PRUDENTIAL SERIES FUND INC, 485APOS, 2000-05-24

PRUDENTIAL SERIES FUND INC
485APOS, 2000-05-24

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AS FILED WITH THE SEC ON May 24, 2000. 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. 38 |X|

AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|

AMENDMENT NO. 41 |X|
(Check appropriate box or boxes)

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

THE PRUDENTIAL SERIES FUND, INC.
(Exact Name of Registrant)
751 BROAD STREET
NEWARK, NEW JERSEY 07102-3777
(800) 778-2255

(Address and telephone number of principal executive offices)

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

LEE D. AUGSBURGER

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

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

Approximate 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 (date) 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.
- - - - - - --------------------------------------------------------------------------------

PRUDENTIAL GLOBAL PORTFOLIO AUGUST , 2000
PRUDENTIAL JENNISON PORTFOLIO
PRUDENTIAL MONEY MARKET PORTFOLIO
PRUDENTIAL STOCK INDEX PORTFOLIO
SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO
SP AIM AGGRESSIVE GROWTH PORTFOLIO
SP AIM GROWTH AND INCOME PORTFOLIO
SP ALLIANCE LARGE CAP GROWTH PORTFOLIO
SP ALLIANCE TECHNOLOGY PORTFOLIO
SP BALANCED ASSET ALLOCATION PORTFOLIO
SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO
SP DAVIS VALUE PORTFOLIO
SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO
SP GROWTH ASSET ALLOCATION PORTFOLIO
SP INVESCO SMALL COMPANY GROWTH PORTFOLIO
SP JENNISON INTERNATIONAL GROWTH PORTFOLIO
SP LARGE CAP VALUE PORTFOLIO
SP MFS CAPITAL OPPORTUNITIES PORTFOLIO
SP MFS MID CAP GROWTH PORTFOLIO
SP PIMCO HIGH YIELD PORTFOLIO
SP PIMCO TOTAL RETURN PORTFOLIO
SP PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO
SP SMALL/MID CAP VALUE PORTFOLIO
SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO

As with all mutual funds, the U.S. Securities and Exchange Commission has
not approved or disapproved the Fund's shares nor has the SEC determined
that this prospectus is complete or accurate. It is a criminal offense to
state otherwise.

[LOGO]

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TABLE OF CONTENTS

RISK/RETURN SUMMARY Page
----
Investment Objectives and Principal Strategies
Principal Risks
Evaluating Performance

HOW THE PORTFOLIOS INVEST

INVESTMENT OBJECTIVES AND POLICIES

Prudential Global Portfolio
Prudential Jennison Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
SP Aggressive Growth Asset Allocation Portfolio
SP AIM Aggressive Growth Portfolio
SP AIM Growth and Income Portfolio
SP Alliance Large Cap Growth Portfolio
SP Alliance Technology Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Davis Value Portfolio
SP Deutsche International Equity Portfolio
SP Growth Asset Allocation Portfolio
SP INVESCO Small Company Growth Portfolio
SP Jennison International Growth Portfolio
SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio
SP MFS Mid Cap Growth Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP Small/Mid Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio

OTHER INVESTMENTS AND STRATEGIES

ADRs
Convertible Debt and Convertible Preferred Stock
Derivatives
Dollar Rolls
Forward Foreign Currency Exchange Contracts
Futures
Interest Rate Swaps
Joint Repurchase Account
Loan Participations
Mortgage-related Securities
Options
Real Estate Investment Trusts
Repurchase Agreements

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Reverse Repurchase Agreements
Short Sales
Short Sales Against-the-Box
When-issued and Delayed Delivery Securities

HOW THE FUND IS MANAGED

Board of Directors
Investment Adviser
Investment Sub-Advisers
Portfolio Managers

HOW TO BUY AND SELL SHARES OF THE FUND

Net Asset Value
Distributor

OTHER INFORMATION

Federal Income Taxes
European Monetary Union
Monitoring for Possible Conflicts

F-1 FINANCIAL HIGHLIGHTS

(For more information - see back cover)

<PAGE>

RISK/RETURN SUMMARY

This prospectus provides information about THE PRUDENTIAL SERIES FUND, INC. (the
Fund), which consists of thirty-seven 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
keeps the assets supporting certain insurance contracts separate from the
general assets and liabilities of the insurance company.) Class II shares are
offered only to separate accounts of non-Prudential insurance companies for the
same types of Contracts. Class I shares of each Portfolio discussed in this
prospectus are available under the Strategic Partners annuity.

This section highlights key information about each Portfolio available under the
Strategic Partners annuity. The initials "SP" that appear before the name of
several of these Portfolios are an abbreviation for "Strategic Partners."
Additional information follows this summary and is also provided in the Fund's
Statement of Additional Information (SAI).

INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES

The following summarizes the investment objectives, principal strategies and
principal risks for each of the available Portfolios. We describe the terms
"company risk," "credit risk," "derivatives risk," "foreign investment risk,"
"high yield risk," "interest rate risk," "leveraging risk," "liquidity risk,"
"management risk," "market risk," and "mortgage risk" in the section on
Principal Risks, on page 10. While we make every effort to achieve the
investment objective for each Portfolio, we can't guarantee success.

PRUDENTIAL GLOBAL PORTFOLIO

The Portfolio's 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 we 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:

o COMPANY RISK
o CREDIT RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o INTEREST RATE RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

PRUDENTIAL JENNISON PORTFOLIO

The Portfolio's investment objective is to achieve long-term growth of capital.
To achieve this

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objective, the Portfolio invests primarily in equity securities of major,
established corporations that it believes offer above-average growth prospects.
In addition, the Portfolio may invest up to 30% of its total assets in foreign
securities. While the Portfolio makes every effort to achieve its objective, it
can't guarantee success.

PRINCIPAL RISKS:

o COMPANY RISK
o CREDIT RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o INTEREST RATE RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

PRUDENTIAL MONEY MARKET PORTFOLIO

The Portfolio's investment objective is MAXIMUM CURRENT INCOME CONSISTENT WITH
THE STABILITY OF CAPITAL AND THE MAINTENANCE OF LIQUIDITY. To achieve its
objective, the Portfolio invests in high-quality short-term money market
instruments issued by the U.S. government or its agencies, as well as by
corporations and banks, both domestic and foreign. The Portfolio will invest
only in instruments that mature in thirteen months or less, and which are
denominated in U.S. dollars. While the Portfolio makes every effort to achieve
its objective, it can't guarantee success.

PRINCIPAL RISKS:

o CREDIT RISK
o INTEREST RATE RISK
o LEVERAGING RISK
o MANAGEMENT RISK

- - - - - - --------------------------------------------------------------------------------
AN INVESTMENT IN THE MONEY MARKET 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 MAINTAIN A NET ASSET VALUE OF
$10 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO.
- - - - - - --------------------------------------------------------------------------------

PRUDENTIAL STOCK INDEX PORTFOLIO

The Portfolio's investment objective is INVESTMENT RESULTS THAT GENERALLY
CORRESPOND TO THE PERFORMANCE OF PUBLICLY-TRADED COMMON STOCKS. To achieve its
objective, the Portfolio attempts to duplicate the price and yield of the S&P
500. The S&P 500 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. While the Portfolio makes every effort to achieve its objective,
it can't guarantee success.

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PRINCIPAL RISKS:

o COMPANY RISK
o DERIVATIVES RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO

The SP Aggressive Growth Asset Allocation Portfolio seeks capital appreciation
by investing in large cap equity Portfolios, international Portfolios, and
small/mid cap equity Portfolios. Pertinent risks are those associated with each
Portfolio in which this Portfolio invests.

SP AIM AGGRESSIVE GROWTH PORTFOLIO

The Portfolio's investment objective is to achieve LONG-TERM GROWTH OF CAPITAL.
The Portfolio seeks to meet this objective by investing primarily in the common
stocks of companies whose earnings the Portfolio's portfolio managers expect to
grow more than 15% per year. The Portfolio will invest in securities of small-
and medium-sized growth companies and may also invest up to 25% of its total
assets in foreign securities. Any percentage limitations with respect to assets
of the Portfolio are applied at the time of purchase.

PRINCIPAL RISKS:

o COMPANY RISK
o FOREIGN INVESTMENT RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

SP AIM GROWTH AND INCOME PORTFOLIO

The Portfolio's primary investment objective is GROWTH OF CAPITAL WITH A
SECONDARY OBJECTIVE OF CURRENT INCOME.

The Portfolio seeks to meet these objectives by investing at least 65% of its
total assets in income-producing securities, including dividend-paying common
stocks and convertible securities. The portfolio managers purchase securities of
established companies that have long-term above-average growth in earnings and
dividends, and growth companies that the portfolio managers believe have the
potential for above-average growth in earnings and dividends. The portfolio
managers consider whether to sell a particular security when they believe the
security no longer has that potential or the capacity to generate income. The
Portfolio may also invest up to 20% of its total assets in foreign securities.
Any percentage limitations with respect to assets of the Portfolio are applied
at the time of purchase.

PRINCIPAL RISKS:

o COMPANY RISK
o CREDIT RISK

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o FOREIGN INVESTMENT RISK
o INTEREST RATE RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

SP ALLIANCE LARGE CAP GROWTH PORTFOLIO

The Portfolio's investment objective is GROWTH OF CAPITAL BY PURSUING AGGRESSIVE
INVESTMENT POLICIES. The Portfolio invests primarily in equity securities of
U.S. companies. Unlike most equity funds, the Portfolio focuses on a relatively
small number of intensively researched companies. Alliance Capital Management
L.P. selects the Portfolio's investments from a research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets, and superior earnings growth prospects. "Alliance",
"Alliance Capital" and their logos are registered marks of Alliance Capital
Management L.P. ("Alliance").

PRINCIPAL RISKS:

o COMPANY RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

SP ALLIANCE TECHNOLOGY PORTFOLIO

The Portfolio's objective is GROWTH OF CAPITAL. The portfolio invests primarily
in securities of companies that use technology extensively in the development of
new or improved products or processes. Within this framework, the Portfolio may
invest in any company and industry and in any type of security with potential
for capital appreciation. It invests in well-known, established companies or in
new or unseasoned companies. The Portfolio also may invest in debt securities
and up to 10% of its total assets in foreign securities. Among the principal
risks of investing in the Portfolio is market risk. In addition, technology
stocks, especially those of smaller, less-seasoned companies, tend to be more
volatile than the overall stock market. To the extent the Portfolio invests in
debt and foreign securities, your investment has interest rate risk, credit
risk, foreign risk, and currency risk.

Principal Risks:

o COMPANY RISK
o CREDIT RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o INTEREST RATE RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

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SP BALANCED ASSET ALLOCATION PORTFOLIO

The SP Balanced Asset Allocation Portfolio seeks to provide a balance between
current income and growth of capital by investing in fixed income Portfolios,
large cap equity Portfolios, small/mid cap equity Portfolios, and international
equity Portfolios. Pertinent risks are those associated with each Portfolio in
which this Portfolio invests.

SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO

The SP Conservative Asset Allocation Portfolio seeks to provide current income
with low to moderate capital appreciation by investing in fixed income
Portfolios, large cap equity Portfolios, and small/mid cap equity Portfolios.
Pertinent risks are those associated with each Portfolio in which this Portfolio
invests.

SP DAVIS VALUE PORTFOLIO

Davis Value Portfolio's investment objective is GROWTH OF CAPITAL. The Portfolio
invests primarily in common stock of U.S. companies with market capitalizations
of at least $5 billion.

The portfolio managers use the Davis investment philosophy to select common
stock of quality, overlooked growth companies at value prices and to hold them
for the long-term. They look for companies with sustainable growth rates selling
at modest price-earnings multiples that they hope will expand as other investors
recognize the company's true worth. The portfolio managers believe that if you
combine a sustainable growth rate with a gradually expanding multiple, these
rates compound and can generate returns that could exceed average returns earned
by investing in large capitalization domestic stocks. They consider selling a
company if the company no longer exhibits the characteristics that they believe
foster sustainable long-term growth, minimize risk and enhance the potential for
superior long-term returns.

PRINCIPAL RISKS:

o COMPANY RISK
o DERIVATIVES RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO

The Portfolio's investment objective is to INVEST FOR LONG-TERM CAPITAL
APPRECIATION. The Portfolio invests primarily in the stocks and other equity
securities of companies in developed countries outside the United States. The
Portfolio seeks to achieve its goal by investing primarily in companies in
developed foreign countries. The companies are selected by an extensive tracking
system plus the input of experts from various financial disciplines.

PRINCIPAL RISKS:

o COMPANY RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK

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o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

SP GROWTH ASSET ALLOCATION PORTFOLIO

The SP Growth Asset Allocation Portfolio seeks to provide long-term growth of
capital with consideration also given to current income, by investing in large
cap equity Portfolios, fixed income Portfolios, international equity Portfolios,
and small/mid cap equity Portfolios. Pertinent risks are those associated with
each Portfolio in which this Portfolio invests.

SP INVESCO SMALL COMPANY GROWTH PORTFOLIO

The Portfolio seeks LONG-TERM CAPITAL GROWTH. Most holdings are in
small-capitalization companies - those with market capitalizations under $2
billion at the time of purchase.

Investments in small, developing companies carry greater risk than investments
in larger, more established companies. Developing companies generally face
intense competition, and have a higher rate of failure than larger companies. On
the other hand, large companies were once small companies themselves, and the
growth opportunities of some small companies may be quite high.

Principal Risks:

o COMPANY RISK
o DERIVATIVES RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

SP JENNISON INTERNATIONAL GROWTH PORTFOLIO

The Portfolio's investment objective is LONG-TERM GROWTH OF CAPITAL. The
Portfolio seeks to achieve this objective by investing in equity-related
securities of foreign issuers. This means the Portfolio looks for investments
that Jennison thinks will increase in value over a period of years. To achieve
its objective, the Portfolio invests primarily in the common stock of large and
medium-sized foreign companies. Under normal circumstances, the Portfolio
invests at least 65% of its total assets in common stock of foreign companies
operating or based in at least five different countries. The Portfolio looks
primarily for stocks of companies whose earnings are growing at a faster rate
than other companies. These companies typically have characteristics such as
above average growth in earnings and cash flow, improving profitability, strong
balance sheets, management strength and strong market share for its products.
The Portfolio also tries to buy such stocks at attractive prices in relation to
their growth prospects.

PRINCIPAL RISKS:

o COMPANY RISK
o CREDIT RISK

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o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o INTEREST RATE RISK
o MARKET RISK

SP LARGE CAP VALUE PORTFOLIO

The Portfolio's investment objective is LONG-TERM GROWTH OF CAPITAL. The
portfolio's investment strategy includes investing at least 65% of total assets
in common stocks of companies with large market capitalizations (over $1 billion
at the time of investment). The Portfolio focuses on investing in securities of
companies that Fidelity Management & Research Company (FMR) believes are
undervalued in the marketplace in relation to factors such as assets, earnings
or growth potential (stocks of these companies are often called "value" stocks).
The Portfolio invests in domestic and foreign issuers. The Portfolio uses both
fundamental analysis of each issuer's financial condition, its industry position
and market and economic conditions, and statistical models to evaluate an
issuer's growth potential, valuation, liquidity and investment risk, to select
investments. An investment in the Portfolio is not a deposit of a bank, and is
not insured by the Federal Deposit Insurance Corporation or any other government
agency.

PRINCIPAL RISKS:

o COMPANY RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK
o "VALUE" INVESTING

SP MFS CAPITAL OPPORTUNITIES PORTFOLIO

The Portfolio's investment objective is CAPITAL APPRECIATION. The Portfolio
invests, under normal market conditions, at least 65% of its total assets in
common stocks and related securities, such as preferred stocks, convertible
securities and depository receipts for those securities. The Portfolio focuses
on companies which MFS believes have favorable growth prospects and attractive
valuations based on current and expected earnings or cash flow. The Portfolio's
investments may include securities listed on a securities exchange or traded in
the over-the-counter markets. MFS uses a bottom-up, as opposed to a top-down,
investment style in managing the Portfolio. This means that securities are
selected based upon fundamental analysis (such as an analysis of earnings, cash
flows, competitive position and management's abilities) performed by the
Portfolio's portfolio manager and MFS's large group of equity research analysts.
The Portfolio may invest in foreign securities (including emerging market
securities), through which it may have exposure to foreign currencies. The
Portfolio has engaged and may engage in active and frequent trading to achieve
its principal investment strategies.

PRINCIPAL RISKS:

o COMPANY RISK
o CREDIT RISK
o DERIVATIVES RISK

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o FOREIGN INVESTMENT RISK
o INTEREST RATE RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

SP MFS MID CAP GROWTH PORTFOLIO

The Portfolio's investment objective is LONG-TERM GROWTH OF CAPITAL. The
Portfolio invests, under normal market conditions, at least 65% of its total
assets in common stocks and related securities, such as preferred stocks,
convertible securities and depository receipts for those securities. These
securities typically are of medium market capitalizations, which the Portfolio's
investment adviser believes have above-average growth potential.

Medium market capitalization companies are defined by the Portfolio as companies
with market capitalizations equaling or exceeding $250 million but not exceeding
the top of the Russell Midcap(TM) Growth Index range at the time of the
Portfolio's investment. This Index is a widely recognized, unmanaged index of
mid-cap common stock prices. Companies whose market capitalizations fall below
$250 million or exceed the top of the Russell Midcap(TM) Growth Index range
after purchase continue to be considered medium-capitalization companies for
purposes of the Portfolio's 65% investment policy. The Portfolio's investments
may include securities listed on a securities exchange or traded in the
over-the-counter markets. MFS uses a bottom-up, as opposed to a top-down,
investment style in managing the Portfolio. This means that securities are
selected based upon fundamental analysis (such as an analysis of earnings, cash
flows, competitive position and management's abilities) performed by the
portfolio manager and MFS' large group of equity research analysts. The
Portfolio is a non-diversified mutual fund portfolio. This means that the
Portfolio may invest a relatively high percentage of its assets in a small
number of issuers. The Portfolio may invest in foreign securities (including
emerging markets securities) through which it may have exposure to foreign
currencies. The Portfolio is expected to engage in active and frequent trading
to achieve its principal investment strategies.

PRINCIPAL RISKS:

o COMPANY RISK
o CREDIT RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o INTEREST RATE RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

SP PIMCO HIGH YIELD PORTFOLIO

The investment objective of the Portfolio is to SEEK MAXIMUM TOTAL RETURN,
CONSISTENT WITH PRESERVATION OF CAPITAL AND PRUDENT INVESTMENT MANAGEMENT. The
Portfolio seeks to achieve its investment objective by investing under normal
circumstances at least 65% of its assets in a diversified portfolio of high
yield securities ("junk bonds") rated below investment grade but rated

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at least B by Moody's or S&P, or, if unrated, determined by Pacific Investment
Management Company (PIMCO) to be of comparable quality. The remainder of the
Portfolio's assets may be invested in investment grade fixed income instruments.
The average duration of the Portfolio normally varies within a two- to six-year
time frame based on PIMCO's forecast for interest rates. The Portfolio may
invest without limit in U.S. dollar-denominated securities of foreign issuers.
The Portfolio may invest up to 15% of its assets in euro-denominated securities.
The Portfolio normally will hedge at least 75% of its exposure to the euro to
reduce the risk of loss due to fluctuations in currency exchange rates.

PRINCIPAL RISKS:

O COMPANY RISK
O CREDIT RISK
O DERIVATIVES RISK
O FOREIGN INVESTMENT RISK
O HIGH YIELD RISK
O INTEREST RATE RISK
O LEVERAGING RISK
O LIQUIDITY RISK
O MANAGEMENT RISK
O MARKET RISK
O MORTGAGE RISK

SP PIMCO TOTAL RETURN PORTFOLIO

The investment objective of the Portfolio is to SEEK MAXIMUM TOTAL RETURN,
CONSISTENT WITH PRESERVATION OF CAPITAL AND PRUDENT INVESTMENT MANAGEMENT. The
Portfolio seeks to achieve its investment objective by investing under normal
circumstances at least 65% of its assets in a diversified portfolio of fixed
income instruments of varying maturities. The average portfolio duration of this
Portfolio normally varies within a three- to six-year time frame based on
PIMCO's forecast for interest rates.

PRINCIPAL RISKS:

o COMPANY RISK
o CREDIT RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o INTEREST RATE RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK
o MORTGAGE RISK

SP PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO

The Portfolio's investment objective is LONG-TERM CAPITAL APPRECIATION, which
means that the Portfolio seeks investments whose price will increase over
several years. The Portfolio normally invests at least 65% of its total assets
in equity securities of small and medium-sized U.S.

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companies with the potential for above-average growth. The Portfolio also may
use derivatives for hedging or to improve the Portfolio's returns. While the
Portfolio makes every effort to achieve its objective, it can't guarantee
success. The Portfolio may actively and frequently trade its portfolio
securities. High portfolio turnover results in higher transaction costs and can
affect the Portfolio's performance.

PRINCIPAL RISKS:

o COMPANY RISK
o CREDIT RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o INTEREST RATE RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

SP SMALL/MID CAP VALUE PORTFOLIO

The Portfolio's investment objective is LONG-TERM GROWTH OF CAPITAL. The
Portfolio's investment strategy includes normally investing at least 65% of
total assets in common stocks of companies with small to medium market
capitalizations (those with market capitalizations similar to companies in the
Russell 2000 or the Russell Midcap at the time of investment). The Portfolio
focuses on investing in securities of companies that FMR believes are
undervalued in the marketplace in relation to factors such as assets, earnings
or growth potential (stocks of these companies are often called "value" stocks).
The Portfolio invests in domestic and foreign issuers. The Portfolio uses both
fundamental analysis of each issuer's financial condition, its industry position
and market and economic conditions, and statistical models to evaluate an
issuer's growth potential, valuation, liquidity and investment risk, to select
investments. An investment in the Portfolio is not a deposit of a bank and is
not insured by the Federal Deposit Insurance Corporation or any other government
agency.

PRINCIPAL RISKS:

o COMPANY RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK
o SMALL CAP INVESTING
o "VALUE" INVESTING

SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO

The Portfolio's investment objective is LONG-TERM GROWTH OF CAPITAL. This means
the Portfolio seeks investments whose price will increase over several years.
The Portfolio normally invests at least

14
<PAGE>

65% of its total assets in equity-related securities of U.S. companies that the
adviser believes to have strong capital appreciation potential. The Portfolio's
strategy is to combine the efforts of two investment advisers and to invest in
the favorite stock selection ideas of three portfolio managers (two of whom
invest as a team). Each investment adviser to the Portfolio utilizes a growth
style to select approximately 20 securities. The portfolio managers build a
portfolio with stocks in which they have the highest confidence and may invest
more than 5% of the Portfolio's assets in any one issuer. The Portfolio may
actively and frequently trade its portfolio securities. The Portfolio is
nondiversified, meaning it can invest more than 5% of its assets in the
securities of any one issuer. Investing in a nondiversified portfolio,
particularly a portfolio investing in approximately 40 equity-related
securities, involves greater risk than investing in a diversified portfolio
because a loss resulting from the decline in the value of one security may
represent a greater portion of the total assets of a nondiversified portfolio.
The Portfolio may actively and frequently trade its portfolio securities. High
portfolio turnover results in higher transaction costs and can affect the
Portfolio's performance.

PRINCIPAL RISKS:

o COMPANY RISK
o DERIVATIVES RISK
o FOREIGN INVESTMENT RISK
o LEVERAGING RISK
o LIQUIDITY RISK
o MANAGEMENT RISK
o MARKET RISK

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Like any mutual
fund, an investment in a Portfolio could lose value, and you could lose money.
The following summarizes the principal risks of investing in the Portfolios.

COMPANY RISK. The price of the stock or debt security of a particular company
can vary based on a variety of factors, such as the company's financial
performance, changes in management and product trends, and the potential for
takeover and acquisition. This is especially true with respect to equity
securities of smaller companies, whose prices may go up and down more than
equity securities of larger, more established companies. Also, since equity
securities of smaller companies may not be traded as often as equity securities
of larger, more established companies, it may be difficult or impossible for a
Portfolio to sell securities at a desirable price. Foreign securities have
additional risks, including exchange rate changes, political and economic
upheaval, the relative lack of information about these companies, relatively low
market liquidity and the potential lack of strict financial and accounting
controls and standards.

CREDIT RISK. Debt obligations are generally subject to the risk that the issuer
may be unable to make principal and interest payments when they are due. There
is also the risk that the securities could lose value because of a loss of
confidence in the ability of the borrower to pay back debt. Non-investment grade
debt - also known as "high-yield bonds" and "junk bonds" - have a higher risk of
default and tend to be less liquid than higher-rated securities.

DERIVATIVES RISK. Derivatives are financial contracts whose value depends on, or
is derived from, the value of an underlying asset, interest rate or index. The
Portfolios typically use derivatives as a

15
<PAGE>

substitute for taking a position in the underlying asset and/or as part of a
strategy designed to reduce exposure to other risks, such as interest rate or
currency risk. A Portfolio may also use derivatives for leverage, in which case
their use would involve leveraging risk. A Portfolio's use of derivative
instruments involves risks different from, or possibly greater than, the risks
associated with investing directly in securities and other traditional
investments. Derivatives are subject to a number of risks described elsewhere,
such as liquidity risk, interest rate risk, market risk, credit risk and
management risk. They also involve the risk of mispricing or improper valuation
and the risk that changes in the value of the derivative may not correlate
perfectly with the underlying asset, rate or index. A Portfolio investing in a
derivative instrument could lose more than the principal amount invested. Also,
suitable derivative transactions may not be available in all circumstances.

FOREIGN INVESTMENT RISK. Investing in foreign securities generally involves more
risk than investing in securities of U.S. issuers. Foreign investment risk is
comprised of the specific risks described below.

CURRENCY RISK. Changes in currency exchange rates may affect the value of
foreign securities held by a Portfolio and the amount of income available for
distribution. If a foreign currency grows weaker relative to the U.S. dollar,
the value of securities denominated in that foreign currency generally decreases
in terms of U.S. dollars. If a Portfolio does not correctly anticipate changes
in exchange rates, its share price could decline as a result. In addition,
certain hedging activities may cause the Portfolio to lose money and could
reduce the amount of income available for distribution.

EMERGING MARKET RISK. To the extent that a Portfolio invests in emerging
markets to enhance overall returns, it may face higher political, information,
and stock market risks. In addition, profound social changes and business
practices that depart from norms in developed countries' economies have
sometimes hindered the orderly growth of emerging economies and their stock
markets in the past. High levels of debt may make emerging economies heavily
reliant on foreign capital and vulnerable to capital flight.

FOREIGN MARKET RISK. Foreign markets, especially those in developing
countries, tend to be more volatile than U.S. markets and are generally not
subject to regulatory requirements comparable to those in the U.S. Because of
differences in accounting standards and custody and settlement practices,
investing in foreign securities generally involves more risk than investing in
securities of U.S. issuers.

INFORMATION RISK. Financial reporting standards for companies based in
foreign markets usually differ from those in the United States. Since the
"numbers" themselves sometimes mean different things, the sub-advisers devote
much of their research effort to understanding and assessing the impact of these
differences upon a company's financial conditions and prospects.

LIQUIDITY RISK. Stocks that trade less can be more difficult or more costly
to buy, or to sell, than more liquid or active stocks. This liquidity risk is a
factor of the trading volume of a particular stock, as well as the size and
liquidity of the entire local market. On the whole, foreign exchanges are
smaller and less liquid than the U.S. market. This can make buying and selling
certain shares more difficult and costly. Relatively small transactions in some
instances can have a disproportionately large effect on the price and supply of
shares. In certain situations, it may become virtually impossible to sell a
stock in an orderly fashion at a price that approaches an estimate of its value.

POLITICAL DEVELOPMENTS. Political developments may adversely affect the
value of a Portfolio's foreign securities.

16
<PAGE>

POLITICAL RISK. Some foreign governments have limited the outflow of
profits to investors abroad, extended diplomatic disputes to include trade and
financial relations, and have imposed high taxes on corporate profits.

REGULATORY RISK. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly established.

HIGH YIELD RISK. Portfolios that invest in high yield securities and unrated
securities of similar credit quality (commonly known as "junk bonds") may be
subject to greater levels of interest rate, credit and liquidity risk than
Portfolios that do not invest in such securities. High yield securities are
considered predominantly speculative with respect to the issuer's continuing
ability to make principal and interest payments. An economic downturn or period
of rising interest rates could adversely affect the market for high yield
securities and reduce a Portfolio's ability to sell its high yield securities
(liquidity risk).

