YIELD BOND PORTFOLIO

George Edwards, Managing Director of Prudential Investments, has managed this
Portfolio since 1997. Mr. Edwards has held various positions with Prudential
Investments since 1985.

<PAGE>

MONEY MARKET PORTFOLIO

Manolita Brasil, Investment Manager of Prudential Investments, has managed this
Portfolio since 1996. She joined Prudential in 1981 and served as an assistant
portfolio manager for six years before she was appointed manager of the P-B
International Money Fund in 1994.

NATURAL RESOURCES PORTFOLIO

Leigh Goehring, Vice President of Prudential Investments, has managed this
Portfolio since 1992. Prior to that time, Mr. Goehring was portfolio manager for
The Prudential-Bache Option Growth Fund.

PRUDENTIAL JENNISON PORTFOLIO

David Poiesz, CFA, Director and Executive Vice President of Jennison, is the
portfolio manager and Peter Reinemann, Director and Senior Vice President of
Jennison, is the associate portfolio manager for this Portfolio. Mr. Poiesz has
managed the Portfolio since its inception in 1995. Mr. Poiesz joined Jennison in
1983 as an equity research analyst and has been a equity portfolio manager for
Jennison since 1991. Mr. Reinemann has been with Jennison since 1992 as an
associate portfolio manager. Prior to 1992, he served as a Vice President at
Paribas Asset Management, Inc.

SMALL CAPITALIZATION STOCK PORTFOLIO

Wai Chiang, Vice President of Prudential Investments, has managed this Portfolio
since its inception in 1995. Mr. Chiang has been employed by Prudential as a
portfolio manager since 1986.

STOCK INDEX PORTFOLIO

John Moschberger, CFA, Vice President of Prudential Investments, has managed
this Portfolio. Mr. Moschberger joined Prudential in 1980 and has been a
portfolio manager since 1986.

20/20 FOCUS PORTFOLIO

Thomas R. Jackson, Managing Director of Prudential Investments, manages
approximately 50% of the Portfolio's assets. Mr. Jackson joined Prudential
Investments in 1990 and has over 30 years of professional equity investment
management experience. He was formerly co-chief investment officer of Red Oak
Advisers and Century Capital Associates, where he managed pension and other
accounts for institutions and individuals. He was also with Dreyfus, where he
managed and served as President of the Dreyfus Fund. Mr. Jackson also managed an
equity pension investment group at Chase Manhattan Bank.

Spiros Segalas, Director, President and Chief Investment Officer of Jennison,
manages approximately 50% of the Portfolio's assets. One of the founders of
Jennison, Mr. Segalas has been in the investment business for over 35 years and
has been the portfolio manager for the Harbor Capital Appreciation Fund since
May 1990.

HOW TO BUY AND SELL SHARES OF THE FUND

The Fund offers two classes of shares in each Portfolio: Class I and Class II.
Class I shares are sold only to separate accounts of Prudential as investment
options under certain Contracts. Class II is offered only to separate accounts
of non-Prudential insurance companies as investment options under certain of
their Contracts. Please refer to the accompanying Contract prospectus to see
what Portfolios are available through your Contract.

<PAGE>

How to Buy and Sell Shares

The only way to invest in the Portfolios is through certain variable life
insurance and variable annuity contracts. Together with this prospectus you
should have received a prospectus for such a Contract which you should refer to
for further information on investing in the Portfolios.

Both Class I and Class II shares of a Portfolio are sold without any sales
charge at the net asset value of the Portfolio. Class II shares, however, are
subject to an annual distribution or "12b-1" fee of 0.25% and an administration
fee of 0.15% of the average daily net assets of Class II. Class I shares do not
have a distribution or administration fee.

Shares are redeemed for cash within 7 days of receipt of a proper notice of
redemption or sooner if required by law. There is no redemption charge. We may
suspend the right to redeem shares or receive payment when the New York Stock
Exchange is closed (other than weekends or holidays), when trading on the New
York Stock Exchange is restricted, or as permitted by the SEC.

Net Asset Value

When you purchase or sell shares of a Portfolio the price you will pay or
receive, as the case may be, is based on the share's value. This is known as the
net asset value or NAV. The price at which a purchase or redemption is made is
based on the next calculation of the NAV after the order is placed. The NAV of
each share class of each Portfolio (except the Money Market Portfolio) is
determined once a day - at 4:15 p.m. New York Time - on each day the New York
Stock Exchange is open for business. If the New York Stock Exchange closes early
on a day, the Portfolios' NAVs will be calculated some time between the closing
time and 4:15 p.m. on that day. The NAV for the Money Market Portfolio is
determined at 12:00 p.m. on each day the New York Stock Exchange is open for
business.

The NAV for each of the Portfolios other than the Money Market Portfolio is
determined by a simple calculation. It's the total value of a Portfolio (assets
minus liabilities) divided by the total number of shares outstanding. The NAV
for the Money Market Portfolio will ordinarily remain at $10 per share because
dividends are declared and reinvested daily. (The price of each share remains
the same but you will have more shares when dividends are declared.)

To determine a Portfolio's NAV, its holdings are valued as follows:

EQUITY SECURITIES are generally valued at the last sale price on an exchange or
NASDAQ, or if there is not sale, at the mean between the most recent bid and
asked prices on that day. If there is no asked price, the security will be
valued at the bid price. Equity securities that are not sold on an exchange or
NASDAQ are generally valued by an independent pricing agent or principal market
maker.

All SHORT-TERM DEBT SECURITIES held by the Money Market Portfolio are valued at
amortized cost. Short-term debt securities with remaining maturities of 12 month
or less held by the Conservative Balanced and Flexible Managed Portfolios are
valued on an amortized cost basis. For the other Portfolios, debt securities
with remaining maturities of 60 days or less are valued on an amortized cost
basis. This valuation method is widely used by mutual funds It means that the
security is valued initially at its purchase price and then decreases in value
by equal amounts each day until the security matures. It almost always results
in a value that is extremely close to the actual market value. The Fund's Board
of Directors has established procedures to monitor whether any material
deviation between valuation and market value occurs and if so, will promptly
consider what action, if any, should be taken to prevent unfair results to
Contract owners.

OTHER DEBT SECURITIES -- those that are not valued on an amortized cost basis --
are valued using an independent pricing service.

<PAGE>

OPTIONS ON STOCK AND STOCK INDEXES that are traded on an national securities
exchange are valued at the average of the bid and asked prices as of the close
of that exchange.

FUTURES CONTRACTS and OPTIONS ON FUTURES CONTRACTS are valued at the last sale
price at the close of the commodities exchange or board of trade on which they
are traded. If there has been no sale that day, the securities will be valued at
the mean between the most recently quoted bid and asked prices on that exchange
or board of trade.

SECURITIES FOR WHICH NO MARKET QUOTATIONS ARE AVAILABLE will be valued at fair
value by Prudential under the direction of the Fund's Board of Directors.

Distributor

Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund. The Fund has Distribution
and Service Plans under Rule 12b-1 of the Investment Company Act of 1940
covering Class II shares that allows Class II to pay distribution fees for the
sale and distribution of those shares.

OTHER INFORMATION

Federal Income Taxes

Variable contract owners and prospective purchasers should consult the
prospectus for the variable contract for a discussion of investing in the
Portfolios through that variable contract.

Year 2000

Many computer systems used today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded. This could be a problem when the year
2000 arrives and could affect securities trades, interest and dividend payments,
pricing and account services. Although we cannot guarantee that this will not be
a problem, the Fund's service providers have been working on adapting their
computer systems. They expect that their systems, and the systems of their
service providers, will be ready for the year 2000.

In addition, issuers of securities may also encounter year 2000 compliance
problems. If these problems are significant and are not corrected, securities
markets could go down or issuers could have poor performance. If a Portfolio
owns these securities, then it is possible that it could lose money.

Monitoring for Possible Conflicts

The Fund sells it shares to fund variable life insurance contracts and variable
annuity contracts and may offer its shares to qualified retirement plans.
Because of differences in tax treatment and other considerations, it is possible
that the interest of variable life insurance contract owners, variable annuity
contract owners and participants in qualified retirement plans could conflict.
The Fund will monitor the situation and in the event that a material conflict
did develop, the Fund would determine what action, if any, to take in response.

FINANCIAL HIGHLIGHTS

The financial highlights will help you evaluate the financial performance of
each Portfolio. The TOTAL RETURN in each chart represents the rate that a
shareholder earned on an investment in that

<PAGE>

share class of the Portfolio, assuming reinvestment of all dividends and other
distributions. The charts do not reflect charges under any variable contract.
The information is for each share class for the periods indicated.

This information has been audited by _________________, whose report, along with
the financial statements, appear in the SAI, which is available upon request.

<PAGE>

For More Information

Additional information about the Fund and each Portfolio can be obtained upon
request without charge and can be found in the following documents:

Statement of Additional Information (SAI) (incorporated by reference into
this prospectus)

Annual Report

(including a discussion of market conditions and strategies that
significantly affected the Portfolios' performance during the previous
year)

Semi-Annual Report

To obtain these documents or to ask any questions about the Fund:

- Call toll-free 1-800-437-4016

- Write to Prudential Series Fund, 751 Broad Street, Newark, NJ 07102-3777

You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows:

BY MAIL:

Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-6009
(The SEC charges a fee to copy documents.)

IN PERSON:

Public Reference Room
IN WASHINGTON, DC

(For hours of operation, call 1(800) SEC-0330.)

VIA THE INTERNET:
http://www.sec.gov

SEC File No. 811-03623

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1999

THE PRUDENTIAL
SERIES FUND, INC.

The Prudential Series Fund, Inc. (the Fund) is a diversified, open-end
management investment company (commonly known as a "mutual fund") that is
intended to provide a range of investment alternatives through its seventeen
separate Portfolios, each of which is, for investment purposes, in effect a
separate fund (the Portfolios).

The Fund offers two classes of shares of each Portfolio: Class I and Class II.
Class I shares are sold only to separate accounts of The Prudential Insurance
Company of America (Prudential) as investment options under variable life
insurance and variable annuity contracts. Class II is offered only to separate
accounts of non-Prudential insurance companies for the same types of contracts
(collectively with the Prudential contracts, the Contracts). These separate
accounts invest in shares of the Fund through subaccounts that correspond to the
Portfolios. The separate 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.

NOT EVERY PORTFOLIO IS AVAILABLE UNDER EACH CONTRACT. THE PROSPECTUS FOR EACH
CONTRACT LISTS THE PORTFOLIOS CURRENTLY AVAILABLE UNDER THAT PARTICULAR
CONTRACT.

In order to sell shares to both Prudential and non-Prudential insurance
companies, the Fund has obtained an Order from the SEC. The Fund and its
Portfolios are managed in compliance with the terms and conditions of that
Order.

<PAGE>

This statement of additional information is not a prospectus and should be read
in conjunction with the Fund's prospectus dated May 1, 1999, which is available
without charge upon written request to The Prudential Series Fund, Inc., 751
Broad Street, Newark, New Jersey 07102-3777 or by telephoning (800) 437-4016.

THE PRUDENTIAL SERIES FUND, INC.
751 Broad Street
Newark, New Jersey 07102-3777
Telephone: (800) 437-4016

PSF-2 Ed 5-98 Catalog No. 646674P

<PAGE>

CONTENTS

CROSS-REFERENCE
TO PAGE
PAGE IN PROSPECTUS
---- --------------
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS
I. GENERAL...............................................
II. CONVERTIBLE SECURITIES................................
III. WARRANTS..............................................
IV. FOREIGN SECURITIES....................................
V. OPTIONS ON STOCK AND DEBT SECURITIES..................
VI. OPTIONS ON STOCK INDEXES..............................
VII. OPTIONS ON FOREIGN CURRENCIES.........................
VIII.FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS....
IX. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS...........
X. INTEREST RATE SWAPS...................................
XI. LOAN PARTICIPATIONS...................................
XII. REVERSE REPURCHASE AGREEMENTS & DOLLAR ROLLS..........
XIII.WHEN-ISSUED AND DELAYED DELIVERY SECURITIES...........
XIV. SHORT SALES...........................................
XV. LOANS OF PORTFOLIO SECURITIES.........................
XVI. ILLIQUID SECURITIES...................................
XVII.FURTHER INFORMATION ABOUT THE ZERO COUPON
BOND PORTFOLIOS.....................................

INVESTMENT RESTRICTIONS....................................

INVESTMENT MANAGEMENT AND
DISTRIBUTION ARRANGEMENTS..................................

OTHER INFORMATION CONCERNING THE FUND
I. INCORPORATION AND AUTHORIZED SHARES ..................
II. PORTFOLIO TRANSACTIONS AND BROKERAGE .................
III. CUSTODIANS ...........................................
IV. EXPERTS ..............................................
V. LICENSES .............................................

MANAGEMENT OF THE FUND.....................................

FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC.

THE PRUDENTIAL SERIES FUND, INC. SCHEDULE OF INVESTMENTS...

APPENDIX: DEBT RATINGS.....................................

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS

I. GENERAL

This prospectus provides information about the Fund, which consists of seventeen
separate portfolios -- the Conservative Balanced Portfolio, Diversified Bond
Portfolio, Diversified Conservative Growth Portfolio, Equity Portfolio, Equity
Income Portfolio, Flexible Managed Portfolio, Global Portfolio, Government
Income Portfolio, high Yield Bond Portfolio, Money Market Portfolio, Natural
Resources Portfolio, Prudential Jennison Portfolio, Small Capitalization Stock
Portfolio, Stock Index Portfolio, 20/20 Focus Portfolio, Zero Coupon Bond
Portfolio 2000 and Zero Coupon Bond Portfolio 2005 (each a Portfolio). Not every
Portfolio is available under all of the Contracts. The prospectus for each
Contract lists the Portfolios currently available under that particular
Contract. The Portfolios are managed by Prudential as discussed in INVESTMENT
MANAGEMENT ARRANGEMENTS AND EXPENSES, page __.

Each of the seventeen Portfolios has a different investment objective. For this
reason, each Portfolio will have different investment results and be subject to
different financial and market risks. FINANCIAL RISK refers to the ability of an
issuer of a debt security to pay principal and interest and to the earnings
stability and overall financial soundness of an issuer of an equity security.
MARKET RISK refers to the degree to which the price of a security will react to
changes in conditions in securities markets in general, and with particular
reference to debt securities, to changes in the overall level of interest rates.

The investment objectives of the Portfolios can be found in PORFOLIO
DESCRIPTIONS AND RISK.F/RETURN SUMMARIES in the prospectus.

II. CONVERTIBLE SECURITIES

The Conservative Balanced, Diversified Conservative Growth, 20/20 Focus,
Flexible Managed, Equity, Prudential Jennison and Small Capitalization Stock
Portfolios may investment in convertible securities and a significant portion of
the assets of the Equity Income, Global and Natural Resources Portfolios may be
invested in these types of securities.

A convertible security is a debt security - for example, a bond or preferred
stock - that may be converted into common stock of the same or different issuer.
The convertible security sets for the price, quantity of shares and time period
in which it may be so converted. Convertible stock are senior to a company's
common stock but are usually subordinated to debt obligations of the company.
Convertible securities provide a steady stream of income which

1
<PAGE>

is generally at a higher rate than the income on the issuer's common stock but
lower than the rate on the issuer's debt obligations. At the same time, they
offer - through their conversion mechanism - the chance to participate in the
capital appreciation of the underlying common stock. The price of a convertible
security tends to increase and decrease with the market value of the underlying
common stock.

III. WARRANTS

The Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global, and Natural Resources Portfolios
may invest in warrants on common stocks. A warrant is a right to buy a number of
shares of stock at a specified price during a specified period of time. The risk
associated with warrants is that the market price of the underlying stock will
stay below the exercise price of the warrant during the exercise period. If this
occurs, the warrant becomes worthless and the investor loses the money he or she
paid for the warrant.

From time to time, the Diversified Bond and the High Yield Bond Portfolios may
invest in debt securities that are offered together with warrants but only when
the debt security meets the Portfolio's investment criteria and the value of the
warrant is relatively very small. If the warrant later becomes valuable, it may
be sold or exercised.

IV. FOREIGN SECURITIES

The Global Portfolio may invest up to 100% of its total assets in common stock
and convertible securities denominated in a foreign currency and issued by
foreign or domestic issuers. The Diversified Bond and High Yield Bond Portfolios
may each invest up to 20% of the their assets in U.S. currency denominated debt
securities issued outside the U.S. by foreign or U.S. issuers. In addition, the
bond portions of the Conservative Balanced and Flexible Managed Portfolios may
each invest up to 20% in such securities. The Conservative Balanced, Flexible
Managed, and Equity Income Portfolios may invest up to 30% of their total assets
in debt and equity securities denominated in a foreign currency and issued by
foreign or U.S. issuers. The Equity, Prudential Jennison and Natural Resources
Portfolios may invest up to 30% of their total assets in non-U.S. currency
denominated common stock and fixed income securities convertible into common
stock of foreign and U.S. issuers. The Diversified Conservative Growth Portfolio
may invest up to 15% of its total assets in foreign equity securities and up to
25% of its total assets in foreign debt obligations (of which, 10% of the
Portfolio's total assets may be invested in debt obligations of issuers in
emerging countries). The 20/20 Focus Portfolio may invest up to 20% of its total
assets in securities of foreign issuers.

2
<PAGE>

American Depositary Receipts (ADRs) are U.S. dollar -denominated certificates
issued by a U.S. bank or trust company. ADRs represent the right to receive
securities of a foreign issuer deposited in a domestic bank or foreign branch of
a U.S. bank and traded on a U.S. exchange or in the over-the-counter (OTC)
market. Investment in ADRs has certain advantages over direct investments in the
underlying foreign securities because they are easily transferable, have readily
available market quotations, and the foreign issuers are usually subject to
comparable auditing, accounting and financial reporting standards as U.S.
issuers.

Foreign securities involve certain risks, which should be considered carefully
by an investor. These risks include political or economic instability in the
country of an issuer, the difficulty of predicting international trade patterns,
the possibility of imposition of exchange controls and, in the case of
securities not denominated in U.S. currency, the risk of currency fluctuations.
Foreign securities may be subject to greater movement in price than U.S.
securities and under certain market conditions, may be less liquid than U.S
securities. In addition, there may be less publicly available information about
a foreign company than a U.S company. Foreign companies generally are not
subject to uniform accountings, auditing and financial reporting standards
comparable to those applicable to U.S. companies. There is generally less
government regulation of securities exchanges, brokers and listed companies
abroad than in the U.S., and, with respect to certain foreign countries, there
is a possibility of expropriations, confiscatory taxation or diplomatic
developments which could affect investment in those countries. Finally, in the
event of a default of any foreign debt obligations, it may be more difficult for
a Portfolio to obtain or enforce a judgment against the issuers of such
securities.

If a security is denominated in a foreign currency, it may be affected by
changes in currency rates and in exchange control regulations, and costs may be
incurred in connection with conversions between currencies. The Portfolios that
may invest in foreign securities may enter into forward foreign currency
exchange contracts for the purchase or sale of foreign currency for hedging
purposes, including: locking in the U.S. dollar price equivalent of interest or
dividends to be paid on such securities which are held by a Portfolio; and
protecting the U.S. dollar value of such securities which are held by the
Portfolio. A Portfolio will not enter into such forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts would
obligate the Portfolio to deliver an amount of foreign currency in excess of the
value of the Portfolio's securities or other assets denominated in that
currency. In addition, the Portfolios may, for hedging purposes, enter into
certain transactions involving options on foreign currencies, foreign currency
futures contracts and options on foreign currency futures contracts.

V. OPTIONS ON STOCK AND DEBT SECURITIES

3
<PAGE>

A. OPTIONS ON STOCK

The Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global and Natural Resources Portfolios
may purchase and "write" (that is, sell) put and call options on equity
securities that are traded on securities exchanges, listed on the National
Association of Securities Dealers Automated Quotations System (NASDAQ), or
privately negotiated with broker-dealers (OTC equity options).

A call option is a short-term contract that gives the option purchaser or
"holder" the right to acquire a particular equity security for a specified price
at any time during a specified period. For this right, the option purchaser pays
the option seller a certain amount of money or "premium" which is set before the
option contract is entered into. The seller or "writer" of the option is
obligated to deliver the particular security if the option purchaser exercises
the option.