INTEREST RATE RISK. The risk that the securities could lose value because of
interest rate changes. For example, bonds tend to decrease in value if interest
rates rise. Debt obligations with longer maturities typically offer higher
yields, but are subject to greater price shifts as a result of interest rate
changes than debt obligations with shorter maturities.

LEVERAGING RISK. Certain transactions may give rise to a form of leverage. Such
transactions may include, among others, reverse repurchase agreements, loans of
portfolio securities, and the use of when-issued, delayed delivery or forward
commitment contracts. The use of derivatives may also create leveraging risks.
To mitigate leveraging risk, a sub-adviser can segregate liquid assets or
otherwise cover the transactions that may give rise to such risk. The use of
leverage may cause a Portfolio to liquidate portfolio positions when it may not
be advantageous to do so to satisfy its obligations or to meet segregation
requirements. Leverage, including borrowing, may cause a Portfolio to be more
volatile than if the Portfolio had not been leveraged. This is because
leveraging tends to exaggerate the effect of any increase or decrease in the
value of a Portfolio's securities.

LIQUIDITY RISK. Liquidity risk exists when particular investments are difficult
to purchase or sell. A Portfolio's investments in illiquid securities may reduce
the returns of the Portfolio because it may be unable to sell the illiquid
securities at an advantageous time or price. Portfolios with principal
investment strategies that involve foreign securities, derivatives or securities
with substantial market and/or credit risk tend to have the greatest exposure to
liquidity risk.

MANAGEMENT RISK. Each Portfolio is subject to management risk because it is an
actively managed investment portfolio. Each sub-adviser will apply investment
techniques and risk analyses in making investment decisions for the Portfolios,
but there can be no guarantee that these will produce the desired results.

MARKET RISK. Common stocks and fixed income securities 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. Generally, the stock prices of large companies are
more stable than the stock prices of smaller companies, but this is not always
the

17
<PAGE>

case. Smaller companies often offer a smaller range of products and services
than large companies. They may also have limited financial resources and may
lack management depth. As a result, stocks issued by smaller companies may
fluctuate in value more than the stocks of larger, more established companies.

MORTGAGE RISK. A Portfolio that purchases mortgage related securities is subject
to certain additional risks. Rising interest rates tend to extend the duration
of mortgage-related securities, making them more sensitive to changes in
interest rates. As a result, in a period of rising interest rates, a Portfolio
that holds mortgage-related securities may exhibit additional volatility. This
is known as extension risk. In addition, mortgage-related securities are subject
to prepayment risk. When interest rates decline, borrowers may pay off their
mortgages sooner than expected. This can reduce the returns of a Portfolio
because the Portfolio will have to reinvest that money at the lower prevailing
interest rates.

* * *

EVALUATING PERFORMANCE

The SP Aggressive Growth Asset Allocation Portfolio, SP AIM Aggressive Growth
Portfolio, SP AIM Growth and Income Portfolio, SP Alliance Large Cap Growth
Portfolio, SP Alliance Technology Portfolio, SP Balanced Asset Allocation
Portfolio, SP Conservative Asset Allocation Portfolio, SP Davis Value Portfolio,
SP Deutsche International Equity Portfolio, SP Growth Asset Allocation
Portfolio, SP INVESCO Small Company Growth Portfolio, SP Jennison International
Growth Portfolio, SP Large Cap Value Portfolio, SP MFS Capital Opportunities
Portfolio, SP MFS Mid Cap Growth Portfolio, SP PIMCO High Yield Portfolio, SP
PIMCO Total Return Portfolio, SP Prudential U.S. Emerging Growth Portfolio, SP
Small/Mid Cap Value Portfolio, and SP Strategic Partners Focused Growth
Portfolios are newly-created, and therefore do not have any performance history.

PRUDENTIAL GLOBAL PORTFOLIO

A number of factors - including risk - can affect how the Portfolio performs.
The bar chart and table below demonstrate the risk of investing in the Portfolio
by showing how returns can change from year to year and by showing how the
Portfolio's average annual returns compare with a stock index and a group of
similar mutual funds. Past performance does not mean that the Portfolio will
achieve similar results in the future.

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Annual Returns* (Class I shares)
- - - - - - --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- - - - - - --------------------------------------------------------------------------------

- - - - - - -12.91% 11.39% -3.42% 43.14% -4.89 15.88% 19.97% 6.98% 25.08% 48.27%

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

Best Quarter: 31.04% (4th quarter of 1999) Worst Quarter: (14.21)% (3rd quarter
of 1998)

*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.

18
<PAGE>

Average Annual Returns* (as of 12/31/99)
- - - - - - --------------------------------------------------------------------------------
SINCE
INCEPTION
1 YEAR 5 YEARS 10 YEARS (9/19/88)
------ ------- -------- ---------
Class I shares 48.27% 22.44% 13.38% 14.33%
Morgan Stanley World Index** 24.93% 19.76% 11.42% 12.67%
Lipper Average*** 44.18% 19.42% 11.73% 12.55%

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

* THE PORTFOLIO'S RETURNS ARE AFTER DEDUCTION OF EXPENSES AND DO NOT INCLUDE
CONTRACT CHARGES.

**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 "SINCE INCEPTION"
RETURN REFLECTS THE CLOSEST CALENDAR MONTH-END RETURN (9/30/88). 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. THE "SINCE INCEPTION"
RETURN REFLECTS THE CLOSEST CALENDAR MONTH-END RETURN (9/30/88). SOURCE: LIPPER,
INC.

PRUDENTIAL JENNISON PORTFOLIO

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Annual Returns* (Class I shares)
- - - - - - --------------------------------------------------------------------------------
1996 1997 1998 1999

14.41% 31.71% 37.46% 41.76%

- - - - - - --------------------------------------------------------------------------------
Best Quarter: 29.46% (4th quarter of 1998) Worst Quarter: (12.07)% (3rd quarter
of 1998)
*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* (as of 12/31/99)
- - - - - - --------------------------------------------------------------------------------
SINCE
INCEPTION
1 YEAR (4/25/95)
------ ---------
Class I shares 41.76% 32.11%
S&P 500** 21.03% 27.48%
Lipper Average*** 31.48% 25.95%

- - - - - - --------------------------------------------------------------------------------
*THE PORTFOLIO'S RETURNS ARE AFTER DEDUCTION OF EXPENSES AND DO NOT INCLUDE
CONTRACT CHARGES.

19
<PAGE>

** 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 "SINCE INCEPTION" RETURN REFLECTS THE CLOSEST CALENDAR MONTH-END
RETURN (4/30/95). 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.
THE "SINCE INCEPTION" RETURN REFLECTS THE CLOSEST CALENDAR MONTH-END RETURN
(4/30/95). SOURCE: LIPPER, INC.

PRUDENTIAL MONEY MARKET PORTFOLIO

A number of factors - including risk - can affect how the Portfolio performs.
The bar chart and table below demonstrate the risk of investing in the Portfolio
by showing how returns can change from year to year and by showing how the
Portfolio's average annual returns compare with a stock index and a group of
similar mutual funds. Past performance does not assure that the Portfolio will
achieve similar results in the future.

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Annual Returns* (Class I shares)
- - - - - - --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

8.16% 6.16% 3.79% 2.95% 4.05% 5.80% 5.22% 5.41% 5.39% 4.97%

- - - - - - --------------------------------------------------------------------------------
Best Quarter: 2.00% (2nd quarter of 1990) Worst Quarter: 0.71% (2nd quarter of
1993)
*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* (as of 12/31/99)
- - - - - - --------------------------------------------------------------------------------
SINCE
INCEPTION
1 YEAR 5 YEARS 10 YEARS (5/13/83)
------ ------- -------- ---------
Class I shares 4.97% 5.36% 5.18% 6.30%
Lipper Average** 4.75% 5.12% 4.88% 6.23%

- - - - - - --------------------------------------------------------------------------------
*THE PORTFOLIO'S RETURNS ARE AFTER DEDUCTION OF EXPENSES AND DO NOT INCLUDE
CONTRACT CHARGES.

** 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.
THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.

7-DAY YIELD* (AS OF 12/31/99)

20
<PAGE>

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

Money Market Portfolio 5.65%

Average Money Market Fund** 5.16
%
- - - - - - --------------------------------------------------------------------------------
* THE PORTFOLIO'S YIELD IS AFTER DEDUCTION OF EXPENSES AND DOES NOT INCLUDE
CONTRACT CHARGES.

**SOURCE: IBC FINANCIAL DATA, INC. AS OF 12/28/99, BASED ON 311 FUNDS IN THE IBC
TAXABLE GENERAL PURPOSE, FIRST AND SECOND TIER MONEY MARKET FUND. THE "SINCE
INCEPTION" RETURN REFLECTS THE CLOSEST CALENDAR MONTH-END RETURN (4/30/83).
SOURCE: LIPPER, INC.

PRUDENTIAL STOCK INDEX PORTFOLIO

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Annual Return* (Class I shares)
- - - - - - --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

- - - - - - -3.63% 29.72% 7.13% 9.66% 1.01% 37.06% 22.57% 32.83% 28.42% 20.54%

- - - - - - --------------------------------------------------------------------------------
Best Quarter: 21.44% (4th quarter of 1998) Worst Quarter: (13.72)% (3rd quarter
of 1990)

*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* (as of 12/31/99)
- - - - - - --------------------------------------------------------------------------------
SINCE
INCEPTION
1 YEAR 5 YEARS 10 YEARS (10/19/87)
------ ------- -------- ----------
Class I shares 20.54% 28.14% 17.75% 18.96%
S&P 500** 21.03% 28.54% 18.19% 18.71%
Lipper Average*** 20.48% 28.07% 17.74% 18.24%

- - - - - - --------------------------------------------------------------------------------
*THE PORTFOLIO'S RETURNS ARE AFTER DEDUCTION OF EXPENSES AND DO NOT INCLUDE
CONTRACT CHARGES.

**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 "SINCE INCEPTION" RETURN REFLECTS THE CLOSEST CALENDAR MONTH-END
RETURN (10/31/87). 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.
THE "SINCE INCEPTION" RETURN REFLECTS THE CLOSEST CALENDAR MONTH-END RETURN

21
<PAGE>

(10/31/87). Source: Lipper, Inc.

HOW THE PORTFOLIOS INVEST

INVESTMENT OBJECTIVES AND POLICIES

We describe each Portfolio's investment objective and policies below. We
describe certain investment instruments that appear in bold lettering below in
the section entitled Other Investments and Strategies. Although we make every
effort to achieve each Portfolio's objective, we can't guarantee success. The
Fund's Board of Directors can change a Portfolio's investment policy if that
policy is not fundamental.

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

PRUDENTIAL GLOBAL PORTFOLIO

The investment objective of this Portfolio is LONG TERM GROWTH OF CAPITAL. To
achieve this objective, the Portfolio invests primarily in equity and
equity-related securities of foreign and U.S. companies. While the Portfolio
makes every effort to achieve this objective, it can't guarantee success.

- - - - - - --------------------------------------------------------------------------------
GLOBAL INVESTING

This Portfolio is intended to provide investors with the opportunity to invest
in companies located throughout the world. Although the Portfolio is not
required to invest in a minimum number of countries, the Portfolio intends
generally to invest in at least three countries, including the U.S. However, in
response to market conditions, the Portfolio can invest up to 35% of its total
assets in any one country other than the U.S.

When selecting stocks, the Portfolio uses a growth approach which means it looks
for companies that have above-average growth prospects. In making its stock
picks, the Portfolio looks for companies that have had growth in earnings and
sales, high returns on equity and assets or other strong financial
characteristics. Often, the companies it chooses have superior management, a
unique market niche or a strong new product.
- - - - - - --------------------------------------------------------------------------------

The Portfolio may invest up to 100% of its assets in money market instruments in
response to adverse market conditions or when it is restructuring. Investing
heavily in these securities limits the Portfolio's ability to achieve its
investment objective, but can help to preserve the Portfolio's assets when the
markets are unstable.

The Portfolio may also use alternative investment strategies - including
DERIVATIVES - to try to improve its returns, protect its assets or for
short-term cash management.

The Portfolio may: purchase and sell OPTIONS on equity securities, stock indexes
and foreign currencies; purchase and sell FUTURES contracts on stock indexes,
debt securities, interest rate indexes and foreign currencies 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.

The Portfolio may also enter into REPURCHASE AGREEMENTS. The Portfolio may
participate with certain other Portfolios of the Fund in a JOINT REPURCHASE
ACCOUNT under an order obtained from the SEC.

22
<PAGE>

PRUDENTIAL JENNISON PORTFOLIO

The investment objective of this Portfolio is to achieve LONG TERM GROWTH OF
CAPITAL. This means the Portfolio seeks investments whose price will increase
over several years. While the Portfolio makes every effort to achieve its
objective, it can't guarantee success.

- - - - - - --------------------------------------------------------------------------------
INVESTMENT STRATEGY
The Portfolio seeks to invest in equity securities of established companies with
above-average growth prospects. The Portfolio selects stocks on a
company-by-company basis using fundamental analysis. In making its stock picks,
it looks for companies that have had growth in earnings and sales, high returns
on equity and assets or other strong financial characteristics. Often, the
companies the Portfolio chooses have superior management, a unique market niche
or a strong new product.

In pursuing the Portfolio's objective, the Portfolio normally invests 65% or
more of its total assets in common stocks and preferred stocks of companies with
capitalization in excess of $1 billion.

For the balance of the Portfolio, the Portfolio may invest in common stocks,
preferred stocks and other equity-related securities of companies that are
undergoing changes in management, product and/or marketing dynamics which the
Portfolio believes have not yet been reflected in reported earnings or
recognized by investors.
- - - - - - --------------------------------------------------------------------------------

In addition, the Portfolio may invest in debt securities and mortgage-related
securities. These 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 American Depository Receipts
(ADRS) as foreign securities.

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

The Portfolio may also use alternative investment strategies - including
DERIVATIVES - to try to improve the Portfolio's returns, protect its assets or
for short-term cash management.

The Portfolio 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 those 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.

The Portfolio may also enter into REPURCHASE AGREEMENTS. The Portfolio may
participate with certain other Portfolios of the Fund in a JOINT REPURCHASE
ACCOUNT under an order obtained from the SEC.

In response to adverse market conditions, the Portfolio may temporarily invest
up to 100% of the Portfolio's assets in money market instruments. Investing
heavily in these securities limits the ability to achieve the Portfolio's
investment objective, but can help to preserve the Portfolio's assets when

23
<PAGE>

the markets are unstable.

PRUDENTIAL MONEY MARKET PORTFOLIO

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 the Portfolio seeks investments that will provide a high level of current
income. While the Portfolio makes every effort to achieve its objective, it
can't guarantee success.

- - - - - - --------------------------------------------------------------------------------
STEADY NET ASSET VALUE

The net asset value for the 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.

The Portfolio invests in a diversified portfolio of short-term debt obligations
issued by the U.S. government, its agencies and instrumentalities, as well as
commercial paper, asset backed securities, funding agreements, certificates of
deposit, floating and variable rate demand notes, notes and other obligations
issued by banks, corporations and other companies (including trust structures),
and obligations issued by foreign banks, companies or foreign governments.
- - - - - - --------------------------------------------------------------------------------

The Portfolio makes investments that meet the requirements of specific rules for
money market mutual funds, such as Investment Company Act Rule 2a-7. As such,
the Portfolio will not acquire any security with a remaining maturity exceeding
thirteen months, and the Portfolio will maintain a dollar-weighted average
portfolio maturity of 90 days or less. In addition, the Portfolio will comply
with the diversification, quality and other requirements of Rule 2a-7. This
means, generally, that the instruments that the Portfolio purchases present
"minimal credit risk" and are of "eligible quality." "Eligible quality" for this
purpose means a security is: (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 the
Portfolio purchases 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.
Funding agreements are contracts issued by insurance companies that guarantee a
return of principal, plus some amount of interest. When purchased by money
market funds, funding agreements will typically be short-term and will provide
an adjustable rate of interest. 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.

The Portfolio may purchase debt securities that include demand features, which
allow it 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
the Portfolio's expectation that it can demand repayment of the obligation at a
set price within a relatively short period of time, in compliance with the rules
applicable to money market mutual funds.

The Portfolio may also purchase floating rate and variable rate securities.
These securities pay

24
<PAGE>

interest at rates that change periodically to reflect changes in market interest
rates. Because these securities adjust the interest they pay, they may be
beneficial when interest rates are rising because of the additional return the
Portfolio will receive, and they may be detrimental when interest rates are
falling because of the reduction in interest payments to the Portfolio.

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

The Portfolio may also use alternative investment strategies to try to improve
its returns, protect its assets or for short-term cash management. There is no
guarantee that these strategies will work, that the instruments necessary to
implement these strategies will be available or that the Portfolio will not lose
money.

The Portfolio may purchase securities on a WHEN-ISSUED or DELAYED DELIVERY
basis.

The Portfolio may also enter into REPURCHASE AGREEMENTS. The Portfolio may
participate with certain other Portfolios of the Fund in A JOINT REPURCHASE
ACCOUNT under an order obtained from the SEC.

The Portfolio may use up to 10% of its net assets in connection with REVERSE
REPURCHASE AGREEMENTS.

- - - - - - --------------------------------------------------------------------------------
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, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO.
- - - - - - --------------------------------------------------------------------------------

PRUDENTIAL STOCK INDEX PORTFOLIO

The investment objective of this Portfolio is to achieve INVESTMENT RESULTS THAT
GENERALLY CORRESPOND TO THE PERFORMANCE OF PUBLICLY-TRADED COMMON STOCKS. To
achieve this goal, the Portfolio attempts to duplicate the performance of the
S&P 500 Index. While the Portfolio makes every effort to achieve its objective,
it can't guarantee success.

- - - - - - --------------------------------------------------------------------------------
S&P 500 INDEX
The Portfolio attempts to duplicate the performance of the S&P 500 Index (500
Index), a market-weighted index which represents more than 70% of the market
value of all publicly-traded common stocks.

Under normal conditions, the Portfolio attempts to invest in all 500 stocks
represented in the S&P 500 Index in proportion to their weighting in the 500
Index. The Portfolio will attempt to remain as fully invested in the S&P 500
stocks as possible in light of cash flow into and out of the Portfolio.

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

To manage investments and redemptions in the Portfolio, the Portfolio may
temporarily hold cash or invest in high-quality money market instruments. To the
extent it does so, the Portfolio's performance will differ from that of the 500
Index. The Portfolio attempts to minimize differences in the performance of the
Portfolio and the 500 Index by using stock index FUTURES CONTRACTS, options on
stock indexes and OPTIONS on stock index futures contracts. 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.

25
<PAGE>

The Portfolio may also use alternative investment strategies to try to improve
the Portfolio's returns or for short-term cash management. There is no guarantee
that these strategies will work, that the instruments necessary to implement
these strategies will be available or that the Portfolio will not lose money.

The Portfolio may: purchase and sell OPTIONS on 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.

The Portfolio may also enter into REPURCHASE AGREEMENTS. The Portfolio may
participate with certain other Portfolios of the Fund in a JOINT REPURCHASE
ACCOUNT under an order obtained from the SEC.

- - - - - - --------------------------------------------------------------------------------
A STOCK'S INCLUSION IN THE S&P 500 INDEX IN NO WAY IMPLIES S&P'S OPINION AS TO
THE STOCK'S ATTRACTIVENESS AS AN INVESTMENT. THE PORTFOLIO IS NOT SPONSORED,
ENDORSED, SOLD OR PROMOTED BY S&P. S&P MAKES NO REPRESENTATIONS REGARDING THE
ADVISABILITY OF INVESTING IN THE PORTFOLIO. "STANDARD & POOR'S," "STANDARD &
POOR'S 500" AND "500" ARE TRADEMARKS OF MCGRAW HILL.
- - - - - - --------------------------------------------------------------------------------

SP AIM AGGRESSIVE GROWTH PORTFOLIO

The Portfolio's investment objective is to achieve LONG-TERM GROWTH OF CAPITAL.

- - - - - - --------------------------------------------------------------------------------
AGGRESSIVE GROWTH STOCK PORTFOLIO
The Portfolio invests primarily in the common stock of small and medium-sized
companies that are anticipated to have excellent prospects for long-term growth
of earnings.
- - - - - - --------------------------------------------------------------------------------

The Portfolio seeks to meet this objective by investing principally in
securities of companies whose earnings the portfolio managers expect to grow
more than 15% per year. The Portfolio will invest in small- and medium-sized
growth companies. The portfolio managers focus on companies they believe are
likely to benefit from new or innovative products, services or processes as well
as those that have experienced above-average, long-term growth in earnings and
have excellent prospects for future growth. The portfolio managers consider
whether to sell a particular security when any of those factors materially
changes. The Portfolio may also invest up to 25% of its total assets in foreign
securities. In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, the Portfolio may
temporarily hold all or a portion of its assets in cash, money market
instruments, shares of affiliated money market funds, bonds or other debt
securities. As a result, the Portfolio may not achieve its investment objective.

26
<PAGE>

SP AIM GROWTH AND INCOME PORTFOLIO

The Portfolio's investment objective is GROWTH OF CAPITAL with a secondary
objective of current income.

The Portfolio may also invest in convertible securities whose values will be
affected by market interest rates, the risk that the issuer may default on
interest or principal payments and the value of the underlying common stock into
which these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest and dividends, their values may fall
if interest rates rise and rise if market interest rates fall. Additionally, an
issuer may have the right to buy back certain of the convertible securities at a
time and price that is unfavorable to the Portfolio.

- - - - - - --------------------------------------------------------------------------------
A GROWTH AND INCOME PORTFOLIO
This Portfolio invests in a wide variety of equity securities and debt
securities in an effort to achieve both capital appreciation as well as current
income.
- - - - - - --------------------------------------------------------------------------------

The Portfolio seeks to meet this objective by investing at least 65% of its
total assets in securities of established companies that have long-term
above-average growth in earnings and dividends, and growth companies that the
portfolio managers believe have the potential for above-average growth in
earnings and dividends. The Portfolio may invest in corporate debt securities.
Corporations issue debt securities of various types, including bonds and
debentures (which are long-term), notes (which may be short- or long-term),
bankers acceptances (indirectly secured borrowings to facilitate commercial
transactions) and commercial paper (short-term unsecured notes). These
securities typically provide for periodic payments of interest, at a rate which
may be fixed or adjustable, with payment of principal upon maturity and are
generally not secured by assets of the issuer or otherwise guaranteed.

The values of fixed rate income securities tend to vary inversely with changes
in interest rates, with longer-term securities generally being more volatile
than shorter-term securities. Corporate securities frequently are subject to
call provisions that entitle the issuer to repurchase such securities at a
predetermined price prior to their stated maturity. In the event that a security
is called during a period of declining interest rates, the Portfolio may be
required to reinvest the proceeds in securities having a lower yield. In
addition, in the event that a security was purchased at a premium over the call
price, the Portfolio will experience a capital loss if the security is called.
Adjustable rate corporate debt securities may have interest rate caps and
floors.

The Portfolio may invest in securities issued or guaranteed by the United States
government or its agencies or instrumentalities. These include Treasury
securities (bills, notes, bonds and other debt securities) which differ only in
their interest rates, maturities and times of issuance. U.S. Government agency
and instrumentality securities include securities which are supported by the
full faith and credit of the U.S., securities that are supported by the right of
the agency to borrow from the U.S. Treasury, securities that are supported by
the discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality and securities that are supported
only by the credit of such agencies. While the U.S. Government may provide
financial

27
<PAGE>

support to such U.S. government-sponsored agencies or instrumentalities, no
assurance can be given that it always will do so. The U.S. government, its
agencies and instrumentalities do not guarantee the market value of their
securities. The values of such securities fluctuate inversely to interest rates.

To the extent consistent with its investment objective and policies, the
Portfolio may invest in equity and/or debt securities issued by Real Estate
Investment Trusts ("REITs"). Such investments will not exceed 25% of the total
assets of the Portfolio.

To the extent that the Portfolio has the ability to invest in REITs, it could
conceivably own real estate directly as a result of a default on the securities
it owns. The Portfolio, therefore, may be subject to certain risks associated
with the direct ownership of real estate including difficulties in valuing and
trading real estate, declines in the value of real estate, risks related to
general and local economic condition, adverse change in the climate for real
estate, environmental liability risks, increases in property taxes and operating
expense, changes in zoning laws, casualty or condemnation losses, limitations on
rents, changes in neighborhood values, the appeal of properties to tenants, and
increases in interest rates.

The Portfolio may hold foreign securities. Such investments may include American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs") and other
securities representing underlying securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted.

The Portfolio has authority to deal in foreign exchange between currencies of
the different countries in which it will invest either for the settlement of
transactions or as a hedge against possible variations in the foreign exchange
rates between those currencies. This may be accomplished through direct
purchases or sales of foreign currency, purchases of futures contracts with
respect to foreign currency (and options thereon), and contractual agreements to
purchase or sell a specified currency at a specified future date (up to one
year) at a price set at the time of the contract. Such contractual commitments
may be forward contracts entered into directly with another party or
exchange-traded futures contracts. The Portfolio may purchase and sell options
on futures contracts or forward contracts which are denominated in a particular
foreign currency to hedge the risk of fluctuations in the value of another
currency.

For the purpose of realizing additional income, the Portfolio may make secured
LOANS of portfolio securities amounting to not more than 33-1/3% of its total
assets.

The Portfolio may invest in REVERSE REPURCHASE AGREEMENTS with banks. The
Portfolio may employ reverse repurchase agreements (i) for temporary emergency
purposes, such as to meet unanticipated net redemptions so as to avoid
liquidating other portfolio securities during unfavorable market conditions;
(ii) to cover short-term cash requirements resulting from the timing of trade
settlements; or (iii) to take advantage of market situations where the interest
income to be earned from the investment of the proceeds of the transaction is
greater than the interest expense of the transaction. At the time it enters into
a reverse repurchase agreement, the Portfolio will segregate liquid securities
having a dollar value equal to the repurchase price. Reverse repurchase
agreements are considered borrowings by the Portfolio under the 1940 Act.

The Portfolio may purchase securities of unseasoned issuers. Securities in such
issuers may provide opportunities for long term capital growth. Greater risks
are associated with investments in securities of unseasoned issuers than in the
securities of more established companies because unseasoned issuers have only a
brief operating history and may have more limited markets and

28
<PAGE>

financial resources. As a result, securities of unseasoned issuers tend to be
more volatile than securities of more established companies.

The Portfolio may invest in other investment companies to the extent permitted
by the 1940 Act, and rules and regulations thereunder, and if applicable,
exemptive orders granted by the SEC.

In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the Portfolio may temporarily
hold all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
Portfolio may not achieve its investment objective.

The Portfolio may engage in active and frequent trading of portfolio securities
to achieve its investment objective. If the Portfolio does trade in this way, it
may incur increased transaction costs and brokerage commissions, both of which
can lower the actual return on your investment.

SP ALLIANCE LARGE CAP GROWTH PORTFOLIO

The investment objective of this Portfolio is GROWTH OF CAPITAL BY PURSUING
AGGRESSIVE INVESTMENT POLICIES.

- - - - - - --------------------------------------------------------------------------------
LARGE CAP GROWTH
The Portfolio usually invests in about 40-50 companies, with the 25 most highly
regarded of these companies generally constituting approximately 70% of the
Portfolio's net assets. Alliance seeks to gain positive returns in good markets
while providing some measure of protection in poor markets
- - - - - - --------------------------------------------------------------------------------

Normally, the Portfolio invests in about 40-50 companies, with the 25 most
highly regarded of these companies usually constituting approximately 70% of the
Portfolio's net assets. During market declines, while adding to positions in
favored stocks, the Portfolio becomes somewhat more aggressive, gradually
reducing the number of companies represented in its portfolio. Conversely, in
rising markets, while reducing or eliminating fully-valued positions, the
Portfolio becomes somewhat more conservative, gradually increasing the number of
companies represented in its portfolio. Through this approach, Alliance seeks to
gain positive returns in good markets while providing some measure of protection
in poor markets. The Portfolio also may invest up to 20% of its net assets in
CONVERTIBLE SECURITIES.