A put option is a similar contract. In a put option, the option purchaser has
the right to sell a particular security to the option seller for a specified
time during a specified period. In exchange for this right, the option purchaser
pays the option seller a premium.

The Portfolios will write only "covered" options on stocks. A call option is
covered if:

(1) the Portfolio owns the security underlying the option;

(2) the Portfolio has an absolute right to acquire the security
immediately;

(3) the Portfolio has a call on the same security that underlies the
option which has an exercise price equal to or less than the exercise
price of the covered option (or, if the exercise price is greater, the
Portfolio sets aside in a segregated account liquid assets that are
equal to the difference).

A put option is covered if:

(1) the Portfolio sets aside in a segregated account liquid assets that
are equal to or greater than the exercise price of the option:

(2) the Portfolio holds a put on the same security that underlies the
option which has an exercise price equal to or greater less than the exercise
price of the covered option (or, if the exercise price is less, the Portfolio
sets aside in a segregated account liquid assets that are equal to the
difference).

The Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global and Natural Resources Portfolios
can also purchase "protective puts" on equity securities. These are acquired to
protect a Portfolio's security from a decline in market value. In a

4
<PAGE>

protective put, a Portfolio has the right to sell the underlying security at the
exercise price, regardless of how much the underlying security may decline in
value. In exchange for this right, the Portfolio pays the put seller a premium.

The Portfolios may use options for both hedging and investment purposes. None of
the Portfolios intend to use more than 5% of its net assets to acquire call
options on stocks. The Portfolios may purchase equity securities that have a put
or call option provided by the issuer.

B. OPTIONS ON DEBT SECURITIES

The Diversified Bond, Diversified Conservative Growth, Government Income,
Conservative Balanced, Flexible Managed and High Yield Bond Portfolios may
purchase and sell put and call options on debt securities, including U.S.
government debt securities, that are traded on a U.S. securities exchange or
privately negotiated with primary U.S. Government securities dealers that are
recognized by the Federal Reserve Bank of New York (OTC debt options). None of
the Portfolios currently intend to invest more than 5% of its net assets at any
one time in call options on debt securities.

Options on debt securities are similar to stock options (see above) except that
the option holder has the right to acquire or sell a debt security rather than
an equity security.

The Portfolios will write only covered options. Options on debt securities are
covered in much the same way as options on equity securities. One exception is
in the case of call options on U.S. Treasury Bills. With these options, a
Portfolio might own U.S. Treasury Bills of a different series from those
underlying the call option, but with a principal amount and value that matches
the option contract amount and a maturity date that is no later than the
maturity date of the securities underlying the option.

The Portfolios may also write straddles - - which are simply combinations of a
call and a put written on the same security at the same strike price and
maturity date. When a Portfolio writes a straddle, the same security is used to
"cover" both the put and the call. If the price of the underlying security is
below the strike price of the put, the Portfolio will set aside liquid assets as
additional cover equal to the difference. A Portfolio will not use more than 5%
of its net assets as cover for straddles.

The Portfolios may also purchase protective puts to try to protect the value of
one of the securities its own against a decline in market value, as well as
putable and callable debt securities.

C. RISKS OF TRANSACTIONS IN OPTIONS ON EQUITY AND DEBT SECURITIES.

5
<PAGE>

A Portfolio's use of options on equity or debt securities is subject to certain
special risks, in addition to the risk that the market value of the security
will move opposite to the Portfolio's option position. An exchange-traded option
position may be closed out only on an exchange, board of trade or other trading
facility which provides a secondary market for an option of the same series.
Although the Portfolios will generally purchase or write only those
exchange-traded options for which there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange will
exist for any particular option, or at any particular time, and for some options
no secondary market on an exchange or otherwise may exist. In such event it
might not be possible to effect closing transactions in particular options, with
the result that the Portfolio would have to exercise its options in order to
realize any profit and would incur brokerage commissions upon the exercise of
such options and upon the subsequent disposition of underlying securities
acquired through the exercise of call options or upon the purchase of underlying
securities for the exercise of put options. If a Portfolio as a covered call
option writer is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.

Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or a clearing
corporation may not be adequate at all times to handle the trading volume; or
(vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in the class or series of options) would cease to exist,
although outstanding options on that exchange that had been issued by a clearing
corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms. There is no assurance that higher
than anticipated trading activity or other unforeseen events might not, at
times, render certain of the facilities of any of the clearing corporations
inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers' orders.

The purchase and sale of OTC options will also be subject to certain risks.
Unlike exchange-traded options, OTC options generally do not have a continuous
liquid market. Consequently, a Portfolio will generally be able to realize the
value of an OTC option it has purchased only by exercising it or reselling it to
the dealer who issued it. Similarly, when a Portfolio writes an

6
<PAGE>

OTC option, it generally will be able to close out the OTC option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to which the Portfolio originally wrote the OTC option. While the Portfolios
will seek to enter into OTC options only with dealers who agree to enter into
closing transactions with the Portfolio, there can be no assurance that the
Portfolio will be able to liquidate an OTC option at a favorable price at any
time prior to expiration. In the event of insolvency of the other party, a
Portfolio may be unable to liquidate an OTC option. Prudential monitors the
creditworthiness of dealers with whom the Portfolios enter into OTC option
transactions under the Board of Directors' general supervision.

VI. OPTIONS ON STOCK INDEXES

A. STOCK INDEX OPTIONS

The Diversified Bond, Government Income, Conservative Balanced, Flexible
Managed, High Yield Bond, Equity, Equity Income, Prudential Jennison, Small
Capitalization Stock, Global and Natural Resources Portfolios may purchase and
sell put and call options on stock indexes that are traded on securities
exchanges, listed on NASDAQ or that are privately-negotiated with broker-dealers
(OTC options). Options on stock indexes are similar to options on stocks, except
that instead of giving the option holder the right to receive or sell a stock,
it gives the holder the right to receive an amount of cash if the closing level
of the stock index is greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash the holder
will receive is determined by multiplying the difference between the index's
closing price and the option's exercise price, expressed in dollars, by a
specified "multiplier." Unlike stock options, stock index options are always
settled in cash and gain or loss depends on price movements in the stock market
generally (or a particular market segment, depending on the index) rather than
the price movement of an individual stock.

A Portfolio will only sell or "write" covered options on stock indexes. A call
option is covered if the Portfolio holds stocks at least equal to the value of
the index times the multiplier times the number of contracts (the Option Value).
When a Portfolio writes a call option on a broadly based stock market index, the
Portfolio will set aside cash, cash equivalents or "qualified securities"
(defined below). The value of the assets to be segregated cannot be less than
100% of the Option Value as of the time the option is written.

If a Portfolio has written an option on an industry or market segment index, it
must set aside at least five "qualified securities," all of which are stocks of
issuers in that market segment, with a market value at the time the option is
written of not less than 100% of the Option Value. Such stocks will include
stocks which represent at least 50% of the weighting of the industry or market
segment index and will represent at least 50% of the Portfolio's

7
<PAGE>

holdings in that industry or market segment. No individual security will
represent more than 15% of the amount so set aside in the case of broadly based
stock market index options or 25% of such amount in the case of options on a
market segment index. If at the close of business on any day the market value of
such qualified securities falls below 100% of the Option Value as of that date,
the Portfolio will set aside an amount in liquid unencumbered assets equal in
value to the difference. In addition, when a Portfolio writes a call on an index
which is "in-the-money" at the time the option is written - that is, the index's
value is above the strike price - the Portfolio will set aside liquid
unencumbered assets equal to the amount by which the call is in-the-money times
the multiplier times the number of contracts. Any amount so set aside may be
applied to the Portfolio's obligation to segregate additional amounts in the
event that the market value of the qualified securities falls below 100% of the
current Option Value. A "qualified security" is an equity security which is
listed on a securities exchange or listed on NASDAQ against which the Portfolio
has not written a stock call option and which has not been hedged by the
Portfolio by the sale of stock index futures. However, if the Portfolio holds a
call on the same index as the call written where the exercise price of the call
held is equal to or less than the exercise price of the call written or greater
than the exercise price of the call written if the difference is maintained by
the Portfolio in liquid unencumbered assets in a segregated account with its
custodian, it will not be subject to the requirement described in this
paragraph.

A put index option is covered if: (1) the Portfolio sets aside in a segregated
account liquid unencumbered assets of a value equal to the strike price times
the multiplier times the number of contracts; or (2) the Portfolio holds a put
on the same index as the put written where the strike price of the put held is
equal to or greater than the strike price of the put written or less than the
strike price of the put written if the difference is maintained by the Portfolio
in liquid unencumbered assets in a segregated account.

B. RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEXES.

A Portfolio's purchase and sale of options on stock indexes has the same risks
as stock options described in the previous section. In addition, the distinctive
characteristics of options on indexes create certain additional risks. Index
prices may be distorted if trading of certain stocks included in the index is
interrupted. Trading in index options also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of stocks
included in the index. If this occurred, a Portfolio would not be able to close
out options which it had purchased or written and, if restrictions on exercise
were imposed, may be unable to exercise an option it holds, which could result
in substantial losses to the Portfolio. It is the policy of the Portfolios to
purchase or write options only on stock indexes which include a number of stocks
sufficient to minimize the likelihood of a trading halt in options on the index.

8
<PAGE>

The ability to establish and close out positions on stock index options are
subject to the existence of a liquid secondary market. A Portfolio will not
purchase or sell any index option contract unless and until, in the portfolio
manager's opinion, the market for such options has developed sufficiently that
the risk in connection with such transactions is no greater than the risk in
connection with options on stocks.

There are certain special risks associated with writing calls on stock indexes.
Because exercises of index options are settled in cash, a call writer such as a
Portfolio cannot determine the amount of its settlement obligations in advance
and, unlike call writing on specific stocks, cannot precisely provide in advance
for, or cover, its potential settlement obligations by acquiring and holding the
underlying securities. However, the Portfolios will follow the "cover"
procedures described above.

Price movements of a Portfolio's equity securities probably will not correlate
precisely with movements in the level of the index. Therefore, in writing a call
on a stock index a Portfolio bears the risk that the price of the securities
held by the Portfolio may not increase as much as the index. In that case, the
Portfolio would bear a loss on the call which may not be completely offset by
movement in the price of the Portfolio's equity securities. It is also possible
that the index may rise when the Portfolio's securities do not rise in value. If
this occurred, the Portfolio would experience a loss on the call which is not
offset by an increase in the value of its securities and might also experience a
loss in its securities. However, because the value of a diversified securities
portfolio will, over time, tend to move in the same direction as the market,
movements in the value of a Portfolio's securities in the opposite direction as
the market would be likely to occur for only a short period or to a small
degree.

When a Portfolio has written a stock index call, there is also a risk that the
market may decline between the time the Portfolio has a call exercised against
it, at a price which is fixed as of the closing level of the index on the date
of exercise, and the time the Portfolio is able to sell stocks in its portfolio.
As with stock options, a Portfolio will not learn that an index option has been
exercised until the day following the exercise date but, unlike a call on stock
where the Portfolio would be able to deliver the underlying securities in
settlement, the Portfolio may have to sell part of its stock portfolio in order
to make settlement in cash, and the price of such stocks might decline before
they can be sold. This timing risk makes certain strategies involving more than
one option substantially more risky with options in stock indexes than with
stock options. For example, even if an index call which a Portfolio has written
is "covered" by an index call held by the Portfolio with the same strike price,
the Portfolio will bear the risk that the level of the index may decline between
the close of trading on the date the exercise notice is filed with the

9
<PAGE>

clearing corporation and the close of trading on the date the Portfolio
exercises the call it holds or the time the Portfolio sells the call which in
either case would occur no earlier than the day following the day the exercise
notice was filed.

There are also certain special risks involved in purchasing put and call options
on stock indexes. If a Portfolio holds an index option and exercises it before
final determination of the closing index value for that day, it runs the risk
that the level of the underlying index may change before closing. If such a
change causes the exercised option to fall out-of-the-money, the Portfolio will
be required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the assigned
writer. Although the Portfolio may be able to minimize this risk by withholding
exercise instructions until just before the daily cutoff time or by selling
rather than exercising an option when the index level is close to the exercise
price, it may not be possible to eliminate this risk entirely because the cutoff
times for index options may be earlier than those fixed for other types of
options and may occur before definitive closing index values are announced.

10
<PAGE>

VII. OPTIONS ON FOREIGN CURRENCIES

A. OPTIONS ON FOREIGN CURRENCY.

The Conservative Balanced, Diversified Conservative Growth, Flexible Managed,
Equity Income, Equity, Prudential Jennison, Global and Natural Resources
Portfolios may purchase and write put and call options on foreign currencies
traded on U.S. or foreign securities exchanges or boards of trade for hedging
purposes in a manner similar to that in which forward foreign currency exchange
contracts and futures contracts on foreign currencies are employed (see below).
Options on foreign currencies are similar to options on stocks, except that the
option holder has the right to take or make delivery of a specified amount of
foreign currency rather than stock.

A Portfolio may purchase and write options to hedge its securities denominated
in foreign currencies. If the U.S. dollar increases in value relative to a
foreign currency in which the Portfolio's securities are denominated, the value
of those securities will decline as well. To hedge against a decline of a
foreign currency a Portfolio may purchase put options on that foreign currency.
If the value of the foreign currency declines, the gain realized on the put
option would offset, at least in part, the decline in the value of the
Portfolio's holdings denominated in that foreign currency. Alternatively, a
Portfolio may write a call option on a foreign currency. If the foreign currency
declines, the option would not be exercised and the decline in the value of the
Portfolio's securities denominated in that foreign currency would be offset in
part by the premium the Portfolio received for the option.

If on the other hand, the portfolio manager anticipates purchasing a foreign
security and also anticipates a rise in the foreign currency in which it is
denominated, the Portfolio may purchase call options on the foreign currency.
The purchase of such options could offset, at least partially, the effects of
adverse movements of the exchange rates. Alternatively, the Portfolio could
write a put option on the currency and, if the exchange rates move as
anticipated, the option would expire unexercised.

B. RISKS OF TRANSACTIONS IN OPTIONS ON FOREIGN CURRENCY.

A Portfolio's successful use of currency exchange options on foreign currencies
depends upon the portfolio manager's ability to predict the direction of the
currency exchange markets and political conditions, which requires different
skills and techniques than predicting changes in the securities markets
generally. For instance, if the currency being hedged has moved in a favorable
direction, the corresponding appreciation of the Portfolio's securities
denominated in such currency would be partially offset by the premiums paid

11
<PAGE>

on the options. If the currency exchange rate does not change, the Portfolio's
net income would be less than if the Portfolio had not hedged since there are
costs associated with options.

The use of these options is subject to various additional risks, The correlation
between the movements in the price of options and the price of the currencies
being hedged is imperfect. The use of these instruments will hedge only the
currency risks associated with investments in foreign securities, not market
risk. A Portfolio's ability to establish and maintain positions will depend on
market liquidity. The ability of the Portfolio to close out an option depends on
a liquid secondary market. There is no assurance that liquid secondary markets
will exist for any particular option at any particular time.

Because there are two currencies involved, developments in either or both
countries can affect the values of options on foreign currencies. In addition,
the quantities of currency underlying option contracts represent odd lots in a
market dominated by transactions between banks; this can mean extra transaction
costs upon exercise. Option markets may be closed while round-the-clock
interbank currency markets are open, and this can create price and rate
discrepancies.

VIII. FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

A. FUTURES AND OPTIONS ON FUTURES

The Conservative Balanced, Diversified Conservative Growth, 20/20 Focus,
Flexible Managed, Stock Index, Equity Income, Equity, Prudential Jennison, Small
Capitalization Stock, Global and Natural Resources Portfolio may purchase and
sell stock index futures contracts. A stock index futures contract is an
agreement between the buyer and the seller of the contract to transfer an amount
of cash equal to the daily variation margin of the contract. No physical
delivery of the underlying stocks in the index is made.

The Diversified Bond, Government Income, Conservative Balanced, Flexible
Managed, High Yield Bond, and Global Portfolios may, to the extent permitted by
applicable regulations, purchase and sell futures contracts.

B. ADDITIONAL INFORMATION REGARDING THE USE OF FUTURES AND OPTIONS BY THE STOCK
INDEX AND SMALL CAPITALIZATION STOCK PORTFOLIOS.

As explained in the prospectus, the Stock Index Portfolio seeks to duplicate the
performance of the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index) and the Small Capitalization Stock Portfolio seeks to duplicate the
performance of the Standard & Poor's Small Capitalization Stock Index (S&P
SmallCap Index). The Portfolios will be as fully invested in the S&P

12
<PAGE>

Indexes stocks as is feasible in light of cash flow patterns and the cash
requirements for efficiently investing in a unit of the basket of stocks
comprising the S&P 500 and S&P SmallCap Indexes, respectively. When the
Portfolios do have short-term investments, they may purchase stock index futures
contracts in an effort to have the Portfolio better mimic the performance of a
fully invested portfolio. When a Portfolio purchases stock index futures
contracts, an amount of cash and cash equivalents, equal to the market value of
the futures contracts, will be deposited in a segregated account with the
Portfolio's custodian and/or in a margin account with a broker to collateralize
the position and thereby ensure that the use of futures is unleveraged.

As an alternative to the purchase of a stock index futures contract, a Portfolio
may construct synthetic positions involving options on stock indexes and options
on stock index futures that are equivalent to such a long futures position. In
particular, the portfolio may utilize "put/call combinations" as synthetic long
stock index futures positions. A put/call combination is the simultaneous
purchase of a call and the sale of a put with the same strike price and
maturity. It is equivalent to a forward position and, if settled every day, is
equivalent to a long futures position. When constructing put/call combinations,
the portfolio will segregate cash or cash equivalents in a segregated account
equal to the market value of the portfolio's forward position to collateralize
the position and ensure that it is unleveraged.

C. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS

There are several risks associated with a Portfolio's use of futures contracts.
When used for investment purposes (that is, non-hedging purposes), successful
use of futures contracts, like successful investment in securities, depends on
the ability of the portfolio manager to predict correctly movements in the
relevant markets, interest rates and/or currency exchange rates. When used for
hedging purposes, there is a risk of imperfect correlation between movements in
the price of the futures contract and the price of the securities or currency
that are the subject of the hedge. In the case of futures contracts on stock or
interest rate indexes, the correlation between the price of the futures contract
and movements in the index might not be perfect. To compensate for differences
in volatility, a Portfolio could purchase or sell futures contracts with a
greater or lesser value than the securities or currency it wished to hedge or
purchase. Other risks apply to use for both hedging and investment purposes.
Temporary price distortions in the futures market could be caused by a variety
of factors. Further, the ability of a Portfolio to close out a futures position
depends on a liquid secondary market. There is no assurance that a liquid
secondary market on an exchange will exist for any particular futures contract
at any particular time.

13
<PAGE>

The hours of trading of futures contracts may not conform to the hours during
which a Portfolio may trade the underlying securities and/or currency. To the
extent that the futures markets close before the securities or currency markets,
significant price and rate movements can take place in the securities and/or
currency markets that cannot be reflected in the futures markets.

D. RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES CONTRACTS

Options on futures contracts are subject to risks similar to those described
above with respect to options on securities, options on stock indexes, and
futures contracts. These risks include the risk that the portfolio manager may
not correctly predict changes in the market, the risk of imperfect correlation
between the option and the securities being hedged, and the risk that there
might not be a liquid secondary market for the option. There is also the risk of
imperfect correlation between the option and the underlying futures contract. If
there were no liquid secondary market for a particular option on a futures
contract, a Portfolio might have to exercise an option it held in order to
realize any profit and might continue to be obligated under an option it had
written until the option expired or was exercised. If the Portfolio were unable
to close out an option it had written on a futures contract, it would continue
to be required to maintain initial margin and make variation margin payments
with respect to the option position until the option expired or was exercised
against the portfolio.

IX. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The Conservative Balanced, Diversified Conservative Growth, Flexible Managed,
Equity Income, Equity, Prudential Jennison, Global, and Natural Resources
Portfolios may purchase debt and equity securities denominated in foreign
currencies. When a Portfolio enters into a contract for the purchase or sale of
a security denominated in a foreign currency, or when a Portfolio anticipates
the receipt in a foreign currency of dividends or interest payments on a
security which it holds, the Portfolio may desire to "lock-in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for a fixed
amount of dollars, for the purchase or sale of the amount of foreign currency
involved in the underlying transactions, the Portfolio will be able to protect
itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the foreign currency during the period
between the date on which the security is purchased or sold, or on which the
dividend or interest payment is declared, and the date on which such payments
are made or received.

Additionally, when a portfolio's manager believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, the Portfolio may enter into a forward contract for a fixed amount of

14
<PAGE>

dollars, to sell the amount of foreign currency approximating the value of
some or all of the portfolio securities denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. The Portfolios will not enter
into such forward contracts or maintain a net exposure to such contracts where
the consummation of the contracts would obligate a Portfolio to deliver an
amount of foreign currency in excess of the value of the securities or other
assets denominated in that currency held by the Portfolio. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the long-term investment decisions made with regard to overall
diversification strategies. However, the Portfolios believe that it is important
to have the flexibility to enter into such forward contracts when it is
determined that the best interests of the Portfolios will thereby be served.

The Portfolios generally will not enter into a forward contract with a term of
greater than 1 year. At the maturity of a forward contract, a Portfolio may
either sell the security and make delivery of the foreign currency or it may
retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency.

It is impossible to forecast with absolute precision the market value of a
particular security at the expiration of the contract. Accordingly, it may be
necessary for a Portfolio to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency that the Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.

If a Portfolio retains the security and engages in an offsetting transaction,
the Portfolio will incur a gain or a loss (as described below) to the extent
that there has been movement in forward contract prices. If forward prices
decline during the period between the Portfolio's entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Portfolio will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. If forward
prices increase, the portfolio will suffer a loss to the extent that the price
of the currency it has agreed to purchase exceeds the price of the currency it
has agreed to sell.

15
<PAGE>

The Portfolios' dealing in forward foreign currency exchange contracts will be
limited to the transactions described above. Of course, the Portfolios are not
required to enter into such transactions with regard to their foreign
currency-denominated securities. It also should be realized that this method of
protecting the value of a Portfolio's securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying prices of the
securities which are unrelated to exchange rates. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time they tend to limit any potential gain which
might result should the value of such currency increase.

Although the Portfolios value their assets daily in terms of U.S. dollars, they
do not intend physically to convert their holdings of foreign currencies into
U.S. dollars on a daily basis. They will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to a Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.

The High Yield Bond Portfolio may also invest up to 10% of its total assets in
foreign currency denominated debt securities of foreign or U.S. issuers;
however, the Portfolio will not engage in such investment activity unless it has
been first authorized to do so by the Fund's Board of Directors. If the
Portfolio does engage in such investment activity, it may also enter into
forward foreign currency exchange contracts.

X. INTEREST RATE SWAPS

The Diversified Bond, Government Income, and High Yield Bond Portfolios and the
fixed income portions of the Conservative Balanced and Flexible Managed
Portfolios may use interest rate swaps subject to the limitations set forth in
the prospectus.

Interest rate swaps, in their most basic form, involve the exchange by a
portfolio with another party of their respective commitments to pay or receive
interest. For example, a portfolio might exchange its right to receive certain
floating rate payments in exchange for another party's right to receive fixed
rate payments. Interest rate swaps can take a variety of other forms, such as
agreements to pay the net differences between two different indexes or rates,
even if the parties do not own the underlying instruments. Despite their
differences in form, the function of interest rate swaps is generally the same -
to increase or decrease a portfolio's exposure to long- or short-term interest
rates. For example, a portfolio may enter into a swap transaction to preserve

16
<PAGE>

a return or spread on a particular investment or a portion of its portfolio or
to protect against any increase in the price of securities the portfolio
anticipates purchasing at a later date.

The use of swap agreements is subject to certain risks. As with options and
futures, if the investment adviser's prediction of interest rate movements is
incorrect, the portfolio's total return will be less than if the portfolio had
not used swaps. In addition, if the counterparty's creditworthiness declines,
the value of the swap would likely decline. Moreover, there is no guarantee that
a portfolio could eliminate its exposure under an outstanding swap agreement by
entering into an offsetting swap agreement with the same or another party.

A portfolio will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a portfolio
enters into a swap agreement on a net basis, it will segregate assets with a
daily value at least equal to the excess, if any, of the portfolio's accrued
obligations under the swap agreement over the accrued amount the portfolio is
entitled to receive under the agreement. If a portfolio enters into a swap
agreement on other than a net basis, it will segregate assets with a value equal
to the full amount of the portfolio's accrued obligations under the agreement.

XI. LOAN PARTICIPATIONS

The Diversified Bond, Diversified Conservative Growth, Conservative Balanced,
Flexible Managed, and High Yield Bond Portfolios may invest in fixed and
floating rate loans that are privately negotiated between a corporate borrower
and one or more financial institutions. The Portfolios will generally invest in
loans in the form of "loan participations." In the typical loan participation,
the Portfolio will have a contractual relationship with the lender but not the
borrower. This means that the Portfolio will not have any right to enforce the
borrower's compliance with the terms of the loan and may not benefit directly
from any collateral supporting the loan. As a result, the Portfolio will assume
the credit risk of both the borrower and the lender. In the event of the
lender's insolvency, the Portfolio may be treated as a general creditor of the
lender and may not benefit from any set-off between the lender and the borrower.

XII. REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS

A. DESCRIPTION OF REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS
B.
The Diversified Bond, Government Income and High Yield Bond Portfolios, and the
debt portions of the Conservative Balanced and Flexible Managed Portfolios, may
use up to 30% of their net assets for reverse repurchase agreements and dollar
rolls. The Money Market Portfolio and the money

17
<PAGE>

market portion of any Portfolio may use up to 10% of its net assets for reverse
repurchase agreements.

In a reverse repurchase transaction, a Portfolio sells one of its securities and
agrees to repurchase the same security at a set price on a specified date.
During the time the security is held by the other party, the Portfoli0o will
often continue to receive principal and interest payments on the security. The
terms of the reverse repurchase agreement reflect a rate of interest for use of
the money received by the Portfolio and thus, is similar to borrowing.

Dollar rolls involve the sale by the Portfolio of ones of its securities for
delivery in the current month and a contract to repurchase substantially similar
securities (for example, with the same coupon) from the other party on a
specified date at a specified amount. During the roll period, a Portfolio does
not receive any principal or interest earned on the security. The Portfolio
realizes a profit to the extent the current sale price is more than the price
specified for the future purchase, plus any interest earned on the cash paid to
the Portfolio on the initial sale.

A "covered roll" is a specific type of dollar roll where there is an offsetting
cash position or a cash equivalent security position which matures on or before
the forward settlement date of the dollar roll transaction.

A Portfolio participating in reverse repurchase or dollar roll transactions will
set aside in a segregated account, liquid assets equal in value to its
obligations under the reverse repurchase agreement or dollar roll, respectively.

B. RISKS OF REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS

Reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities retained by a Portfolio may decline below the price of
the securities it has sold but is obligated to repurchase under the agreement.
If the other party in a reverse purchase or dollar roll transaction becomes
insolvent, a Portfolio's use of the proceeds of the agreement may be restricted
pending a determination by a third party of whether to enforce the Portfolio's
obligation to repurchase.

XIII. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Diversified Bond, 20/20 Focus, Government Income, Conservative Balanced,
Flexible Managed, High Yield Bond, Equity Income, Equity, Prudential Jennison,
Small Capitalization, Global and Natural Resources Portfolios may purchase or
sell securities on a when-issued or delayed delivery basis. This means that the
delivery and payment can take place a month or more after the date of the
transaction. A Portfolio will make commitments for when-issued transactions only
with the intention of actually acquiring the

18
<PAGE>

securities. A Portfolio's custodian will maintain in a segregated account,
liquid assets having a value equal to or greater to such commitments. If the
Portfolio chooses to dispose of the right to acquire a when-issued security
prior to its acquisition, it could, as with the disposition of any other
security, incur a gain or loss.

The Money Market Portfolio and the short-term portion of the other Portfolios
may purchase money market securities on a when-issued or delayed-delivery basis.

XIV. SHORT SALES

The Diversified Bond, Government Income, Conservative Balanced, Flexible Managed
and High Yield Bond Portfolios may enter into short sales. In a short sale, a
Portfolio sells a security it does not own in anticipation of a decline in the
market value of those securities. To complete the transaction, the Portfolio
will borrow the security to make delivery to the buyer. The Portfolio is then
obligated to replace the security it borrowed by purchasing it at the market
price at the time of replacement. The price at that time may be more or less
than the price at which the Portfolio sold it. Until the security is replaced,
the Portfolio is required to pay to the lender any interest which accrues during
the period of the loan. To borrow the security, the Portfolio may be required to
pay a fee which would increase the cost of the security sold.

Until a Portfolio replaces a borrowed security used in a short sale, it will set
aside liquid assets in segregated accounts equal to the current market value of
the security sold short or otherwise cover the short position. No more than 25%
of any Portfolio's net assets will be, when added together: (1) deposited as
collateral for the obligation to replace securities borrowed in connection with
short sales and (2) segregated in accounts in connection with short sales.

A Portfolio incurs a loss in a short sale if the price of the security increases
between the date of the short sale and the date the Portfolio replaces the
borrowed security. On the other hand, a Portfolio will realize gain if the
security's price decreases between the date of the short sale and the date the
security is replaced.

XV. LOANS OF PORTFOLIO SECURITIES

A. DESCRIPTION OF SECURITIES LOANS

All of the Portfolios except the Money market Portfolio may lend the securities
they hold to broker-dealers, qualified banks and certain institutional
investors. All securities loans will be made pursuant to a written agreement and

19
<PAGE>

continuously secured by collateral in the form of cash, U.S. Government
securities or irrevocable standby letters of credit in an amount equal or great
than the market value of the loaned securities plus the accrued interest and
dividends. While a security is loaned, the Portfolio will continue to receive
the interest and dividends on the loaned security while also receiving a fee
from the borrower or earning interest on the investment of the cash collateral.
Upon termination of the loan, the borrower will return to the Portfolio a
security identical to the loaned security. The Portfolio will not have the right
to vote a security that is on loan, but would be able to terminate the loan and
retain the right to vote if that were considered important with respect to the
investment.

B. RISKS ASSOCIATED WITH LENDING SECURITIES

The primary risk in lending securities is that the borrower may become
insolvent on a day on which the loaned security is rapidly advancing in price.
In this event, if the borrower fails to return the loaned security, the existing
collateral might be insufficient to purchase back the full amount of the
security loaned, and the borrower would be unable to furnish additional
collateral. The borrower would be liable for any shortage but the Portfolio
would be an unsecured creditor with respect to any shortfall and might not be
able to recover all or any of it. However, this risk can be decreased by the
careful selection of borrowers and securities to be lent.

None of the Portfolios will lend securities to entities affiliated with
Prudential.

20
<PAGE>

XVI. ILLIQUID SECURITIES

Each Portfolio, other than the Money Market Portfolio, may hold up to 15% of its
net assets in illiquid securities. The Money Market Portfolio may hold up to 10%
of its net assets in illiquid securities. Securities are "illiquid" if they
cannot be sold in the ordinary course of business within seven days at
approximately the value at which the Portfolio has them valued. Repurchase
agreements with a maturity of greater than seven days are considered illiquid.

The Portfolios may purchase securities which are not registered under the
Securities Act of 1933 but which can be sold to qualified institutional buyers
in accordance with Rule 144A under that Act. These securities will not be
considered illiquid so long as it is determined by the investment adviser,
acting under guidelines approved and monitored by the Board of Directors, that
an adequate trading market exists for that security. In making that
determination, the investment adviser will consider, among other relevant
factors: (1) the frequency of trades and quotes for the security; (2) the number
of dealers willing to purchase or sell the security and the number of other
potential purchasers; (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and the nature of the marketplace trades. A
Portfolio's treatment of Rule 144A securities as liquid could have the effect of
increasing the level of portfolio illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. In addition, the investment adviser, acting under guidelines
approved and monitored by the Board of Directors, may conditionally determine,
for purposes of the 15% test, that certain commercial paper issued in reliance
on the exemption from registration in Section 4(2) of the Securities Act of 1933
will not be considered illiquid, whether or not it may be resold under Rule
144A. To make that determination, the following conditions must be met: (1) the
security must not be traded flat or in default as to principal or interest; (2)
the security must be rated in one of the two highest rating categories by at
least two nationally recognized statistical rating organizations ("NRSROs"), or
if only one NRSRO rates the security, by that NRSRO; if the security is unrated,
the investment adviser must determine that the security is of equivalent
quality; and (3) the investment adviser must consider the trading market for the
specific security, taking into account all relevant factors. The investment
adviser will continue to monitor the liquidity of any Rule 144A security or any
Section 4(2) commercial paper which has been determined to be liquid and, if a
security is no longer liquid because of changed conditions, the holdings of
illiquid securities will be reviewed to determine if any steps are required to
assure that the 15% test continues to be satisfied.

XVII. FURTHER INFORMATION ABOUT THE ZERO COUPON BOND PORTFOLIOS

21
<PAGE>

As stated in the prospectus, the objective of Zero Coupon Bond Portfolios 2000
and 2005 is to achieve the highest predictable compounded investment return for
a specified period of time, consistent with the safety of invested capital. This
discussion provides a more detailed explanation of the investment policies that
will be employed to manage these Portfolios.

If each Zero Coupon Bond Portfolio held only stripped securities that were
obligations of the United States Government, maturing on the liquidation date,
the compounded yield of the Portfolio from the date of initial investment until
the liquidation date could be calculated arithmetically to a high degree of
accuracy. By: (i) including stripped corporate obligations and interest bearing
debt securities; (ii) including securities with maturity dates within 2 years of
the liquidation date; and (iii) more actively managing the Portfolio, the
accuracy of the predicted yield is reduced somewhat with the objective of
achieving an increased yield. The reduction in accuracy is kept to an acceptably
small amount, however, by an investment technique known as "immunization." By
purchasing securities with maturity dates or with interest payment dates prior
to the liquidation date, a risk is incurred that the payments received will not
be able to be reinvested at interest rates as high as or higher than the yield
initially predicted. This is known as "reinvestment risk." By including
securities with maturity dates after the liquidation date, a risk is incurred
that, because interest rates have increased, the market value of such securities
will be lower than had been anticipated. This is known as "market risk." It is
also possible, conversely, that payments received prior to the liquidation date
can be reinvested at higher rates than the predicted yield and that the value of
unmatured securities on the liquidation date will be greater than anticipated.
Reinvestment risk and market risk are thus reciprocal in that any change in the
general level of interest rates has an opposite effect on the two classes of
securities described above.

The Portfolios' investment adviser seeks to balance these risks by making use of
the concept of "duration." A bond's duration is the average weighted period of
time until receipt of all scheduled cash payments under the bond (whether
principal or interest), where the weights are the present value of the amounts
to be received on each payment date. Unlike the concept of a bond's "term to
maturity," therefore, duration takes into account both the amount and timing of
a bond's interest payments, in addition to its maturity date and yield to
maturity. The duration of a zero coupon bond is the product of the face amount
of the bond and the time until maturity. As applied to a Portfolio of bonds, a
Portfolio's "duration" is the average weighted period of time until receipt of
all scheduled payments, whether principal or interest, from all bonds in the
Portfolio.

When a Portfolio's duration is equal to the length of time remaining until its
liquidation date, fluctuations in the amount of income accumulated by the
Portfolio through reinvestment of coupon or principal payments received prior

22
<PAGE>

to the liquidation date (i.e., fluctuations caused by reinvestment risk) will,
over the period ending on the liquidation date, be approximately equal in
magnitude to, but opposite in direction from, fluctuations in the market value
on the liquidation date of the Portfolio's unmatured bonds (i.e., fluctuations
caused by market risk). By maintaining each Portfolio's duration within 1 year
of the length of time remaining until its liquidation date, Prudential believes
that each Portfolio's value on its liquidation date, and hence an investor's
compounded investment return to that date, will largely be immunized against
changes in the general level of interest rates. The success of this technique
could be affected, however, by such factors as changes in the relationship
between long-term and short-term interest rates and changes in the difference
between the yield on corporate and Treasury securities.

Prudential will also calculate a projected yield for each Zero Coupon Bond
Portfolio. At the beginning of each week, after the net asset value of each Zero
Coupon Bond Portfolio has been determined, Prudential will calculate the
compounded annual yield that will result if all securities in the Portfolio are
held until the liquidation date or, if earlier, until their maturity dates (with
the proceeds reinvested until the liquidation date). This is the predicted yield
for that date. It can also be expressed as the amount to which a premium of
$10,000 is predicted to grow by the Portfolio's liquidation date. Both of these
numbers will be furnished upon request. Unless there is a significant change in
the general level of interest rates--in which case a recalculation will be
made--the predicted yield is not likely to vary materially over the course of
each week.

As stated in the prospectus, as much as 30% of each Portfolio's assets may be
invested in zero coupon debt securities issued by United States corporations or
in high grade interest bearing debt securities, provided that no more than 20%
of the assets of the Portfolio may be invested in interest bearing securities.
The extent to which the Portfolio invests in interest bearing securities may
rise above 20% as the Portfolio moves closer to its liquidation date since both
reinvestment risk and market risk become smaller as the period to the
liquidation date decreases.

INVESTMENT RESTRICTIONS

Set forth below are certain investment restrictions applicable to the
Portfolios. Restrictions 1, 3, 5, and 8-11 are fundamental and may not be
changed without shareholder approval as required by the 1940 Act. Restrictions
2, 4, 6, 7, and 12 are not fundamental and may be changed by the Board of
Directors without shareholder approval. None of the Portfolios will:

23
<PAGE>

1. Buy or sell real estate and mortgages, although the Portfolios may buy
and sell securities that are secured by real estate and securities of
real estate investment trusts and of other issuers that engage in real
estate operation. Buy or sell commodities or commodities contracts,
except that the Diversified Stock, Balanced, and Specialized
Portfolios may purchase and sell stock index futures contracts and
related options; the Fixed Income Portfolios (other than the Money
Market and Zero Coupon Bond Portfolios), the Global Portfolio, and the
Balanced Portfolios may purchase and sell interest rate futures
contracts and related options; and all Portfolios (other than the
Money Market, Government Income, Zero Coupon Bond, and Small
Capitalization Stock Portfolios) may purchase and sell foreign
currency futures contracts and related options and forward foreign
currency exchange contracts.

2. Except as part of a merger, consolidation, acquisition or
reorganization, invest more than 5% of the value of its total assets
in the securities of any one investment company or more than 10% of
the value of its total assets, in the aggregate, in the securities of
two or more investment companies, or acquire more than 3% of the total
outstanding voting securities of any one investment company.

3. Acquire securities for the purpose of exercising control or management
of any company except in connection with a merger, consolidation,
acquisition or reorganization.

4. Make short sales of securities or maintain a short position, except
that the Diversified Bond, 20/20 Focus, High Yield Bond, Government
Income, Conservative Balanced and Flexible Managed Portfolios may sell
securities short up to 25% of their net assets and except that the
Portfolios (other than the Money Market and Zero Coupon Bond
Portfolios) may make short sales against the box. Collateral
arrangements entered into with respect to options, futures contracts
and forward contracts are not deemed to be short sales. Collateral
arrangements entered into with respect to interest rate swap
agreements are not deemed to be short sales.