The Portfolio will invest in special situations from time to time. A special
situation arises when, in the opinion of Alliance, the securities of a
particular company will, within a reasonably estimable period of time, be
accorded market recognition at an appreciated value solely by reason of a
development particularly or uniquely applicable to that company, and regardless
of general business conditions or movements of the market as a whole.
Developments creating special situations might include, among other,
liquidations, reorganizations, recapitalizations or mergers, material
litigation, technological breakthroughs and new management or management
policies. Although large and well-known companies may be involved, special
situations often involve much greater risk than is inherent in ordinary
investment securities.

29
<PAGE>

Among the principal risks of investing in the Portfolio is market risk. Because
the Portfolio invests in a smaller number of securities than many other equity
funds, your investment has the risk that changes in the value of a single
security may have a more significant effect, either negative or positive, on the
Portfolio's net asset value.

The Portfolio seeks long-term growth of capital by investing predominantly in
the equity securities of a limited number of large, carefully selected,
high-quality U.S. companies that are judged likely to achieve superior earnings
growth. As a matter of fundamental policy, the Portfolio normally invests at
least 85% of its total assets in the equity securities of U.S. companies. A U.S.
company is a company that is organized under United States law, has its
principal office in the United States and issues equity securities that are
traded principally in the United States. The Portfolio is thus atypical from
most equity mutual funds in its focus on a relatively small number of
intensively researched companies. The Portfolio is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.

Alliance's investment strategy for the Portfolio emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.

In managing the Portfolio, Alliance seeks to utilize market volatility
judiciously (assuming no change in company fundamentals), striving to capitalize
on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Portfolio
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes.

Alliance expects the average market capitalization of companies represented in
the Portfolio normally to be in the range, or in excess, of the average market
capitalization of companies included in the S&P 500 Index.

The Portfolio also may:

o invest up to 15% of its total assets in FOREIGN SECURITIES;

o purchase and sell exchange-traded index options and stock index FUTURES
CONTRACTS;

o write covered exchange-traded call OPTIONS on its securities of up to 15%
of its total assets, and purchase and sell exchange-traded call and put
options on common stocks written by others of up to, for all options, 10%
of its total assets;

o make SHORT SALES "AGAINST THE BOX" of up to 15% of its net assets; and

o invest up to 10% of its total assets in ILLIQUID SECURITIES.

The Portfolio may invest in a wide variety of equity securities including large
cap stock, convertible and preferred securities, warrants and rights. The
Portfolio may also invest in foreign securities,

30
<PAGE>

including foreign equity securities, American Depository Receipts (ADRs) and
other similar securities that represent interests in foreign equity securities,
such as European Depository Receipts (EDRs) and Global Depository Receipts
(GDRs). The Portfolio may also invest in derivatives and in short term
investments, including money market securities, short term U.S. government
obligations, repurchase agreements, commercial paper, banker's acceptances and
certificates of deposit.

SP ALLIANCE TECHNOLOGY PORTFOLIO

- - - - - - --------------------------------------------------------------------------------
A TECHNOLOGY PORTFOLIO
This Portfolio normally invests at least 80% of its assets in technology.
- - - - - - --------------------------------------------------------------------------------

The Portfolio emphasizes GROWTH OF CAPITAL AND INVESTS FOR CAPITAL APPRECIATION.
Current income is only an incidental consideration. The Portfolio may seek
income by writing listed call OPTIONS. The Portfolio invests primarily in
securities of companies expected to benefit from technological advances and
improvements (i.e., companies that use technology extensively in the development
of new or improved products or processes). The Portfolio will normally have at
least 80% of its assets invested in the securities of these companies. The
Portfolio normally will have substantially all of its assets invested in equity
securities, but it also invests in debt securities offering an opportunity for
price appreciation. The Portfolio will invest in listed and unlisted securities,
in U.S. securities, and up to 10% of its total assets in foreign securities.

The Portfolio's policy is to invest in any company and industry and in any type
of security with potential for capital appreciation. It invests in well-known
and established companies and in new and unseasoned companies.

The Portfolio also may:

o write covered call OPTIONS on its securities of up to 15% of its total
assets and purchase exchange-listed call and put options, including
exchange-traded index put options of up to, for all options, 10% of
its total assets;

o invest up to 10% of its total assets in WARRANTS;

o invest up to 15% of its net assets in ILLIQUID SECURITIES; and

o make LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets.

Because the Portfolio invests primarily in technology companies, factors
affecting those types of companies could have a significant effect of the
Portfolio's net asset value. In addition, the Portfolio's investments in
technology stocks, especially those of small, less-seasoned companies, tend to
be more volatile than the overall market. The Portfolio's investments in debt
and foreign securities have credit risk and foreign risk.

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<PAGE>

The Portfolio normally will have substantially all of its assets invested in
equity securities, but also invests in debt securities offering an opportunity
for price appreciation. The Portfolio may invest in listed and unlisted
securities, in U.S. securities and in foreign securities. The Portfolio may also
write covered call options on its securities and purchase exchange-listed call
and put options, including exchange-traded index put options. The Portfolio may
also invest in warrants, convertibles, preferred securities, and OTC options.

SP ASSET ALLOCATION PORTFOLIOS

There are four Asset Allocation Portfolios, entitled SP Aggressive Growth Asset
Allocation Portfolio, SP Balanced Asset Allocation Portfolio, SP Conservative
Asset Allocation Portfolio, and SP Growth Asset Allocation Portfolio. The
investment objective of each of the Portfolios is to OBTAIN THE HIGHEST
POTENTIAL TOTAL RETURN CONSISTENT WITH THE SPECIFIED LEVEL OF RISK TOLERANCE.
The definition of risk tolerance level is not a fundamental policy and,
therefore, can be changed by the Board at any time. The Asset Allocation
Portfolios are designed for:

o the investor who wants to maximize total return potential, but lacks
the time, or expertise to do so effectively;

o the investor who does not want to watch the financial markets in order
to make periodic exchanges among portfolios;

o the investor who wants to take advantage of the risk management
features of an asset allocation program; and

Each of the Asset Allocation Portfolios invests in a combination of shares of
other Portfolios. The investor chooses a Asset Allocation Portfolio by
determining which risk tolerance level most closely corresponds to the
investor's individual planning needs, objectives and comfort.

With respect to each of the four Asset Allocation Portfolios, Prudential
Investments Fund Management LLC reserves the right to alter the percentage
allocations indicated below and/or the other Fund Portfolios in which the Asset
Allocation Portfolio invests if market conditions warrant. Although we will make
every effort to meet each Asset Allocation Portfolio's investment objective, we
can't guarantee success.

SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO

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<PAGE>

- - - - - - --------------------------------------------------------------------------------
AN AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO
This Portfolio aggressively seeks capital appreciation by investing in large cap
equity Portfolios, international Portfolios, and small/mid cap equity
Portfolios.
- - - - - - --------------------------------------------------------------------------------

The SP Aggressive Growth Asset Allocation Portfolio is composed of:

o a large capitalization equity component (approximately 40% of the
Portfolio, invested in shares of the SP Davis Value Portfolio, the SP
Alliance Large Cap Growth Portfolio, and the Prudential Jennison
Portfolio); and

o an international shares of the component SP Jennison (approximately
International 35% of the Growth Portfolio, Portfolio and invested in the SP
Deutsche International Equity Portfolio); and

o a small/mid capitalization equity component (approximately 25% of the
Portfolio, invested in shares of the SP Small/Mid Cap Value Portfolio and
the SP Prudential U.S. Emerging Growth Portfolio).

SP BALANCED ASSET ALLOCATION PORTFOLIO

33
<PAGE>

- - - - - - --------------------------------------------------------------------------------
A BALANCE BETWEEN CURRENT INCOME AND CAPITAL APPRECIATION
This Portfolio seeks to balance current income and growth of capital by
investing in fixed income Portfolios, large cap equity Portfolios, small/mid cap
equity Portfolios, and international equity Portfolios
- - - - - - --------------------------------------------------------------------------------

The SP Balanced Asset Allocation Portfolio is composed of:

o a fixed income component (approximately 40% of and international equity
Portfolios the Portfolio, invested in shares of the SP PIMCO Total Return
Portfolio and the SP PIMCO High Yield Portfolio); and

o a large capitalization equity component (approximately 35% of the
Portfolio, invested in shares of the SP Davis Value Portfolio, the SP
Alliance Large Cap Growth Portfolio, and the Prudential Jennison
Portfolio); and

o a small/mid capitalization equity component (approximately 15% of the
Portfolio, invested in shares of the SP Small/Mid Cap Value Portfolio and
the SP Prudential U.S. Emerging Growth Portfolio); and

o an international component (approximately 10% of the Portfolio, invested in
shares of the SP Jennison International Growth Portfolio and the SP
Deutsche International Equity Portfolio).

SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO

34
<PAGE>

- - - - - - --------------------------------------------------------------------------------
AN ASSET ALLOCATION PORTFOLIO INVESTING PRIMARILY IN FIXED INCOME FUNDS
This Portfolio is invested in fixed income, large cap equity, and small/mid cap
equity Portfolios.
- - - - - - --------------------------------------------------------------------------------

The SP Conservative Asset Allocation Portfolio is
Portfolio is composed of:

o a fixed income component (approximately 60% of the Portfolio, invested in
shares of the SP PIMCO Total Return Portfolio and the SP PIMCO High Yield
Portfolio); and

o a large capitalization equity component (approximately 30% of the
Portfolio, invested in shares of the SP Davis Value Portfolio, the SP
Alliance Large Cap Growth Portfolio, and the Prudential Jennison
Portfolio); and

o a small/mid capitalization equity component (approximately 10% of the
Portfolio, invested in shares of the SP Small/Mid Cap Value Portfolio and
the SP Prudential U.S. Emerging Growth Portfolio).

SP GROWTH ASSET ALLOCATION PORTFOLIO

- - - - - - --------------------------------------------------------------------------------
AN ASSET ALLOCATION PORTFOLIO INVESTING PRIMARILY IN GROWTH PORTFOLIOS
This Portfolio seeks to provide long-term growth of capital with consideration
also given to current income.
- - - - - - --------------------------------------------------------------------------------

The Growth Asset Allocation Portfolio is composed of:

o a large capitalization equity component (approximately 45% of the
Portfolio, invested in shares of the SP Davis Value Portfolio, the SP
Alliance Large Cap Growth Portfolio, and the Prudential Jennison
Portfolio); and

o a fixed income component (approximately 20% of the Portfolio, invested in
shares of the SP PIMCO High Yield Portfolio and the SP PIMCO Total Return
Portfolio); and

o an international component (approximately 20% of the Portfolio, invested in
shares of the SP Jennison International Growth Portfolio and the SP
Deutsche International Equity Portfolio); and

o a small/mid capitalization equity component (approximately 15% of the
Portfolio, invested in shares of the SP Small/Mid Cap Value Portfolio and
the SP Prudential U.S. Emerging Growth Portfolio).

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<PAGE>

SP DAVIS VALUE PORTFOLIO

SP Davis Value Portfolio's investment objective is GROWTH OF CAPITAL.

- - - - - - --------------------------------------------------------------------------------
THE DAVIS BACK-TO-BASICS APPROACH
Under the Davis philosophy, Davis seeks to identify companies possessing ten
basic characteristics, which Davis believes will foster sustainable long-term
growth.
- - - - - - --------------------------------------------------------------------------------

In keeping with the Davis investment philosophy, the portfolio managers select
common stock that offer the potential for capital growth over the long-term. The
Portfolio invests primarily in common stock of U.S. companies with market
capitalizations of at least $5 billion, but it may also invest in foreign
companies and U.S. companies with smaller capitalizations.

COMMON STOCKS

WHAT THEY ARE. Common stock represents ownership of a company.

HOW THEY PICK THEM. The Davis investment philosophy stresses a back-to-basics
approach: they use extensive research to buy growing companies at value prices
and hold on to them for the long-term. Over the years, Davis Selected Advisers
has developed a list of ten characteristics that they believe foster sustainable
long-term growth, minimize risk and enhance the potential for superior long-term
returns. While very few companies have all ten, Davis searches for those
possessing several of the characteristics that are listed below.

WHY WE BUY THEM. SP Davis Value Portfolio buys common stock to take an ownership
position in companies with growth potential, and then holds that position long
enough to realize the benefits of growth.

The Portfolio may also invest in foreign securities, primarily as a way of
providing additional opportunities to invest in quality overlooked growth
stocks. Investment in foreign securities can also offer the Portfolio the
potential for economic diversification.

WHAT DAVIS LOOKS FOR IN A COMPANY

1. FIRST-CLASS MANAGEMENT. The Davis investment philosophy believes that great
companies are created by great managers. In visiting companies, they look for
managers with a record of doing what they say they are going to do.

2. MANAGEMENT OWNERSHIP. Just as they invest heavily their own Portfolios, they
look for companies where individual managers own a significant stake.

3. STRONG RETURNS ON CAPITAL. They want companies that invest their capital
wisely and reap superior returns on those investments.

4. LEAN EXPENSE STRUCTURE. Companies that can keep costs low are able to compete
better, especially in difficult times. A low cost structure sharply reduces the
risk of owning a company's shares.

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<PAGE>

5. DOMINANT OR GROWING MARKET SHARE IN A GROWING MARKET. A company that is
increasing its share of a growing market has the best of both worlds.

6. PROVEN RECORD AS AN ACQUIRER. When an industry or market downturn occurs, it
is a good idea to own companies that can take advantage of attractive prices to
expand operations through inexpensive acquisitions.

7. STRONG BALANCE SHEET. Strong finances give a company staying power to weather
difficult economic cycles.

8. COMPETITIVE PRODUCTS OR SERVICES. They invest in companies with products that
are not vulnerable to obsolescence.

9. SUCCESSFUL INTERNATIONAL OPERATIONS. A proven ability to expand
internationally reduces the risk of being tied too closely to the U.S. economic
cycle.

10. INNOVATION. The savvy use of technology in any business, from a food company
to an investment bank, can help reduce costs and increase sales.

OTHER SECURITIES AND INVESTMENT STRATEGIES

The Portfolio invests primarily in the common stock of large capitalization
domestic companies. There are other securities in which the Portfolio may
invest, and investment strategies which the Portfolio may employ, but they are
not principal investment strategies.

The Portfolio uses short-term investments to maintain flexibility while
evaluating long-term opportunities. The Portfolio also may use short-term
investments for temporary defensive purposes; in the event the portfolio
managers anticipate a decline in the market values of common stock of large
capitalization domestic companies, they may reduce the risk by investing in
short-term securities until market conditions improve. Unlike common stocks,
these investments will not appreciate in value when the market advances. In such
a circumstance, the short-term investments will not contribute to the
Portfolio's investment objective.

SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO

- - - - - - --------------------------------------------------------------------------------
INTERNATIONAL EQUITIES FROM DEVELOPED COUNTRIES
The Portfolio invests primarily in the stocks of companies located in developed
foreign countries that make up the MSCI EAFE Index, plus Canada. The Portfolio
also may invest in emerging markets securities.
- - - - - - --------------------------------------------------------------------------------

The Portfolio seeks LONG-TERM CAPITAL APPRECIATION.Under normal circumstances,
the Portfolio invests at least 65% of its total assets in the stocks and other
securities with equity characteristics of companies in developed countries
outside the United States. The Portfolio invests for capital appreciation, not
income; any dividend or interest income is incidental to the pursuit of that
goal. While the Portfolio gives priority to capital appreciation, it cannot
offer any assurance of achieving this goal.

STRATEGY

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The Portfolio invests for the long term. The Portfolio employs a strategy of
growth at a reasonable price. The Portfolio seeks to identify companies outside
the United States that combine strong potential for earnings growth with
reasonable investment value. Such companies typically exhibit increasing rates
of profitability and cash flow, yet their share prices compare favorably to
other stocks in a given market and to their global peers. In evaluating stocks,
the Portfolio considers factors such as sales, earnings, cash flow and
enterprise value. Enterprise value is a company's market capitalization plus the
value of its net debt. The Portfolio further considers the relationship between
these and other quantitative factors. Together, these indicators of growth and
value may identify companies with improving prospects before the market in
general has taken notice.

PRINCIPAL INVESTMENTS

Almost all the companies in which the Portfolio invests are based in the
developed foreign countries that make up the MSCI EAFE Index, plus Canada. The
Portfolio may also invest a portion of its assets in companies based in the
emerging markets of Latin America, the Middle East, Europe, Asia and Africa if
it believes that its return potential more than compensates for the extra risks
associated with these markets. Under normal market conditions investment in
emerging markets is not considered to be a central element of the Portfolio's
strategy. Typically, the Portfolio will not hold more than 15% of its net assets
in emerging markets. The Portfolio may invest in a variety of debt securities,
equity securities, and other instruments, including convertible securities,
warrants, foreign securities, options (on stock, debt, stock indices, foreign
currencies, and futures), futures, forward foreign currency exchange contracts,
interest rate swaps, loan participations, reverse repurchase agreements, dollar
rolls, when-issued and delayed delivery securities, short sales, and illiquid
securities. We explain each of these instruments in detail in the Statement of
Additional Information.

INVESTMENT PROCESS

Company research lies at the heart of Deutsche's investment process, as it does
with many stock mutual fund portfolios. Several thousand companies are tracked
to arrive at the approximately 100 stocks the Portfolio normally holds. But the
process brings an added dimension to this fundamental research. It draws on the
insight of experts from a range of financial disciplines--regional stock market
specialists, global industry specialists, economists and quantitative analysts.
They challenge, refine and amplify each other's ideas. Their close collaboration
is a critical element of the investment process.

Temporary Defensive Position. The Portfolio may from time to time adopt a
temporary defensive position in response to extraordinary adverse political,
economic or stock market events. The Portfolio may invest up to 100% of its
assets in U.S. or foreign government money market investments, or other
short-term bonds that offer comparable safety, if the situation warranted. To
the extent the Portfolio might adopt such a position over the course of its
duration, the Portfolio may not meet its goal of long-term capital appreciation.

RISKS

Below are set forth some of the prominent risks associated with international
investing.

PRIMARY RISKS

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Market Risk. Although individual stocks can outperform their local markets,
deteriorating market conditions might cause an overall weakness in the stock
prices of the entire market.

Stock Selection Risk. A risk that pervades all investing is the risk that the
securities an investor has selected will not perform to expectations. To
minimize this risk, Bankers Trust monitors each of the stocks in the Portfolio
according to three basic quantitative criteria. They subject a stock to
intensive review if:

o its rate of price appreciation begins to trail that of its national stock
index,

o the financial analysts who follow the stock, both within Bankers Trust and
outside, cut their estimates of the stock's future earnings; or

o the stock's price approaches the downside target set when they first bought
the stock (and may since have modified to reflect changes in market and
economic conditions).

In this review, Bankers Trust seeks to learn if the deteriorating performance
accurately reflects deteriorating prospects or if it merely reflects investor
overreaction to temporary circumstances.

Foreign Stock Market Risk. From time to time, foreign capital markets have
exhibited more volatility than those in the United States. Trading stocks on
some foreign exchanges is inherently more difficult than trading in the United
States for reasons including:

o Political Risk. Some foreign governments have limited the outflow of
profits to investors abroad, extended diplomatic disputes to include trade
and financial relations, and imposed high taxes on corporate profits. While
these political risks have not occurred recently in the major countries in
which the Portfolio invests, Bankers Trust analyzes countries and regions
to try to anticipate these risks.

o Information Risk. Financial reporting standards for companies based in
foreign markets differ from those in the United States. Since the "numbers"
themselves sometimes mean different things, Bankers Trust devotes much of
its research effort to understanding and assessing the impact of these
differences upon a company's financial conditions and prospects.

o Liquidity Risk. Stocks that trade less can be more difficult or more costly
to buy, or to sell, than more liquid or active stocks. This liquidity risk
is a factor of the trading volume of a particular stock, as well as the
size and liquidity of the entire local market. On the whole, foreign
exchanges are smaller and less liquid than the U.S. market. This can make
buying and selling certain shares more difficult and costly. Relatively
small transactions in some instances can have a disproportionately large
effect on the price and supply of shares. In certain situations, it may
become virtually impossible to sell a stock in an orderly fashion at a
price that approaches an estimate of its value.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established.

In an effort to reduce these foreign stock market risks, the Portfolio
diversifies its investments, just as you may spread your investments among a
range of securities so that a setback in one does not overwhelm your entire
strategy. In this way, a reversal in one market or stock need not undermine the
pursuit of long-term capital appreciation.

Currency Risk. The Portfolio invests in foreign securities denominated in
foreign currencies. This

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<PAGE>

creates the possibility that changes in foreign exchange rates will affect the
value of foreign securities or the U.S. dollar amount of income or gain received
on these securities. Bankers Trust seeks to minimize this risk by actively
managing the currency exposure of the Portfolio.

Emerging Market Risk. To the extent that the Portfolio does invest in emerging
markets to enhance overall returns, it may face higher political, information,
and stock market risks. In addition, profound social changes and business
practices that depart from norms in developed countries' economies have hindered
the orderly growth of emerging economies and their stock markets in the past.
High levels of debt tend to make emerging economies heavily reliant on foreign
capital and vulnerable to capital flight. For all these reasons, the Portfolio
carefully limits and balances its commitment to these markets.

SECONDARY RISKS

Small Company Risk. Although the Portfolio generally invests in the shares of
large, well-established companies, it may occasionally take advantage of
exceptional opportunities presented by small companies. Such opportunities pose
unique risks. Small company stocks tend to experience steeper price fluctuations
- - - - - - - down as well as up - than the stocks of larger companies. A shortage of
reliable information - the same information gap that creates opportunity in
small company investing - can also pose added risk. Industrywide reversals have
had a greater impact on small companies, since they lack a large company's
financial resources. Finally, small company stocks are typically less liquid
than large company stocks; when things are going poorly, it is harder to find a
buyer for a small company's shares.

Pricing Risk. When price quotations for securities are not readily available,
Bankers Trust determines their value by the method that most accurately reflects
their current worth in the judgment of the Board. This procedure implies an
unavoidable risk, the risk that our prices are higher or lower than the prices
that the securities might actually command if we sold them.

SP INVESCO SMALL COMPANY GROWTH PORTFOLIO

The Portfolio seeks long-term capital growth.

- - - - - - --------------------------------------------------------------------------------
A SMALL CAP STOCK PORTFOLIO
The Portfolio generally invests at least 65% of its total assets in the stocks
of small companies with market capitalizations under $2 billion at the time of
purchase. The Portfolio may invest up to 35% of its total assets in the stocks
of companies with market capitalizations in excess of $2 billion.
- - - - - - --------------------------------------------------------------------------------

The Portfolio seeks LONG-TERM CAPITAL GROWTH. Most holdings are in
small-capitalization companies. INVESCO is primarily looking for companies in
the the potential for accelerated developing stages of their life cycles, which
are currently priced below INVESCO's estimation of their potential, have
earnings which may be expected to grow faster than the U.S. economy in general,
and/or offer earnings growth of sales, new products, management changes, or
structural changes in the economy. The Portfolio may invest up to 25% of its
assets in securities of non-U.S. issuers. Securities of Canadian issuers and
American Depository Receipts are not subject to this 25% limitation.

40
<PAGE>

Most holdings are in small-capitalization companies - those with market
capitalizations under $2 billion at the time of purchase. Although not a
principal investment, the Portfolio may invest in DERIVATIVES. A derivative is a
financial instrument whose value is "derived," in some manner, from the price of
another security, index, asset or rate. Derivatives include options and futures
contracts, among a wide range of other instruments.

Although not a principal investment, the Portfolio may invest in OPTIONS AND
FUTURES. Options and futures are common types of derivatives that the Portfolio
may occasionally use to hedge its investments. An option is the right to buy or
sell a security or other instrument, index or commodity at a specific price on
or before a specific date. A future is an agreement to buy or sell a security or
other instrument, index or commodity at a specific price on a specific date.

Although not a principal investment, the Portfolio may invest in REPURCHASE
AGREEMENTS. In addition, the Portfolio may invest in debt securities, ADRs,
convertible securities, junk bonds, warrants, options (on stock, debt, stock
indices, currencies, and futures), forward foreign currency exchange contracts,
interest rate swaps, when-issued and delayed delivery securities, short sales
against-the-box, U.S. government securities, Brady Bonds, and illiquid
securities. The Portfolio may lend its portfolio securities. We provide
additional information on these types of securities in the Statement of
Additional Information.

SP JENNISON INTERNATIONAL GROWTH PORTFOLIO

- - - - - - --------------------------------------------------------------------------------
A FOREIGN STOCK GROWTH PORTFOLIO
The Portfolio seeks long-term growth by investing in the common stock of foreign
companies. The Portfolio generally invests in about 60 securities of issuers
located in at least five different foreign countries.
- - - - - - --------------------------------------------------------------------------------

The investment objective of the Portfolio is to SEEK LONG-TERM GROWTH OF
CAPITAL. The Portfolio seeks to achieve its objective through investment in
equity-related securities of foreign companies. This means the Portfolio seeks
investments--primarily the common stock of foreign companies--that will increase
in value over a period of years. A company is considered to be a foreign company
if it satisfies at least one of the following criteria: its securities are
traded principally on stock exchanges in one or more foreign countries; it
derives 50% or more of its total revenue from goods produced, sales made or
services performed in one or more foreign countries; it maintains 50% or more of
its assets in one or more foreign countries; it is organized under the laws of a
foreign country; or its principal executive office is located in a foreign
country.

The Portfolio invests in about 60 securities of primarily non-U.S. growth
companies whose shares appear attractively valued on a relative and absolute
basis. The Portfolio invests in at least five countries outside of the U.S. The
Portfolio looks for companies that have above-average actual and potential
earnings growth over the long term and strong financial and operational
characteristics. The Portfolio selects stocks on the basis of individual company
research. Thus, country, currency and industry weightings are primarily the
result of individual stock selections. Although the Portfolio may invest in
companies of all sizes, the Portfolio typically focuses on large and medium
sized

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<PAGE>

companies. Under normal conditions, the Portfolio intends to invest at least 65%
of its total assets in the equity-related securities of foreign companies in at
least five foreign countries. The Portfolio may invest anywhere in the world,
including North America, Western Europe, the United Kingdom and the Pacific
Basin, but generally not the U.S.

The principal type of equity-related security in which the Portfolio invests is
common stock. In addition to common stock, the Portfolio may invest in other
equity-related securities that include, but are not limited to, preferred stock,
rights that can be exercised to obtain stock, warrants and debt securities or
preferred stock convertible or exchangeable for common or preferred stock and
master limited partnerships. The Portfolio may also invest in AMERICAN
DEPOSITORY RECEIPTS (ADRS). We consider ADRs to be equity-related securities.

HOW THE PORTFOLIO INVESTS

In deciding which stocks to purchase for the Portfolio, Jennison looks for
growth companies that have both strong fundamentals and appear to be
attractively valued relative to their growth potential. Jennison uses a
bottom-up approach in selecting securities for the Portfolio, which means that
they select stocks based on individual company research, rather than allocating
by country or sector. In researching which stocks to buy, they look at a
company's basic financial and operational characteristics as well as compare the
company's stock price to the price of stocks of other companies that are its
competitors, absolute historic valuation levels for that company's stock, its
earnings growth and the price of existing portfolio holdings. Another important
part of Jennison's research process is to have regular contact with management
of the companies that they purchase in order to confirm earnings expectations
and to assess management's ability to meet its stated goals. Although the
Portfolio may invest in companies of all sizes, it typically focuses on large
and medium sized companies.

Generally, Jennison looks for companies that have one or more of the following
characteristics: actual and potential growth in earnings and cash flow; actual
and improving profitability; strong balance sheets; management strength; and
strong market share for the company's products.

In addition, Jennison looks for companies whose securities appear to be
attractively valued relative to: each company's peer group; absolute historic
valuations; and existing holdings of the Portfolio. Generally, they consider
selling a security when there is an identifiable change in a company's
fundamentals or when expectations of future earnings growth become fully
reflected in the price of that security.

The Statement of Additional Information--which we refer to as the SAI--contains
additional information about the Portfolio. To obtain a copy, see the back cover
page of this prospectus.

OTHER INVESTMENTS AND STRATEGIES

MONEY MARKET INSTRUMENTS, BONDS AND OTHER FIXED-INCOME OBLIGATIONS

Money market instruments and bonds are known as fixed-income securities because
issuers of these securities are obligated to pay interest and principal.
Typically, FIXED-INCOME securities don't increase or decrease in value in
relation to an issuer's financial condition or business prospects as stocks may,
although their value does fluctuate inversely to changes in interest rates
generally and directly in relation to their perceived credit quality. The
Portfolio may buy obligations of companies, foreign countries or the U.S.
Government. Money market instruments include the commercial paper and short-term
obligations of foreign and domestic corporations, banks and governments and
their agencies.

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<PAGE>

Generally, the Portfolio will purchase only "INVESTMENT-GRADE" commercial paper
and bonds. This means the commercial paper and bonds have received one of the
four highest quality ratings determined by Moody's Investors Service, Inc.
("Moody's"), or Standard & Poor's Ratings Group (S&P), or one of the other
nationally recognized statistical rating organizations (NRSROs). Obligations
rated in the fourth category (Baa for Moody's or BBB for S&P) have speculative
characteristics and are subject to a greater risk of loss of principal and
interest. On occasion, the Portfolio may buy instruments that are not rated, but
that are of comparable quality to the investment-grade bonds described above.

TEMPORARY DEFENSIVE INVESTMENTS

In response to adverse market, economic or political conditions, the Portfolio
may temporarily invest up to 100% of its assets in money market instruments or
in the stock and other equity-related securities of U.S. companies. Investing
heavily in money market instruments limits our ability to achieve capital
appreciation, but may help to preserve the Portfolio's assets when global or
international markets are unstable. When the Portfolio is temporarily invested
in equity-related securities of U.S. companies, the Portfolio may achieve
capital appreciation, although not through investment in foreign companies.

REPURCHASE AGREEMENTS

The Portfolio may also use REPURCHASE AGREEMENTS.

DERIVATIVE STRATEGIES
The Portfolio may use a number of alternative derivative strategies--including
DERIVATIVES--to try to improve its returns or protect its assets, although the
Portfolio 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.

OPTIONS

The Portfolio may purchase and sell put and call OPTIONS on equity securities,
stock indices and foreign currencies that are traded on U.S. or foreign
securities exchanges, on NASDAQ or in the over-the-counter market.

FUTURES CONTRACTS AND RELATED OPTIONS, FOREIGN CURRENCY FORWARD CONTRACTS The
Portfolio may purchase and sell stock and bond index futures contracts and
related options on stock and bond index futures. The Portfolio also may purchase
and sell futures contracts on foreign currencies and related options on foreign
currency futures contracts.

OTHER STRATEGIES
The Portfolio follows certain policies when it borrows money (the Portfolio can
borrow up to 33-1/3% of the value of its total assets); lends its securities to
others (as an operating policy, which may be changed without stockholder
approval, the Portfolio will not lend more than 30% of the value of its total
assets, which for this purpose includes the value of any collateral received in
the transaction); and holds illiquid securities (the Portfolio may hold up to
15% of its net assets in illiquid securities, including restricted securities
with legal or contractual restrictions, those without a readily available market
and repurchase agreements with maturities longer than seven 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

43
<PAGE>

restrictions, see "Investment Restrictions" in the SAI.

SP LARGE CAP VALUE PORTFOLIO

- - - - - - --------------------------------------------------------------------------------
A LARGE CAP VALUE PORTFOLIO
The Portfolio normally invests at least 65% of its assets in stocks of companies
with large market capitalizations. The Portfolio invests in "value" stocks.
- - - - - - --------------------------------------------------------------------------------

FMR normally invests at least 65% of the Portfolio's total assets in common
stocks of companies with large market capitalizations. FMR defines large market
capitalization companies as companies with market capitalizations equaling or
exceeding $1 billion at the time of the Portfolio's investment. Companies whose
capitalizations no longer meet this definition after purchase continue to be
considered to have large market capitalizations for purposes of the 65% policy.

PRINCIPAL INVESTMENT STRATEGIES

FMR focuses on securities of companies that it believes are undervalued in the
marketplace in relation to factors such as the company's assets, earnings, or
growth potential. The stocks of these companies are often called "value" stocks.

FMR may invest the Portfolio's assets in securities of foreign issuers in
addition to securities of domestic issuers.

In buying and selling securities for the Portfolio, FMR relies on fundamental
analysis of each issuer and its potential for success in light of its current
financial condition, its industry position, and economic and market factors.
Factors considered include growth potential, earnings estimates, and management.
These securities are then analyzed using statistical models to further evaluate
growth potential, valuation, liquidity and investment risk.

FMR may use various techniques, such as buying and selling futures contracts, to
increase or decrease the Portfolio's exposure to changing security prices or
other factors that affect security values. If FMR's strategies do not work as
intended, the Portfolio may not achieve its objective.

DESCRIPTION OF PRINCIPAL SECURITIES TYPES

Equity securities represent an ownership interest, or the right to acquire an
ownership interest, in an issuer. Different types of equity securities provide
different voting and dividend rights and priority in the event of the bankruptcy
of the issuer. Equity securities include common stocks, preferred stocks,
convertible securities, and warrants.

PRINCIPAL INVESTMENT RISKS

Many factors affect the Portfolio's performance. The Portfolio's share price
changes daily based on changes in market conditions and interest rates and in
response to other economic, political or financial developments. The Portfolio's
reaction to these developments will be affected by the types of the securities
in which the Portfolio invests, the financial condition, industry and economic
sector, and geographic location of an issuer, and the Portfolio's level of
investment in the securities

44
<PAGE>

of that issuer. When you sell units corresponding to shares of the Portfolio,
they could be worth more or less than what you paid for them.

In addition to company risk, derivatives risk, foreign investment risk,
leveraging risk, liquidity risk, management risk, and market risk, the following
factor can significantly affect the Portfolio's performance:

"VALUE" INVESTING. "Value" stocks can react differently to issuer, political,
market and economic developments than the market as a whole and other types of
stocks. "Value" stocks tend to be inexpensive relative to their earnings or
assets compared to other types of stocks. However, "value" stocks can continue
to be inexpensive for long periods of time and may not ever realize their full
value.

In response to market, economic, political or other conditions, FMR may
temporarily use a different investment strategy for defensive purposes. If FMR
does so, different factors could affect the Portfolio's performance and the
Portfolio may not achieve its investment objective.

SP MFS CAPITAL OPPORTUNITIES PORTFOLIO

- - - - - - --------------------------------------------------------------------------------
CAPITAL OPPORTUNITIES IN BOTH U.S. AND FOREIGN STOCKS
The Portfolio invests primarily in stocks, convertible securities, and
depository receipts of companies in both the United States and in foreign
countries.
- - - - - - --------------------------------------------------------------------------------

The Portfolio invests, under normal market conditions, AT LEAST 65% OF ITS TOTAL
ASSETS IN COMMON STOCKS AND RELATED SECURITIES, SUCH AS PREFERRED STOCKS,
CONVERTIBLE SECURITIES AND DEPOSITORY RECEIPTS FOR THOSE SECURITIES. The
portfolio focuses on COMPANIES WHICH MFS BELIEVES HAVE FAVORABLE GROWTH
PROSPECTS AND ATTRACTIVE VALUATIONS BASED ON CURRENT AND EXPECTED EARNINGS OR
CASH FLOW. The Portfolio's investments may include securities listed on a
securities exchange or traded in the over-the-counter markets.

MFS uses a bottom-up, as opposed to a top-down, investment style in managing the
Portfolio. This means that securities are selected based upon fundamental
analysis (such as an analysis of earnings, cash flows, competitive position and
management's abilities) performed by the Portfolio's portfolio manager and MFS's
large group of equity research analysts. The Portfolio may invest in foreign
securities (including emerging market securities), through which it may have
exposure to foreign currencies. The Portfolio may engage in active and frequent
trading to achieve its principal investment strategies. Because the Portfolio is
new, it does not yet have any performance history. Generally, the SP MFS Capital
Opportunities Portfolio will invest no more than (i) 35% of its net assets in
foreign securities and (ii) 15% in lower rated bonds, and the Portfolio will not
lend more than 30% of the value of its securities.

The Portfolio can invest in a wide variety of debt and equity securities,
including corporate debt, lower-rated bonds, U.S. Government securities,
variable and floating rate obligations, zero coupon bonds, deferred interest
bonds, PIK bonds, Brady Bonds, depository receipts, forward contracts, futures
contracts, investment company securities, options (on currencies, futures,
securities and stock indices), repurchase agreements, reverse repurchase
agreements, dollar rolls, restricted securities, short sales, warrants, and
when-issued securities. The Portfolio may lend its securities

45
<PAGE>

and borrow from a bank. The Portfolio also may assume a temporary defensive
position. We provide more detail in the Statement of Additional Information.

SP MFS MID CAP GROWTH PORTFOLIO

- - - - - - --------------------------------------------------------------------------------
A MID-CAP GROWTH STOCK PORTFOLIO
The Portfolio invests primarily in companies with market capitalizations
equaling or exceeding $250 million but not exceeding the top of the Russell
MidcapTM Growth Index range at the time of purchase.
- - - - - - --------------------------------------------------------------------------------

The Portfolio's investment objective is LONG-TERM GROWTH OF CAPITAL. The
Portfolio invests, under normal market conditions, at least 65% of its total
assets in common stocks and related securities, such as preferred stocks,
convertible securities and depository receipts for those securities, of
companies with medium market capitalization which the Portfolio's investment
adviser believes have above-average growth potential.

Medium market capitalization companies are defined by the Portfolio as companies
with market capitalizations equaling or exceeding $250 million but not exceeding
the top of the Russell Midcap(TM) Growth Index range at the time of the
Portfolio's investment. This Index is a widely recognized, unmanaged index of
mid-cap common stock prices. Companies whose market capitalizations fall below
$250 million or exceed the top of the Russell Midcap(TM) Growth Index range
after purchase continue to be considered medium-capitalization companies for
purposes of the fund's 65% investment policy. As of February 29, 2000, the top
of the Russell Midcap(TM) Growth Index range was $59.6 billion. The Portfolio's
investments may include securities listed on a securities exchange or traded in
the over-the-counter markets. MFS uses a bottom-up, as opposed to a top-down,
investment style in managing Portfolio. This means that securities are selected
based upon fundamental analysis (such as an analysis of earnings, cash flows,
competitive position and management's abilities) performed by the portfolio
manager and MFS' large group of equity research analysts.

The Portfolio is a non-diversified mutual portfolio. This means that the
Portfolio may invest a relatively high percentage of its assets in a small
number of issuers. The Portfolio may invest in foreign securities (including
emerging markets securities) through which it may have exposure to foreign
currencies. The Portfolio is expected to engage in active and frequent trading
to achieve its principal investment strategies. Generally, the SP MFS Mid Cap
Growth Portfolio will invest no more than (i) 20% of its net assets in foreign
securities and (ii) 10% in lower rated bonds, and the Portfolio will not lend
more than 30% of the value of its securities. The Portfolio may invest in a
variety of debt securities, equity securities, and other instruments, including
corporate debt, lower-rated bonds, U.S. government securities, variable and
floating rate obligations, zero coupon bonds, deferred interest bonds, PIK
bonds, depository receipts, emerging markets equity securities, forward
contracts, futures contracts, investment company securities, options (on
currencies, futures, securities, and stock indices), repurchase agreements,
restricted securities, short sales, short sales against-the-box, short-term
debt, warrants, and when-issued securities. The Portfolio may borrow for
temporary purposes, assume a temporary defensive position, and lend its
portfolio securities. You can find more detail in the Statement of Additional
Information.

SP PIMCO HIGH YIELD PORTFOLIO

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<PAGE>

- - - - - - --------------------------------------------------------------------------------
A HIGH-YIELD, HIGH-RISK BOND PORTFOLIO
The Portfolio invests primarily in high-yield, high-risk bonds, also known as
"junk bonds."
- - - - - - --------------------------------------------------------------------------------

Under normal circumstances, the Portfolio invests AT LEAST 65% OF ITS ASSETS IN
JUNK BONDS. The Portfolio may invest up to 15% of its assets in DERIVATIVE
instruments, such as options, futures contracts or swap agreements. The
Portfolio may also invest in mortgage- or asset-backed securities. The Portfolio
may LEND its portfolio securities to brokers, dealers, and other financial
institutions to earn income.

The Portfolio may seek to obtain market exposure to the securities in which it
primarily invests by entering into a series of purchase and sale contracts or by
using other investment techniques (such as buy backs or dollar rolls). The
"total return" sought by the Portfolio consists of income earned on the
Portfolio's investments, plus capital appreciation, if any, which generally
arises from decreases in interest rates or improving credit fundamentals for a
particular sector or security.

In selecting securities for the Portfolio, PIMCO develops an outlook for
interest rates, currency exchange rates and the economy; analyzes credit and
call risks, and uses other security selection techniques. The proportion of a
Portfolio's assets committed to investment in securities with particular
characteristics (such as quality, sector, interest rate or maturity) varies
based on PIMCO's outlook for the U.S. economy and the economies of other
countries in the world, the financial markets and other factors.

PIMCO attempts to identify areas of the bond market that are undervalued
relative to the rest of the market. PIMCO identifies these areas by grouping
bonds into the following sectors: money markets, governments, corporates,
mortgages, asset-backed and international. Sophisticated proprietary software
then assists in evaluating sectors and pricing specific securities. Once
investment opportunities are identified, PIMCO will shift assets among sectors
depending upon changes in relative valuations and credit spreads. There is no
guarantee that PIMCO's security selection techniques will produce the desired
results.

The Portfolio may invest in Brady Bonds, which are described below in the
section on the PIMCO Total Return Portfolio.

Securities rated lower than Baa by Moody's Investors Service, Inc. ("Moody's")
or lower than BBB by Standard & Poor's Ratings Services ("S&P") are sometimes
referred to as "high yield" or "junk" bonds. Investing in high yield securities
involves special risks in addition to the risks associated with investments in
higher-rated fixed income securities. While offering a greater potential
opportunity for capital appreciation and higher yields, high yield securities
typically entail greater potential price volatility and may be less liquid than
higher-rated securities. High yield securities may be regarded as predominantly
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. They may also be more susceptible to real or perceived
adverse economic and competitive industry conditions than higher-rated
securities.

The Portfolio may invest in inflation-indexed bonds, which are described below
in the section on the PIMCO Total Return Portfolio.

The Portfolio may invest in CONVERTIBLE SECURITIES.

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The Portfolio may invest in MORTGAGE-OR OTHER ASSET-BACKED SECURITIES.

The Portfolio may also enter into, or acquire participations in, delayed funding
loans and revolving credit facilities, which are described in the section on SP
PIMCO Total Return Portfolio.

For the purpose of achieving income, each Portfolio may LEND ITS PORTFOLIO
SECURITIES to brokers, dealers, and other financial institutions provided a
number of conditions are satisfied, including that the loan is fully
collateralized.

The Portfolio may make SHORT SALES as part of its overall portfolio management
strategies or to offset a potential decline in value of a security.

The Portfolio may purchase securities which it is eligible to purchase on a
WHEN-ISSUED OR DELAYED DELIVERY BASIS, and may make contracts to purchase such
securities for a fixed price at a future date beyond normal settlement time
(forward commitments).

The Portfolio may enter into REPURCHASE AGREEMENTS.

The Portfolio may enter into REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS,
subject to a Portfolio's limitations on borrowings.

The Portfolio may invest in "event-linked bonds," which are described in the
section below on the SP PIMCO Total Return Portfolio.

The Portfolio may invest up to 15% of its net assets in ILLIQUID SECURITIES.

The Portfolio may invest up to 10% of its assets in securities of other
investment companies, such as closed-end management investment companies, or in
pooled accounts or other investment vehicles which invest in foreign markets. As
a shareholder of an investment company, a Portfolio may indirectly bear service
and other fees which are in addition to the fees the Portfolio pays its service
providers.

For temporary or defensive purposes, the Portfolio may invest without limit in
U.S. debt securities, including taxable securities and short-term money market
securities, when PIMCO deems it appropriate to do so. When the Portfolio engages
in such strategies, it may not achieve its investment objective.

SP PIMCO TOTAL RETURN PORTFOLIO

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- - - - - - --------------------------------------------------------------------------------
AN INVESTMENT GRADE BOND PORTFOLIO
The Portfolio invests primarily in investment grade debt securities, including
foreign debt securities, but may invest some of its assets in junk bonds.
- - - - - - --------------------------------------------------------------------------------

The Portfolio invests primarily in INVESTMENT GRADE DEBT SECURITIES, BUT MAY
INVEST UP TO 10% OF ITS ASSETS IN HIGH YIELD SECURITIES ("JUNK BONDS") RATED B
OR HIGHER BY MOODY'S OR S&P OR, IF UNRATED, DETERMINED BY PIMCO TO BE OF
COMPARABLE QUALITY. The Portfolio may invest up to 20% of its assets in
securities denominated in foreign currencies, and may invest beyond this limit
in U.S. dollar-denominated securities of foreign issuers. The Portfolio will
normally hedge at least 75% of its exposure to foreign currency to reduce the
risk of loss due to fluctuations in currency exchange rates.

The Portfolio may invest all of its assets in DERIVATIVE INSTRUMENTS, such as
options, FUTURES contracts or swap agreements, or in mortgage- or asset-backed
securities. The Portfolio may LEND its portfolio securities to brokers, dealers
and other financial institutions to earn income. The Portfolio may seek to
obtain market exposure to the securities in which it primarily invests by
entering into a series of purchase and sale contracts or by using other
investment techniques (such as buy backs or dollar rolls). The "total return"
sought by the Portfolio consists of income earned on the Portfolio's
investments, plus capital appreciation, if any, which generally arises from
decreases in interest rates or improving credit fundamentals for a particular
sector or security.

In selecting securities for a Portfolio, PIMCO develops an outlook for interest
rates, currency exchange rates and the economy; analyzes credit and call risks,
and uses other security selection techniques. The proportion of a Portfolio's
assets committed to investment in securities with particular characteristics
(such as quality, sector, interest rate or maturity) varies based on PIMCO's
outlook for the U.S. economy and the economies of other countries in the world,
the financial markets and other factors.

The Portfolio may invest in Brady Bonds, which are securities created through
the exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with a debt restructuring. Investments in Brady Bonds
may be viewed as speculative. Brady Bonds acquired by the Portfolio may be
subject to restructuring arrangements or to requests for new credit, which may
cause the Portfolio to suffer a loss of interest or principal on any of its
holdings.

Inflation-indexed bonds are fixed income securities whose principal value is
periodically adjusted according to the rate of inflation. If the index measuring
inflation falls, the principal value of inflation-indexed bonds will be adjusted
downward, and consequently the interest payable on these securities (calculated
with respect to a smaller principal amount) will be reduced. Repayment of the
original bond principal upon maturity (as adjusted for inflation) is guaranteed
in the case of U.S.

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<PAGE>

Treasury inflation-indexed bonds. For bonds that do not provide a similar
guarantee, the adjusted principal value of the bond repaid at maturity may be
less than the original principal. The value of inflation-indexed bonds is
expected to change in response to changes in real interest rates. Real interest
rates are tied to the relationship between nominal interest rates and the rate
of inflation. If nominal interest rates increase at a faster rate than
inflation, real interest rates may rise, leading to a decrease in value of
inflation-indexed bonds. Short-term increases in inflation may lead to a decline
in value. Any increase in the principal amount of an inflation-indexed bond will
be considered taxable ordinary income, even though investors do not receive
their principal until maturity.

The Portfolio may invest in CONVERTIBLE SECURITIES.

The Portfolio may invest in MORTGAGE- OR OTHER ASSET-BACKED SECURITIES.

The Portfolio may also enter into, or acquire participations in, delayed funding
loans and revolving credit facilities, in which a lender agrees to make loans up
to a maximum amount upon demand by the borrower during a specified term. These
commitments may have the effect of requiring a Portfolio to increase its
investment in a company at a time when it might not otherwise decide to do so
(including at a time when the company's financial condition makes it unlikely
that such amounts will be repaid). To the extent that a Portfolio is committed
to advance additional Portfolios, it will segregate assets determined to be
liquid by PIMCO in accordance with procedures established by the Board of
Directors in an amount sufficient to meet such commitments. Delayed loans and
revolving credit facilities are subject to credit, interest rate and liquidity
risk and the risks of being a lender.

The Portfolio may make SHORT SALES as part of its overall portfolio management
strategies or to offset a potential decline in value of a security.

The Portfolio may enter into REPURCHASE AGREEMENTS.

The Portfolio may enter into REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS,
subject to a Fund's limitations on borrowings.

The Portfolio may invest in "event-linked bonds," which are fixed income
securities for which the return of principal and payment of interest is
contingent on the non-occurrence of a specific "trigger" event, such as a
hurricane, earthquake, or other physical or weather-related phenomenon. If a
trigger event occurs, a Portfolio may lose a portion or all of its principal
invested in the bond. Event-linked bonds often provide for an extension of
maturity to process and audit loss claims where a trigger event has, or possibly
has, occurred. An extension of maturity may increase volatility. Event-linked
bonds may also expose the Portfolio to certain unanticipated risks including
credit risk, adverse regulatory or jurisdictional interpretations, and adverse
tax consequences. Event-linked bonds may also be subject to liquidity risk.

The Portfolio may invest up to 15% of its net assets in ILLIQUID SECURITIES.

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<PAGE>

The Portfolio may invest up to 10% of its assets in securities of other
investment companies, such as closed-end management investment companies, or in
pooled accounts or other investment vehicles which invest in foreign markets. As
a shareholder of an investment company, the Portfolio may indirectly bear
service and other fees which are in addition to the fees the Portfolio pays its
service providers.

SP PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO

- - - - - - --------------------------------------------------------------------------------
A SMALL/MEDIUM-SIZED STOCK PORTFOLIO
The Portfolio invests primarily in the stocks of small and medium-sized
companies with the potential for above-average growth.
- - - - - - --------------------------------------------------------------------------------

The Portfolio's investment objective is LONG-TERM CAPITAL APPRECIATION. This
means the Portfolio seeks investments whose price will increase over several
years. While the Portfolio makes every effort to achieve its objective, it can't
guarantee success.

WE'RE GROWTH INVESTORS

In deciding which equities to buy, the Portfolio uses what is known as a growth
investment style. This means the Portfolio invests in companies that it believes
could experience superior sales or earnings growth. In pursuing this objective,
the Portfolio normally invests at least 65% of the Portfolio's total assets in
equity securities of small and medium-sized U.S. companies with the potential
for above-average growth. The Portfolio considers small and medium-sized
companies to be those with market capitalizations beginning at $500 million. The
upper capitalization limit is 300% of the dollar-weighted median market
capitalization of the S&P 400 Mid-Cap Index. As of December 31, 1999, this
number was $9 billion. Market capitalization is measured at the time of
measurement.

In addition to buying equities, the Portfolio may invest in other equity-related
securities. Equity-related securities include AMERICAN DEPOSITORY RECEIPTS
(ADRs); common stocks; nonconvertible preferred stocks; WARRANTS and rights that
can be exercised to obtain stock; investments in various types of business
ventures, including partnerships and joint ventures; real estate investment
trusts (REITS); and similar securities.

The Portfolio also may buy CONVERTIBLE SECURITIES. These are securities--like
bonds, corporate notes and preferred stocks--that it can convert into the
company's common stock or some other equity security. The Portfolio will only
invest in investment-grade convertible securities. Generally, the Portfolio
considers selling a security when, in the opinion of the investment adviser, the
stock has experienced a fundamental disappointment in earnings; it has reached
an intermediate-term price

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<PAGE>

objective and its outlook no longer seems sufficiently promising; a relatively
more attractive stock emerges; or the stock has experienced adverse price
movements.

For more information, see the Statement of Additional Information.

OTHER INVESTMENTS AND STRATEGIES

In addition to the principal strategies, the Portfolio also may use the
following investment strategies to try to increase its returns or protect its
assets if market conditions warrant.

OTHER EQUITY SECURITIES

The Portfolio can invest up to 35% of total assets in equity securities of
companies with larger or smaller market capitalizations than previously noted.
The Portfolio may participate in the initial public offering (IPO) market. IPO
investments may increase the Portfolio's total returns. As the Portfolio's
assets grow, the impact of IPO investments will decline, which may reduce the
Portfolio's total returns.

FOREIGN SECURITIES

The Portfolio can invest up to 35% of total assets in FOREIGN SECURITIES,
including stocks and other equity-related securities, money market instruments
and other investment-grade fixed-income securities of foreign issuers, including
those in developing countries. For purposes of the 35% limit, the Portfolio does
not consider ADRs and other similar receipts or shares to be foreign securities.

FIXED-INCOME OBLIGATIONS, INCLUDING BONDS AND MONEY MARKET INSTRUMENTS

Fixed-income obligations include bonds and notes. The Portfolio can invest up to
35% of total assets in investment-grade corporate or government obligations.
Investment-grade obligations are rated in one of the top four long-term quality
ratings by a major rating service (such as Baa/BBB or better by Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group, respectively). The
Portfolio also may invest in obligations that are not rated, but which it
believes to be of comparable quality. Obligations rated in the fourth category
(Baa/BBB) have speculative characteristics. These lower-rated obligations are
subject to a greater risk of loss of principal and interest. Generally,
fixed-income securities provide a fixed rate of return, but provide less
opportunity for capital appreciation than investing in stocks. The Portfolio
will purchase money market instruments only in one of the two highest short-term
quality ratings of a major rating service.

TEMPORARY DEFENSIVE INVESTMENTS

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

REPURCHASE AGREEMENTS

The Portfolio may also use REPURCHASE AGREEMENTS.

FOREIGN CURRENCY FORWARD CONTRACTS

The Portfolio may enter into foreign currency forward contracts to protect the
value of its portfolio against future changes in the level of currency exchange
rates. The Portfolio may enter into such contracts on a spot, that is, cash,
basis at the rate then prevailing in the currency exchange market or on a
forward basis, by entering into a forward contract to purchase or sell currency.

DERIVATIVE STRATEGIES

The Portfolio may use various derivative strategies to try to improve its
returns or protect its assets.

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<PAGE>

The Portfolio cannot guarantee that these strategies will work, that the
instruments necessary to implement these strategies will be available or that
the Portfolio will not lose money.

SECURITIES ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES

The Portfolio may invest in securities issued by agencies of the U.S. Government
or instrumentalities of the U.S. Government. These obligations, including those
which are guaranteed by Federal agencies or instrumentalities, may or may not be
backed by the full faith and credit of the United States. Obligations of the
Government National Mortgage Association (GNMA), the Farmers Home Administration
and the Small Business Administration are backed by the full faith and credit of
the United States. In the case of securities not backed by the full faith and
credit of the United States, the Portfolio must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States if the agency or
instrumentality does not meet its commitments. Securities in which the Portfolio
may invest which are not backed by the full faith and credit of the United
States include obligations such as those issued by the Federal Home Loan Bank,
the Federal Home Loan Mortgage Corporation (FHLMC), the Federal National
Mortgage Association, the Student Loan Marketing Association, Resolution Funding
Corporation and the Tennessee Valley Authority, each of which has the right to
borrow from the U.S. Treasury to meet its obligations, and obligations of the
Farm Credit System, the obligations of which may be satisfied only by the
individual credit of the issuing agency. FHLMC investments may include
collateralized mortgage obligations.

MORTGAGE-RELATED SECURITIES ISSUED BY U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES.

The Portfolio may invest in mortgage-backed securities, including those which
represent undivided ownership interests in pools of mortgages. The U.S.
Government or the issuing agency or instrumentality guarantees the payment of
interest on and principal of these securities. However, the guarantees do not
extend to the yield or value of the securities nor do the guarantees extend to
the yield or value of the Portfolio's shares. These securities are in most cases
"pass-through" instruments, through which the holders receive a share of all
interest and principal payments from the mortgages underlying the securities,
net of certain fees.

OPTIONS TRANSACTIONS

The Portfolio may purchase and write (that is, sell) put and call options on
securities, stock indexes and currencies that are traded on U.S. or foreign
securities exchanges or in the over-the-counter market to seek to enhance return
or to protect against adverse price fluctuations in securities in the
Portfolio's portfolio. These options will be on equity securities, financial
indexes (for example, S&P 500 Stock Index) and foreign currencies. The Portfolio
may write put and call options to generate additional income through the receipt
of premiums, purchase put options in an effort to protect the value of
securities (or currencies) that it owns against a decline in market value and
purchase call options in an effort to protect against an increase in the price
of securities (or currencies) it intends to purchase. The Portfolio also may
purchase put and call options to offset previously written put and call options
of the same series. The Portfolio will write only "covered" options. In addition
to options on securities, the Portfolio may also purchase and sell put and call
options on securities indexes traded on U.S. or foreign securities exchanges or
traded in the over-the-counter markets.