5. Purchase securities on margin or otherwise borrow money or issue
senior securities except that the Diversified Bond, High Yield Bond
and Government Income Portfolios, as well as the fixed income portions
of the Balanced Portfolios, may enter into reverse repurchase
agreements, dollar rolls and may purchase securities on a when-issued
and delayed delivery basis; except that the Money Market Portfolio and
the money market portion of any Portfolio may enter into reverse
repurchase agreements and may purchase securities on a when-issued and
delayed delivery basis; and except that the Equity, Prudential
Jennison, 20/20 Focus, Small Capitalization Stock, Equity Income,
Natural Resources, Global, Flexible Managed and Conservative Balanced
Portfolios may purchase securities on

24
<PAGE>

a when-issued or a delayed delivery basis. The Fund may also obtain
such short-term credit as it needs for the clearance of securities
transactions and may borrow from a bank for the account of any
Portfolio as a temporary measure to facilitate redemptions (but not
for leveraging or investment) or to exercise an option, an amount that
does not exceed 5% of the value of the Portfolio's total assets
(including the amount owed as a result of the borrowing) at the time
the borrowing is made. Interest paid on borrowings will not be
available for investment. Collateral arrangements with respect to
futures contracts and options thereon and forward foreign currency
exchange contracts (as permitted by restriction no. 1) are not deemed
to be the issuance of a senior security or the purchase of a security
on margin. Collateral arrangements with respect to the writing of the
following options by the following Portfolios are not deemed to be the
issuance of a senior security or the purchase of a security on margin:
Diversified Stock and Specialized Portfolios other than the Stock
Index Portfolio (options on equity securities, stock indexes, foreign
currencies) and the Small Capitalization Stock Portfolio (options on
equity securities, stock indexes); Balanced Portfolios (options on
debt securities, equity securities, stock indexes, foreign
currencies); Diversified Bond and High Yield Bond Portfolios (options
on debt securities, foreign currencies); Government Income Portfolio
(options on debt securities). Collateral arrangements entered into by
the Fixed Income Portfolios (other than the Money Market and Zero
Coupon Bond Portfolios) and the Balanced Portfolios with respect to
interest rate swap agreements are not deemed to be the issuance of a
senior security or the purchase of a security on margin.

6. Enter into reverse repurchase agreements if, as a result, the
Portfolio's obligations with respect to reverse repurchase agreements
would exceed 10% of the Portfolio's net assets (defined to mean total
assets at market value less liabilities other than reverse repurchase
agreements); except that the Diversified Bond, High Yield Bond, and
Government Income Portfolios, as well as the fixed income portions of
the Conservative Balanced and Flexible Managed Portfolios, may enter
into reverse repurchase agreements and dollar rolls provided that the
Portfolio's obligations with respect to those instruments do not
exceed 30% of the Portfolio's net assets (defined to mean total assets
at market value less liabilities other than reverse repurchase
agreements and dollar rolls).

7. Pledge or mortgage assets, except that no more than 10% of the value
of any Portfolio may be pledged (taken at the time the pledge is made)
to secure authorized borrowing and except that a Portfolio may enter
into reverse repurchase agreements. Collateral arrangements entered
into with respect to futures and forward contracts and the writing of
options are not deemed to be the pledge of assets. Collateral
arrangements

25
<PAGE>

entered into with respect to interest rate swap agreements are not
deemed to be the pledge of assets.

8. Lend money, except that loans of up to 10% of the value of each
Portfolio may be made through the purchase of privately placed bonds,
debentures, notes, and other evidences of indebtedness of a character
customarily acquired by institutional investors that may or may not be
convertible into stock or accompanied by warrants or rights to acquire
stock. Repurchase agreements and the purchase of publicly traded debt
obligations are not considered to be "loans" for this purpose and may
be entered into or purchased by a Portfolio in accordance with its
investment objectives and policies.

9. Underwrite the securities of other issuers, except where the Fund may
be deemed to be an underwriter for purposes of certain federal
securities laws in connection with the disposition of Portfolio
securities and with loans that a Portfolio may make pursuant to item 8
above.

10. Make an investment unless, when considering all its other investments,
75% of the value of a Portfolio's assets would consist of cash, cash
items, obligations of the United States Government, its agencies or
instrumentalities, and other securities. For purposes of this
restriction, "other securities" are limited for each issuer to not
more than 5% of the value of a Portfolio's assets and to not more than
10% of the issuer's outstanding voting securities held by the Fund as
a whole. Some uncertainty exists as to whether certain of the types of
bank obligations in which a Portfolio may invest, such as certificates
of deposit and bankers' acceptances, should be classified as "cash
items" rather than "other securities" for purposes of this
restriction, which is a diversification requirement under the 1940
Act. Interpreting most bank obligations as "other securities" limits
the amount a Portfolio may invest in the obligations of any one bank
to 5% of its total assets. If there is an authoritative decision that
any of these obligations are not "securities" for purposes of this
diversification test, this limitation would not apply to the purchase
of such obligations.

11. Purchase securities of a company in any industry if, as a result of
the purchase, a Portfolio's holdings of securities issued by companies
in that industry would exceed 25% of the value of the Portfolio,
except that this restriction does not apply to purchases of
obligations issued or guaranteed by the U.S. Government, its agencies
and instrumentalities or issued by domestic banks. For purposes of
this restriction, neither finance companies as a group nor utility
companies as a group are considered to be a single industry and will
be grouped instead according to their services; for example, gas,
electric, and telephone utilities will each be considered a separate
industry. For purposes of this exception, domestic banks shall

26
<PAGE>

include all banks which are organized under the laws of the United
States or a state (as defined in the 1940 Act), U.S. branches of
foreign banks that are subject to the same regulations as U.S. banks
and foreign branches of domestic banks (as permitted by the Securities
and Exchange Commission ("SEC").

12. Invest more than 15% of its net assets in illiquid securities. (The
Money Market Portfolio will not invest more than 10% of its net assets
in illiquid securities.) For purposes of this restriction, illiquid
securities are those deemed illiquid pursuant to SEC regulations and
guidelines, as they may be revised from time to time.

Consistent with item 5 above, the Fund has entered into a credit agreement (the
"Line of Credit") with an unaffiliated lender to facilitate redemptions if
necessary. The maximum commitment under the Line of Credit, which expires on
December 18, 1998, is $250,000,000. The Fund pays a commitment fee at an annual
rate of 0.055 of 1% of the unused portion of the Line of Credit and interest on
any borrowings under the Line of Credit at market rates. As of April 30, 1998,
the Fund had not borrowed against the Line of Credit.

The Natural Resources Portfolio will generally invest a substantial majority of
its total assets in securities of natural resource companies. With respect to
item 11 above, as it relates to the Natural Resources Portfolio, the following
categories will be considered separate and distinct industries: integrated
oil/domestic, integrated oil/international, crude oil production, natural gas
production, gas pipeline, oil service, coal, forest products, paper, foods
(including corn and wheat), tobacco, fertilizers, aluminum, copper, iron and
steel, all other basic metals (e.g., nickel, lead), gold, silver, platinum,
mining finance, plantations (e.g., edible oils), mineral sands, and diversified
resources. A company will be deemed to be in a particular industry if the
majority of its revenues is derived from or the majority of its assets is
dedicated to one of the categories described in the preceding sentence. The
Board of Directors of the Fund will review these industry classifications from
time to time to determine whether they are reasonable under the circumstances
and may change such classifications, without shareholder approval, to the extent
necessary.

Certain additional non-fundamental investment policies are applicable only to
the Money Market Portfolio. That Portfolio will not:

1. Invest in oil and gas interests, common stock, preferred stock,
warrants or other equity securities.

2. Write or purchase any put or call option or combination of them,
except that it may purchase putable or callable securities.

27
<PAGE>

3. Invest in any security with a remaining maturity in excess of 397
days, except that securities held pursuant to repurchase agreements
may have a remaining maturity of more than 397 days.

Certain additional non-fundamental investment policies are applicable only to
the High Yield Bond Portfolio. That Portfolio will not:

1. Invest in any non-fixed income equity securities, including warrants,
except when attached to or included in a unit with fixed income
securities, but not including preferred stock.

2. Invest more than 20% of the market or other fair value of its total
assets in United States currency denominated issues of foreign
governments and other foreign issuers; or invest more than 10% of the
market or other fair value of its total assets in securities which are
payable in currencies other than United States dollars. The Portfolio
will not engage in investment activity in non-U.S. dollar denominated
issues without first obtaining authorization to do so from the Fund's
Board of Directors. See INVESTMENT OBJECTIVES AND POLICIES OF THE
PORTFOLIOS, page 1.

The investments of the various Portfolios are generally subject to certain
additional restrictions under the laws of the State of New Jersey. In the event
of future amendments to the applicable New Jersey statutes, each Portfolio will
comply, without the approval of the shareholders, with the statutory
requirements as so modified. The pertinent provisions of New Jersey law as they
stand are, in summary form, as follows:

1. An Account may not purchase any evidence of indebtedness issued,
assumed or guaranteed by any institution created or existing under the
laws of the U.S., any U.S. state or territory, District of Columbia,
Puerto Rico, Canada or any Canadian province, if such evidence of
indebtedness is in default as to interest. "Institution" includes any
corporation, joint stock association, business trust, business joint
venture, business partnership, savings and loan association, credit
union or other mutual savings institution.

2. The stock of a corporation may not be purchased unless: (i) the
corporation has paid a cash dividend on the class of stock during each
of the past 5 years preceding the time of purchase; or (ii) during the
5-year period the corporation had aggregate earnings available for
dividends on such class of stock sufficient to pay average dividends
of 4% per annum computed upon the par value of such stock or upon
stated value if the stock has no par value. This limitation does not
apply to any class of stock which is preferred as to dividends over a
class of stock whose purchase is not prohibited.

28
<PAGE>

3. Any common stock purchased must be: (i) listed or admitted to trading
on a securities exchange in the United States or Canada; or (ii)
included in the National Association of Securities Dealers' national
price listings of "over-the-counter" securities; or (iii) determined
by the Commissioner of Insurance of New Jersey to be publicly held and
traded and have market quotations available.

4. Any security of a corporation may not be purchased if after the
purchase more than 10% of the market value of the assets of a
Portfolio would be invested in the securities of such corporation.

As a result of these currently applicable requirements of New Jersey law, which
impose substantial limitations on the ability of the Fund to invest in the stock
of companies whose securities are not publicly traded or who have not recorded a
5-year history of dividend payments or earnings sufficient to support such
payments, the Portfolios will not generally hold the stock of newly organized
corporations. Nonetheless, an investment not otherwise eligible under items 1 or
2 above may be made if, after giving effect to the investment, the total cost of
all such non-eligible investments does not exceed 5% of the aggregate market
value of the assets of the Portfolio.

Investment limitations also arise under the insurance laws and regulations of
Arizona and may arise under the laws and regulations of other states. Although
compliance with the requirements of New Jersey law set forth above will
ordinarily result in compliance with any applicable laws of other states, under
some circumstances the laws of other states could impose additional restrictions
on the Portfolios. For example, the Fund will generally invest no more than 10%
of its assets in the obligations of banks of the foreign countries enumerated in
item 2 of the Appendix to the prospectus.

Current federal income tax laws require that the assets of each Portfolio be
adequately diversified so that Prudential and other insurers with separate
accounts which invest in the Fund, as applicable, and not the Contract owners,
are considered the owners of assets held in the Accounts for federal income tax
purposes. See DIVIDENDS, DISTRIBUTIONS, AND TAXES in the prospectus. Prudential
intends to maintain the assets of each Portfolio pursuant to those
diversification requirements.

INVESTMENT MANAGEMENT AND DISTRIBUTION ARRANGEMENTS

I. INVESTMENT MANAGEMENT ARRANGEMENTS

Prudential is the investment advisor of the Fund. It is the largest insurance
company in the United States. The Fund has entered into an Investment Advisory
Agreement with Prudential under which Prudential will, subject to the

29
<PAGE>

direction of the Board of Directors of the Fund, be responsible for the
management of the Fund, and provide investment advice and related services to
each Portfolio. Prudential has entered into a Service Agreement with its
wholly-owned subsidiary The Prudential Investment Corporation ("PIC"), which
provides that PIC will furnish to Prudential such services as Prudential may
require in connection with Prudential's performance of its obligations under
advisory agreements with clients which are registered investment companies. In
addition, Prudential has entered into a Subadvisory Agreement with its
wholly-owned subsidiary Jennison Associates Capital Corp. ("Jennison") under
which Jennison furnishes investment advisory services in connection with the
management of the Prudential Jennison Portfolio. More detailed information about
Prudential and its role as investment adviser can be found in INVESTMENT
MANAGEMENT ARRANGEMENTS AND EXPENSES in the prospectus.

Under the Investment Advisory Agreement, Prudential receives an investment
management fee as compensation for its services to the Fund. The fee is a daily
charge, payable quarterly, equal to an annual percentage of the average daily
net assets of each individual Portfolio.

The investment management fee for the Stock Index Portfolio is equal to an
annual rate of 0.35% of the average daily net assets of the Portfolio. For the
Money Market, Diversified Bond, Government Income, Zero Coupon Bond, Equity
Income, and Small Capitalization Stock Portfolios that fee is equal to an annual
rate of 0.40% of the average daily net assets of each of the Portfolios. For the
Equity and Natural Resources Portfolios, the fee is equal to an annual rate of
0.45% of the average daily net assets of each of the Portfolios. The fee for the
Conservative Balanced and High Yield Bond Portfolios is equal to an annual rate
of 0.55% of the average daily net assets of each of the Portfolios. For the
Flexible Managed and Prudential Jennison Portfolios, the fee is equal to an
annual rate of 0.60% of the average daily net assets of the Portfolio. The fee
for the Global Portfolio is equal to an annual rate of 0.75% of the average
daily net assets of the Portfolio. Under the Service Agreement, Prudential pays
PIC a portion of the fee it receives for providing investment management
services. Prudential pays Jennison a portion of the fee it receives for
providing investment management services to the Prudential Jennison Portfolio.

For the years ended December 31, 1998, 1997 and 1996, Prudential was paid the
following fees for providing investment management services to the Portfolios:

30
<PAGE>

INVESTMENT MANAGEMENT FEES
YEAR ENDED DECEMBER 31
-----------------------------------------------
PORTFOLIO 1998 1997 1996
- --------- ---- ---- ----
<S> <C> <C>
Money Market Portfolio $ 2,667,947 $ 2,495,613
Diversified Bond Portfolio 2,981,884 2,713,429
Government Income Portfolio 1,758,870 1,957,623
Zero Coupon Bond 1995 Portfolio -- --
Zero Coupon Bond 2000 Portfolio 161,101 119,545
Zero Coupon Bond 2005 Portfolio 123,525 97,040
Conservative Balanced Portfolio 25,757,735 23,052,572
Flexible Managed Portfolio 31,740,440 27,247,674
High Yield Bond Portfolio 2,679,304 2,192,765
Stock Index Portfolio 7,121,699 4,488,042
Equity Income Portfolio 6,601,602 4,863,078
Equity Portfolio 24,840,379 19,216,733
14,518,058
Prudential Jennison Portfolio (1) 2,063,572 821,423
Small Capitalization Stock Portfolio (1) 867,687 362,830
Global Portfolio 4,836,302 3,671,568
Natural Resources Portfolio 1,975,906 1,662,931
------------ -----------
Total $116,177,953 $94,962,866
============ ===========

</TABLE>

(1) Portfolio commenced operations on April 25, 1995.

The Investment Advisory Agreement requires Prudential to pay for maintaining any
Prudential staff and personnel who perform clerical, accounting, administrative,
and similar services for the Fund, other than investor services and any daily
Fund accounting services. It also requires Prudential to pay for the equipment,
office space and related facilities necessary to perform these services and the
fees or salaries of all officers and directors of the Fund who are affiliated
persons of Prudential or of any subsidiary of Prudential.

Each Portfolio pays all other expenses incurred in its individual operation and
also pays a portion of the Fund's general administrative expenses allocated on
the basis of the asset size of the respective Portfolios. Expenses that will be
borne directly by the Portfolios include redemption expenses, expenses of
portfolio transactions, shareholder servicing costs, interest, certain taxes,
charges of the custodian and transfer agent, and other expenses attributable to
a particular Portfolio. Expenses that will be allocated among all Portfolios
include legal expenses, state franchise taxes, auditing services, costs of
printing proxies, costs of stock certificates, SEC fees, accounting costs, the
fees and expenses of directors of the Fund who are not affiliated persons of
Prudential or any subsidiary of Prudential, and other expenses properly payable
by the entire Fund. If the Fund is sued, litigation costs may be directly
applicable to one or more Portfolio or allocated on the basis of the size of the
respective Portfolios, depending upon the nature of the lawsuit. The Fund's
Board of Directors has determined that this is an appropriate method of
allocating expenses.

31
<PAGE>

Under the Investment Advisory Agreement, Prudential has agreed to refund to a
Portfolio (except the Global Portfolio) the portion of the investment management
fee for that Portfolio equal to the amount that the aggregate annual ordinary
operating expenses of that Portfolio (excluding interest, taxes, and brokerage
fees and commissions but including investment management fees) exceeds 0.75% of
the Portfolio's average daily net assets. There is no expense limitation or
reimbursement provision for the Global Portfolio.

The Investment Advisory Agreement with Prudential was most recently approved by
the Fund's Board of Directors, including a majority of the Directors who are not
interested persons of Prudential, on May 28, 1998 with respect to all
Portfolios. The Investment Advisory Agreement was most recently approved by the
shareholders in accordance with instructions from Contract owners at their 1989
annual meeting with respect to all Portfolios except the Prudential Jennison and
Small Capitalization Stock Portfolios. A Supplemental Advisory Agreement
regarding the Prudential Jennison and Small Capitalization Stock Portfolios was
approved by the Fund Board of Directors on December 20, 1994 and by the sole
shareholder of the Prudential Jennison and Small Capitalization Stock Portfolios
on April 5, 1995. A Supplemental Advisory Agreement with the 20/20 Focus
Portfolio and the Diversified Conservative Growth Portfolio was approved by the
Fund's Board of Directors on February 25, 1999 and by the sole shareholder of
those Portfolios on _____, 1999. The Investment Advisory and Supplemental
Investment Advisory Agreements will continue in effect if approved annually by:
(1) a majority of the non-interested persons of the Fund's Board of Directors;
and (2) by a majority of the entire Board of Directors or by a majority vote of
the shareholders of each Portfolio. The required shareholder approval of the
Agreements shall be effective with respect to any Portfolio if a majority of the
voting shares of that Portfolio vote to approve the Agreements, even if the
Agreements are not approved by a majority of the voting shares of any other
Portfolio or by a majority of the voting shares of the entire Fund. The
Agreements provide that they may not be assigned by Prudential and that they may
be terminated upon 60 days' notice by the Fund's Board of Directors or by a
majority vote of its shareholders. Prudential may terminate the Agreements upon
90 days' notice.

The Service Agreement between Prudential and PIC was most recently ratified by
shareholders of the Fund at their 1989 annual meeting with respect to all
Portfolios except for the Prudential Jennison, Small Capitalization Stock, 20/20
Focus and Diversified Conservative Growth Portfolios, which had not yet been
established. The Service Agreement with respect to the Prudential Jennison and
Small Capitalization Stock Portfolios and the Investment Subadvisory Agreement
with Jennison were ratified by the sole shareholder of those Portfolios on April
5, 1995. The Service Agreement with respect to the 20/20 Focus and Diversified
Conservative Growth Portfolios were ratified by the sole shareholder of those
Portfolios on _________, 1999. The Service Agreement

32
<PAGE>

between Prudential and PIC will continue in effect as to the Fund for a period
of more than 2 years from its execution, only so long as such continuance is
specifically approved at least annually in the same manner as the Investment
Advisory Agreement between Prudential and the Fund. The Service Agreement may be
terminated by either party upon not less than 30 days prior written notice to
the other party, will terminate automatically in the event of its assignment,
and will terminate automatically as to the Fund in the event of the assignment
or termination of the Investment Advisory Agreement between Prudential and the
Fund. Prudential is not relieved of its responsibility for all investment
advisory services under the Investment Advisory Agreement.

The Fund has entered into Sub-Advisory Agreements in respect of its Diversified
Conservative Growth Portfolio with Jennison, PIC, Franklin Advisers, Inc.
(Franklin), The Dreyfus Corporation (Dreyfus) and Pacific Investment Management
Company (PIMCO). Under each Sub-Advisory Agreement, Prudential has agreed to pay
the named sub-adviser an annual fee equal to 0.__% of the average net assets of
the Portfolio. A brief description of Franklin, Dreyfus and PIMCO follows:

Franklin Advisers, Inc.