FUTURES CONTRACTS AND OPTIONS THEREON

The Portfolio may purchase and sell financial futures contracts and options
thereon which are traded on a commodities exchange or board of trade to reduce
certain risks of its investments and to attempt to enhance return in accordance
with regulations of the Commodity Futures Trading

53
<PAGE>

Commission (CFTC).

ADDITIONAL STRATEGIES

The Portfolio also follows certain policies when it BORROWS MONEY (the Portfolio
can borrow up to 20% of the value of its total assets); LENDS ITS SECURITIES to
others (the Portfolio can lend up to 33 1/3% of the value of its total assets,
including collateral received in the transaction); 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 on resale, those
without a readily available market and repurchase agreements with maturities
longer than seven 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.

PORTFOLIO TURNOVER

As a result of the strategies described above, the Portfolio may have an annual
portfolio turnover rate of up to 200%. Portfolio turnover is generally the
percentage found by dividing the lesser of portfolio purchases or sales by the
monthly average value of the portfolio. High portfolio turnover (100% or more)
results in higher brokerage commissions and other transaction costs and can
affect the Portfolio's performance.

SP SMALL/MID CAP VALUE PORTFOLIO

- - - - - - --------------------------------------------------------------------------------
A SMALL/MID CAP VALUE PORTFOLIO
The Portfolio normally invests at least 65% of its total assets in companies
with small to medium market capitalizations. The Portfolio invests in "value"
stocks
- - - - - - --------------------------------------------------------------------------------

FMR normally invests at least 65% of the Portfolio's total assets in common
stocks of companies with small to medium market capitalizations. Small to medium
market capitalization companies are those companies with market capitalizations
similar to the market capitalization of companies in the Russell 2000 or the
Russell MidCap at the time of the Portfolio's investment. Companies whose
capitalization no longer meets this definition after purchase continue to be
considered to have a small to medium market capitalization for purposes of the
65% policy. The size of companies in the Russell 2000 and Russell MidCap changes
with market conditions and the composition of the index.

PRINCIPAL INVESTMENT STRATEGIES

FMR may invest the Portfolio's assets in securities of foreign issuers in
addition to securities of domestic issuers.

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<PAGE>

economic and market factors. Factors considered include growth potential,
earnings estimates and management. These securities are then analyzed using
statistical models to further evaluate growth potential, valuation, liquidity
and investment risk.

DESCRIPTION OF PRINCIPAL SECURITY TYPES

EQUITY SECURITIES represent an ownership interest, or the right to acquire an
ownership interest, in an issuer. Different types of equity securities provide
different voting and dividend rights and priority in the event of the bankruptcy
of the issuer. Equity securities include common stocks, preferred stocks,
convertible securities, and warrants.

PRINCIPAL INVESTMENT RISKS

Many factors affect the Portfolio's performance. The Portfolio's share price
changes daily based on changes in market conditions and interest rates and in
response to other economic, political, or financial developments. The
Portfolio's reaction to these developments will be affected by the types of
securities in which the Portfolio invests, the financial condition, industry and
economic sector, and geographic location of an issuer, and the Portfolio's level
of investment in the securities of that issuer. When you sell units
corresponding to shares of the Portfolio, they could be worth more or less than
what you paid for them.

In addition to company risk, derivatives risk, foreign investment risk,
leveraging risk, liquidity risk, management risk, and market risk, the following
factors can significantly affect the Portfolio's performance:

SMALL CAP INVESTING. The value of securities of smaller, less well-known issuers
can be more volatile than that of larger issuers and can react differently to
issuer, political, market and economic developments than the market as a whole
and other types of stocks. Smaller issuers can have more limited product lines,
markets and financial resources.

SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO

55
<PAGE>

- - - - - - --------------------------------------------------------------------------------
A GROWTH STOCK PORTFOLIO
The Portfolio normally invests at least 65% of its total assets in the
equity-related securities of U.S. companies that are believed to have strong
capital appreciation potential. The Portfolio is managed according to a growth
investment style.
- - - - - - --------------------------------------------------------------------------------

In pursuing its objective of long-term growth of capital, the Portfolio normally
invests at least 65% of its total assets in equity-related securities of U.S.
companies that are believed have strong capital appreciation potential.

The Portfolio's strategy is to combine the efforts of two investment advisers
and to invest in the favorite stock selection ideas of three portfolio managers
(two of whom invest as a team). Each investment adviser to the Portfolio
utilizes a growth style to select approximately 20 securities. The portfolio
managers build a portfolio with stocks in which they have the highest confidence
and may invest more than 5% of the Portfolio's assets in any one issuer. The
Portfolio may actively and frequently trade its portfolio securities. The
Portfolio is nondiversified, meaning it can invest more than 5% of its assets in
the securities of any one issuer. Investing in a nondiversified mutual fund,
particularly a fund investing in approximately 40 equity-related securities,
involves greater risk than investing in a diversified fund because a loss
resulting from the decline in the value of one security may represent a greater
portion of the total assets of a nondiversified fund.

The primary equity-related securities in which the Portfolio invests are common
stocks. Generally, each investment adviser will consider selling or reducing a
stock position when, in their opinion, the stock has experienced a fundamental
disappointment in earnings; it has reached an intermediate-term price objective
and its outlook no longer seems sufficiently promising; a relatively more
attractive stock emerges; or the stock has experienced adverse price movement. A
price decline of a stock does not necessarily mean that an investment adviser
will sell the stock at that time. During market declines, either investment
adviser may add to positions in favored stocks, which can result in a somewhat
more aggressive strategy, with a gradual reduction of the number of companies in
which the adviser invests. Conversely, in rising markets, either investment
adviser may reduce or eliminate fully valued positions, which can result in a
more conservative investment strategy, with a gradual increase in the number of
companies represented in the adviser's portfolio segment.

WE'RE GROWTH INVESTORS

In deciding which stocks to buy, each investment adviser uses what is known as a
growth investment style. This means that each adviser will invest in stocks they
believe could experience superior sales or earnings growth.

In addition to common stocks in which the Portfolio primarily invests,
equity-related securities include nonconvertible preferred stocks; CONVERTIBLE
SECURITIES; American Depository Receipts (ADRS); warrants and rights that can be
exercised to obtain stock; investments in various types of business ventures,
including partnerships and joint ventures; real estate investment trusts
(REITS); and similar securities. Convertible securities are securities-- like
bonds, corporate notes and preferred stocks--that we can convert into the
company's common stock or some other equity security.

The Portfolio may buy common stocks of companies of every size--small-, medium-
and large-capitalization-- although its investments are mostly in medium- and
large-capitalization stocks. The Portfolio intends to be fully invested, holding
less than 5% of its total assets in cash under normal market conditions.

DIVISION OF ASSETS

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<PAGE>

Strategy. Under normal conditions, there will be an approximately equal division
of the Portfolio's assets between the two investment advisers. All daily cash
inflows (that is, purchases and reinvested distributions) and outflows (that is,
redemptions and expense items) will be divided between the two investment
advisers as the portfolio manager deems appropriate. There will be a periodic
rebalancing of each segment's assets to take account of market fluctuations in
order to maintain the approximately equal allocation. As a consequence, the
portfolio manager may allocate assets from the portfolio segment that has
appreciated more to the other.

OUR GROWTH STYLE

Alliance Capital Management's portfolio manager, Alfred Harrison, utilizes the
fundamental analysis and research of Alliance's large internal research staff.
In selecting stocks for the Portfolio, he emphasizes stock selection and
investment in a limited number of companies that have strong management,
superior industry positions, excellent balance sheets and the ability to
demonstrate superior earnings growth.

Jennison Associates' portfolio managers, Spiros Segalas and Kathleen
McCarragher, invest in mid-size and large companies experiencing some or all of
the following: high sales growth, high unit growth, high or improving returns on
assets and equity and a strong balance sheet. These companies generally trade at
high prices relative to their current earnings.

Risks. Reallocations may result in additional costs since sales of securities
may result in higher portfolio turnover. Also, because each investment adviser
selects portfolio securities independently, it is possible that a security held
by one portfolio segment may also be held by the other portfolio segment of the
Portfolio or that the two advisers may simultaneously favor the same industry.
Jennison Associates will monitor the overall portfolio to ensure that any such
overlaps do not create an unintended industry concentration. In addition, if one
investment adviser buys a security as the other adviser sells it, the net
position of the Portfolio in the security may be approximately the same as it
would have been with a single portfolio and no such sale and purchase, but the
Portfolio will have incurred additional costs. The portfolio manager will
consider these costs in determining the allocation of assets. The portfolio
manager will consider the timing of reallocation based upon the best interests
of the Portfolio and its shareholders. To maintain the Portfolio's federal
income tax status as a regulated investment company, Jennison Associates also
may have to sell securities on a periodic basis and the Portfolio could realize
capital gains that would not have otherwise occurred.

For more information, see the Statement of Additional Information. The Statement
of Additional Information--which we refer to as the SAI--contains additional
information about the Portfolio. To obtain a copy, see the back cover page of
this prospectus.

The Portfolio's investment objective is a fundamental policy that cannot be
changed without shareholder approval. The Fund's Board can change investment
policies that are not fundamental.

OTHER INVESTMENTS AND STRATEGIES

In addition to its principal strategies, the Portfolio also uses the following
investment strategies to try to increase its returns or protect its assets if
market conditions warrant.

FOREIGN SECURITIES

The Portfolio may invest up to 20% of its total assets in FOREIGN SECURITIES,
including stocks and other equity-related securities, money market instruments
and other fixed-income securities of

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<PAGE>

foreign issuers. The Portfolio does not consider ADRs and other similar receipts
or shares to be foreign securities.

MONEY MARKET INSTRUMENTS

The Portfolio may temporarily hold cash or invest in high-quality foreign or
domestic money market instruments pending investment of proceeds from new sales
of Portfolio shares or to meet ordinary daily cash needs subject to the policy
of normally investing at least 65% of the Portfolio's assets in equity-related
securities.

REPURCHASE AGREEMENTS

The Portfolio may use REPURCHASE AGREEMENTS.

TEMPORARY DEFENSIVE INVESTMENTS

In response to adverse market, economic, political or other conditions, the
Portfolio may temporarily invest up to 100% of its assets in MONEY MARKET
INSTRUMENTS. Investing heavily in these securities limits the ability to achieve
the investment objective, but can help to preserve the Portfolio's assets when
the equity markets are unstable.

OPTIONS ON SECURITIES INDEXES.

The Portfolio may purchase and write (that is, sell) put and call OPTIONS on
securities indexes that are traded on U.S. or foreign securities exchanges or in
the over-the-counter market to try to enhance return or to hedge the Portfolio's
portfolio. The Portfolio may write covered put and call options to generate
additional income through the receipt of premiums, purchase put options in an
effort to protect the value of a security that it owns against a decline in
market value and purchase call options in an effort to protect against an
increase in the price of securities it intends to purchase. The Portfolio also
may purchase put and call options to offset previously written put and call
options of the same series. The Portfolio will write only "covered" options. The
Portfolio may purchase and sell stock index futures contracts and related
options on stock index futures. The Portfolio may purchase and sell futures
contracts on foreign currencies and related options on foreign currency futures
contracts.

U.S. GOVERNMENT SECURITIES

The Portfolio may invest in securities issued or guaranteed by the U.S. Treasury
or by an agency or instrumentality of the U.S. government. Not all U.S.
government securities are backed by the full faith and credit of the United
States. Some are supported only by the credit of the issuing agency.

OPTIONS ON FUTURES CONTRACTS.

The Portfolio will also enter into options on futures contracts for certain bona
fide hedging, return enhancement and risk management purposes. The Portfolio may
purchase put and call options and write (that is, sell) "covered" put and call
options on futures contracts that are traded on U.S. and foreign exchanges.

FUTURES CONTRACTS ON FOREIGN CURRENCIES AND OPTIONS THEREON.
The Portfolio may buy and sell futures contracts on foreign currencies and
purchase and write options thereon.

SHORT SALES

The Portfolio may use SHORT SALES.

DERIVATIVE STRATEGIES

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<PAGE>

The Portfolio may use various DERIVATIVE STRATEGIES to try to improve the
Portfolio's returns. The Portfolio may use hedging techniques to try to protect
the Portfolio's assets. We cannot guarantee that these strategies will work,
that the instruments necessary to implement these strategies will be available,
or that the Portfolio will not lose money.

ADDITIONAL STRATEGIES

The Portfolio also follows certain policies when it BORROWS MONEY (the Portfolio
can borrow up to 33 1/3% of the value of its total assets); LENDS ITS SECURITIES
to others for cash management purposes (the Portfolio can lend up to 33 1/3% of
the value of its total assets including collateral received in the transaction);
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 on resale, those without a readily available market and repurchase
agreements with maturities longer than seven 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.

PORTFOLIO TURNOVER

It is not a principal strategy of the Portfolio to actively and frequently trade
its portfolio securities to achieve its investment objective. Nevertheless, the
Portfolio may have an annual portfolio turnover rate of up to 200%. Portfolio
turnover is generally the percentage found by dividing the lesser of portfolio
purchases and sales by the monthly average value of the portfolio. High
portfolio turnover (100% or more) results in higher brokerage commissions and
other costs and can affect the Portfolio's performance.

* * *

OTHER INVESTMENTS AND STRATEGIES

As indicated in the description of the Portfolios above, certain Portfolios may
use the following investment strategies to increase return or protect assets if
market conditions warrant.

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.

CONVERTIBLE DEBT AND CONVERTIBLE PREFERRED STOCK - A convertible security is a
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 the
price, quantity of shares and time period in which it may be so converted.
Convertible stock is senior to a company's common stock but is usually
subordinated to debt obligations of the company. Convertible securities provide
a steady stream of income which is generally at a higher rate than the income on
the company's common stock but lower than the rate on the company'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.

DERIVATIVES - A derivative is an investment instrument that derives its price,
performance, value, or cash flow from one or more underlying securities or other
interests. Derivatives involve costs and can be volatile. With derivatives, the
investment adviser tries 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

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consistent with a Portfolio's overall investment objective. The investment
adviser 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 fully offset a Portfolio's underlying positions and this could
result in losses to the Portfolio that would not otherwise have occurred.

DOLLAR ROLLS - 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 a set price
and date in the future. 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.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - A foreign currency forward
contract is an obligation to buy or sell a given currency on a future date at a
set price. 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. 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.

FUTURES - A futures contract is an agreement to buy or sell a set quantity of an
underlying product at a future date, or to make or receive a cash payment based
on the value of a securities index. When a futures contract is entered into,
each party deposits with a futures commission merchant (or in a segregated
account) approximately 5% of the contract amount. This is known as the "initial
margin." Every day during the futures contract, either the buyer or the futures
commission merchant will make payments of "variation margin." In other words, if
the value of the underlying security, index or interest rate increases, then the
buyer will have to add to the margin account so that the account balance equals
approximately 5% of the value of the contract on that day. The next day, the
value of the underlying security, index or interest rate may decrease, in which
case the borrower would receive money from the account equal to the amount by
which the account balance exceeds 5% of the value of the contract on that day. 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.

INTEREST RATE SWAPS - 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 that
type of a swap if we think interest rates are going down.

JOINT REPURCHASE ACCOUNT - In a joint repurchase transaction, uninvested cash
balances of various Portfolios are added together and invested in one or more
repurchase agreements. Each of the participating Portfolios receives a portion
of the income earned in the joint account based on the percentage of its
investment.

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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 will 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
will not benefit from any set-off between the lender and the borrower.

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. We may invest in mortgage-related
securities issued and guaranteed by the U.S. government or its agencies like the
Federal National Mortgage Association (Fannie Maes) and the Government National
Mortgage Association (Ginnie Maes) and debt securities issued (but not
guaranteed) by the Federal Home Loan Mortgage Company (Freddie Macs). Private
mortgage-related 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 entities such as banks, U.S. governmental entities or
broker-dealers. A multi-class pass-through security is an 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.

OPTIONS - A call option on stock 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 on stock 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 price at any time during a specified
period. In exchange for this right, the option purchaser pays the option seller
a premium. Options on debt securities are similar to stock options except that
the option holder has the right to acquire or sell a debt security rather than
an equity security. 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.

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

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<PAGE>

money to real estate developers and receive interest income from the mortgages.
Some REITs invest in both types of interests.

REPURCHASE AGREEMENTS - In a repurchase transaction, the Portfolio agrees to
purchase certain securities and the seller agrees to repurchase the same
securities at an agreed upon price on a specified date. This creates a fixed
return for the Portfolio.

REVERSE REPURCHASE AGREEMENTS - In a reverse repurchase transaction, the
Portfolio sells a security it owns and agrees to buy it back at a set 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 security.

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.

SHORT SALES AGAINST-THE-BOX -A short sale against-the-box means the Portfolio
owns securities identical to those sold short.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES - With when-issued or delayed
delivery securities, 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
securities. A Portfolio's custodian will maintain in a segregated account,
liquid assets having a value equal to or greater than 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.

* * *

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Each Portfolio (other than the Money Market Portfolio) also follows certain
policies when it borrows money; lends its securities; and holds illiquid
securities (a Portfolio may hold up to 15% of its net assets in illiquid
securities, including securities with legal or contractual restrictions on
resale, those without a readily available market and repurchase agreements with
maturities longer than seven days). If the Portfolio were to exceed this limit,
the investment adviser would take prompt action to reduce a Portfolio's holdings
in illiquid securities to no more than 15% of its net assets, as required by
applicable law.

The Prudential Money Market Portfolio follows certain policies when it borrows
money (the Portfolio may borrow up to 5% of the value of its total assets) 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
on resale, those without a readily available market and repurchase agreements
with maturities longer than seven days). If the Portfolio were to exceed this
limit, the investment adviser would take prompt action to reduce the Portfolio's
holdings in illiquid securities to no more than 10% of its net assets, as
required by applicable law.

HOW THE FUND IS MANAGED

BOARD OF DIRECTORS

The Board of Directors oversees the actions of the Investment Adviser, the
sub-advisers and the Distributor and decides on general policies. The Board also
oversees the Fund's officers who conduct and supervise the daily business
operations of the Fund.

- - - - - - --------------------------------------------------------------------------------
INVESTMENT ADVISER
- - - - - - --------------------------------------------------------------------------------

Prudential serves as the investment adviser for certain Portfolios of the Fund.
Founded in 1875, Prudential is responsible for the management of the Fund and
provides investment advice and related services to certain Portfolios. As of
December 31, 1999, Prudential had total assets under management of approximately
$364 billion. Prudential is located at 751 Broad Street, Newark, New Jersey
07102-3777.

The following chart lists the total annualized investment advisory fees to be
paid in 2000 with respect to each of the Fund's Portfolios.

- - - - - - --------------------------------------------------------------------------------
TOTAL ADVISORY FEES AS % OF
PORTFOLIO AVERAGE NET ASSETS
- - - - - - --------------------------------------------------------------------------------
Prudential Global Portfolio 0.75
Prudential Jennison Portfolio 0.60
Prudential Money Market Portfolio 0.40
Prudential Stock Index Portfolio 0.35
SP Aggressive Growth Asset Allocation Portfolio 0.89
SP AIM Aggressive Growth Portfolio 0.95
SP AIM Growth and Income Portfolio 0.85
SP Alliance Large Cap Growth Portfolio 0.90
SP Alliance Technology Portfolio 1.15
SP Balanced Asset Allocation Portfolio 0.78
SP Conservative Asset Allocation Portfolio 0.72
SP Davis Value Portfolio 0.75
SP Deutsche International Equity Portfolio 0.90

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SP Growth Asset Allocation Portfolio 0.82
SP INVESCO Small Company Growth Portfolio 0.95
SP Jennison International Growth Portfolio 0.95
SP Large Cap Value Portfolio 0.80
SP MFS Capital Opportunities Portfolio 0.75
SP MFS Mid Cap Growth Portfolio 0.80
SP PIMCO High Yield Portfolio 0.60
SP PIMCO Total Return Portfolio 0.60
SP Prudential U.S. Emerging Growth Portfolio 0.85
SP Small/Mid Cap Value Portfolio 0.90
SP Strategic Partners Focused Growth Portfolio 0.90

- - - - - - --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISERS
- - - - - - --------------------------------------------------------------------------------

The Prudential Insurance Company of America (Prudential) is the investment
adviser to the Prudential Global Portfolio, the Prudential Jennison Portfolio,
the Prudential Money Market Portfolio, the Prudential Stock Index Portfolio, and
certain other Fund Portfolios not offered through this Prospectus. Prudential,
located at 751 Broad Street, New Jersey, NJ, is an SEC-registered investment
adviser. Prudential is currently considering reorganizing itself from a mutual
insurance company to a publicly-traded stock company in a process known as
"demutualization." Jennison Associates LLC, a Prudential subsidiary, serves as
subadviser to the Prudential Global Portfolio, the Prudential Jennison
Portfolio, and the Prudential Stock Index Portfolio. Jennison's address is 466
Lexington Avenue, New York, NY, and as of December 31, 1999, it had over $59
billion of assets under management. Prudential Investment Corporation (PIC),
also a Prudential subsidiary, serves as subadviser to the Prudential Money
Market Portfolio. PIC's address is 751 Broad Street, Newark, NJ.

Prudential Investments Fund Management LLC (PIFM), located at 100 Mulberry
Street, Newark, NJ is the investment adviser to the SP Aggressive Growth Asset
Allocation Portfolio, SP AIM Aggressive Growth Portfolio, SP AIM Growth and
Income Portfolio, SP Alliance Large Cap Growth Portfolio, SP Alliance Technology
Portfolio, SP Balanced Asset Allocation Portfolio, SP Conservative Asset
Allocation Portfolio, SP Davis Value Portfolio, SP Deutsche International Equity
Portfolio, SP Growth Asset Allocation Portfolio, SP INVESCO Small Company Growth
Portfolio, SP Jennison International Growth Portfolio, SP Large Cap Value
Portfolio, SP MFS Capital Opportunities Portfolio, SP MFS Mid Cap Growth
Portfolio, SP PIMCO High Yield Portfolio, SP PIMCO Total Return Portfolio, SP
Prudential U.S. Emerging Growth Portfolio, SP Small/Mid Cap Value Portfolio, and
SP Strategic Partners Focused Growth Portfolio. PIFM is a subsidiary of
Prudential that, with its predecessors, have served as manager or administrator
to investment companies since 1987. As of December 31, 1999, PIFM served as the
manger to all 42 of the Prudential mutual funds, and as manager or administrator
to 22 closed-end investment companies, with aggregate assets of approximately
$75.6 billion. Jennison provides subadvisory services to the SP Jennison
International Growth Portfolio, SP Prudential U.S. Emerging Growth Portfolio,
and the SP Strategic Partners Focused Growth Portfolio. A sub-adviser that is
not affiliated with Prudential provides subadvisory services to the other
PIFM-advised Portfolios.

We provide more information below on the sub-advisers and their portfolio
managers.

A I M CAPITAL MANAGEMENT, INC. (AIM CAPITAL) (the sub-adviser) serves as
sub-adviser to the SP AIM

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Aggressive Growth Portfolio and the SP AIM Growth and Income Portfolio. The firm
is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The
sub-adviser provides investment advisory services to each Portfolio by obtaining
and evaluating economic, statistical and financial information and formulating
and implementing investment programs. Today, AIM Capital, together with its
affiliates, advises or manages over 125 investment portfolios, encompassing a
broad range of investment objectives. AIM Capital uses a team approach to
investment management.

ALLIANCE CAPITAL MANAGEMENT, L.P. serves as the sub-adviser to the SP Alliance
Technology Portfolio and the SP Alliance Large Cap Growth Portfolio. The
sub-adviser is located at 1345 Avenue of the Americas, New York, New York 10105.
Alliance is a leading international investment manager. Alliance's clients are
primarily major corporate employee benefit funds, public employee retirement
systems, investment companies, foundations and endowment funds.

BANKERS TRUST COMPANY (BANKERS TRUST), with headquarters at 130 Liberty Street,
New York, New York 10006, acts as the sub-adviser to the SP Deutsche
International Equity Portfolio. Bankers Trust is an indirect wholly-owned
subsidiary of Deutsche Bank AG. As of September 30, 1999, Bankers Trust had
total assets under management of approximately $285 billion. Bankers Trust is
dedicated to servicing the needs of corporations, governments, financial
institutions, and private clients, and has invested retirement assets on behalf
of the nation's largest corporations and institutions for more than 50 years.

On March 11, 1999, Bankers Trust announced that it had reached an agreement with
the United States Attorney's Office in the Southern District of New York to
resolve an investigation concerning inappropriate transfers of unclaimed funds
and related record-keeping problems that occurred between 1994 and early 1996.
Bankers Trust pleaded guilty to misstating entries in the bank's books and
records and agreed to pay a $63.5 million fine to state and federal authorities.
On July 26, 1999, the federal criminal proceedings were concluded with Bankers
Trust formal sentencing . The events leading up to the guilty pleas did not
arise out of the investment advisory or mutual fund management activities of
Bankers Trust or its affiliates.

As a result of the plea, absent an order from the SEC, Bankers Trust would not
be able to continue to provide investment advisory services to the Portfolio.
The SEC has granted a temporary order to permit Bankers Trust and its affiliates
to continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.

DAVIS SELECTED ADVISERS, LP serves as the sub-adviser to the SP Davis Value
Portfolio. The sub-adviser is located at 124 East Elvira Street, Santa Fe, New
Mexico 87501.

FIDELITY - Fidelity Research & Management Company (FMR) is the sub-adviser to
the SP Large Cap Value Portfolio and the SP Small/Mid Cap Value Portfolio. As of
March 31, 2000, FMR had approximately $995 billion in discretionary assets under
management. The address of FMR is 82 Devonshire Street, Boston, MA 02109.

INVESCO FUNDS GROUP, INC. (INVESCO), located at 7800 East Union Avenue, Denver,
Colorado, is the sub-adviser of the SP INVESCO Small Company Growth Portfolio.
INVESCO was founded in 1932 and manages over $39.2 billion for more than
1,103,139 shareholders of 45 INVESCO mutual funds. INVESCO is a subsidiary of
AMVESCAP PLC, an international investment management company that manages more
than $392 billion in assets world-wide. AMVESCAP is based in London, with money
managers in Europe, North and South America and the far east.

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MASSACHUSETTS FINANCIAL SERVICES COMPANY (MFS), located at 500 Boylston Street,
Boston, MA, acts as the sub-adviser for the SP MFS Capital Opportunities
Portfolio and the SP MFS Mid Cap Growth Portfolio. MFS and its predecessor
organizations have a history of money management dating from 1924. MFS is an
indirect wholly-owned subsidiary of Sun Life Assurance Company of Canada.

PACIFIC INVESTMENT MANAGEMENT COMPANY (PIMCO) acts as the sub-adviser for the SP
PIMCO Total Return Portfolio and the SP PIMCO High Yield Portfolio. 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, 1999, PIMCO managed over
$186 billion in assets.

- - - - - - --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- - - - - - --------------------------------------------------------------------------------

We set out below descriptions of the portfolio managers and for certain
Portfolios, the past performance of a similarly-managed mutual fund. Those
performance figures do not reflect variable insurance contract fees which, if
deducted, would reduce performance.

PRUDENTIAL GLOBAL PORTFOLIO

Daniel Duane, CFA, Managing Director of Prudential Investments, Ingrid Holm,
CFA, Vice President of Prudential Investments and Michelle Picker, CFA, 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.

PRUDENTIAL JENNISON PORTFOLIO

This Portfolio is managed by Messrs. Segalas and Del Balso and Ms. McCarragher
of Jennison Associates. Mr. Segalas is a founding member and President,
Director, and Chief Investment Officer of Jennison. He has been in the
investment business for over 35 years. Mr. Segalas received a B.A. from
Princeton University and is a member of the New York Society of Security
Analysts. Mr. Del Balso, a Director and Executive Vice President of Jennison,
has been part of the Jennison team since 1972 when he joined the firm from
White, Weld & Company. Mr. Del Balso is a member of the New York Society of
Security Analysts. Ms. McCarragher, Director and Executive Vice President of
Jennison, is also Jennison's Growth Equity Investment Strategist, having joined
Jennison in 1998 after a 17 year investment career, including positions with
Weiss, Peck & Greer and State Street Research and Management Company, where she
was a member of the Investment Committee. She received B.B.A. from the
University of Wisconsin and an M.B.A. from Harvard Business School.

PRUDENTIAL MONEY MARKET PORTFOLIO

Prudential Investments' Fixed Income Group, which provides portfolio management
services to the Prudential Money Market Portfolio, manages more than $127
billion for Prudential's retail investors, institutional investors, and
policyholders. Senior Managing Directors James J. Sullivan and Jack W. Gaston
head the Group, which is organized into teams specializing in different market
sectors. Top-down,

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<PAGE>

broad investment decisions are made by the Fixed Income Policy Committee,
whereas bottom-up security selection is made by the sector teams.

Mr. Sullivan has overall responsibility for overseeing portfolio management and
credit research. Prior to joining Prudential Investments in 1998, he was a
Managing Director in Prudential's Capital Management Group, where he oversaw
portfolio management and credit research for Prudential's General Account and
subsidiary fixed-income portfolios. He has more than 16 years of experience in
risk management, arbitrage trading and corporate bond investing.

Mr. Gaston has overall responsibility for overseeing quantitative research and
risk management. Prior to his appointment in 1999, he was Senior Managing
Director of the Capital Management Group where he was responsible for the
investment performance and risk management for Prudential's General Account and
subsidiary fixed-income portfolios. He has more than 20 years of experience in
investment management, including extensive experience applying quantitative
techniques to portfolio management.

The Fixed Income Investment Policy Committee is comprised of key senior
investment managers. Members include seven sector team leaders, the chief
investment strategist, and the head of risk management. The Committee uses a
top-down approach to investment strategy, asset allocation and general risk
management, identifying sectors in which to invest.

The Money Market Team, headed by Joseph Tully, is primarily responsible for
overseeing the day-to-day management of the Portfolio. This team uses a
bottom-up approach, which focuses on individual securities, while staying within
the guidelines of the Investment Policy Committee and the Portfolio's investment
restrictions and policies.

MONEY MARKET TEAM

ASSETS UNDER MANAGEMENT (as of December 31, 1999): $3.6 billion.

TEAM LEADER: Joseph Tully. GENERAL INVESTMENT EXPERIENCE: 16 years.

PORTFOLIO MANAGERS: 8. AVERAGE GENERAL INVESTMENT EXPERIENCE: 12 years, which
includes team members with significant mutual fund experience.

SECTOR: High-quality short-term debt securities, including both taxable and
tax-exempt instruments.

INVESTMENT STRATEGY: Focus is on safety of principal, liquidity and controlled
risk.

PRUDENTIAL STOCK INDEX PORTFOLIO

John Moschberger, CFA, Vice President of Prudential Investments, has managed
this Portfolio since 1990. Mr. Moschberger joined Prudential in 1980 and has
been a portfolio manager since 1986.

SP AIM AGGRESSIVE GROWTH PORTFOLIO

A I M Capital Management, Inc. (AIM Capital) uses a team approach to investment
management.

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The individual members of the team who are primarily responsible for the
day-to-day management of the Portfolio, all of whom are officers of AIM Capital
are - - Ryan E. Crane, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with AIM Capital and/or its affiliates since
1994. - - Robert M. Kippes, Senior Portfolio Manager, has been associated with
AIM Capital and/or its affiliates since 1989. - - Charles D. Scavone, Senior
Portfolio Manager, who has been associated with AIM Capital and/or its
affiliates since 1996 (from 1994 to 1996 Mr. Scavone was an Associate Portfolio
Manager for Van Kampen American Capital Asset Management, Inc.) - Ken Zschappel,
Senior Portfolio Manager, who has been associated with AIM Capital and/or its
affiliates since 1990.

We set out below performance information for AIM Aggressive Growth FUND, which
is a mutual fund managed by A I M Advisors, Inc., the immediate parent company
of AIM Capital, according to investment objectives and practices that are
substantially similar to those governing the SP AIM Aggressive Growth Portfolio.
AIM Aggressive Growth Fund and SP AIM Aggressive Growth Portfolio are separate
funds with different expense structures and portfolio holdings and different
purchase and redemption patterns, and the past performance of AIM Aggressive
Growth Fund is not indicative of the future performance of SP AIM Aggressive
Growth Portfolio. If material differences between the investment styles of AIM
Aggressive Growth Fund and SP AIM Aggressive Growth Portfolio should develop in
the future, we will disclose such differences. Unlike AIM Aggressive Growth
Fund, SP AIM Aggressive Growth Portfolio has PIFM as an investment adviser.

AVERAGE ANNUAL TOTAL RETURNS

<TABLE>
<CAPTION>
(for the periods ended
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE

<S> <C> <C> <C> <C> <C> <C>
Class A(1) 44.98% 22.55% 23.04% 17.43% 5/l/84
Russell 2000 Growth
Index(2) 43.09% 18.99% 13.51%
</TABLE>

(1) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.

(2) The Russell 2000 Growth Index is an unmanaged index of certain growth
stocks within the 2,000 smallest U.S. companies included in the Russell
3000 Index.

SP AIM GROWTH AND INCOME PORTFOLIO

A I M Capital Management, Inc. (AIM Capital) uses a team approach to investment
management. The individual members of the team who are primarily responsible for
the day-to-day management of the Portfolio are:

Monika H. Degan, Portfolio Manager, has been associated with AIM Capital and/or
its affiliates since 1995.

Lanny H. Sachnowitz, Senior Portfolio Manager, has been associated with AIM
Capital and/or its affiliates since 1987.

We set out below performance information for the AIM CHARTER FUND, which is a
mutual fund managed by A I M Advisors, Inc., the immediate parent company of AIM
Capital, according to investment objectives and practices that are substantially
similar to those governing the SP AIM

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<PAGE>

Growth and Income Portfolio. AIM Charter Fund and SP AIM Growth and Income
Portfolio are separate funds with different expense structures and portfolio
holdings and different purchase and redemption patterns, and the past
performance of AIM Charter Fund is not indicative of the future performance of
SP AIM Growth and Income Portfolio. If material differences between the
investment styles of the AIM Charter Fund and SP AIM Growth and Income Portfolio
should develop in the future, we will disclose such differences. Unlike AIM
Charter Fund, SP AIM Growth and Income Portfolio has PIFM as an investment
adviser.

AVERAGE ANNUAL TOTAL RETURNS

<TABLE>
<CAPTION>
(for the periods ended
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE

<S> <C> <C> <C> <C> <C>
Class A(1) 33.87% 28.00% 18.43% 15.11% 11/26/68

Russell 1000 Index(2) 20.91% 28.04% 18.13%
</TABLE>

(1) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.

(2) The Russell 1000 Index is an unmanaged index considered representative of
large-company stocks.

SP ALLIANCE LARGE CAP GROWTH PORTFOLIO

Alfred Harrison, Director and Vice Chairman of Alliance Capital Management
Corporation (ACMC) leads the team managing this Portfolio, with Syed Hasnain, a
Senior Portfolio Manager, also being directly involved.

Mr. Hasnain joined Alliance Capital after working as a strategist with Merrill
Lynch Capital Markets. Previously he was an international economist with
Citicorp and a financial analyst at Goldman Sachs & Co. He holds a M. Phil in
Finance from Cambridge University, and Sc.B. from Brown University, and studied
towards a doctorate at Stanford Business School. Investment experience: 9 years.

We set out below performance information for Alliance PREMIER GROWTH FUND, which
is a mutual fund managed by ACMC according to investment objectives and
practices that are substantially similar to those governing the SP Alliance
Large Cap Growth Portfolio. Alliance Premier Growth Fund and SP Alliance Large
Cap Growth Portfolio are separate funds, and the past performance of Alliance
Premier Growth Fund is not indicative of the future performance of SP Alliance
Large Cap Growth Portfolio. If material differences between the investment
styles of Alliance Premier Growth Fund and SP Alliance Large Cap Growth
Portfolio should develop in the future, we will disclose such differences.
Unlike Alliance Premier Growth Fund, SP Alliance Large Cap Growth Portfolio has
PIFM as an investment adviser.

69
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS

<TABLE>
<CAPTION>
(for the periods ended
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE

<S> <C> <C> <C> <C>
Class A 28.98% 36.03% 25.75% 9/28/92
Russell 1000 Growth 33.16% 32.41% 23.43%
Index(1)
</TABLE>

(1) The Russell 1000 Growth Index is a measure of the Russell 1000 companies
with higher price-to-book ratios and higher forecasted growth values.

SP ALLIANCE TECHNOLOGY PORTFOLIO

Peter Anastos and Gerald T. Malone manage the SP Alliance Technology Portfolio.
Both portfolio managers are Senior Vice Presidents of ACMC and have been
associated with ACMC for more than five years.

We set out below performance information for the Alliance Technology FUND, which
is a mutual fund managed by ACMC according to investment objectives and
practices that are substantially similar to those governing the SP Alliance
Technology Portfolio. Alliance Technology Fund and SP Alliance Technology
Portfolio are separate funds, and the past performance of Alliance Technology
Fund is not indicative of the future performance of SP Alliance Technology
Portfolio. If material differences between the investment styles of the Alliance
Technology Fund and SP Alliance Technology Portfolio should develop in the
future, we will disclose such differences. Unlike Alliance Technology Fund, SP
Alliance Technology Portfolio has PIFM as an investment adviser.

AVERAGE ANNUAL TOTAL RETURNS

<TABLE>
<CAPTION>
(for the periods ended
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE

<S> <C> <C> <C> <C>
Class A 71.78% 38.52% 29.98% 3/1/82
S&P 500(1) 21.03% 28.54% 18.19%
</TABLE>

(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.

SP ASSET ALLOCATION PORTFOLIOS

For the four Asset Allocation Portfolios, Prudential Investments invests in
shares of other Fund Portfolios within the product according to the percentage
allocations discussed in this prospectus.

SP DAVIS VALUE PORTFOLIO

The following individuals provide day-to-day management of the SP Davis Value
Portfolio.

CHRISTOPHER C. DAVIS

Responsibilities:

o Vice President of Davis New York Venture Fund, Inc.

o Also manages or co-manages other equity funds advised by Davis Selected
Advisers.

Other Experience:

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<PAGE>

o Portfolio Manager of Davis New York Venture Fund from February 1997 to
April 1998.

o Assistant Portfolio Manager and research analyst working with Shelby M.C.
Davis from September 1989 to September 1995.

KENNETH CHARLES FEINBERG

Responsibilities:

o Co-Portfolio Manager of Davis New York Venture Fund with Christopher C.
Davis since May 1998.

o Also co-manages other equity funds advised by Davis Selected Advisers.

Other Experience:

o Research analyst at Davis Selected Advisers since December 1994.

o Assistant Vice President of Investor Relations for Continental Corp. from
1988 to 1994.

We set out below performance information for Davis NEW YORK VENTURE FUND, which
is a mutual fund managed by Davis Selected Advisers, LP according to investment
objectives and practices that are substantially similar to those governing the
SP Davis Value Portfolio. Davis New York Venture Fund and SP Davis Value
Portfolio are separate funds, and the past performance of Davis New York Venture
is not indicative of the future performance of SP Davis Value Portfolio. If
material differences between the investment styles of Davis New York Venture
Fund and SP Davis Value Portfolio should develop in the future, we will disclose
such differences. Unlike Davis New York Venture Fund, SP Davis Value Portfolio
has PIFM as an investment adviser.

AVERAGE ANNUAL TOTAL RETURNS

<TABLE>
<CAPTION>
(for the periods ended
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION INCEPTION DATE

<S> <C> <C> <C> <C> <C>
Class A(1) 12.00% 25.01% 18.19% 14.95% 2/17/69
S&P 500(2) 21.04% 28.51% 18.17% 13.01%
</TABLE>

Average annual total returns earned by Class A shares of Davis New York Venture
Fund for the periods listed above, after adjusting for the maximum 4.75% sales
charge and with all distributions reinvested for the periods ended 12/31/99.

(1) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.

(2) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.

SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO

The following portfolio managers are responsible for the day-to-day management
of the Portfolio's investments:

MICHAEL LEVY

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<PAGE>

Co-Lead Portfolio Manager.

International equity strategist, overseeing the design and implementation of the
firm's proprietary stock selection process.

28 years of business experience, 18 of them as an investment professional.

Degrees in mathematics and geophysics from the University of Michigan.

ROBERT REINER

Co-Lead Portfolio Manager.

Specializes in Japanese and European stock and market analysis.

Served as a Senior Financial Analyst at Scudder, Stevens & Clark from 1993 to
1994.

18 years of investment industry experience.

Degrees from the University of Southern California and Harvard University.

JULIE WANG

Co-Portfolio Manager.

Focuses on the Portfolio's Asia-Pacific investments and its emerging markets
exposure.

Served as Investment Manager for American International Group's Southeast Asia
portfolio from 1991 to 1994.

11 years of investment management experience.

BS in economics from Yale University, MBA from The Wharton School, University of
Pennsylvania.

We set out below performance information for BT INVESTMENT FUNDS - INTERNATIONAL
EQUITY, which is a mutual fund managed by Bankers Trust Company, an indirect
wholly-owned subsidiary of Deutsche Bank AG according to investment objectives
and practices that are substantially similar to those governing the SP Deutsche
International Equity Portfolio. BT Investment Funds - International Equity and
SP Deutsche International Equity Portfolio are separate funds, and the past
performance of BT Investment Funds - International Equity is not indicative of
the future performance of SP Deutsche International Equity Portfolio. If
material differences between the investment styles of BT Investment Funds -
International Equity and SP Deutsche International Equity Portfolio should
develop in the future, we will disclose such differences. Unlike BT Investment
Funds - International Equity, SP Deutsche International Equity Portfolio has
PIFM as an investment adviser.

The following performance table compares the BT Investment Funds - International
Equity performance to that of a broad-based securities market index.

AVERAGE ANNUAL RETURNS

<TABLE>
<CAPTION>
(for the periods ended
December 31, 1999) 1 YEAR 5 YEARS SINCE INCEPTION INCEPTION DATE
DATE(1)

<S> <C> <C> <C> <C>
International Equity
Fund 32.22% 21.44% 19.25% 8/4/92
MSCI EAFE Index(1)(3) 26.96% 12.83% 13.84%
Lipper(2) 40.81% 15.05% 14.23%
International Funds
Average
</TABLE>

72
<PAGE>

(1) The MSCI EAFE Index and Lipper International Funds Average are calculated
from July 31, 1992.

(2) Unweighted average annual return, net of fees and expenses, of all mutual
funds that invested primarily in stocks and other equity securities of
companies outside the United States during the periods covered.

(3) The MSCI EAFE Index of major markets in Europe, Australia and the Far East
is a widely accepted benchmark of international stock performance. It is a
model, not an actual portfolio. It tracks stocks in Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy,
Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland and the United Kingdom.

SP INVESCO SMALL COMPANY GROWTH PORTFOLIO

The following individuals are primarily responsible for the day-to-day
management of the Portfolio's holdings:

Stacie Cowell - is the lead portfolio manager of the SP INVESCO Small Company
Growth Portfolio and a Chartered Financial Analyst (CFA) who joined INVESCO in
1997. She is also a vice president of INVESCO. Before joining the company, she
was senior equity analyst with Founders Asset Management and capital markets and
trading analyst with Chase Manhattan Bank in New York. She holds a B.A. in
Economics from Colgate University and an M.S from the University of Colorado
(Boulder).

Timothy J. Miller - is the leader of INVESCO's Growth Team and a CFA. He is also
a director and senior vice president of INVESCO. Before joining INVESCO in 1992,
Tim was a portfolio manager with Mississippi Valley Advisors. He holds an M.B.A.
from the University of Missouri - St. Louis and a B.S.B.A. from St. Louis
University.

Trent E. May - is also a senior vice president of INVESCO and a CFA. Before
joining INVESCO in 1996, he was a senior equity analyst with Munder Capital
Management and a research assistant with SunBank Capital Management. He holds an
M.B.A. from Rollins College and a B.S. in Engineering from Florida Institute of
Technology.

We set out below performance information for INVESCO Small Company Growth FUND
(Investor Class), which is a mutual fund managed by INVESCO, according to
investment objectives and practices that are substantially similar to those
governing the SP INVESCO Small Company Growth Portfolio. INVESCO Small Company
Growth Fund and SP INVESCO Small Company Growth Portfolio are separate funds,
and the past performance of INVESCO Small Company Growth Fund is not indicative
of the future performance of SP INVESCO Small Company Growth Portfolio. If
material differences between the investment styles of INVESCO Small Company
Growth Fund and SP INVESCO Small Company Growth Portfolio should develop in the
future, we will disclose such differences. Unlike INVESCO Small Company Growth
Fund, SP INVESCO Small Company Growth Portfolio has PIFM as an investment
adviser.

AVERAGE ANNUAL TOTAL RETURNS

(for the periods ended
December 31, 1999) 1 YEAR 5 YEARS SINCE INCEPTION(2)

Investor Class shares(1) 81.64% 29.08% 23.91%
Russell 2000 Growth 21.26% 16.69% 13.40%
Index(3)

(1) Total return figures include reinvested dividends and capital gain
distributions, and include the effect of the Fund's expenses.

(2) The INVESCO Small Company Growth Fund commenced investment operations on
December 27, 1991.

(3) The Russell 2000 Growth Index is an unmanaged index of certain growth
stocks within the 2,000 smallest U.S. companies included in the Russell
3000 Index.

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<PAGE>

SP JENNISON INTERNATIONAL PORTFOLIO

The Portfolio is co-managed by Howard Moss and Blair Boyer. Mr. Moss and Mr.
Boyer have worked together managing international equity portfolios since 1989.
Howard Moss has been an Executive Vice President and Director of Jennison since
1993. Mr. Moss has been in the investment business for 30 years. Mr. Moss
received a B.A. from the University of Liverpool. Blair Boyer is an Executive
Vice President and Director of Jennison and has been with Jennison since 1993.
Mr. Boyer received a B.A. from Bucknell University and an M.B.A. from New York
University.

SP LARGE CAP VALUE PORTFOLIO AND SP SMALL/MID CAP VALUE PORTFOLIO

Fidelity Management & Research Company is the Portfolios' sub-adviser. Jeff
Kerrigan is portfolio manager of the Small/Mid Cap Value Portfolio. Since
joining Fidelity in 1999, Mr. Kerrigan has worked as an analyst and manager.
Robert MacDonald is portfolio manager of the SP Large Cap Value Portfolio. Since
joining Fidelity in 1985, Mr. MacDonald has worked as an analyst and manager.

SP MFS CAPITAL OPPORTUNITIES PORTFOLIO

Maura A. Shaughnessy, a Senior Vice President of Massachusetts Financial
Services Company (MFS), has been employed in the investment management area of
MFS since 1991.

We set out below performance information for MFS Capital Opportunities SERIES,
which is a mutual fund managed by MFS according to investment objectives and
practices that are substantially similar to those governing the SP MFS Capital
Opportunities Portfolio. MFS Capital Opportunities Series and SP MFS Capital
Opportunities Portfolio are separate funds, and the past performance of MFS
Capital Opportunities Series is not indicative of the future performance of SP
MFS Capital Opportunities Portfolio. If material differences between the
investment styles of MFS Capital Opportunities Series and SP MFS Capital
Opportunities Portfolio should develop in the future, we will disclose such
differences. Unlike MFS Capital Opportunities Series, SP MFS Capital
Opportunities Portfolio has PIFM as an investment adviser.

74
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS

(for the periods ended
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION

Class A 47.72% 31.93% 20.20% 14.95%
S&P 500(1) 21.04% 28.51% 18.17%

(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.

SP MFS MID CAP GROWTH PORTFOLIO

Mark Regan, a Senior Vice President of MFS, has been employed in the investment
management area of MFS since 1989. David E. Sette-Ducati, a Vice President of
MFS, has been employed in the investment management area of MFS since 1995.

MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is an indirect wholly owned subsidiary of Sun Life Assurance
Company of Canada.

We set out below performance information for MFS Mid Cap Growth SERIES, which is
a mutual fund managed by MFS, according to investment objectives and practices
that are substantially similar to those governing the SP MFS Mid Cap Growth
Portfolio. MFS Mid Cap Growth Series and SP MFS Mid Cap Growth Portfolio are
separate funds, and the past performance of MFS Mid Cap Growth Series is not
indicative of the future performance of SP MFS Mid Cap Growth Portfolio. If
material differences between the investment styles of MFS Mid Cap Growth Series
and SP MFS Mid Cap Growth Portfolio should develop in the future, we will
disclose such differences. Unlike MFS Mid Cap Growth Series, SP MFS Mid Cap
Growth Portfolio has PIFM as an investment adviser.

AVERAGE ANNUAL TOTAL RETURNS

(for the periods ended
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION

Class A 78.62% 28.50% 14.95%
Russell Mid Cap Growth 51.29% 28.02%
Index

SP PIMCO HIGH YIELD PORTFOLIO

Benjamin L. Trosky, Managing Director, joined PIMCO as a portfolio manager in
1990, and has managed fixed income accounts for various institutional clients
and funds since that time.

We set out below performance information for PIMCO High Yield Fund, which is a
mutual fund managed by PIMCO, according to investment objectives and practices
that are substantially similar to those governing the SP PIMCO High Yield
Portfolio. PIMCO High Yield Fund and SP PIMCO High Yield Portfolio are separate
funds, and the past performance of PIMCO High Yield Fund is not

75
<PAGE>

indicative of the future performance of SP PIMCO High Yield Portfolio. If
material differences between the investment styles of PIMCO High Yield Fund and
SP PIMCO High Yield Portfolio should develop in the future, we will disclose
such differences. Unlike PIMCO High Yield Fund, SP PIMCO High Yield Portfolio
has PIFM as an investment adviser.

AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/99)

<TABLE>
<CAPTION>
1 Year 5 Years Fund Inception
------ ------- --------------
(12/16/92)(3)
<S> <C> <C> <C>
Institutional Class 2.82% 10.82% 10.63%
Administrative Class 2.57% 10.55% 10.36%
Lehman Brothers BB
Intermediate Corporate Index (1) 2.20% 9.38% 8.85%
Lipper High Current Yield
Fund Avg. (2) 4.53% 8.84% 8.65%
</TABLE>

(1) The Lehman Brothers BB Intermediate Corporate Index is an unmanaged index
comprised of various fixed income securities rated BB. It is not possible
to invest directly in the index.

(2) The Lipper High Current Yield Fund Average is a total return performance
average of Funds tracked by Lipper Analytical Services, Inc. that aim at
high (relative) current yield from fixed income securities, have no quality
or maturity restrictions, and tend to invest in lower grade debt issues. It
does not take into account sales charges.

(3) The Fund began operations on 12/16/92. Index comparisons began on 12/31/92.

SP PIMCO TOTAL RETURN PORTFOLIO

William H. Gross, Managing Director, Chief Investment Officer and a founding
partner of PIMCO has managed comparable accounts since 1987. He leads a team
which manages several other PIMCO funds.

We set out below performance information for PIMCO Total Return Fund, which is a
mutual fund managed by PIMCO, according to investment objectives and practices
that are substantially similar to those governing the SP PIMCO Total Return
Portfolio. PIMCO Total Return Fund and SP PIMCO Total Return Portfolio are
separate funds, and the past performance of PIMCO Total Return Fund is not
indicative of the future performance of SP PIMCO Total Return Portfolio. If
material differences between the investment styles of PIMCO Total Return Fund
and SP PIMCO Total Return Portfolio should develop in the future, we will
disclose such differences. Unlike PIMCO Total Return Fund, SP PIMCO Total Return
Portfolio has PIFM as an investment adviser.

AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/99)

1 Year 5 Years 10 Years
------ ------- --------

Institutional Class (0.28)% 8.62% 8.80%
Administrative Class (0.53)% 8.35% 8.54%
Lehman Aggregate Bond Index (1) (0.82)% 7.73% 7.70%
Lipper Intermediate Investment
Grade Debt Portfolio Avg. (2) (1.31)% 6.79% 7.09%

(1) The Lehman Brothers Aggregate Bond Index is an unmanaged index of
investment grade U.S. dollar-denominated fixed income securities of
domestic issuers having a maturity greater than one year. It is not
possible to invest directly in the index.

(2) The Lipper Intermediate Investment Grade Debt Portfolio Average is a total
return performance average of Funds tracked by Lipper Analytical Services,
Inc. that invest at least 65% of their assets in investment-grade debt
issues (rated in the top four grades) with dollar weighted average
maturities of five to ten years. It does not take into account sales
charges.

76
<PAGE>

SP PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO

Susan Hirsch, a managing Director of Prudential Investments, has managed the
retail fund counterpart of this Portfolio since it began. Ms. Hirsch joined
Prudential Investments in July 1996. Before that she was employed by Lehman
Brothers Global Asset Management from 1988 to 1996 and Delphi Asset Management
in 1996. She managed growth stock portfolios at both firms. Ms. Hirsch holds a
B.S. from Brooklyn College and is a member of the Financial Analysts Federation
and the New York Society of Security Analysts.

We set out below performance information for Prudential U.S. Emerging Growth
Fund, which is a mutual fund managed by PIFM, according to investment objectives
and practices that are substantially similar to those governing the SP
Prudential U.S. Emerging Growth Portfolio. Prudential U.S. Emerging Growth Fund
and SP Prudential U.S. Emerging Growth Portfolio are separate funds, and the
past performance of Prudential U.S. Emerging Growth Fund is not indicative of
the future performance of SP Prudential U.S. Emerging Growth Portfolio. If
material differences between the investment styles of Prudential U.S. Emerging
Growth Fund and SP Prudential U.S. Emerging Growth Portfolio should develop in
the future, we will disclose such differences.

AVERAGE ANNUAL RETURNS (1) (AS OF 12-31-99)

1 Year Since Inception
Class A shares 83.44% 39.88% (since 12-31-96)
Class B shares 86.47% 40.65% (since 12-31-96)
Class C shares 88.56% 40.68% (since 12-31-96)
Class Z shares 93.55% 42.60% (since 12-31-96)
S&P 400 Mid-Cap Index (2) 14.72% 21.81% (since 12-31-96)
Lipper Average (3) 72.56% 30.78% (since 12-31-96)

1. The Fund's returns are after deduction of sales charges and expenses.
Without the distribution and service (12b-1) fee waiver for Class A shares,
the returns would have been lower.

2. The Standard & Poor's Mid-Cap 400 Stock Index (S&P 400 Mid-Cap Index)- an
unmanaged index of 400 domestic stocks chosen for market size, liquidity
and industry group representation-gives a broad look at how mid-cap stock
prices have performed. These returns do not include the effect of any sales
charges or operating expenses of a mutual fund portfolio. These returns
would be lower if they included the effect of sales charges and operating
expenses. The securities in the S&P 400 Mid-Cap Index may be very different
from those in the Portfolio. Source: Lipper Inc.

3. The Lipper Average is based on the average return of all mutual funds in
the Lipper Mid-Cap Growth Fund category and does not include the effect of
any sales charges. Again, these returns would be lower if they included the
effect of sales charges. Source: Lipper Inc.

77
<PAGE>

SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO

Alfred Harrison is portfolio manager for the portion of the Portfolio's assets
advised by Alliance. Mr. Harrison joined Alliance in 1978 and is manager of the
firm's Minneapolis office. He is Vice Chairman of Alliance Capital Management
Corporation.

Spiros Segalas and Kathleen McCarragher are co-portfolio managers for the
portion of the Portfolio's assets advised by Jennison. (See descriptions above,
under "Prudential Jennison Portfolio").

HOW TO BUY AND SELL SHARES OF THE FUND

The Fund offers two classes of shares in each Portfolio - Class I and Class II.
Each Class participates in the same investments within a given Portfolio, but
the Classes differ as far as their charges. 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.

Together with this prospectus, you should have received a prospectus for the
Strategic Partners Variable Annuity contract. You should refer to that
prospectus 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 seven 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

Any purchase or sale of Portfolio shares is made at the net asset value, or NAV,
of such shares. The price at which a purchase or redemption is made is based on
the next calculation of the NAV after the order is received in good order. The
NAV of each share class of each Portfolio (except the Money Market Portfolio) is
determined once a day - at 4:00 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 4:00 p.m. on that day. The NAV for the Prudential Money Market
Portfolio is determined as of 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 Prudential Money Market
Portfolio is determined by a simple calculation. It's the total value of a
Portfolio (assets minus liabilities) divided by the

78
<PAGE>

total number of shares outstanding. The NAV for the Prudential Money Market
Portfolio will ordinarily remain at $10 per share. (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 a sale on that day, 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.