Franklin is a California corporation located at 777 Mariners Island Blvd., San
Mateo, Ca 94404. Franklin is a wholly-owned subsidiary of Franklin Resources
Inc., a publicly-owned company engaged in the financial services industry
through its subsidiaries. Franklin advises 97 domestic equity and fixed income
mutual funds in the Franklin Templeton Group of funds. As of June 30, 1998,
Franklin and its affiliates managed over $230 in assets.

The Dreyfus Corporation

The Dreyfus Corporation has its headquarters at 200 Park Avenue, New York, NY
10166. Dreyfus is a subsidiary of Mellon Bank corporation, a broad-based
financial services company with a bank at its core, and over $300 billion under
management or administration. Dreyfus currently manages over $100 billion in
assets in in both equity and fixed income mutual funds.

Pacific Investment Management Company

PIMCO is a Delaware general partnership located at 840 Newport Center Drive,
Newport Beach, CA 92660. PIMCO is a subsidiary of PIMCO Advisors L.P. ("PIMCO
Advisors"). The general partners of PIMCO Advisors are PIMCO Partners, G.P. and
PIMCO Advisors Holdings L.P. ('PAH"). PIMCO Partners, G.P. is a general
partnership between PIMCO Holding LLC, a Delaware limited liability company and
indirect wholly-owned subsidiary of Pacific Life Insurance company, and Pimco
Partners LLC, a California limited liability company

33
<PAGE>

controlled by the PIMCO Managing Directors. PimCO Partners, G.P. is the sole
general partner of PAH. PIMCO is registered as an investment advisor with the
Commission and as a commodity trading advisor with the CFTC. As of December 31,
1997, PIMCO had approximately $118 billion of assets under management. pimco
also manages the Intermediate-Term Bond and Total Return Bond Portfolios of The
Target Portfolio Trust.

Prudential also serves as the investment adviser to several other investment
companies. When investment opportunities arise that may be appropriate for more
than one entity for which Prudential serves as investment adviser, Prudential
will not favor one over another and may allocate investments among them in an
impartial manner believed to be equitable to each entity involved. The
allocations will be based on each entity's investment objectives and its current
cash and investment positions. Because the various entities for which Prudential
acts as investment adviser have different investment objectives and positions,
Prudential may from time to time buy a particular security for one or more such
entities while at the same time it sells such securities for another.

Prudential is currently considering reorganizing itself into a stock company.
This form of reorganization, known as demutualization, is a complex process that
may take two or more years to complete. No plan of demutualization has been
adopted yet by Prudential's Board of Directors. Adoption of a plan of
demutualization would occur only after enactment of appropriate legislation in
New Jersey and would have to be approved by Prudential policyholders and
appropriate state insurance regulators. Throughout the process, there will be a
continuing evaluation by the Board of Directors and management of Prudential as
to the desirability of demutualization. The Prudential Board of Directors, in
its discretion, may choose not to demutualize or to delay demutualization for a
time.

II. DISTRIBUTION ARRANGEMENTS

Prudential Investment Management Services LLC (PIMS), an indirect wholly-owned
subsidiary of Prudential, acts as the principal underwriter of the Fund. PIMS is
a limited liability corporation organized under Delaware law in 1996. PIMS is a
registered broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. PIMS' principal
business address is 751 Broad Street, Newark, New Jersey 07102-3777.

The Fund has adopted a Distribution and Service Plan pursuant to Rule 12b-1 of
the Investment Company Act of 1940 (the Plan) in respect of Class II of each
Portfolio. The expenses incurred under the Plan include commissions and account
servicing fees paid to, or on account of, insurers or their agents who sell
Class II shares, advertising expenses, indirect and overhead costs of the

34
<PAGE>

Fund's underwriter associated with the sale of Class II shares. Under the Plan,
the Fund pays the Fund's underwriter 0.25 of 1% of the average net assets of the
Class II shares.

The Class II Plan will continue in effect from year to year, upon annual
approval by a vote of the Fund's Board of Directors, including a majority vote
of the Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the 12b-1 Directors). The Plan may be terminated
at any time, without penalty, by the vote of a majority of the Rule 12b-1
Directors or by the vote of the holders of a majority of the outstanding shares
of Class II written notice. The Plan may not be amended to materially increase
the amounts payable thereunder.

OTHER INFORMATION CONCERNING THE SERIES FUND

I. INCORPORATION AND AUTHORIZED STOCK

The Fund was incorporated under Maryland law on November 15, 1982. As of the
date of this SAI, the shares of capital stock are divided into thirty-four
classes: Conservative Balanced Portfolio Capital Stock - Class I, Conservative
Balanced Portfolio Capital Stock - Class II, Diversified Bond Portfolio Capital
Stock - Class I, Diversified Bond Portfolio Capital Stock - Class II,
Diversified Conservative Growth Portfolio Capital Stock - Class I, Diversified
Conservative Growth Portfolio Capital Stock - Class II, Equity Portfolio Capital
Stock - Class I, Equity Portfolio Capital Stock - Class II, Equity Income
Portfolio Capital Stock Class I, Equity Income Portfolio Capital Stock - Class
II, Flexible Managed Portfolio Capital Stock - Class I, Flexible Managed
Portfolio Capital Stock - Class II, Global Portfolio Capital Stock - Class I,
Global Portfolio Capital Stock - Class II, Government Income Portfolio Capital
Stock - Class I, Government Income Portfolio Capital Stock - Class II, High
Yield Bond Portfolio Capital Stock - Class I, Yield Bond Portfolio Capital Stock
- - Class II, Money Market Portfolio Capital Stock - Class I, Money Market
Portfolio Capital Stock - Class II, Natural Resources Portfolio Capital Stock -
Class I, Natural Resources Portfolio Capital Stock Class II, Prudential Jennison
Portfolio Capital Stock - Class I, Prudential Jennison Portfolio Capital Stock -
Class II, Small Capitalization Stock Portfolio Capital Stock - Class I, Small
Capitalization Stock Portfolio Capital Stock - Class II, Stock Index Portfolio
Capital Stock - Class I, Stock Index Portfolio Capital Stock - Class II, 20/20
Focus Portfolio Capital Stock - Class I, 20/20 Focus Portfolio Capital Stock -
Class II, Zero Coupon Bond 2000 Portfolio Capital Stock - Class I, Zero Coupon
Bond 2000 Portfolio Capital Stock - Class II, Zero Coupon Bond 2005 Portfolio
Capital Stock - Class I and Zero Coupon Bond 2005 Portfolio Capital Stock -
Class II.

35
<PAGE>

Each class of shares of each Portfolio represents an interest in the same assets
of the Portfolio and is identical in all respects except that (1) Class II
shares are subject to distribution and administration fees whereas Class I
shares are not; (2) each class has exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and has
separate voting rights on any matter submitted to shareholders in which the
interest of one class differ from the interests of any class; and (3) each class
is offered to a limited group of investors.

The shares of each class, when issued, will be fully paid and non-assessable,
will have no conversion, exchange or similar rights, and will be freely
transferable. Each share of each class is equal as to earnings, assets and
voting privileges. Class II bears the expenses related to the distribution of
its shares. IN the event of liquidation, each share of a Portfolio is entitled
to its portion of all of the Portfolio's assets after all debts and expenses of
the Portfolio have been paid. Since Class II shares bear distribution and
administration expenses, the liquidation proceeds to Class II shareholders are
likely to be lower that to Class I shareholders, whose shares are not subject to
any distribution or administration fees.

From time to time, Prudential has purchased shares of the Fund to provide
initial capital and to enable the Portfolios to avoid unrealistically poor
investment performance that might otherwise result because the amounts available
for investment are too small. Prudential will not redeem any of its shares until
a Portfolio is large enough so that redemption will not have an adverse effect
upon investment performance. Prudential will vote its shares in the same manner
and in the same proportion as the shares held by the separate accounts that
invest in the Fund, which in turn, are generally voted in accordance with
instructions from Contract owners.

II. PORTFOLIO TRANSACTIONS AND BROKERAGE

Prudential, as the Portfolio's investment adviser, is responsible for decisions
to buy and sell securities, options on securities and indexes, and futures and
related options for the Fund. Prudential is also responsible for the selection
of brokers, dealers, and futures commission merchants to effect the transactions
and the negotiation of brokerage commissions, if any. Broker-dealers may receive
brokerage commissions on Portfolio transactions, including options and the
purchase and sale of underlying securities upon the exercise of options. Orders
may be directed to any broker or futures commission merchant including, to the
extent and in the manner permitted by applicable law, Prudential Securities
Incorporated, an indirect wholly-owned subsidiary of Prudential (PSI).

36
<PAGE>

Equity securities traded in the over-the-counter market and bonds, including
convertible bonds, are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments and U.S.
Government agency securities may be purchased directly from the issuer, in which
case no commissions or discounts are paid. The Fund will not deal with PSI in
any transaction in which PSI acts as principal. Thus, it will not deal with PSI
if execution involves PSI's acting as principal with respect to any part of the
Fund's order.

Portfolio securities may not be purchased from any underwriting or selling
syndicate of which PSI, during the existence of the syndicate, is a principal
underwriter (as defined in the 1940 Act) except in accordance with rules of the
SEC. This limitation, in the opinion of the Fund, will not significantly affect
the Portfolios' current ability to pursue their respective investment
objectives. However, in the future it is possible that the Fund may under other
circumstances be at a disadvantage because of this limitation in comparison to
other funds not subject to such a limitation.

In placing orders for portfolio securities, Prudential is required to give
primary consideration to obtaining the most favorable price and efficient
execution. Within the framework of this policy, Prudential will consider the
research and investment services provided by brokers, dealers or futures
commission merchants who effect or are parties to portfolio transactions,
Prudential or Prudential's other clients. Such research and investment services
are those which brokerage houses customarily provide to institutional investors
and include statistical and economic data and research reports on particular
companies and industries. Such services are used by Prudential in connection
with all of its investment activities, and some of such services obtained in
connection with the execution of transactions for the Portfolios may be used in
managing other investment accounts. Conversely, brokers, dealers or futures
commission merchants furnishing such services may be selected for the execution
of transactions for such other accounts, and the services furnished by such
brokers, dealers or futures commission merchants may be used by Prudential in
providing investment management for the Portfolios. Commission rates are
established pursuant to negotiations with the broker, dealer or futures
commission merchant based on the quality and quantity of execution services
provided by the broker in the light of generally prevailing rates. Prudential's
policy is to pay higher commissions to brokers, other than PSI, for particular
transactions than might be charged if a different broker had been selected on
occasions when, in Prudential's opinion, this policy furthers the objective of
obtaining best price and execution. Prudential's present policy is not to permit
higher commissions to be paid on Fund transactions in order to

37
<PAGE>

secure research, statistical, and investment services from brokers. Prudential
might in the future authorize the payment of such higher commissions but only
with the prior concurrence of the Board of Directors of the Fund, if it is
determined that the higher commissions are necessary in order to secure desired
research and are reasonable in relation to all the services that the broker
provides.

Subject to the above considerations, PSI may act as a securities broker or
futures commission merchant for the Fund. In order for PSI to effect any
transactions for the Portfolios, the commissions received by PSI must be
reasonable and fair compared to the commissions received by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time.
This standard would allow PSI to receive no more than the remuneration that
would be expected to be received by an unaffiliated broker or futures commission
merchant in a commensurate arm's-length transaction. Furthermore, the Board of
Directors of the Fund, including a majority of the directors who are not
"interested" persons, has adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to PSI are
consistent with the foregoing standard. In accordance with Rule 11a2-2(T) under
the Securities Exchange Act of 1934, PSI may not retain compensation for
effecting transactions on a national securities exchange for the Fund unless the
Fund has expressly authorized the retention of such compensation in a written
contract executed by the Fund and PSI. Rule 11a2-2(T) provides that PSI must
furnish to the Fund at least annually a statement setting forth the total amount
of all compensation retained by PSI from transactions effected for the Fund
during the applicable period. Brokerage and futures transactions with PSI are
also subject to such fiduciary standards as may be imposed by applicable law.

For the years ended December 31 1998, 1997, and 1996, the Portfolios paid the
following amounts in brokerage commissions:

COMMISSIONS PAID BY THE PORTFOLIOS
YEAR ENDED DECEMBER 31, 1998

%
AGGREGATE COMMISSIONS OF COMMISSIONS
PORTFOLIO COMMISSIONS PAID TO PSI PAID TO PSI
- --------- ----------- ----------- -----------

----------- ----------- -----------
Total
=========== =========== ===========

38
<PAGE>

COMMISSIONS PAID BY THE PORTFOLIOS
YEAR ENDED DECEMBER 31, 1997

%
AGGREGATE COMMISSIONS OF COMMISSIONS
PORTFOLIO COMMISSIONS PAID TO PSI PAID TO PSI
- --------- ----------- ----------- -----------
<S> <C> <C> <C>
Diversified Bond $ 54,863 $ 0 0%
Government Income 4,971 0 0
Conservative Balanced 3,338,897 256,752 7.69%
Flexible Managed 6,544,4287 428,008 6.54%
High Yield Bond 47,273 0 0
Stock Index 200,865 0 0
Equity Income 2,241,887 198,726 8.86%
Equity 1,823,705 189,498 10.39%
Prudential Jennison 484,086 0 0
Small Capitalization Stock 227,781 0 0
Global 2,055,319 7,621 0.37%
Natural Resources 569,768 132 0.02%
----------- ----------
Total $17,593,843 $1,080,737
=========== ==========

</TABLE>

39
<PAGE>
<TABLE>
<CAPTION>

COMMISSIONS PAID BY THE PORTFOLIOS
YEAR ENDED DECEMBER 31, 1996

AGGREGATE COMMISSIONS
PORTFOLIO COMMISSIONS PAID TO PSI
- --------- ----------- -----------
<S> <C> <C>
Conservative Balanced $2,192,303 $120,976
Flexible Managed 5,760,972 582,317
High Yield Bond 300 0
Stock Index 190,060 0
Equity Income 925,727 66,311
Equity 1,498,313 165,924
Prudential Jennison 217,853 0
Small Capitalization 146,850 0
Global 1,231,548 19,388
Natural Resources 627,390 6,608
----------- ---------
Total $12,791,316 $961,524
=========== ========

</TABLE>

For 1998, the percentage of the aggregate dollar amount of transactions effected
through Prudential Securities Incorporated was:

- -------------------------.

III. CUSTODIANS

Investors Fiduciary Trust Company (IFTC), 127 West 10th Street, Kansas City, MO
64105-1716, is the custodian of the assets held by all the Portfolios except the
Global Portfolio. IFTC is also the custodian of the assets held in connection
with repurchase agreements entered into by the Portfolios, and is authorized to
use the facilities of the Depository Trust Company and the facilities of the
book-entry system of the Federal Reserve Bank with respect to securities held by
these Portfolios. Brown Brothers Harriman & Co. (Brown Brothers), 40 Water
Street, Boston, MA 02109, is the custodian of the assets of the Global
Portfolio. Each of the Fund's custodians employs subcustodians, who were
approved in accordance with regulations of the SEC, for the purpose of providing
custodial service for the Fund's foreign assets held outside the United States.

IV. EXPERTS

The financial statements included in this statement of additional information
and the FINANCIAL HIGHLIGHTS included in the Fund's prospectus for the years
ended December 31, 1998 and December 31, 1997 have been audited by Price
Waterhouse LLP, independent accountants, as stated in their report appearing
herein and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing. Price

40
<PAGE>

Waterhouse LLP's principal business address is 1177 Avenue of the Americas, New
York, NY 10036.

V. LICENSES

As part of the Investment Advisory Agreement, Prudential has granted the Fund a
royalty-free, non-exclusive license to use the words "The Prudential" and
"Prudential" and its registered service mark of a rock representing the Rock of
Gibraltar. However, Prudential may terminate this license if Prudential or a
company controlled by it ceases to be the Fund's investment adviser. Prudential
may also terminate the license for any other reason upon 60 days' written
notice; but, in this event, the Investment Advisory Agreement shall also
terminate 120 days following receipt by the Fund of such notice, unless a
majority of the outstanding voting securities of the Fund vote to continue the
Agreement notwithstanding termination of the license.

The Fund is not sponsored, endorsed, sold or promoted by S&P. S&P makes no
representation or warranty, express or implied, to Contract owners or any member
of the public regarding the advisability of investing in securities generally or
in the Fund particularly or the ability of the S&P 500 Index or the S&P SmallCap
600 Index to track general stock market performance. S&P's only relationship to
the Fund is the licensing of certain trademarks and trade names of S&P and the
S&P 500 Index. The S&P 500 Index and the S&P SmallCap 600 Index are determined,
composed and calculated by S&P without regard to the Fund, the Stock Index
Portfolio or the Small Capitalization Stock Portfolio. S&P has no obligation to
take the needs of the Fund or the Contract owners into consideration in
determining, composing or calculating the S&P 500 Index or the S&P SmallCap 600
Index. S&P is not responsible for and has not participated in the determination
of the prices and amount of the Fund shares or the timing of the issuance or
sale of those shares or in the determination or calculation of the equation by
which the shares are to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading of the
Fund shares.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES
NO WARRANTY, EXPRESS OR IMPLIED AS TO RESULTS TO BE OBTAINED BY THE SERIES FUND,
CONTRACT OWNERS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500
INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 500 INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE

41
<PAGE>

FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.

MANAGEMENT OF THE SERIES FUND

The names of all directors and major officers of the Fund and the principal
occupation of each during the last 5 years are shown below. Unless otherwise
stated, the address of each director and officer is 751 Broad Street, Newark,
New Jersey 07102-3777.

DIRECTORS OF THE SERIES FUND

MENDEL A. MELZER, CFA*, 38, Chairman of the Board--Chief Investment Officer of
Prudential Investments since 1998; 2996 to 1998: Chief Investment Officer of
Prudential Mutual Funds; 1995 to 1996: Chief Financial Officer of the Money
Management Group of Prudential; 1993 to 1995: Senior Vice President and Chief
Financial Officer of Prudential Preferred Financial Services; Prior to 1993:
Managing Director, The Prudential Investment Corporation.

E. MICHAEL CAULFIELD*, 52, Director--Executive Vice President, Prudential
Financial Management since 1998; 1995 to 1998: Chief Executive Officer of
Prudential Investments; 1995: Chief Executive Officer, Prudential Preferred
Financial Services; 1993 to 1995: President, Prudential Preferred Financial
Services; 1992 to 1993: President, Prudential Property and Casualty Insurance
Company; Prior to 1992: President of Investment Services of Prudential.

SAUL K. FENSTER, 66, Director--President of New Jersey Institute of Technology.
Address: 323 Martin Luther King Boulevard, Newark, New Jersey 07102.

W. SCOTT MCDONALD, JR., 62, Director--Vice President, Kaludis Consulting Group
since 1997; 1995 to 1996: Principal, Scott McDonald & Associates; Prior to 1995:
Executive Vice President of Fairleigh Dickinson University. Address: 9 Zamrok
Way, Morristown, New Jersey 07960.

JOSEPH WEBER, 75, Director--Vice President, Interclass (international corporate
learning). Address: 37 Beachmont Terrace, North Caldwell, New Jersey 07006.

42
<PAGE>

OFFICERS WHO ARE NOT DIRECTORS

CAREN A. CUNNINGHAM, Secretary--Assistant General Counsel of Prudential Mutual
Fund Management, Inc. since 1997; 1994 to 1997: Vice President and Associate
General Counsel of Smith Barney Mutual Fund Management Inc.

GRACE C. TORRES, Treasurer and Principal Financial and Accounting Officer--First
Vice President of PIFM since 1996; 1994 to 1996: First Vice President of
Prudential Securities Inc.

STEPHEN M. UNGERMAN, Assistant Treasurer--Vice President and Tax Director of
Prudential Investments since 1996; 1993 to 1996: First Vice President of
Prudential Mutual Fund Management, Inc.

No director or officer of the Fund who is also an officer, director or employee
of Prudential or its affiliates is entitled to any remuneration from the Fund
for services as one of its directors or officers. An single annual retainer fee
of $35,000 is paid to each of the directors who is not an interested person of
the Fund for services rendered to five different Prudential mutual funds,
including this Fund. (The amount paid in respect of each fund is determined on
the basis of the funds' relative average net assets.) The directors who are not
interested persons of the Fund are also reimbursed for all expenses incurred in
connection with attendance at meetings.