A Portfolio may own securities that are primarily listed on foreign exchanges
that trade on weekends or other days when the Portfolios do not price their
shares. Therefore, the value of a Portfolio's assets may change on days when
shareholders cannot purchase or redeem Portfolio shares.

All SHORT-TERM DEBT SECURITIES held by the Prudential Money Market Portfolio are
valued at amortized cost. The amortized cost 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.

For each Portfolio, other than the Prudential Money Market Portfolio, short-term
debt securities, including bonds, notes, debentures and other debt securities,
and money market instruments such as certificates of deposit, commercial paper,
bankers' acceptances and obligations of domestic and foreign banks, with
remaining maturities of more than 60 days, for which market quotations are
readily available, are valued by an independent pricing agent or principal
market maker (if available, otherwise a primary market dealer).

Short-term debt securities with remaining maturities of 60 days or less are
valued at cost with interest accrued or discount amortized to the date of
maturity, unless such valuation, in the judgment of Prudential or a sub-adviser,
does not represent fair value.

CONVERTIBLE DEBT SECURITIES that are traded in the over-the-counter market,
including listed convertible debt securities for which the primary market is
believed by Prudential or a sub-adviser to be over-the-counter, are valued at
the mean between the last bid and asked prices provided by a principal market
maker (if available, otherwise a primary market dealer).

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

OPTIONS ON STOCK AND STOCK INDEXES that are traded on a national securities
exchange are valued at the last sale price on such exchange on the day of
valuation or, if there was no such sale on such day, at the mean between the
most recently quoted bid and asked prices on such 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.

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FORWARD CURRENCY EXCHANGE CONTRACTS are valued at the cost of covering or
offsetting such contracts calculated on the day of valuation. Securities which
are valued in accordance herewith in a currency other than U.S. dollars shall be
converted to U.S. dollar equivalents at a rate obtained from a recognized bank,
dealer or independent service on the day of valuation.

OVER-THE-COUNTER (OTC) OPTIONS are valued at the mean between bid and asked
prices provided by a dealer (which may be the counterparty). The sub-adviser
will monitor the market prices of the securities underlying the OTC options with
a view to determining the necessity of obtaining additional bid and asked
quotations from other dealers to assess the validity of the prices received from
the primary pricing dealer.

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. PIMS' principal business
address is 751 Broad Street, Newark, New Jersey 07102-3777. The Fund has adopted
a distribution plan under Rule 12b-1 of the Investment Company Act of 1940
covering Class II shares. Under that plan, Class II of each Portfolio pays to
PIMS a distribution or "12b-1" fee at the annual rate of 0.25% of the average
daily net assets of Class II. This fee pays for distribution services for Class
II shares. Because these fees are paid out of the Portfolio's assets on an
on-going basis, over time these fees will increase the cost of an investment in
Class II shares and may cost more than paying other types of sales charges.
These 12b-1 fees do not apply to Class I.

OTHER INFORMATION

FEDERAL INCOME TAXES

If you own or are considering purchasing a Strategic Partners Variable annuity
contract, you should consult the prospectus for that contract for tax
information. You should also consult with a qualified tax adviser for
information and advice.

The SAI provides information about certain tax laws applicable to the Fund.

EUROPEAN MONETARY UNION

On January 1, 1999, 11 of the 15 member states of the European Monetary Union
introduced the "euro" as a common currency. During a three-year transitional
period, the euro will coexist with each participating state's currency and, on
July 1, 2002, the euro is expected to become the sole currency of the
participating states. During the transition period, the Fund will treat the euro
as a separate currency from that of any participating state. The conversion may
adversely affect the Fund if the euro does not take effect as planned; if a
participating state withdraws from the European Monetary Union; or if the
computing, accounting and trading systems used by the Fund's service providers,
or by entities with which the Fund or its service providers do business, are not
capable of recognizing the euro as a distinct currency at the time of, and
following, euro conversion. In addition, the conversion could cause markets to
become more volatile.

MONITORING FOR POSSIBLE CONFLICTS

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The Fund sells its shares to fund variable life insurance contracts and variable
annuity contracts and is authorized to 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.

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(This page intentionally left blank.)

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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 (800) 778-2255

Write to The Prudential Series Fund, Inc., 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 20549-0102

By Electronic Request:

[email protected]

(The SEC charges a fee to copy documents.)

In Person:
- - - - - - ---------

Public Reference Room
in Washington, DC
(For hours of operation, call 1-202-942-8090)

Via the Internet:

on the EDGAR Database at
http://www.sec.gov

SEC File No. 811-03623

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

AUGUST __, 2000

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 thirty-seven 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 shares are 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 exemptive order (the Order) from the SEC.
The Fund and its Portfolios are managed in compliance with the terms and
conditions of that Order. This statement of additional information is not a
prospectus and should be read in conjunction with the Fund's prospectus dated
August , 2000, 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) 778-2255.

THE PRUDENTIAL SERIES FUND, INC.
751 Broad Street
Newark, New Jersey 07102-3777
Telephone: (800) 778-2255

<PAGE>

PSF-2 Ed 8-00 Catalog No. 646674P

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<PAGE>

CONTENTS

PAGE
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS
GENERAL
CONVERTIBLE SECURITIES
WARRANTS
FOREIGN SECURITIES
OPTIONS ON STOCK AND DEBT SECURITIES
OPTIONS ON STOCK INDEXES
OPTIONS ON FOREIGN CURRENCIES
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
INTEREST RATE SWAPS
LOAN PARTICIPATIONS
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
SHORT SALES
LOANS OF PORTFOLIO SECURITIES
LLIQUID SECURITIES
FURTHER INFORMATION ABOUT THE ZERO COUPON BOND PORTFOLIOS
U.S. GOVERNMENT SECURITIES
BRADY BONDS
RISK FACTORS RELATING TO JUNK BONDS
OTHER INVESTMENT PRACTICES

INVESTMENT RESTRICTIONS

INVESTMENT MANAGEMENT AND DISTRIBUTION ARRANGEMENTS
INVESTMENT MANAGEMENT ARRANGEMENTS
DISTRIBUTION ARRANGEMENTS
CODE OF ETHICS

OTHER INFORMATION CONCERNING THE FUND
INCORPORATION AND AUTHORIZED STOCK
PORTFOLIO TRANSACTIONS AND BROKERAGE
TAXATION OF THE FUND
CUSTODIAN AND TRANSFER AGENT
EXPERTS
LICENSES

MANAGEMENT OF THE FUND

FUND PERFORMANCE

FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC.

THE PRUDENTIAL SERIES FUND, INC. SCHEDULE OF INVESTMENTS

APPENDIX: DEBT RATINGS

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INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS

I. GENERAL

This Statement of Additional Information provides information about the Fund,
which consists of thirty-seven 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, SP Aggressive Growth
Asset Allocation Portfolio, SP AIM Aggressive Growth Portfolio, SP AIM Growth
and Income Portfolio, SP Alliance Large Cap Growth Portfolio, SP Alliance
Technology Portfolio, SP Balanced Asset Allocation Portfolio, SP Conservative
Asset Allocation Portfolio, SP Davis Value Portfolio, SP Deutsche International
Equity Portfolio, SP Growth Asset Allocation Portfolio, SP INVESCO Small Company
Growth Portfolio, SP Jennison International Growth Portfolio, SP Large Cap Value
Portfolio, SP MFS Capital Opportunities Portfolio, SP MFS Mid Cap Growth
Portfolio, SP PIMCO High Yield Portfolio, SP PIMCO Total Return Portfolio, SP
Prudential U.S. Emerging Growth Portfolio, SP Small/Mid Cap Value Portfolio, SP
Strategic Partners Focused Growth Portfolio, Stock Index Portfolio, 20/20 Focus
Portfolio, Zero Coupon Bond Portfolio 2000 and Zero Coupon Bond Portfolio 2005.
Not every Portfolio is available under every Contract. The prospectus for each
Contract lists the Portfolios currently available under that particular
Contract. The Portfolios are managed by Prudential and Prudential Investments
Fund Management LLC (PIFM) as discussed under MANAGEMENT OF THE FUND.

Each of the thirty-seven 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. As discussed in the prospectus,
several of the Portfolios may invest in money market instruments and comparable
securities as part of assuming a temporary defensive position.

The investment objectives of the Portfolios can be found under RISK/RETURN
SUMMARY and HOW THE PORTFOLIOS INVEST in the prospectus.

A detailed discussion of the type of investment instruments in which the
Portfolios may invest follows.

II. CONVERTIBLE SECURITIES

The Conservative Balanced, Diversified Conservative Growth, Flexible Managed,
Equity, Prudential Jennison, Small Capitalization Stock, 20/20 Focus, SP Large
Cap Value, and SP Small/Mid Cap Value Portfolios may invest 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.
As discussed in the Prospectus, certain PIFM-Advised Portfolios also may invest
in this type of security.

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

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Prudential Jennison, Small Capitalization Stock, 20/20 Focus, SP Large Cap
Value, and SP Small/Mid Cap Value Portfolios may invest in warrants on common
stocks. As discussed in the Prospectus, certain PIFM-Advised Portfolios also may
invest in this type of security. 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 their assets in U.S. currency denominated debt
securities issued outside the U.S. by foreign or U.S. issuers. In addition, the
fixed income portions of the Conservative Balanced and Flexible Managed
Portfolios may each invest up to 20% in such securities. The Conservative
Balanced, Equity Income and Flexible Managed 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, Natural Resources
and Prudential Jennison 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. The
SP Large Cap Value and SP Small/Mid Cap Value Portfolios also may invest a
portion of their assets in securities of foreign issuers. As discussed in the
Prospectus, certain PIFM-Advised Portfolios also may invest in this type of
security.

American Depository Receipts (ADRs) are not considered "foreign securities" for
purposes of the percentage limitations set forth in the preceding paragraph.
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 (including ADRs) 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 accounting, 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,

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<PAGE>

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.

SPECIAL CONSIDERATIONS OF INVESTMENT IN EURO-DENOMINATED SECURITIES. On January
1, 1999, 11 of the 15 member states of the European Monetary Union introduced
the "euro" as a common currency. During a three-year transitional period, the
euro will coexist with each participating state's currency and, on July 1, 2002,
the euro is expected to become the sole currency of the participating states.
During the transition period, the Portfolios will treat the euro as a separate
currency from that of any participating state. The conversion may adversely
affect a Portfolio if the euro does not take effect as planned; if a
participating state withdraws from the European Monetary Union; or if the
computing, accounting and trading systems used by the Portfolio's service
providers, or by entities with which the Portfolio or its service providers do
business, are not capable of recognizing the euro as a distinct currency at the
time of, and following euro conversion. In addition, the conversion could cause
markets to become more volatile. The overall effect of the transition of member
states' currencies to the euro is not known at this time. It is likely that more
general short- and long-term ramifications can be expected, such as changes in
the economic environment and change in the behavior of investors, which would
affect a Portfolio's investments and its net asset value. In addition, although
U.S. Treasury regulations generally provide that the euro conversion will not,
in itself, cause a U.S. taxpayer to realize gain or loss, other changes that may
occur at the time of the conversion, such as accrual periods, holiday
conventions, indexes, and other features may require the realization of a gain
or loss by a Portfolio as determined under existing tax law. The Portfolio
managers have taken steps: (1) that they believe will reasonably address
euro-related changes to enable the Portfolios and their service providers to
process transactions accurately and completely with minimal disruption to
business activities and (2) to obtain reasonable assurances that appropriate
steps have been taken by the Portfolios' other service providers to address the
conversion. The Portfolios have not borne any expense relating to these actions.

V. OPTIONS ON STOCK AND DEBT SECURITIES

A. OPTIONS ON STOCK

The Conservative Balanced, Diversified Conservative Growth, Equity Income,
Equity, Flexible Managed, Global, Natural Resources, Prudential Jennison , Small
Capitalization Stock, SP Large Cap Value and SP Small/Mid Cap Value 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 Quotation System (NASDAQ), or
privately negotiated with broker-dealers (OTC equity options). As discussed in
the Prospectus, certain PIFM-Advised Portfolios also may invest in this type of
security.

A call option is a short-term contract that gives the option purchaser or
"holder" the right to acquire a

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<PAGE>

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
price at any 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 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, Diversified Conservative Growth, Equity Income,
Equity, Flexible Managed, Global, Natural Resources, Prudential Jennison, Small
Capitalization Stock, 20/20 Focus, SP Large Cap Value, and SP Small/Mid Cap
Value 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 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 intends 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 Conservative Balanced, Diversified Bond, Diversified Conservative Growth,
Flexible Managed, Government Income, High Yield Bond, SP Large Cap Value, and SP
Small/Mid Cap Value 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 intends to invest more than
5% of its net assets at any one time in call options on debt securities. As
discussed in the Prospectus, certain PIFM-Advised Portfolios also may invest in
this type of security.

Options on debt securities are similar to stock options (see above) except that
the option holder has the

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<PAGE>

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 above 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 above Portfolios may also purchase protective puts to try to protect the
value of one of the securities it owns 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.

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 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

8
<PAGE>

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 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 a 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 Conservative Balanced, Diversified Conservative Growth, Equity, Equity
Income, Flexible Managed, Global, Natural Resources, Prudential Jennison, Small
Capitalization Stock, Stock Index, 20/20 Focus, SP Large Cap Value, and SP
Small/Mid Cap Value 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). As discussed in the
Prospectus, certain PIFM-Advised Portfolios also may invest in this type of
security.

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. The qualified securities 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 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 the 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

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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, the Portfolio will not be subject to the requirement described
in this paragraph if it holds a call on the same index as the call written and
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.

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 special 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.

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 additional 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

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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 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.

VII. OPTIONS ON FOREIGN CURRENCIES

A. OPTIONS ON FOREIGN CURRENCY

The Conservative Balanced, Diversified Conservative Growth, Equity Income,
Equity, Flexible Managed, Global, Natural Resources, Prudential Jennison, SP
Large Cap Value, and SP Small/Mid Cap Value 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). As discussed in the Prospectus,
certain PIFM-Advised Portfolios also may invest in this type of security.

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 in U.S. dollar terms. 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,

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<PAGE>

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 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, Equity, Equity
Income, Flexible Managed, Global, Natural Resources, Prudential Jennison, Small
Capitalization Stock, Stock Index, 20/20 Focus, SP Large Cap Value, and SP
Small/Mid Cap Value Portfolios may purchase and sell stock index futures
contracts. As discussed in the Prospectus, certain PIFM-Advised Portfolios also
may invest in this type of security.

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 Conservative Balanced, Diversified Bond, Flexible Managed, Global,
Government Income, High Yield Bond, SP Large Cap Value, and SP Small/Mid Cap
Value Portfolios may, to the extent permitted by applicable regulations,
purchase and sell futures contracts on interest-bearing securities or interest
rate indexes. The Diversified Conservative Growth, SP Large Cap Value, and SP
Small/Mid Cap Value Portfolios may, to the extent permitted by applicable
regulations, purchase and sell futures contracts on debt securities, aggregates
of debt securities, and U.S. government securities. As discussed in the
Prospectus, certain PIFM-Advised Portfolios also may invest in this type of
security.

The Conservative Balanced, Diversified Conservative Growth, Flexible Managed,
Equity Income, Equity, Prudential Jennison, Global, Natural Resources, 20/20
Focus, SP Large Cap Value, and SP Small/Mid

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Cap Value Portfolios may purchase and sell futures contracts on foreign
currencies. As discussed in the Prospectus, certain PIFM-Advised Portfolios also
may invest in this type of security.

When a futures contract is entered into, each party deposits with a futures
commission merchant (or in a segregated account) approximately 5% of the
contract amount. This is known as the "initial margin." Every day during the
futures contract, either the buyer or the futures commission merchant will make
payments of "variation margin." In other words, if the value of the underlying
security, index or interest rate increases, then the buyer will have to add to
the margin account so that the account balance equals approximately 5% of the
value of the contract on that day. The next day, the value of the underlying
security, index or interest rate may decrease, in which case the buyer would
receive money from the account equal to the amount by which the account balance
exceeds 5% of the value of the contract on that day.

The above Portfolios may purchase or sell futures contracts without limit for
hedging purposes. This would be the case, for example, if a portfolio manager is
using a futures contract to reduce the risk of a particular position on a
security. The above Portfolios can also purchase or sell futures contract for
non-hedging purposes provided the initial margins and premiums associated with
the contracts do not exceed 5% of the fair market value of the Portfolio's
assets, taking into account unrealized profits or unrealized losses on any such
futures. This would be the case if a portfolio manager uses futures for
investment purposes, to increase income or to adjust the Portfolio's asset mix.

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 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 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 follow 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, a Portfolio may utilize "put/call combinations" as synthetic long
stock index futures positions. A put/call combination is the purchase of a call
and the sale of a put at the same time 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 set aside 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

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<PAGE>

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.

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, Natural Resources, 20/20
Focus, SP Large Cap Value, and SP Small/Mid Cap Value Portfolios may enter into
foreign currency exchange contracts to protect the value of their foreign
holdings against future changes in the level of currency exchange rates. As
discussed in the Prospectus, certain PIFM-Advised Portfolios also may invest in
this type of security.

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 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
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

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<PAGE>

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 movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain. The above 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 one 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.

The above 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. If the
Portfolio does engage in such investment

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<PAGE>

activity, it may also enter into forward foreign currency exchange contracts.

X. INTEREST RATE SWAPS

The Diversified Bond, Diversified Conservative Growth, Government Income, High
Yield Bond, SP Large Cap Value, and SP Small/Mid Cap Value 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. As discussed in the Prospectus, certain PIFM-Advised Portfolios
also may invest in this type of security.

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 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 portfolio manager'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.

Each of the above Portfolios will set aside 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 Conservative Balanced, Diversified Bond, Diversified Conservative Growth,
Flexible Managed, High Yield Bond, Money Market, SP Large Cap Value, and SP
Small/Mid Cap Value Portfolios may invest in fixed and floating rate loans that
are privately negotiated between a corporate borrower and one or more financial
institutions. The above Portfolios will generally invest in loans in the form of
"loan participations." As discussed in the Prospectus, certain PIFM-Advised
Portfolios also may invest in this type of security.

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

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A. DESCRIPTION OF REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS

The Diversified Bond, Diversified Conservative Growth, Government Income, High
Yield Bond , SP Large Cap Value, and SP Small/Mid Cap Value Portfolios and the
fixed income 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 market
portion of any Portfolio may use up to 10% of its net assets for reverse
repurchase agreements. As discussed in the Prospectus, certain PIFM-Advised
Portfolios also may invest in this type of security.

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 Portfolio 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 one 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 in the future 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 liquid assets in a segregated account which equal in value the
Portfolio's 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 Conservative Balanced, Diversified Bond, Diversified Conservative Growth,
Equity, Equity Income, Flexible Managed, Global, Government Income, High Yield
Bond, Natural Resources, Prudential Jennison, Small Capitalization Stock, 20/20
Focus, SP Large Cap Value, and SP Small/Mid Cap Value Portfolios may purchase or
sell securities on a when-issued or delayed delivery basis. As discussed in the
Prospectus, certain PIFM-Advised Portfolios also may invest in this type of
security.

Purchasing a security on a when-issued or delayed delivery basis 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 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

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<PAGE>

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 Conservative Balanced, Diversified Bond, Diversified Conservative Growth,
Flexible Managed, Government Income, High Yield Bond, 20/20 Focus, SP Large Cap
Value, and SP Small/Mid Cap Value Portfolios may enter into short sales. As
discussed in the Prospectus, certain PIFM-Advised Portfolios also may invest in
this type of security.

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 a segregated account 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
continuously secured by collateral in the form of cash, U.S. Government
securities or irrevocable standby letters of credit in an amount equal or
greater 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

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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.

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 (10% for the Money Market Portfolio) continues to be
satisfied.

XVII. FURTHER INFORMATION ABOUT THE ZERO COUPON BOND PORTFOLIOS

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

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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 to
the liquidation date (that is, 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 (that is,
fluctuations caused by market risk). By maintaining each Portfolio's duration
within one year of the length of time remaining until its liquidation date, the
investment adviser 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.

The investment adviser 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, the investment adviser
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

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smaller as the period to the liquidation date decreases.

XVIII. U.S. GOVERNMENT SECURITIES

A. U.S. TREASURY SECURITIES.

Certain Portfolios may invest in U.S. Treasury securities, including bills,
notes, bonds and other debt securities issued by the U.S. Treasury. These
instruments are direct obligations of the U.S. government and, as such, are
backed by the "full faith and credit" of the United States. They differ
primarily in their interest rates, the lengths of their maturities and the dates
of their issuances.

B. OBLIGATIONS ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES.

Certain Portfolios may invest in debt securities issued or guaranteed by
agencies or instrumentalities of the U.S. government, including but not limited
to, Government National Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC)
securities. Obligations of GNMA, the Farmers Home Administration and the
Export-Import Bank are backed by the "full faith and credit" of the United
States. In the case of securities not backed by the "full faith and credit" of
the United States, a Portfolio must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment. Such securities include
obligations issued by the Student Loan Marketing Association (SLMA), FNMA and
FHLMC, each of which may borrow from the U.S. Treasury to meet its obligations,
although the U.S. Treasury is under no obligation to lend to such entities.

Obligations issued or guaranteed as to principal and interest by the U.S.
Government may be acquired by a Portfolio in the form of U.S. Treasury notes or
bonds. Such notes and bonds are held in custody by a bank on behalf of the
owners. These custodial receipts are commonly referred to as Treasury Strips.

Certain Portfolios may invest in component parts of U.S. government debt
securities, namely either the corpus (principal) of such obligations or one or
more of the interest payments scheduled to be paid on such obligations. These
obligations may take the form of (1) obligations from which the interest coupons
have been stripped; (2) the interest coupons that are stripped; (3) book-entries
at a Federal Reserve member bank representing ownership of obligation
components; or (4) receipts evidencing the component parts (corpus or coupons)
of U.S. government obligations that have not actually been stripped. Such
receipts evidence ownership of component parts of U.S. government obligations
(corpus or coupons) purchased by a third party (typically an investment banking
firm) and held on behalf of the third party in physical or book-entry form by a
major commercial bank or trust company pursuant to a custody agreement with the
third party. The Fund may also invest in custodial receipts held by a third
party that are not U.S. Government securities.

SPECIAL CONSIDERATIONS.

U.S. government securities are considered among the most creditworthy of
fixed-income investments. The yields available from U.S. government securities
are generally lower than the yields available from corporate debt securities.
The values of U.S. government securities (like those of fixed-income securities
generally) will change as interest rates fluctuate.

During periods of falling U.S. interest rates, the values of outstanding
long-term U.S. government securities generally rise. Conversely, during periods
of rising interest rates, the values of such securities

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generally decline. The magnitude of those fluctuations will generally be greater
for securities with longer maturities. Although changes in the value of U.S.
government securities will not affect investment income from those securities,
they will affect the net asset value (NAV) of a Portfolio.

At a time when a Portfolio has written call options on a portion of its U.S.
government securities, its ability to profit from declining interest rates will
be limited. Any appreciation in the value of the securities held in the
portfolio above the strike price would likely be partially or wholly offset by
unrealized losses on call options written by a Portfolio. The termination of
option positions under these conditions would generally result in the
realization of capital losses, which would reduce the Portfolio's capital gains
distributions. Accordingly, a Portfolio would generally seek to realize capital
gains to offset realized losses by selling portfolio securities. In such
circumstances, however, it is likely that the proceeds of such sales would be
reinvested in lower yielding securities.

D. MORTGAGE-RELATED SECURITIES ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES AND INSTRUMENTALITIES

Certain Portfolios may invest in mortgage-backed securities and other derivative
mortgage products, including those representing an undivided ownership interest
in a pool of mortgages, e.g., GNMA, FNMA and FHLMC Certificates where the U.S.
government or its agencies or instrumentalities guarantees the payment of
interest and principal of these securities. However, these guarantees do not
extend to the securities' yield or value, which are likely to vary inversely
with fluctuations in interest rates nor do these guarantees extend to the yield
or value of a Portfolio's shares. These certificates are in most cases
"pass-through" instruments, through which the holder receives a share of all
interest and principal payments from the mortgages underlying the certificate,
net of certain fees.

In addition to GNMA, FNMA or FHLMC certificates through which the holder
receives a share of all interest and principal payments from the mortgages
underlying the certificate, certain Portfolios may also invest in certain
mortgage pass-through securities issued by the U.S. government or its agencies
and instrumentalities commonly referred to as mortgage-backed security strips or
MBS strips. MBS strips are usually structured with two classes that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. A common type of stripped mortgage security will have one class
receiving some of the interest and most of the principal from the mortgage
assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yields to
maturity on IOs and POs are sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets, and principal
payments may have a material effect on yield to maturity. If the underlying
mortgage assets experience greater than anticipated prepayments of principal, a
Portfolio may not fully recoup its initial investment in IOs. Conversely, if the
underlying mortgage assets experience less than anticipated prepayments of
principal, the yield on POs could be materially adversely affected.

Certain Portfolios will invest in both Adjustable Rate Mortgage Securities
(ARMs), which are pass-through mortgage securities collateralized by adjustable
rate mortgages, and Fixed-Rate Mortgage Securities (FRMs), which are
collateralized by fixed-rate mortgages.

FHLMC SECURITIES.

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FHLMC presently issues two types of mortgage pass-through securities, mortgage
participation certificates (PCs) and guaranteed mortgage certificates (GMCs).
PCs resemble GNMA Certificates in that each PC represents a pro rata share of
all interest and principal payments made and owed on the underlying pool. FHLMC
guarantees timely monthly payment of interest on PCs and the stated principal
amount.

ADJUSTABLE RATE MORTGAGE SECURITIES.

Generally, ARMs have a specified maturity date and amortize principal over their
life. In periods of declining interest rates, there is a reasonable likelihood
that ARMs will experience increased rates of prepayment of principal. However,
the major difference between ARMs and FRMs is that the interest rate and the
rate of amortization of principal of ARMs can and do change in accordance with
movements in a particular, pre-specified, published interest rate index. Because
the interest rate on ARMs generally moves in the same direction as market
interest rates, the market value of ARMs tends to be more stable than that of
long-term fixed-rate securities.

FIXED-RATE MORTGAGE SECURITIES.

Certain Portfolios may invest in high-coupon fixed-rate mortgage securities.
Such securities are collateralized by fixed-rate mortgages and tend to have high
prepayment rates when the level of prevailing interest rates declines
significantly below the interest rates on the mortgages. Thus, under those
circumstances, the securities are generally less sensitive to interest rate
movements than lower coupon FRMs.

COLLATERALIZED MORTGAGE OBLIGATIONS.

Collateralized mortgage obligations (CMOs) are debt instruments collateralized
by GNMA, FNMA or FHLMC Certificates, but also may be collateralized by whole
loans or private mortgage pass-through securities (such collateral collectively
hereinafter referred to as Mortgage Assets). Multi-class pass-through securities
are equity interests in a trust composed of Mortgage Assets. Payments of
principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multi-class pass-through securities. CMOs may be issued by
agencies or instrumentalities of the U.S. government, or by private originators
of, or investors in, mortgage loans, including depository institutions, mortgage
banks, investment banks and special-purpose subsidiaries of the foregoing. The
issuer of a series of CMOs may elect to be treated as a Real Estate Mortgage
Investment Conduit (REMIC). All future references to CMOs include REMICs and
multi-class pass-through securities.

In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche," is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semi-annual basis. The principal of and interest on the Mortgage Assets may
be allocated among the several classes of a CMO series in a number of different
ways.

SPECIAL CONSIDERATIONS OF MORTGAGE-BACKED SECURITIES.

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The underlying mortgages which collateralize the ARMs, CMOs and REMICs in which
certain Portfolios may invest will frequently have caps and floors which limit
the maximum amount by which the loan rate to the residential borrower may change
up or down (1) per reset or adjustment interval and (2) over the life of the
loan. Some residential mortgage loans restrict periodic adjustments by limiting
changes in the borrower's monthly principal and interest payments rather than
limiting interest rate changes. These payment caps may result in negative
amortization. In addition, because of the pass-through of prepayments of
principal on the underlying securities, mortgage-backed securities are often
subject to more rapid prepayment of principal than their stated maturity would
indicate.