*These members of the Board are interested persons of Prudential, its affiliates
or the Fund as defined in the 1940 Act. Certain actions of the Board, including
the annual continuance of the Investment Advisory Agreement between the Fund and
Prudential, must be approved by a majority of the members of the Board who are
not interested persons of Prudential, its affiliates or the Fund. Mr. Melzer and
Mr. Caulfield, two of the five members of the Board, are interested persons of
Prudential and the Fund, as that term is defined in the 1940 Act, because they
are officers and/or affiliated persons of Prudential, the investment advisor to
the Fund. Messrs. Fenster, McDonald, and Weber are not interested persons of
Prudential, its affiliates or the Fund. However, Mr. Fenster is President of the
New Jersey Institute of Technology. Prudential has issued a group annuity
contract to the Institute and provides group life and group health insurance to
its employees.

The following table sets forth the aggregate compensation paid by the Fund to
the Directors who are not affiliated with Prudential for the fiscal year ended
December 31, 1998 and the aggregate compensation paid to such Directors for
service on the Fund's Board and the Boards of any other investment companies
managed by Prudential for the calendar year ended December 31, 1998. Below are
listed all Directors who have served the Fund during its most recent fiscal
year.

43
<PAGE>

<TABLE>

COMPENSATION TABLE

PENSION OR TOTAL
RETIREMENT ESTIMATED COMPENSATION
AGGREGATE BENEFITS ACCRUED ANNUAL RELATED TO FUNDS
COMPENSATION FROM AS PART OF SERIES BENEFITS UPON MANAGED BY
NAME AND POSITION SERIES FUND FUND EXPENSES RETIREMENT PRUDENTIAL (**)
----------------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
E. Michael Caulfield* -- --
Saul K. Fenster None N/A $35,000 (5)
W. Scott McDonald None N/A $35,000 (5)
Mendel A. Melzer, CFA* -- --
Joseph Weber None N/A $35,000 (5)

</TABLE>

* Directors who are "interested" do not receive compensation from Prudential
(including the Fund).

** Indicates number of funds (including the Fund) to which aggregate
compensation relates.

[As of April 30, 1999, the Directors and officers of the Fund, as a group,
beneficially owned less than one percent of the outstanding shares of the Fund
capital stock.]

44
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

45
<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS

46
<PAGE>

APPENDIX

DEBT RATINGS

Moody's Investors Services, Inc. describes its categories of corporate debt
securities and its "Prime-1" and "Prime-2" commercial paper as follows:

Bonds:

Aaa -- Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

Aa -- Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities.

A -- Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.

Baa -- Bonds which are rated "Baa" are considered as medium grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.

Ba -- Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B -- Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.

Caa -- Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

47
<PAGE>

Ca -- Bonds which are rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C -- Bonds which are rated "C" are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Commercial paper:

o Issuers rated Prime-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics:

- --Leading market positions in well-established industries.

- --High rates of return of funds employed.

- --Conservative capitalization structure with moderate reliance on debt and ample
asset protection.

- --Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

- --Well established access to a range of financial markets and assured sources of
alternate liquidity.

o Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of short-term debt obligations. This will normally be evidenced by
many of the characteristics cited above but to a lesser degree. Earnings trends
and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

Standard & Poor's Ratings Services describes its grades of corporate debt
securities and its "A" commercial paper as follows:

Bonds:

AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.

A Debt rated "A" has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.

BBB Debt rated "BBB" is regarded as having adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.

BB-B-CCC-CC-C

48
<PAGE>

Debt rated "BB", "B", "CCC", "CC", and "C" is regarded as having
predominantly speculative characteristics with respect to capacity to
pay interest and repay principal. BB indicates the least degree of
speculation and C the highest. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions.

Commercial paper:

Commercial paper rated A by Standard & Poor's Ratings Services has the
following characteristics: Liquidity ratios are better than the
industry average. Long term senior debt rating is "A" or better. In
some cases BBB credits may be acceptable. The issuer has access to at
least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowances made for unusual
circumstances. Typically, the issuer's industry is well established,
the issuer has a strong position within its industry and the
reliability and quality of management is unquestioned. Issuers rated A
are further referred to by use of numbers 1, 2 and 3 to denote
relative strength within this classification.

THE PRUDENTIAL
SERIES FUND, INC.

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
751 Broad Street, Newark, NJ 07102-3777

49
<PAGE>

PART C

OTHER INFORMATION

ITEM 23.

EXHIBITS

<C> <S> <C>
(a) (1) Articles of Incorporation of The Prudential Incorporated by reference to Post-Effective Amendment
Series Fund, Inc. No. 33 to this Registration Statement, filed April 28,
1997.

(2) Articles Supplementary to the Articles of Incorporated by reference to Post-Effective Amendment
Incorporation of The Prudential Series Fund, No. 33 to this Registration Statement, filed April 28,
Inc. 1997.

(b) By-laws of The Prudential Series Fund, Inc., Incorporated by reference to Post-Effective Amendment
as amended February 16, 1990. No. 33 to this Registration Statement, filed April 28,
1997

(d) (1) Investment Advisory Agreement, as amended July 14, 1988 Incorporated by reference to Post-Effective Amendment
between The Prudential Insurance Company of America and The No. 33 to this Registration Statement, filed April 28,
Prudential Series Fund, Inc. 1997.

(2) Supplemental Investment Advisory Agreement between The Prudential Incorporated by reference to Post-Effective Amendment
Insurance Company of America and The Prudential Series Fund, Inc. No. 28 to this Registration Statement, filed April 28,
1997.

(3) Subadvisory Agreement between The Prudential Insurance Company of Incorporated by reference to Post-Effective Amendment
America and Jennison Associates Capital Corp. No. 28 to this Registration Statement, filed February
1, 1995.

(4) Service Agreement between The Prudential Insurance Company of Incorporated by reference to Post-Effective Amendment
America and The Prudential Investment Corporation. No. 33 to this Registration Statement, filed April 28,
1997.

(e) Distribution Agreement between The Prudential Series Fund, Inc. Incorporated by reference to Post-Effective Amendment
and Pruco Securities Corporation. No. 33 to this Registration Statement, filed April 28,
1997.

(g) (1) Custodian Agreement between Chase Manhattan Bank (formerly Incorporated by reference to Post-Effective Amendment
Chemical Bank and Manufacturers Hanover Trust Company) and The No. 33 to this Registration Statement, filed April 28,
Prudential Series Fund, Inc. 1997.

(1)(a) Addendum #2 to Custodian Contract Between Chase Manhattan Bank Incorporated by reference to Post-Effective Amendment
and The Prudential Series Fund, Inc. No. 32 to this Registration Statement, filed February
28, 1997.

(2) Custodian Agreement between Brown Brothers Harriman & Co. and Incorporated by reference to Post-Effective Amendment
The Prudential Series Fund, Inc. No. 33 to this Registration Statement, filed April 28,
1997.

(3) Form of Custodian Agreement between Investors Fiduciary Trust Incorporated by reference to Post-Effective Amendment
Company and The Prudential Series Fund, Inc. No. 34 to this Registration Statement, filed April 24,
1998.

(h) (1) Indemnification Agreement Regarding Reg. No. 33-49994. Incorporated by reference to Post-Effective Amendment
No. 33 to this Registration Statement, filed April 28,
1997.

(2) Indemnification Agreement Regarding Reg. No. 33-57186. Incorporated by reference to Post-Effective Amendment
No. 33 to this Registration Statement, filed April 28,
1997.

C-1

<PAGE>

(j) Consent of PricewaterhouseCoopers LLP Independent accountants. To be filed by Post-Effective Amendment.

(n) Financial Data Schedule. To be filed by Post-Effective Amendment.
</TABLE>

C-2

<PAGE>

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND

All of Registrant's outstanding securities are owned by the following separate
accounts which are registered as unit investment trusts under the Investment
Company Act of 1940 (the "Act"): The Prudential Variable Appreciable Account,
The Prudential Individual Variable Contract Account, The Prudential Variable
Contract Account GI-2, The Prudential Qualified Individual Variable Contract
Account, The Prudential Variable Contract Account-24, The Prudential Discovery
Select Group Variable Annuity Contract Account (separate accounts of
Prudential); the Pruco Life Flexible Premium Variable Annuity Account; the Pruco
Life PRUvider Variable Appreciable Account; the Pruco Life Variable Universal
Account, the Pruco Life Variable Insurance Account, the Pruco Life Variable
Appreciable Account, the Pruco Life Single Premium Variable Life Account, the
Pruco Life Single Premium Variable Annuity Account (separate accounts of Pruco
Life Insurance Company ["Pruco Life"]); the Pruco Life of New Jersey Flexible
Premium Variable Annuity Account; the Pruco Life of New Jersey Variable
Insurance Account, the Pruco Life of New Jersey Variable Appreciable Account,
the Pruco Life of New Jersey Single Premium Variable Life Account, and the Pruco
Life of New Jersey Single Premium Variable Annuity Account (separate accounts of
Pruco Life Insurance Company of New Jersey ["Pruco Life of New Jersey"]). Pruco
Life, a corporation organized under the laws of Arizona, is a direct
wholly-owned subsidiary of Prudential. Pruco Life of New Jersey, a corporation
organized under the laws of New Jersey, is a direct wholly-owned subsidiary of
Pruco Life, and an indirect wholly-owned subsidiary of Prudential.

Registrant's shares will be voted in proportion to the directions of persons
having interests in the above-referenced separate accounts. Registrant may
nonetheless be deemed to be controlled by such entities by virtue of the
presumption contained in Section 2(a)(9) of the Act, although Registrant
disclaims such control.

The subsidiaries of Prudential are set forth in Schedule D of Prudential's
Annual Statement as shown on the following pages. In addition to those
subsidiaries, Prudential holds all of the voting securities of Prudential's
Gibraltar Fund, Inc., a Maryland corporation, in three of its separate accounts.
The Gibraltar Fund is registered as an open-end, diversified, management
investment company under the Act. The separate accounts are registered as unit
investment trusts under the Act. Registrant may also be deemed to be under
common control with The Prudential Variable Contract Account-2, The Prudential
Variable Contract Account-10, The Prudential Variable Account Contract
Account-11, (separate accounts of Prudential which are registered as open-end,
diversified management investment companies) and The Prudential Variable
Contract Account-24 (separate account of Prudential which is registered as a
unit investment trust under the Act).

C-3

<PAGE>

ANNUAL STATEMENT FOR THE YEAR 1997 OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

SCHEDULE D - PART 6 - SECTION 1

Valuation of Shares of Subsidiary, Controlled or Affiliated Companies

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5
Do Insurer's
Admitted
Assets
NAIC Include
NAIC Valuation Intangible
Company Method (See Assets
Code or SVO Connected
Alien Purposes with Holding
Description Insurer and of Such If Yes,
CUSIP Name of Subsidiary, Controlled or Identification Procedures Company's Amount of Such
Identification Affiliated Company Number Manual) Stock? Intangible Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prudential of America Life Ins. Co
74429#-12-0 (Canada) Class A AA-1560018 3(f) No
Prudential of America Life Ins. Co
74429#-13-8 (Canada) Class B AA-1560018 3(f) No
Prudential of America Life Ins. Co
74429#-14-6 (Canada) Class C AA-1560018 3(f) No
- ------------------------------------------------------------------------------------------------------------------------------------
0499999 - Preferred Stock - Alien Insurer
- ------------------------------------------------------------------------------------------------------------------------------------
74438*-11-5 Prudential Timber Investments, Inc. 3(f) No
71953K-77-2 PIC Holdings Ltd. 3(f) No
- ------------------------------------------------------------------------------------------------------------------------------------
0799999 - Preferred Stock - Other Affiliates
- ------------------------------------------------------------------------------------------------------------------------------------
0899999 - Total Preferred Stocks
- ------------------------------------------------------------------------------------------------------------------------------------
37465@-10-8 Gibraltar Casualty 35947 3(c) No
- ------------------------------------------------------------------------------------------------------------------------------------
1099999 - Common Stock - U S P&C Insurer
- ------------------------------------------------------------------------------------------------------------------------------------
74408#-10-9 Pruco Life Insurance Company 79227 3(c) No
Prudential Healthcare and Life Insurance
74445@-10-6 Co. of America 74020 3(c) No
- ------------------------------------------------------------------------------------------------------------------------------------
1199999 - Common Stock - U S LAH Insurer
- ------------------------------------------------------------------------------------------------------------------------------------
T7415#-10-9 PRICOA Vita S P A AA-1360003 3(g) Yes 233,595
Prudential of America Life Ins. (Canada)
74429#-10-4 Series 1 AA-1560018 3(g) No
Prudential of America Life Ins. (Canada)
74429#-11-2 Series 2 AA-1560018 3(g) No
The Prudential Life Insurance Company of
Y7443@-10-1 Korea Ltd AA-0130001 3(g) No
The Prudential Life Insurance Company,
J7443#-10-6 Ltd AA-1580001 3(g) No
- ------------------------------------------------------------------------------------------------------------------------------------
1299999 - Common Stock - Alien Insurer 233,595
- ------------------------------------------------------------------------------------------------------------------------------------
74408@-10-1 PRUCO Inc. 3(b) No
744400-10-2 Prudential Select Holdings, Inc. 3(b) Yes 1,070,769
- ------------------------------------------------------------------------------------------------------------------------------------
1399999 - Common Stock - Non-Insurer Which Controls Insurer 1,070,769
- ------------------------------------------------------------------------------------------------------------------------------------
BREE00-07-9 BREE Investors Inc. 3(b) No
42223@-10-1 Health Ventures Partner, Inc. 3(a) No
69337*-10-9 PIC Realty, Canada, Inc. 3(b) No
74430*-10-5 Prudential Mortgage Asset Corporation II 3(b) No
RE - - Prudential Realty Securities, Inc. 3(a) No
74390@-10-1 Prudential Realty Securities II, Inc. 3(a) No
GATWAY-00-5 Gateway Holdings, Inc. 3(a) No
74496P-L0-8 PruLease, Inc. 3(a) No
26244*-10-1 Dryden Holdings, Inc. 3(a) No
78487@-10-6 SVIIT Holdings, Inc. 3(a) No
78457#-10-0 SMP Holdings, Inc. 3(a) No
- ------------------------------------------------------------------------------------------------------------------------------------
1499999 - Common Stock - Investment Subsidiary
- ------------------------------------------------------------------------------------------------------------------------------------
47620*-10-1 Jennison Associates Capital Corporation 3(d) No
69332#-10-0 PGR Advisors I, Inc. 3(a) Yes 2,275,000
71953K-69-9 PIC Holdings, Ltd. 3(b) No
74408@-10-1 PRUCO, Inc. 3(b) No
744400-10-2 Prudential Select Holdings, Inc. 3(b) Yes 1,070,769
74445#-10-4 Prudential Direct Distributors, Inc. 3(a) No
744299-20-7 Prudential Global Funding 3(a) No
74440@-10-1 Prudential Homes Corporation 3(a) No
Prudential Private Placement Investors,
744442@-10-9 Inc. 3(a) No
744441#-10-8 Prudential Service Bureau, Inc. 3(a) No
74441@-10-0 PruServicos Participacoes, S A 3(g) No
76111#-10-2 Residential Services Corporation of America 3(d) No
74437#-10-4 The Prudential Investment Corporation 3(b) No
74390*-10-3 The Prudential Real Estate Affiliates, Inc. 3(b) No
91204*-10-3 U.S. High Yield Management Company 3(a) No
Prudential Assigned Settlement Services,
74446@-10-5 Inc. 3(a) No
- ------------------------------------------------------------------------------------------------------------------------------------
1599999 - Common Stock - Other Affiliates 3,345,769
- ------------------------------------------------------------------------------------------------------------------------------------
1699999 - Total Common Stocks 4,650,133
- ------------------------------------------------------------------------------------------------------------------------------------
1799999 Totals 4,650,133
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1 6 Stock of Such Company Owned
by Insurer on Statement Date
---------------------------------
7 8

Description
CUSIP Name of Subsidiary, Controlled or Statement Number % of
Identification Affiliated Company Value of Shares Outstanding
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prudential of America Life Ins. Co
74429#-12-0 (Canada) Class A 6,545,455 60,000.000 100.0
Prudential of America Life Ins. Co
74429#-13-8 (Canada) Class B 9,681,818 88,750.000 100.0
Prudential of America Life Ins. Co
74429#-14-6 (Canada) Class C 10,909,091 100,000.000 100.0
- ----------------------------------------------------------------------------------------------------------------------------
0499999 - Preferred Stock - Alien Insurer 27,136,364 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------
74438*-11-5 Prudential Timber Investments, Inc. 875,461 7.000 100.0
71953K-77-2 PIC Holdings Ltd. 11,873,000 7,750,000.000 100.0
- ----------------------------------------------------------------------------------------------------------------------------
0799999 - Preferred Stock - Other Affiliates 12,748,461 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------
0899999 - Total Preferred Stocks 39,884,825 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------
37465@-10-8 Gibraltar Casualty 20,996,755 2,000.000 100.0
- ----------------------------------------------------------------------------------------------------------------------------
1099999 - Common Stock - U S P&C Insurer 20,996,755 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------
74408#-10-9 Pruco Life Insurance Company 958,007,757 250,000.000 100.0
Prudential Healthcare and Life Insurance
74445@-10-6 Co. of America 10,917,759 500,000.000 100.0
- ----------------------------------------------------------------------------------------------------------------------------
1199999 - Common Stock - U S LAH Insurer 968,925,516 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------
T7415#-10-9 PRICOA Vita S P A 8,100,076 20,000,000.000 100.0
Prudential of America Life Ins. (Canada)
74429#-10-4 Series 1 (5,560,689) 35,715.000 100.0
Prudential of America Life Ins. (Canada)
74429#-11-2 Series 2 (277,918) 1,785.000 50.0
The Prudential Life Insurance Company of
Y7443@-10-1 Korea Ltd 14,701,962 2,640,000.000 100.0
The Prudential Life Insurance Company,
J7443#-10-6 Ltd 196,123,673 100,000.000 100.0
- ----------------------------------------------------------------------------------------------------------------------------
1299999 - Common Stock - Alien Insurer 213,087,104 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------
74408@-10-1 PRUCO Inc. 1,222,220,402 94.000 100.0
744400-10-2 Prudential Select Holdings, Inc. 14,649,164 44,977.000 100.0
- ----------------------------------------------------------------------------------------------------------------------------
1399999 - Common Stock - Non-Insurer Which Controls Insurer 1,236,869,566 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------
BREE00-07-9 BREE Investors Inc. 3,077,568 1.000
42223@-10-1 Health Ventures Partner, Inc. 29,416,130 1,000.000 100.0
69337*-10-9 PIC Realty, Canada, Inc. 421,009 16,561,003.000 100.0
74430*-10-5 Prudential Mortgage Asset Corporation II 43,661 500.000 50.0
RE - - Prudential Realty Securities, Inc. 47,025,512 92.000 100.0
74390@-10-1 Prudential Realty Securities II, Inc. 130,387,058 115.000 87.0
GATWAY-00-5 Gateway Holdings, Inc. 94,313,410 1,000.000 100.0
74496P-L0-8 PruLease, Inc. 44,688,259 3,100.000 100.0
26244*-10-1 Dryden Holdings, Inc. 741,406,287 1,000.000 100.0
78487@-10-6 SVIIT Holdings, Inc. 145,527,011 1,000.000 100.0
78457#-10-0 SMP Holdings, Inc. 24,104,344 1,000.000 100.0
- ----------------------------------------------------------------------------------------------------------------------------
1499999 - Common Stock - Investment Subsidiary 1,260,410,249 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------
47620*-10-1 Jennison Associates Capital Corporation 33,078,500 913,497.000 100.0
69332#-10-0 PGR Advisors I, Inc. 4,380,195 100.000 100.0
71953K-69-9 PIC Holdings, Ltd. 68,687,296 30,717,585.000 100.0
74408@-10-1 PRUCO, Inc. 1,032,253,585 94.000 100.0
744400-10-2 Prudential Select Holdings, Inc. 5,277,893 44,977.000 100.0
74445#-10-4 Prudential Direct Distributors, Inc. 13,398 100.000 100.0
744299-20-7 Prudential Global Funding 12,472,659 100.000 100.0
74440@-10-1 Prudential Homes Corporation 10,391,686 1.000 100.0
Prudential Private Placement Investors,
744442@-10-9 Inc. 51,049 40,000.000 100.0
744441#-10-8 Prudential Service Bureau, Inc. 695,491 100.000 100.0
74441@-10-0 PruServicos Participacoes, S A 22,301,686 422,168.000 100.0
76111#-10-2 Residential Services Corporation of America 40,368,856 1,000.000 100.0
74437#-10-4 The Prudential Investment Corporation 46,118,752 84.000 100.0
74390*-10-3 The Prudential Real Estate Affiliates, Inc. 15,852,588 99.000 100.0
91204*-10-3 U.S. High Yield Management Company 1,000 100.000 100.0
Prudential Assigned Settlement Services,
74446@-10-5 Inc. 110,587 100.000 100.0
- ----------------------------------------------------------------------------------------------------------------------------
1599999 - Common Stock - Other Affiliates 1,292,055,221 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------
1699999 - Total Common Stocks 4,992,344,411 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------
1799999 Totals 5,032,229,236 XXX XXX
- ----------------------------------------------------------------------------------------------------------------------------

Amount of insurer's capital and surplus from the prior year's annual statement $ 9,374,618,899
</TABLE>

SCHEDULE D - PART 6 - SECTION 2
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1 2

- -------------------------------------------------------------------------------------------------------------------------------
0199999 - Preferred Stock
- -------------------------------------------------------------------------------------------------------------------------------
ML/MSB Acquisition Inc. Prudential Residential Services, L.P.
PRICOA Relocation Management Ltd. Prudential Residential Services, L.P.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1 3 Stock in Lower-tier Company Owned
Indirectly by Insurer on Statement
Date
Amount of Intangible ----------------------------------
Assets Included in 4 5
CUSIP Amount Shown in % of
Identification Name of Lower-tier company Column 5, Section 1 Number of Shares Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Clivwell Securities, Ltd. 7,750,000.000 100.0
PRICOA Investment Company 84,000,000.000 100.0
PRICOA Mezzanine Investment Co. 4,282,789.000 100.0
Prudential Capital and Investment Services, Inc. 1.000 100.0
Prudential Securities Group, Inc.
Lapine Holding Company 7,499,999.000 100.0
Prudential Asia Investments Ltd. 0 5.000 50.0
0

- ------------------------------------------------------------------------------------------------------------------------------------
0199999 - Preferred Stock 0 xxx xxx
- ------------------------------------------------------------------------------------------------------------------------------------
ML/MSB Acquisition Inc. 1,000.000 100.0
PRICOA Relocation Management Ltd. 99.000 100.0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

C-4

<PAGE>

ANNUAL STATEMENT FOR THE YEAR 1997 OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

SCHEDULE D - PART 6 - SECTION 2
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1 2

CUSIP Name of Company Listed in Section 1
Identification Name of Lower-tier company Which Controls Lower-tier Company
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Prudential Community Interaction Consulting, Inc. Prudential Residential Services, L.P.
Prudential Relocation Canada Ltd. Prudential Residential Services, L.P.
Prudential Relocation Management Company of Canada Ltd. Prudential Residential Services, L.P.
The Relocation Funding Corporation of America Prudential Residential Services, L.P.
JACC Services Corp. Jennison Associates Capital Corp.
Clivwell Securities, Ltd. PIC Holdings, Ltd.
Industrial Properties (Gen Partner) II Ltd. PIC Holdings, Ltd.
PRICOA Capital Group, Ltd. PIC Holdings, Ltd.
PRICOA Funding, Ltd. PIC Holdings, Ltd.
PRICOA Investment Company PIC Holdings, Ltd.
PRICOA Property Investment Management Ltd. PIC Holdings, Ltd.
Northern Retail Properties (General Partner) Ltd. PIC Holdings, Ltd.
PRICOA P I M (Regulated) Ltd. PIC Holdings, Ltd.
South Downs (General Partner) Ltd. PIC Holdings, Ltd.
South Downs Trading (General Partner) Ltd. PIC Holdings, Ltd.
TransEuropean Properties (General Partner) Ltd. PIC Holdings, Ltd.
PRICOA Asset Management PIC Holdings, Ltd.
PRICOA Capital Management PIC Holdings, Ltd.
PRICOA General Partner Ltd. PIC Holdings, Ltd.
PRICOA Management Partner Ltd. PIC Holdings, Ltd.
PRICOA Mezzanine Funding, Ltd. PIC Holdings, Ltd.
PRICOA Mezzanine Investment Co. PIC Holdings, Ltd.
BREE Investments Ltd. PRUCO, Inc.
Capital Agricultural Property Services, Inc. PRUCO, Inc.
Flor-Ag Corporation PRUCO, Inc.
PIC Realty Corporation PRUCO, Inc.
Pruco Securities Corporation PRUCO, Inc.
Prudential Agricultural Credit, Inc. PRUCO, Inc.
Prudential Capital and Investment Services, Inc. PRUCO, Inc.
Prudential Securities Group Inc. - Series A PRUCO, Inc.
Prudential Securities Group Inc. - Series B PRUCO, Inc.
Bache Insurance Agency of Arkansas, Inc. PRUCO, Inc.
Bache Insurance Agency of Louisiana, Inc. PRUCO, Inc.
Prudential-Bache Securities (Germany) Inc. PRUCO, Inc.
Braeloch Successor Corporation PRUCO, Inc.
Braeloch Holdings, Inc. PRUCO, Inc.
Graham Resources, Inc. PRUCO, Inc.
Graham Depository Company II PRUCO, Inc.
Graham Energy, Ltd. PRUCO, Inc.
Graham Exploration, Ltd. PRUCO, Inc.
Graham Royalty, Ltd. PRUCO, Inc.
Prudential-Bache Global Markets PRUCO, Inc.
Prudential-Bache International (Hong Kong) Ltd. PRUCO, Inc.
Prudential-Bache Futures (Hong Kong) Ltd. PRUCO, Inc.
Prudential-Bache Nominees (Hong Kong) Ltd. PRUCO, Inc.
Prudential-Bache Securities (Hong Kong) Ltd. PRUCO, Inc.
PB Financial Services, Inc. PRUCO, Inc.
P-B Finance Ltd. PRUCO, Inc.
PGR Advisors, Inc. PRUCO, Inc.
PBML Custodian Ltd. PRUCO, Inc.
Prudential-Bache Capital Funding BV PRUCO, Inc.
Prudential-Bache Energy Corp. PRUCO, Inc.
Prudential-Bache Energy Production Inc. PRUCO, Inc.
Commodity Admin. Services, Inc. PRUCO, Inc.
Prudential Commodities de Mexico S, de RL de CV PRUCO, Inc.
Mexico Commodity Funding Corp. PRUCO, Inc.
Mexico Commodity Sourcing Corp. PRUCO, Inc.
Prudential Commodities de Mexico S, de RL de CV PRUCO, Inc.
PSI Partners Inc. PRUCO, Inc.
Prudential-Bache International Banking Corp. PRUCO, Inc.
Prudential-Bache International Bank Ltd. PRUCO, Inc.
Prudential-Bache International (U.K.) Ltd. PRUCO, Inc.
Prudential-Bache Capital Funding (Money Brokers) PRUCO, Inc.
Prudential-Bache International Ltd. PRUCO, Inc.
Circle (Nominees) Limited PRUCO, Inc.
Prudential-Bache Forex (U.K.) Ltd. PRUCO, Inc.
Prudential-Bache International S.A. PRUCO, Inc.
Prudential-Bache International Trust Co. (Cayman) PRUCO, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1 3 Stock in Lower-tier Company Owned
Indirectly by Insurer on Statement
Date
Amount of Intangible ----------------------------------
Assets Included in 4 5
CUSIP Amount Shown in % of
Identification Name of Lower-tier company Column 5, Section 1 Number of Shares Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prudential Community Interaction Consulting, Inc. 1,000.000 100.0
Prudential Relocation Canada Ltd. 1,000.000 100.0
Prudential Relocation Management Company of Canada Ltd. 1,000.000 100.0
The Relocation Funding Corporation of America 1,000.000 100.0
JACC Services Corp. 100,000.000 100.0
Clivwell Securities, Ltd. 13,266,766.000 100.0
Industrial Properties (Gen Partner) II Ltd. 10,000.000 100.0
PRICOA Capital Group, Ltd. 3,713,050.000 100.0
PRICOA Funding, Ltd. 11,205,000.000 100.0
PRICOA Investment Company 15,000.000 100.0
PRICOA Property Investment Management Ltd. 1,499,532 2.000 100.0
Northern Retail Properties (General Partner) Ltd. 10,000.000 100.0
PRICOA P I M (Regulated) Ltd. 10,000.000 100.0
South Downs (General Partner) Ltd. 1.000 100.0
South Downs Trading (General Partner) Ltd. 1.000 100.0
TransEuropean Properties (General Partner) Ltd. 100,000.000 100.0
PRICOA Asset Management 1,250,000.000 100.0
PRICOA Capital Management 100,000.000 100.0
PRICOA General Partner Ltd. 1,000.000 100.0
PRICOA Management Partner Ltd. 1,000.000 100.0
PRICOA Mezzanine Funding, Ltd. 900,000.000 100.0
PRICOA Mezzanine Investment Co. 1,000.000 100.0
BREE Investments Ltd. 1.000 100.0
Capital Agricultural Property Services, Inc. 995.000 100.0
Flor-Ag Corporation 50.000 100.0
PIC Realty Corporation 236.000 100.0
Pruco Securities Corporation 995.000 100.0
Prudential Agricultural Credit, Inc. 999.000 100.0
Prudential Capital and Investment Services, Inc. 99.000 100.0
Prudential Securities Group Inc. - Series A 1.000 100.0
Prudential Securities Group Inc. - Series B 100.000 100.0
Bache Insurance Agency of Arkansas, Inc. 57.000 100.0
Bache Insurance Agency of Louisiana, Inc. 100.000 100.0
Prudential-Bache Securities (Germany) Inc. 100.000 100.0
Braeloch Successor Corporation 330,000.000 100.0
Braeloch Holdings, Inc. 7,758,803.000 100.0
Graham Resources, Inc. 7,734,234.000 100.0
Graham Depository Company 1,000.000 100.0
Graham Energy, Ltd. 90.000 100.0
Graham Exploration, Ltd. 130.000 100.0
Graham Royalty, Ltd. 20.000 100.0
Prudential-Bache Global Markets 100.000 100.0
Prudential-Bache International (Hong Kong) Ltd. 1,502.000 100.0
Prudential-Bache Futures (Hong Kong) Ltd. 1,499.000 100.0
Prudential-Bache Nominees (Hong Kong) Ltd. 1,750.000 100.0
Prudential-Bache Securities (Hong Kong) Ltd. 49,999.000 100.0
PB Financial Services, Inc. 50.000 100.0
P-B Finance Ltd. 3.000 100.0
PGR Advisors, Inc. 1,000.000 100.0
PBML Custodian Ltd. 5,000,000.000 100.0
Prudential-Bache Capital Funding BV 40,000.000 100.0
Prudential-Bache Energy Corp. 1.000 100.0
Prudential-Bache Energy Production Inc. 100.000 100.0
Commodity Admin. Services, Inc. 50.000 100.0
Prudential Commodities de Mexico S, de RL de CV 2,999.000 99.0
Mexico Commodity Funding Corp. 100.000 100.0
Mexico Commodity Sourcing Corp. 100.000 100.0
Prudential Commodities de Mexico S, de RL de CV 1.000 1.0
PSI Partners Inc. 1.000 100.0
Prudential-Bache International Banking Corp. 1,000.000 100.0
Prudential-Bache International Bank Ltd. 35,000,000.000 100.0
Prudential-Bache International (U.K.) Ltd. 41,400,211.000 100.0
Prudential-Bache Capital Funding (Money Brokers) 10,000,000.000 100.0
Prudential-Bache International Ltd. 7,500,000.000 100.0
Circle (Nominees) Limited 2.000 100.0
Prudential-Bache Forex (U.K.) Ltd. 3,000,000.000 100.0
Prudential-Bache International S.A. 839.000 100.0
Prudential-Bache International Trust Co. (Cayman) 500.000 100.0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

C-5

<PAGE>

ANNUAL STATEMENT FOR THE YEAR 1997 OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

SCHEDULE D - PART 6 - SECTION 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1 2

CUSIP Name of Company Listed in Section 1
Identification Name of Lower-tier company Which Controls Lower-tier Company
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Prudential-Bache Corp. Director Services, Inc. PRUCO, Inc.
Prudential-Bache Corp. Trustee Services, Inc. PRUCO, Inc.
Prudential-Bache Investor Services Inc. PRUCO, Inc.
Prudential-Bache Investor Services II, Inc. PRUCO, Inc.
Prudential-Bache Leasing Inc. PRUCO, Inc.
Prudential-Bache Program Services Inc. PRUCO, Inc.
Prudential-Bache Properties Inc. PRUCO, Inc.
Prudential-Bache Securities (Australia) Ltd. PRUCO, Inc.
Bache Nominees Ltd. PRUCO, Inc.
Corcarr Funds Management Limited PRUCO, Inc.
Corcarr Management Pty. Limited PRUCO, Inc.
Corcarr Nominees Pty. Limited PRUCO, Inc.
Prudential Bache Funds Management, Ltd. PRUCO, Inc.
Divsplit Nominees Pty. Limited PRUCO, Inc.
PruBache Nominees Pty. Limited PRUCO, Inc.
Prudential-Bache Trade Services Inc. PRUCO, Inc.
PB Trade Ltd. PRUCO, Inc.
Prudential-Bache Transfer Agent Services, Inc. PRUCO, Inc.
Prudential Securities Capmark Inc. PRUCO, Inc.
Prudential Securities Credit Corp. PRUCO, Inc.
Prudential Securities Municipal Derivatives, Inc. PRUCO, Inc.
Prudential Securities Secured Financing Corporation PRUCO, Inc.
Prudential Securities Structured Assets, Inc. PRUCO, Inc.
R & D Funding Corp. PRUCO, Inc.
Seaport Futures Management, Inc. PRUCO, Inc.
Prudential Securities Incorporated PRUCO, Inc.
Lapine Holding Company PRUCO, Inc.
Lapine Development Corporation PRUCO, Inc.
Lapine Technology Corporation PRUCO, Inc.
Prudential Investment Fund Management, L.L.C. PRUCO, Inc.
Bache & Co. (Lebanon) S.A.L. PRUCO, Inc.
Bache & Co. S.A. de C.V. (Mexico) PRUCO, Inc.
Bache Insurance Agency Inc. PRUCO, Inc.
P-B Holding Japan Inc. PRUCO, Inc.
Prudential Securities (Japan) Ltd. PRUCO, Inc.
Prudential-Bache Futures Asia Pacific Ltd. PRUCO, Inc.
Prudential-Bache Securities Agencia de Valores S.A. PRUCO, Inc.
Prudential-Bache Securities Asia Pacific Ltd. PRUCO, Inc.
Prudential-Bache Securities (Holland) Inc. PRUCO, Inc.
Prudential-Bache Securities (Holland) N.V. PRUCO, Inc.
Prudential-Bache Securities (Monaco) Inc. PRUCO, Inc.
Prudential-Bache Securities (Switzerland) Inc. PRUCO, Inc.
Prudential-Bache Securities (U.K.) Inc. PRUCO, Inc.
Prudential Mutual Fund Distributors, Inc. PRUCO, Inc.
Prudential Mutual Fund Services, L.L.C. PRUCO, Inc.
Prudential Securities (Brazil) LTDA PRUCO, Inc.
Prudential Securities (Chile) Inc. PRUCO, Inc.
Prudential Securities CMO Issuer Inc. PRUCO, Inc.
Prudential Securities Futures Management Inc. PRUCO, Inc.
Prudential Securities (South America) Inc. PRUCO, Inc.
Prudential Securities (Argentina) Inc. PRUCO, Inc.
Prudential Securities (Uruguay) S.A. PRUCO, Inc.
Wexford Clearing Services Corporation PRUCO, Inc.
Prudential Dental Maintenance Organization, Inc. PRUCO, Inc.
Prudential Direct, Inc. PRUCO, Inc.
Prudential Equity Investors, Inc. PRUCO, Inc.
Prudential Funding Corporation PRUCO, Inc.
Prudential Health and Dental Group Holdings, Inc. PRUCO, Inc.
Prudential Healthcare Group Inc. PRUCO, Inc.
Prudential Health Care Plan, Inc. PRUCO, Inc.
Prudential Health Care Plan of California, Inc. PRUCO, Inc.
Prudential Health Care Plan of Connecticut, Inc. PRUCO, Inc.
Prudential Health Care Plan of Georgia, Inc. PRUCO, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

SCHEDULE D - PART 6 - SECTION 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1 3 Stock in Lower-tier Company Owned
Indirectly by Insurer on Statement
Date
Amount of Intangible ----------------------------------
Assets Included in 4 5
CUSIP Amount Shown in % of
Identification Name of Lower-tier company Column 5, Section 1 Number of Shares Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prudential-Bache Corp. Director Services, Inc. 1,000.000 100.0
Prudential-Bache Corp. Trustee Services, Inc. 1,000.000 100.0
Prudential-Bache Investor Services Inc. 100.000 100.0
Prudential-Bache Investor Services II, Inc. 100.000 100.0
Prudential-Bache Leasing Inc. 500.000 100.0
Prudential-Bache Program Services Inc. 100.000 100.0
Prudential-Bache Properties Inc. 1.000 100.0
Prudential-Bache Securities (Australia) Ltd. 10,000.000 100.0
Bache Nominees Ltd. 4.000 100.0
Corcarr Funds Management Limited 50,050.000 100.0
Corcarr Management Pty. Limited 2.000 100.0
Corcarr Nominees Pty. Limited 4.000 100.0
Prudential Bache Funds Management, Ltd. 4.000 100.0
Divsplit Nominees Pty. Limited 4.000 100.0
PruBache Nominees Pty. Limited 2.000 100.0
Prudential-Bache Trade Services Inc. 1,000.000 100.0
PB Trade Ltd. 100,000.000 100.0
Prudential-Bache Transfer Agent Services, Inc. 10,000.000 100.0
Prudential Securities Capmark Inc. 20.000 100.0
Prudential Securities Credit Corp. 100.000 100.0
Prudential Securities Municipal Derivatives, Inc. 100.000 100.0
Prudential Securities Secured Financing Corporation 100.000 100.0
Prudential Securities Structured Assets, Inc. 99.000 100.0
R & D Funding Corp. 100.000 100.0
Seaport Futures Management, Inc. 1,000.000 100.0
Prudential Securities Incorporated 864.000 100.0
Lapine Holding Company 12,499,999.000 71.0
Lapine Development Corporation 4,650,000.000 100.0
Lapine Technology Corporation 1.000 100.0
Prudential Investment Fund Management, L.L.C. 0.000 100.0
Bache & Co. (Lebanon) S.A.L. 2,000.000 100.0
Bache & Co. S.A. de C.V. (Mexico) 96.000 100.0
Bache Insurance Agency Inc. 100.000 100.0
P-B Holding Japan Inc. 1,000.000 100.0
Prudential Securities (Japan) Ltd. 200,000.000 100.0
Prudential-Bache Futures Asia Pacific Ltd. 100.000 100.0
Prudential-Bache Securities Agencia de Valores S.A. 150,000.000 100.0
Prudential-Bache Securities Asia Pacific Ltd. 100.000 100.0
Prudential-Bache Securities (Holland) Inc. 100.000 100.0
Prudential-Bache Securities (Holland) N.V. 40,000.000 100.0
Prudential-Bache Securities (Monaco) Inc. 100.000 100.0
Prudential-Bache Securities (Switzerland) Inc. 100.000 100.0
Prudential-Bache Securities (U.K.) Inc. 200.000 100.0
Prudential Mutual Fund Distributors, Inc. 100.000 100.0
Prudential Mutual Fund Services, L.L.C. 0.000 100.0
Prudential Securities (Brazil) LTDA 750,000.000 100.0
Prudential Securities (Chile) Inc. 100.000 100.0
Prudential Securities CMO Issuer Inc. 100.000 100.0
Prudential Securities Futures Management Inc. 100.000 100.0
Prudential Securities (South America) Inc. 100.000 100.0
Prudential Securities (Argentina) Inc. 100.000 100.0
Prudential Securities (Uruguay) S.A. 100.000 100.0
Wexford Clearing Services Corporation 100.000 100.0
Prudential Dental Maintenance Organization, Inc. 50.000 100.0
Prudential Direct, Inc. 150.000 100.0
Prudential Equity Investors, Inc. 1,000.000 100.0
Prudential Funding Corporation 100.000 100.0
Prudential Health and Dental Group Holdings, Inc. 100.000 100.0
Prudential Healthcare Group Inc. 1,000.000 100.0
Prudential Health Care Plan, Inc. 99.000 100.0
Prudential Health Care Plan of California, Inc. 1,000.000 100.0
Prudential Health Care Plan of Connecticut, Inc. 1,000.000 100.0
Prudential Health Care Plan of Georgia, Inc. 1,000.000 100.0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

C-6

<PAGE>

ANNUAL STATEMENT FOR THE YEAR 1997 OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

SCHEDULE D - PART 6 - SECTION 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1 2

CUSIP Name of Company Listed in Section 1
Identification Name of Lower-tier company Which Controls Lower-tier Company
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Prudential Health Care Plan of New York, Inc. PRUCO, Inc.
Prudential Holdings, Inc. PRUCO, Inc.
Prudential Human Resources Management Co., Inc. PRUCO, Inc.
Human Resource Finance Co., Inc. PRUCO, Inc.
Prudential Property and Casualty Insurance Company PRUCO, Inc.
Prudential Commercial Insurance Company PRUCO, Inc.
Prudential General Insurance Company PRUCO, Inc.
Prudential Insurance Brokerage, Inc. PRUCO, Inc.
The Prudential Property and Casualty
General Agency, Inc. PRUCO, Inc.
The Prudential Property and Casualty Insurance Co.
of New Jersey PRUCO, Inc.
Prudential Resources Management Asia, Limited PRUCO, Inc.
Prudential Realty Partnerships, Inc. PRUCO, Inc.
Prudential Realty Securities II, Inc. PRUCO, Inc.
Prudential Trust Company PRUCO, Inc.
PTC Services, Inc. PRUCO, Inc.
Prudential Uniformed Services Administrators, Inc. PRUCO, Inc.
The Prudential Bank and Trust Company PRUCO, Inc.
PBT Mortgage Corporation PRUCO, Inc.
The Prudential Savings Bank, F.S.B. PRUCO, Inc.
PBT Home Equity Holdings PRUCO, Inc.
Pruco Life Insurance Company of New Jersey Pruco Life Insurance Company
The Prudential Life Insurance Company of Arizona Pruco Life Insurance Company
Prudential Texas Residential Services Corporation Prudential Homes Corporation
Prudential Select Life Insurance Company of America Prudential Select Holdings, Inc.
Private Label Mortgage Services Corporation Residential Services Corp. of America
Residential Information Services, Inc. Residential Services Corp. of America
Securitized Asset Sales, Inc. Residential Services Corp. of America
PHMC Services Corporation Residential Services Corp. of America
The Prudential Home Mortgage Company, Inc. Residential Services Corp. of America
The Prudential Home Mortgage Securities Co., Inc. Residential Services Corp. of America
Gateway Holdings, S.A. The Prudential Investment Corporation
Amicus Investment Company The Prudential Investment Corporation
Global Income Fund Management Company, S.A. The Prudential Investment Corporation
Global Series Fund II Management Company, S.A. The Prudential Investment Corporation
Prudential Asset Sales and Syndications, Inc. The Prudential Investment Corporation
Prudential Home Building Investors, Inc. The Prudential Investment Corporation
The Prudential Asset Management Company, Inc. The Prudential Investment Corporation
Enhanced Investment Technologies, Inc. The Prudential Investment Corporation
PCM International, Inc. The Prudential Investment Corporation
Prudential Asia Investments Limited The Prudential Investment Corporation
Prudential Asia Fund Management Ltd. (BVI) The Prudential Investment Corporation
Prudential Asia Fund Management Ltd. The Prudential Investment Corporation
Prudential Asia Fund Managers (H.K.) Ltd. The Prudential Investment Corporation
Prudential Asset Management Asia Ltd. (BVI) The Prudential Investment Corporation
PAMA (Indonesia) Ltd. The Prudential Investment Corporation
PAMA (Singapore) Private Ltd. The Prudential Investment Corporation
Prudential Asset Management Asia H.K. Ltd. The Prudential Investment Corporation
PT PAMA Indonesia The Prudential Investment Corporation
Prudential Asia Infrastructure Investors Ltd. The Prudential Investment Corporation
Prudential Asia Infrastructure Investors
(H.K.) Ltd. The Prudential Investment Corporation
Prudential Timber Investments, Inc. The Prudential Investment Corporation
Texas Rio Grande Other Asset Group Company, Inc. The Prudential Investment Corporation
The Prudential Investment Advisory Company, Ltd. The Prudential Investment Corporation
The Prudential Property Co., Inc. The Prudential Investment Corporation
The Prudential Realty Advisors, Inc. The Prudential Investment Corporation
The Prudential Real Estate Financial Services
of America, Inc. Prudential Real Estate Affiliates, Inc.
Preferred Coastal Realty, Inc. Prudential Real Estate Affiliates, Inc.
Prudential Referral Services, Inc. Prudential Real Estate Affiliates, Inc.
Real Estate Connecticut, Inc. Prudential Real Estate Affiliates, Inc.
Referral Associates of Connecticut, Inc. Prudential Real Estate Affiliates, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
0399999 TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

SCHEDULE D - PART 6 - SECTION 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1 3 Stock in Lower-tier Company Owned
Indirectly by Insurer on Statement
Date
Amount of Intangible ----------------------------------
Assets Included in 4 5
CUSIP Amount Shown in % of
Identification Name of Lower-tier company Column 5, Section 1 Number of Shares Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prudential Health Care Plan of New York, Inc. 200.000 100.0
Prudential Holdings, Inc. 1,000.000 100.0
Prudential Human Resources Management Co., Inc. 1,000.000 100.0
Human Resource Finance Co., Inc. 100.000 100.0
Prudential Property and Casualty Insurance Company 800.000 100.0
Prudential Commercial Insurance Company 2,000.000 100.0
Prudential General Insurance Company 2,000.000 100.0
Prudential Insurance Brokerage, Inc. 25,000,000.000 100.0
The Prudential Property and Casualty
General Agency, Inc. 100.000 100.0
The Prudential Property and Casualty Insurance Co.
of New Jersey 400.000 100.0
Prudential Resources Management Asia, Limited 10,000.000 100.0
Prudential Realty Partnerships, Inc. 100.000 100.0
Prudential Realty Securities II, Inc. 17.000 100.0
Prudential Trust Company 300,000.000 100.0
PTC Services, Inc. 100.000 100.0
Prudential Uniformed Services Administrators, Inc. 500,000.000 100.0
The Prudential Bank and Trust Company 203,996.000 100.0
PBT Mortgage Corporation 2,250.000 100.0
The Prudential Savings Bank, F.S.B. 10,000.000 100.0
PBT Home Equity Holdings 4,000.000 100.0
Pruco Life Insurance Company of New Jersey 400,000.000 100.0
The Prudential Life Insurance Company of Arizona 200,000.000 100.0
Prudential Texas Residential Services Corporation 1,000.000 100.0
Prudential Select Life Insurance Company of America 2,500,000.000 100.0
Private Label Mortgage Services Corporation 1,000.000 100.0
Residential Information Services, Inc. 1,000.000 100.0
Securitized Asset Sales, Inc. 1,000.000 100.0
PHMC Services Corporation 1,000.000 100.0
The Prudential Home Mortgage Company, Inc. 100.000 100.0
The Prudential Home Mortgage Securities Co., Inc. 1,000.000 100.0
Gateway Holdings, S.A. 20,000.000 100.0
Amicus Investment Company 1,000.000 100.0
Global Income Fund Management Company, S.A. 5,000.000 100.0
Global Series Fund II Management Company, S.A. 1,400.000 100.0
Prudential Asset Sales and Syndications, Inc. 1,000.000 100.0
Prudential Home Building Investors, Inc. 100.000 100.0
The Prudential Asset Management Company, Inc. 85.000 100.0
Enhanced Investment Technologies, Inc. 100.000 100.0
PCM International, Inc. 100.000 100.0
Prudential Asia Investments Limited 3,000,000.000 100.0
Prudential Asia Fund Management Ltd. (BVI) 200,000.000 100.0
Prudential Asia Fund Management Ltd. 180.000 100.0
Prudential Asia Fund Managers (H.K.) Ltd. 20.000 100.0
Prudential Asset Management Asia Ltd. (BVI) 1,500.000 100.0
PAMA (Indonesia) Ltd. 7,500.000 100.0
PAMA (Singapore) Private Ltd. 1,000,000.000 100.0
Prudential Asset Management Asia H.K. Ltd. 100.000 100.0
PT PAMA Indonesia 650.000 65.0
Prudential Asia Infrastructure Investors Ltd. 100,000.000 100.0
Prudential Asia Infrastructure Investors
(H.K.) Ltd. 100.000 100.0
Prudential Timber Investments, Inc. 100.000 100.0
Texas Rio Grande Other Asset Group Company, Inc. 100.000 100.0
The Prudential Investment Advisory Company, Ltd. 5,000.000 100.0
The Prudential Property Co., Inc. 99.000 100.0
The Prudential Realty Advisors, Inc. 100.000 100.0
The Prudential Real Estate Financial Services
of America, Inc. 100.000 100.0
Preferred Coastal Realty, Inc. 290,356 80.000 80.0
Prudential Referral Services, Inc. 1,000.000 100.0
Real Estate Connecticut, Inc. 100.000 100.0
Referral Associates of Connecticut, Inc. 1,000.000 100.0
- ------------------------------------------------------------------------------------------------------------------------------------
0399999 TOTAL 1,789,888 xxx xxx
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

C-7
<PAGE>

ITEM 25. INDEMNIFICATION

Article VI, paragraph (4) of Registrant's Articles of Incorporation provides
that "(e)ach director and each officer of the Corporation shall be indemnified
by the Corporation to the full extent permitted by the General Laws of the State
of Maryland and as provided in the by-laws of the Corporation." Article VIII of
the Registrant's Articles of Incorporation provides, in pertinent part, that
"(n)o provision of these Articles of Incorporation shall be effective to (a)
require a waiver of compliance with any provision of the Securities Act of 1933,
as amended, or the Investment Company Act of 1940, as amended, or of any valid
rule, regulation or order of the Securities and Exchange Commission thereunder
or (b) protect or purport to protect any director or officer of the Corporation
against any liability to the Corporation or its security holders to which he
would otherwise by subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office."

Paragraph 6 of both the Investment Advisory Agreement and the Supplemental
Investment Advisory Agreement between Registrant and Prudential provides that
"Prudential will not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except for a loss resulting from willful misfeasance, bad
faith, or gross negligence in the performance of its duties on behalf of the
Fund or from reckless disregard of its obligation and duties under this
Agreement."

The Registrant, in conjuction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee, or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a trustee, director, officer, employee or agent of such other
affiliated trust or corporation, against any liability asserted against and
incurred by him or her arising out of his or her position with such trust or
corporation.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER

Prudential Investment Corporation (PIC) is the investment unit of Prudential and
actively engages in the business of giving investment advice. The officers and
directors of Prudential and PIC who are engaged directly or indirectly in
activities relating to the registrant have no business, profession, vocation, or
employment of a substantial nature other than with Prudential and PIC, and have
not had such other connections during the past two years.

The business and other connections of Prudential's Directors are listed in the
Pre-Effective Amendment No. 1 to the Registration Statement of The Prudential
Variable Appreciable Account, Registration No. 333-64957, filed on December 23,
1998, the text of which is hereby incorporated by reference.

C-8

<PAGE>

ITEM 27. PRINCIPAL UNDERWRITERS

(a)(1)Pruco Securities Corporation is an underwriter of Prudential's Gilbraltar
Fund, Inc., The Prudential Variable Contract Account-2, The Prudential Variable
Contract Account-10, The Prudential Variable Contract Account-11, The Prudential
Variable Contract Account-24, Prudential Variable Appreciable Account, The
Prudential Individual Variable Contract Account, The Prudential Qualified
Individual Variable Contract Account, (separate accounts of Prudential); The
Prudential Discovery Select Group Variable Contract Account, the Pruco Life
Flexible Premium Variable Annuity Account; the Pruco Life PRUvider Variable
Appreciable Account; the Pruco Life Variable Universal Account, the Pruco Life
Variable Insurance Account, the Pruco Life Variable Appreciable Account, the
Pruco Life Single Premium Variable Life Account, the Pruco Life Single Premium
Variable Annuity Account (separate accounts of Pruco Life Insurance Company
["Pruco Life"]); the Pruco Life of New Jersey Flexible Premium Variable Annuity
Account; the Pruco Life of New Jersey Variable Insurance Account, the Pruco Life
of New Jersey Variable Appreciable Account, the Pruco Life of New Jersey Single
Premium Variable Life Account, and the Pruco Life of New Jersey Single Premium
Variable Annuity Account (separate accounts of Pruco Life Insurance Company of
New Jersey ["Pruco Life of New Jersey"]). Pruco Life, a corporation organized
under the laws of Arizona, is a direct wholly-owned subsidiary of Prudential.
Pruco Life of New Jersey, a corporation organized under the laws of New Jersey,
is a direct wholly-owned subsidiary of Pruco Life, and an indirect wholly-owned
subsidiary of Prudential.

(a)(2)Prudential Investment Management Services LLC (PIMS) is principal
underwriter for Prudential's Gibraltar Fund, Inc., The Prudential Variable
Contract Account-2, The Prudential Variable Contract Account-10, The Prudential
Variable Contract Account- 11, The Prudential Variable Contract Account-24, The
Prudential Discovery Select Group Variable Contract Account, Pruco Life Flexible
Premium Variable Annuity Account, Pruco Life of New Jersey Flexible Premium
Variable AnnuIty Account, Cash Accumulation Trust, Command Money Fund, Command
Government Fund, Command Tax-Free Fund, The Global Total Return Fund, Inc.,
Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate
Growth Equity Fund), Prudential Balance Fund, Prudential California Municipal
Fund, Prudential Distressed Securities Fund, Inc., Prudential Diversified Bond
Fund, Inc., Prudential Emerging Growth Fund, Inc., Prudential Equity Fund, Inc.,
Prudential Equity Income Fund, Prudential Europe Growth Fund, Inc., Prudential
Global Genesis Fund, Inc., Prudential Global Genesis Fund, Inc., Prudential
Global Limited Maturity Fund, Inc., Prudential Government Income Fund, Inc.,
Prudential Government Securities Trust, Prudential High Yield Fund, Inc.,
Prudential High Total Return Fund, Inc., Prudential Index Series Fund,
Prudential Institutional Liquidity Portfolio, Inc., Prudential Intermediate
Global Income Fund, Inc., Prudential International Bond Fund, Inc. The
Prudential Investment Portfolios, Inc., Prudential Mid-Cap Value Fund,
Prudential MoneyMart Assets, Inc., Prudential Mortgage Income Fund, Inc.,
Prudential Municipal Bond Fund, Prudential Municipal Series Fund, Prudential
National Municipals Fund, Inc., Prudential Natural Resources Fund, Inc.,
Prudential Pacific Growth Fund, Inc., Prudential Real Eastate Securities Fund,
Prudential Small-Cap Quantum Fund, Inc., Prudential Small Company Value Fund,
Inc., Prudential Special Money Market Fund, Inc., Prudential Structured Maturity
Fund, Inc., Prudential Tax-Free Money Fund, Inc., Prudential 20/20 Focus Fund,
Prudential Utility Fund, Inc., Prudential World Fund, Inc. and The Target
Portfolio Trust.

(b)(1) NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
------------------ --------------------- ---------------------
<S> <C> <C>
James Avery Jr.** Chairman of the Board None
Richard A. Topp* Director and President None
Joseph F.Mahoney Jr.** Director None
Gordon Wilson** Director None
Brian M. Storms**** Director None
Richard O. Painter** Director None
James D. Price*** Director None
Margaret M. Deverell**** Vice President and Chief Auditor None
Clifford E. Kirsch** Chief Legal Officer and Secretary None
Charles A. McGee** Comptroller and Chief Financial Officer None
C. Edward Chaplin* Treasurer None
Kevin Frawley** Vice President and Chief Compliance Officer None

<FN>
* Principal Business Address: 751 Broad Street, Newark, NJ 07102
** Principal Business Address: 213 Washington Street, Newark, NJ 07102
*** Principal Business Address: 199 Water Street, New York, NY 07102
**** Principal Business Address: 100 Mulberry Street, Newark, NJ 10292
</FN>
</TABLE>
C-9

<PAGE>

(b)(2) NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
------------------ --------------------- ---------------------
<S> <C> <C>
Brian M. Storms*** President None
Mark R. Fetting*** Executive Vice President None
Mendel A. Melzer,CFA* Executive Vice President Chairman of the Board of Directors
and Principal Executive Officer
Jean D. Hamilton* Executive Vice President None
Ronald P. Joelson* Executive Vice President None
John R. Stangfeld, Jr.* Executive Vice President None
Brian Henderson*** Sr. Vice President and Chief Operating Officer None
William V. Healey* Sr. Vice President, Secretary and Chief Legal Officer None
Margaret M. Deverell*** Vice President, Computroller and Chief Financial Officer None
C. Edward Chaplin* Treasurer None
Kevin Frawley** Sr. Vice President and Chief Compliance Officer None
<FN>

* Principal Business Address: 751 Broad Street, Newark, NJ 07102
** Principal Business Address: 213 Washington Street, Newark, NJ 07102
*** Principal Business Address: 100 Mulberry Street, Newark, NJ 07102
</FN>
</TABLE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books, or other documents required to be maintained by Section 31
(a) of the 1940 Act and the rules promulgated thereunder are maintained by the
Registrant, 751 Broad Street, Newark, New Jersey 07102-3777; the Registrant's
Investment Advisor, The Prudential Insurance Company of America, 751 Broad
Street, Newark, New Jersey 07102-3777, the Registrant's Accounting Agent,
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, MO
64105-1716 or the Registrant's Custodians, Investors Fiduciary Trust Company,
127 West 10th Street, Kansas City, MO 64105-1716, and Brown Brothers Harriman &
Co., 40 Water Street, Boston, MA 02109.

ITEM 29. MANAGEMENT SERVICES

Not Applicable.

ITEM 30. UNDERTAKINGS

Not Applicable.

C-10

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act and the Investment Company
Act, the Fund has duly caused this registration statement to be signed on its
behalf by the undersigned, duly authorized, in the City of Newark, State of New
Jersey, on the 12th day of February, 1999.

THE PRUDENTIAL SERIES FUND, INC.

By: /s/ MENDEL A. MELZER
-----------------------------
Mendel A. Melzer
Chairman of the Board

Pursuant to the requirements of the Securities Act, this Post-Effective
Amendment No. 35 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.

SIGNATURE AND TITLE DATE
- ------------------- ----
<S> <C> <C>
/s/ MENDEL A. MELZER
- -----------------------------------------------
Mendel A. Melzer February 12, 1999
Chairman of the Board of Directors and
Principal Executive Officer

/s/ GRACE C. TORRES February 12, 1999
- -----------------------------------------------
Grace C. Torres
Treasurer and Principal Financial and
Accounting Officer

/s/ E. MICHAEL CAULFIELD February 12, 1999
- -----------------------------------------------
E. Michael Caulfield
Director
*By: /s/ CAREN CUNNINGHAM
------------------------
/s/ * February 12, 1999 Caren Cunningham
- ----------------------------------------------- (Attorney-in-Fact)
Saul K. Fenster
Director

/s/ * February 12, 1999
- -----------------------------------------------
W. Scott McDonald, Jr.
Director

/s/ * February 12, 1999
- -----------------------------------------------
Joseph Weber
Director
</TABLE>

C-11