The market value of mortgage securities, like other U.S. government securities,
will generally vary inversely with changes in market interest rates, declining
when interest rates rise and rising when interest rates decline. However,
mortgage securities, while having comparable risk of decline during periods of
rising rates, usually have less potential for capital appreciation than other
investments of comparable maturities due to the likelihood of increased
prepayments of mortgages as interest rates decline. In addition, to the extent
such mortgage securities are purchased at a premium, mortgage foreclosures and
unscheduled principal prepayments generally will result in some loss of the
holders' principal to the extent of the premium paid. On the other hand, if such
mortgage securities are purchased at a discount, an unscheduled prepayment of
principal will increase current and total returns and will accelerate the
recognition of income which when distributed to shareholders will be taxable as
ordinary income.

Because the prepayment characteristics of the underlying mortgages vary, it is
not possible to predict accurately the average life of a particular issue of
pass-through certificates. Mortgage-backed securities are often subject to more
rapid prepayment than their stated maturity date would indicate as a result of
the pass-through of prepayments on the underlying mortgage obligations. During
periods of declining interest rates, prepayments of mortgages underlying
mortgage-backed securities can be expected to accelerate. When mortgage
obligations are prepaid, a Portfolio reinvests the prepaid amounts in
securities, the yields of which reflect interest rates prevailing at that time.
Therefore, a Portfolio's ability to maintain a portfolio of high-yielding
mortgage-backed securities will be adversely affected to the extent that
prepayments of mortgages must be reinvested in securities which have lower
yields than the prepaid mortgages. Moreover, prepayments of mortgages which
underlie securities purchased at a premium generally will result in capital
losses. During periods of rising interest rates, the rate of prepayment
mortgages underlying mortgage-backed securities can be expected to decline,
extending the projected average maturity of the mortgage-backed securities. This
maturity extension risk may effectively change a security which was considered
short- or intermediate-term at the time of purchase into a long-term security.
Long-term securities generally fluctuate more widely in response to changes in
interest rates than short- or intermediate-term securities.

XIX. BRADY BONDS

Certain Portfolios may invest in debt obligations commonly known as "Brady
Bonds" which are created through the exchange of existing commercial bank loans
to foreign entities for new obligations in connection with debt restructurings
under a plan introduced by former U.S. Secretary of the Treasury, Nicholas F.
Brady (the Brady Plan). Brady Bonds have been issued in connection with the
restructuring of the bank loans, for example, of the governments of Mexico,
Venezuela and Argentina.

Brady Bonds have been issued only recently, and, accordingly, do not have a long
repayment history. They may be collateralized or uncollateralized and issued in
various currencies (although most are dollar-denominated) and they are actively
traded in the over-the-counter secondary market.

Dollar-denominated, collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal due at maturity by U.S. Treasury zero

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<PAGE>

coupon obligations which may have the same maturity as the Brady Bonds. Interest
payments on these Brady Bonds generally are collateralized by cash or securities
in an amount that, in the case of fixed rate bonds, is equal to at least one
year of rolling interest payments based on the applicable interest rate at that
time and is adjusted at regular intervals thereafter. Certain Brady Bonds are
entitled to value recovery payments in certain circumstances, which in effect
constitute supplemental interest payments but generally are not collateralized.
Brady Bonds are often viewed as having three or four valuation components: (1)
the collateralized repayment of principal at final maturity; (2) the
collateralized interest payments; (3) the uncollateralized interest payments;
and (4) any uncollateralized repayment of principal at maturity (these
uncollateralized amounts constitute the residual risk). In the event of a
default with respect to collateralized Brady Bonds as a result of which payment
obligations of the issuer are accelerated, the U.S. Treasury zero coupon
obligations held as collateral for the payment of principal will not be
distributed to investors, nor will such obligations be sold and the proceeds
distributed. The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds which will continue to be
outstanding at the time the face amount of the collateral will equal the
principal payments which would have been due on the Brady Bonds in the normal
course. In addition, in light of the residual risk of Brady Bonds and, among
other factors, the history of defaults with respect to commercial bank loans by
public and private entities of countries issuing Brady Bonds, investments in
Brady Bonds are to be viewed as speculative.

XX. RISK FACTORS RELATING TO JUNK BONDS

Fixed-income securities are subject to the risk of an issuer's inability to meet
principal and interest payments on the obligations (credit risk) and may also be
subject to price volatility due to such factors as interest rate sensitivity,
market perception of the creditworthiness of the issuer and general market
liquidity (market risk). Lower rated or unrated (that is, high yield or high
risk) securities (commonly referred to as junk bonds) are more likely to react
to developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates. Fluctuations in the prices of portfolio securities subsequent to their
acquisition will not affect cash income from such securities but will be
reflected in a Portfolio's net asset value. The investment adviser considers
both credit risk and market risk in making investment decisions for a Portfolio.
Investors should carefully consider the relative risks of investing in
high-yield securities and understand that such securities are not generally
meant for short term investing.

The investment adviser will perform its own investment analysis and will not
rely principally on the ratings assigned by the rating services, although such
ratings will be considered by the investment adviser. The investment adviser
will consider, among other things, the financial history and condition, the
prospects and the management of an issuer in selecting securities for a
Portfolio.

Under adverse economic conditions, there is a risk that highly leveraged issuers
may be unable to service their debt obligations or to repay their obligations
upon maturity. During an economic downturn or recession, securities of highly
leveraged issuers are more likely to default than securities of higher rated
issuers. In addition to the risk of default, there are the related costs of
recovery on defaulted issues. In addition, the secondary market for high-yield
securities, which is concentrated in relatively few market makers, may not be as
liquid as the secondary market for more highly rated securities and, from time
to time, it may be more difficult to value high-yield securities than more
highly rated securities. Under adverse market or economic conditions, the
secondary market for high-yield securities could contract further, independent
of any specific adverse changes in the condition of a particular issuer. As a
result, the investment adviser could find it more difficult to sell these
securities or may be able to sell the securities only at prices lower than if
such securities were widely traded. Prices realized upon the sale of such lower
rated or unrated securities, under these circumstances, may be less than the
prices used in calculating the

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Fund's NAV.

Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, a Portfolio may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If a Portfolio experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the debt portion of the Portfolio's
portfolio and increasing the exposure of the Portfolio to the risks of
high-yield securities.

Ratings of fixed-income securities represent the rating agencies' opinions
regarding their credit quality and are not a guarantee of quality. Rating
agencies attempt to evaluate the safety of principal and interest payments and
do not evaluate the risks of fluctuations in market value. Also, rating agencies
may fail to make timely changes in credit ratings in response to subsequent
events, so that an issuer's current financial condition may be better or worse
than a rating indicates. Since investors generally perceive that there are
greater risks associated with the medium to lower rated securities of the type
in which a Portfolio may invest, the yields and prices of such securities may
tend to fluctuate more than those for higher rated securities. In the lower
quality segments of the fixed-income securities market, changes in perceptions
of issuers' creditworthiness tend to occur more frequently and in a more
pronounced manner than do changes in higher quality segments of the fixed-income
securities which fluctuate in response to the general level of interest rates.

XXI. OTHER INVESTMENT PRACTICES.

AFFILIATED BANK TRANSACTIONS. The SP Large Cap Value and SP Small/Mid Cap Value
Portfolios may engage in transactions with financial institutions that are, or
may be considered to be, "affiliated persons" of the Portfolio under the 1940
Act. These transactions may involve repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest U.S.
banks (measured by deposits); municipal securities; U.S. Government securities
with affiliated financial institutions that are primary dealers in these
securities; short-term currency transactions; and short-term borrowings. The
Board of Directors periodically reviews transactions involving affiliated
financial institutions.

BORROWING. The SP Large Cap Value and SP Small/Mid Cap Value Portfolios each may
borrow from banks or from other funds advised by FMR or its affiliates, or
through reverse repurchase agreements. If a Portfolio borrows money, its share
price may be subject to greater fluctuation until the borrowing is paid off. If
a Portfolio makes additional investments while borrowings are outstanding, this
may be considered a form of leverage.

INDEXED SECURITIES are instruments whose prices are indexed to the prices of
other securities, securities indices, currencies, or other financial indicators.
Indexed securities typically, but not always, are debt securities or deposits
whose value at maturity or coupon rate is determined by reference to a specific
instrument or statistic.

Currency-indexed securities typically are short-term to intermediate-term debt
securities whose maturity values or interest rates are determined by reference
to the values of one or more specified foreign currencies, and may offer higher
yields than U.S. dollar-denominated securities. Currency-indexed securities may
be positively or negatively indexed; that is, their maturity value may increase
when the specified currency value increases, resulting in a security that
performs similarly to a foreign-denominated instrument, or their maturity value
may decline when foreign currencies increase, resulting in a security whose
price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values of a
number of different foreign currencies relative to each other.

The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the United
States and abroad. Indexed securities may be more volatile than the underlying
instruments. Indexed securities are also

26
<PAGE>

subject to the credit risks associated with the issuer of the security, and
their values may decline substantially if the issuer's creditworthiness
deteriorates. Recent issuers of indexed securities have included banks,
corporations, and certain U.S. Government agencies. The SP Large Cap Value
Portfolio, SP Small/Mid Cap Value Portfolio, and certain other Portfolios may
invest in indexed securities.

LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are interests
in amounts owed by a corporate, governmental, or other borrower to lenders or
lending syndicates (loans and loan participations), to suppliers of goods or
services (trade claims or other receivables), or to other parties. Direct debt
instruments involve a risk of loss in case of default or insolvency of the
borrower and may offer less legal protection to the purchaser in the event of
fraud or misrepresentation, or there may be a requirement that a Portfolio
supply additional cash to a borrower on demand.

Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of interest and repayment of
principal. If scheduled interest or principal payments are not made, the value
of the instrument may be adversely affected. Loans that are fully secured
provide more protections than an unsecured loan in the event of failure to make
scheduled interest or principal payments. However, there is no assurance that
the liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral could be liquidated. Indebtedness of
borrowers whose creditworthiness is poor involves substantially greater risks
and may be highly speculative. Borrowers that are in bankruptcy or restructuring
may never pay off their indebtedness, or may pay only a small fraction of the
amount owed. Direct indebtedness of developing countries also involves a risk
that the governmental entities responsible for the repayment of the debt may be
unable, or unwilling, to pay interest and repay principal when due.

Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks. For example, if a
loan is foreclosed, the purchaser could become part owner of any collateral, and
would bear the costs and liabilities associated with owning and disposing of the
collateral. In addition, it is conceivable that under emerging legal theories of
lender liability, a purchaser could be held liable as a co-lender. Direct debt
instruments may also involve a risk of insolvency of the lending bank or other
intermediary.

A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified in the loan agreement. Unless, under the terms of the loan or other
indebtedness, the purchaser has direct recourse against the borrower, the
purchaser may have to rely on the agent to apply appropriate credit remedies
against a borrower. If assets held by the agent for the benefit of a purchaser
were determined to be subject to the claims of the agent's general creditors,
the purchaser might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or interest.

Direct indebtedness may include letters of credit, revolving credit facilities,
or other standby financing commitments that obligate purchasers to make
additional cash payments on demand. These commitments may have the effect of
requiring a purchaser to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.

The SP Large Cap Value Portfolio and SP Small/Mid Cap Value Portfolio each
limits the amount of total assets that it will invest in any one issuer or in
issuers within the same industry (see each Portfolio's investment limitations).
For purposes of these limitations, a Portfolio generally will treat the borrower
as the "issuer" of indebtedness held by the Portfolio. In the case of loan
participations where a bank or other lending institution serves as financial
intermediary between a Portfolio and the borrower, if the participation does not
shift to the Portfolio the direct debtor-creditor relationship with the
borrower, SEC interpretations require a Portfolio, in appropriate circumstances,
to treat both the lending bank or other lending institution and the borrower as
"issuers" for these purposes. Treating a financial intermediary as an issuer of
indebtedness may restrict a Portfolio's ability to invest in indebtedness
related to a single financial intermediary, or a group of intermediaries engaged
in the same industry, even if the underlying borrowers represent many different
companies and industries.

PREFERRED STOCK is a class of equity or ownership in an issuer that pays
dividends at a specified rate and that has precedence over common stock in the
payment of dividends. In the event an issuer is liquidated or declares
bankruptcy, the claims of owners of bonds take precedence over the claims of
those who own preferred and common

27
<PAGE>

stock.

REAL ESTATE INVESTMENT TRUSTS. Equity real estate investment trusts own real
estate properties, while mortgage real estate investment trusts make
construction, development, and long-term mortgage loans. Their value may be
affected by changes in the value of the underlying property of the trusts, the
creditworthiness of the issuer, property taxes, interest rates, and tax and
regulatory requirements, such as those relating to the environment. Both types
of trusts are dependent upon management skill, are not diversified, and are
subject to heavy cash flow dependency, defaults by borrowers, self-liquidation,
and the possibility of failing to qualify for tax-free status of income under
the Internal Revenue Code and failing to maintain exemption from the 1940 Act.

RESTRICTED SECURITIES are subject to legal restrictions on their sale.
Difficulty in selling securities may result in a loss or be costly to a
Portfolio. Restricted securities generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is required,
the holder of a registered security may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time it
decides to seek registration and the time it may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the holder might obtain a less favorable
price than prevailed when it decided to seek registration of the security.

TEMPORARY DEFENSIVE POLICIES. The SP Large Cap Value Portfolio and SP Small/Mid
Cap Value Portfolio each reserves the right to invest without limitation in
preferred stocks and investment-grade debt instruments for temporary, defensive
purposes.

INVESTMENT RESTRICTIONS

Set forth below are certain investment restrictions applicable to the
Portfolios. Restrictions 1, 3, 5, and 8 through 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.

With respect to each Portfolio (other than the SP Large Cap Value and SP
Small/Mid Cap Value Portfolios), none of the Portfolios will:

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. No Portfolio will, 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. Provided, however, that any Portfolio may invest
in the securities of one or more investment companies to the extent
permitted by any order of exemption granted by the United States
Securities and Exchange Commission.

28
<PAGE>

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, Diversified Conservative Growth, 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, Diversified
Conservative Growth, 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 and Global
Portfolios may purchase securities on 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); the Diversified Conservative Growth and
the 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);
20/20 Focus Portfolio (options on stock indexes). Collateral
arrangements entered into by the Fixed Income Portfolios (other than
the Money Market and Zero Coupon Bond Portfolios), Diversified
Conservative Growth Portfolio 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, Diversified
Conservative Growth, 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

29
<PAGE>

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 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 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 joint $1 billion
revolving credit facility with other Prudential mutual funds to facilitate
redemptions if necessary. This credit facility, which was entered into on March
13, 1999, is a syndicated arrangement with 12 different major banks.

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

30
<PAGE>

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 (for example, nickel, lead), gold, silver,
platinum, mining finance, plantations (for example, 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.

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.

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. Prudential intends to maintain the assets of each Portfolio pursuant
to those diversification requirements.

FUNDAMENTAL INVESTMENT RESTRICTIONS APPLICABLE ONLY TO SP LARGE CAP VALUE
PORTFOLIO AND SP SMALL/MID CAP VALUE PORTFOLIO

INVESTMENT LIMITATIONS OF SP LARGE CAP VALUE PORTFOLIO

The following are the Portfolio's fundamental investment limitations set
forth in their entirety. The Portfolio may not:

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<PAGE>

1. issue senior securities, except as permitted under the Investment Company
Act of 1940, as amended;

2. borrow money, except that the Portfolio may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed)
less liabilities (other than borrowings). Any borrowings that come to
exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33
1/3% limitation;

3. UNDERWRITE SECURITIES ISSUED BY OTHERS, EXCEPT TO THE EXTENT THAT THE
PORTFOLIO MAY BE CONSIDERED AN UNDERWRITER WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 IN THE DISPOSITION OF RESTRICTED SECURITIES OR
IN CONNECTION WITH INVESTMENTS IN OTHER INVESTMENT COMPANIES.

4. PURCHASE THE SECURITIES OF ANY ISSUER (OTHER THAN SECURITIES ISSUED OR
GUARANTEED BY THE U.S. GOVERNMENT OR ANY OF ITS AGENCIES OR
INSTRUMENTALITIES, OR SECURITIES OF OTHER INVESTMENT COMPANIES), IF,
AS A RESULT, MORE THAN 25% OF THE PORTFOLIO'S TOTAL ASSETS WOULD BE
INVESTED IN COMPANIES WHOSE PRINCIPAL BUSINESS ACTIVITIES ARE IN THE
SAME INDUSTRY;

5. PURCHASE OR SELL REAL ESTATE UNLESS ACQUIRED AS A RESULT OF OWNERSHIP OF
SECURITIES OR OTHER INSTRUMENTS (BUT THIS WILL NOT PREVENT THE
PORTFOLIO FROM INVESTING IN SECURITIES OR OTHER INSTRUMENTS BACKED BY
REAL ESTATE OR SECURITIES OF COMPANIES ENGAGED IN THE REAL ESTATE
BUSINESS);

6. PURCHASE OR SELL PHYSICAL COMMODITIES UNLESS ACQUIRED AS A RESULT OF
OWNERSHIP OF SECURITIES OR OTHER INSTRUMENTS (BUT THIS SHALL NOT
PREVENT THE FUND FROM PURCHASING OR SELLING OPTIONS AND FUTURES
CONTRACTS OR FROM INVESTING IN SECURITIES OR OTHER INSTRUMENTS BACKED
BY PHYSICAL COMMODITIES); AND

7. LEND ANY SECURITY OR MAKE ANY LOAN IF, AS A RESULT, MORE THAN 33 1/3% OF
ITS TOTAL ASSETS WOULD BE LENT TO OTHER PARTIES, BUT THIS LIMITATION
DOES NOT APPLY TO PURCHASES OF DEBT SECURITIES OR TO REPURCHASE
AGREEMENTS.

8. THE PORTFOLIO MAY, NOTWITHSTANDING ANY OTHER FUNDAMENTAL POLICY OR
LIMITATION, INVEST ALL OF ITS ASSETS IN THE SECURITIES OF A SINGLE
OPEN-END MANAGEMENT INVESTMENT COMPANY MANAGED BY FIDELITY MANAGEMENT
& RESEARCH COMPANY OR AN AFFILIATE OR SUCCESSOR WITH SUBSTANTIALLY THE
SAME FUNDAMENTAL INVESTMENT OBJECTIVE, POLICIES AND LIMITATIONS AS THE
PORTFOLIO.

THE FOLLOWING INVESTMENT LIMITATIONS RESTRICTIONS ARE NOT FUNDAMENTAL AND
MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.

(i) IN ORDER TO QUALIFY AS A "REGULATED INVESTMENT COMPANY" UNDER SUBCHAPTER M
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE PORTFOLIO
CURRENTLY INTENDS TO COMPLY WITH CERTAIN

32
<PAGE>

DIVERSIFICATION LIMITS IMPOSED BY SUBCHAPTER M;

(ii) THE PORTFOLIO DOES NOT CURRENTLY INTEND TO SELL SECURITIES SHORT, UNLESS
IT OWNS OR HAS THE RIGHT TO OBTAIN SECURITIES EQUIVALENT IN KIND AND
AMOUNT TO THE SECURITIES SOLD SHORT, AND PROVIDED THAT TRANSACTIONS IN
FUTURES CONTRACTS AND OPTIONS ARE NOT DEEMED TO CONSTITUTE SELLING
SECURITIES SHORT.

(iii) THE PORTFOLIO DOES NOT CURRENTLY INTEND TO PURCHASE SECURITIES ON MARGIN,
EXCEPT THAT THE FUND MAY OBTAIN SUCH SHORT-TERM CREDITS AS ARE
NECESSARY FOR THE CLEARANCE OF TRANSACTIONS, AND PROVIDED THAT MARGIN
PAYMENTS IN CONNECTION WITH FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS SHALL NOT CONSTITUTE PURCHASING SECURITIES ON MARGIN.

(iv) The Portfolio may borrow money only (a) from a bank or from a registered
investment company or portfolio for which Fidelity Management &
Research Company or an affiliate serves as investment adviser or (b)
by engaging in reverse repurchase agreements with any party (reverse
repurchase agreements are treated as borrowings for purposes of
fundamental investment limitation (2)).

(v) THE PORTFOLIO DOES NOT CURRENTLY INTEND TO PURCHASE ANY SECURITY IF, AS A
RESULT, MORE THAN 15% OF ITS NET ASSETS WOULD BE INVESTED IN
SECURITIES THAT ARE DEEMED TO BE ILLIQUID BECAUSE THEY ARE SUBJECT TO
LEGAL OR CONTRACTUAL RESTRICTIONS ON RESALE OR BECAUSE THEY CANNOT BE
SOLD OR DISPOSED OF IN THE ORDINARY COURSE OF BUSINESS AT
APPROXIMATELY THE PRICES AT WHICH THEY ARE VALUED.

(vi) THE PORTFOLIO DOES NOT CURRENTLY INTEND TO LEND ASSETS OTHER THAN
SECURITIES TO OTHER PARTIES, EXCEPT BY (A) LENDING MONEY (UP TO 15% OF
THE PORTFOLIO'S NET ASSETS) TO A REGISTERED INVESTMENT COMPANY OR
PORTFOLIO FOR WHICH FIDELITY MANAGEMENT & RESEARCH COMPANY OR AN
AFFILIATE SERVES AS INVESTMENT ADVISER OR (B) ACQUIRING LOANS, LOAN
PARTICIPATIONS, OR OTHER FORMS OF DIRECT DEBT INSTRUMENTS AND, IN
CONNECTION THEREWITH, ASSUMING ANY ASSOCIATED UNFUNDED COMMITMENTS OF
THE SELLERS. (THIS LIMITATION DOES NOT APPLY TO PURCHASES OF DEBT
SECURITIES OR TO REPURCHASE AGREEMENTS.)

FOR PURPOSES OF LIMITATION (i), SUBCHAPTER M GENERALLY REQUIRES THE
PORTFOLIO TO INVEST NO MORE THAN 25% OF ITS TOTAL ASSETS IN SECURITIES OF
ANY ONE ISSUER AND TO INVEST AT LEAST 50% OF ITS TOTAL ASSETS SO THAT NO
MORE THAN 5% OF THE PORTFOLIO'S TOTAL ASSETS ARE INVESTED IN THE
SECURITIES OF ANY ONE ISSUER. HOWEVER, SUBCHAPTER M ALLOWS UNLIMITED
INVESTMENTS IN CASH, CASH ITEMS, GOVERNMENT SECURITIES (AS DEFINED BY
SUBCHAPTER M) AND SECURITIES OF OTHER INVESTMENT COMPANIES. THESE TAX
REQUIREMENTS ARE GENERALLY APPLIED AT THE END OF EACH QUARTER OF THE
FUND'S TAXABLE YEAR.

WITH RESPECT TO LIMITATION (V), IF, THROUGH A CHANGE IN VALUES, NET
ASSETS, OR OTHER CIRCUMSTANCES, THE PORTFOLIO WERE IN A POSITION WHERE
MORE THAN 15% OF ITS NET ASSETS WAS INVESTED IN ILLIQUID SECURITIES, IT
WOULD CONSIDER APPROPRIATE STEPS TO PROTECT LIQUIDITY.

FOR PURPOSES OF NORMALLY INVESTING AT LEAST 65% OF THE PORTFOLIO'S TOTAL
ASSETS IN COMMON STOCKS OF COMPANIES WITH LARGE MARKET CAPITALIZATIONS,
FMR INTERPRETS "TOTAL ASSETS" TO EXCLUDE COLLATERAL

33
<PAGE>

RECEIVED FOR SECURITIES LENDING TRANSACTIONS.

34
<PAGE>

INVESTMENT LIMITATIONS OF SP SMALL/MID CAP VALUE PORTFOLIO

The following are the Portfolio's fundamental investment limitations set
forth in their entirety. The Portfolio may not:

1. issue senior securities, except as permitted under the Investment Company
Act of 1940, as amended;

6. PURCHASE OR SELL PHYSICAL COMMODITIES UNLESS ACQUIRED AS A RESULT OF
OWNERSHIP OF SECURITIES OR OTHER INSTRUMENTS (BUT THIS SHALL NOT
PREVENT THE PORTFOLIO FROM PURCHASING OR SELLING OPTIONS AND FUTURES
CONTRACTS OR FROM INVESTING IN SECURITIES OR OTHER INSTRUMENTS BACKED
BY PHYSICAL COMMODITIES); AND

35
<PAGE>

THE FOLLOWING INVESTMENT LIMITATIONS RESTRICTIONS ARE NOT FUNDAMENTAL AND
MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.

(i) IN ORDER TO QUALIFY AS A "REGULATED INVESTMENT COMPANY" UNDER SUBCHAPTER
M OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE PORTFOLIO
CURRENTLY INTENDS TO COMPLY WITH CERTAIN DIVERSIFICATION LIMITS
IMPOSED BY SUBCHAPTER M.

(iii) THE PORTFOLIO DOES NOT CURRENTLY INTEND TO PURCHASE SECURITIES ON MARGIN,
EXCEPT THAT THE PORTFOLIO MAY OBTAIN SUCH SHORT-TERM CREDITS AS ARE
NECESSARY FOR THE CLEARANCE OF TRANSACTIONS, AND PROVIDED THAT MARGIN
PAYMENTS IN CONNECTION WITH FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS SHALL NOT CONSTITUTE PURCHASING SECURITIES ON MARGIN.

FOR PURPOSES OF LIMITATION (i), SUBCHAPTER M GENERALLY REQUIRES THE
PORTFOLIO TO INVEST NO MORE THAN 25% OF ITS TOTAL ASSETS IN SECURITIES OF
ANY ONE ISSUER AND TO INVEST AT LEAST 50% OF ITS TOTAL ASSETS SO THAT NO
MORE THAN 5% OF THE PORTFOLIO'S TOTAL ASSETS ARE INVESTED IN SECURITIES OF
ANY ONE ISSUER. HOWEVER, SUBCHAPTER M ALLOWS UNLIMITED INVESTMENTS IN
CASH, CASH ITEMS, GOVERNMENT SECURITIES (AS DEFINED BY SUBCHAPTER M) AND
SECURITIES OF OTHER INVESTMENT COMPANIES. THESE TAX REQUIREMENTS ARE
GENERALLY APPLIED AT THE END OF EACH QUARTER OF THE FUND'S TAXABLE YEAR.

WITH RESPECT TO LIMITATION (V), IF, THROUGH A CHANGE IN VALUES, NET
ASSETS, OR OTHER CIRCUMSTANCES,

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<PAGE>

THE PORTFOLIO WERE IN A POSITION WHERE MORE THAN 15% OF ITS NET ASSETS WAS
INVESTED IN ILLIQUID SECURITIES, IT WOULD CONSIDER APPROPRIATE STEPS TO
PROTECT LIQUIDITY.

FOR PURPOSES OF NORMALLY INVESTING AT LEAST 65% OF THE PORTFOLIO'S TOTAL
ASSETS IN COMMON STOCKS OF COMPANIES WITH MEDIUM MARKET CAPITALIZATIONS,
FMR INTERPRETS "TOTAL ASSETS" TO EXCLUDE COLLATERAL RECEIVED FOR SECURITIES
LENDING TRANSACTIONS.

INVESTMENT MANAGEMENT AND
DISTRIBUTION ARRANGEMENTS

I. INVESTMENT MANAGEMENT ARRANGEMENTS

Prudential-Advised Funds

With respect to the 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 Portfolio
2000, and Zero Coupon Bond 2005 Portfolios, Prudential serves as investment
adviser. With respect to those Portfolios, the Fund has entered into an
Investment Advisory Agreement with Prudential under which Prudential will,
subject to the 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 such 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 Subadvisory Agreements with Franklin
Advisers, Inc. ("Franklin"), The Dreyfus Corporation ("Dreyfus"), Pacific
Investment Management Company ("PIMCO") and Jennison Associates LLC ("Jennison")
under which these companies provide investment advisory services to the
Diversified Conservative Growth Portfolio. Prudential has also entered into
Subadvisory Agreements with Jennison under which Jennison furnishes investment
advisory services in connection with the management of the Prudential Jennison
and 20/20 Focus Portfolios. More detailed information about Prudential and its
role as investment adviser can be found in HOW THE PORTFOLIOS ARE MANAGED 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, 20/20 Focus and Diversified Conservative Growth Portfolios is
equal to an annual rate of 0.75% of the average daily net assets of the
Portfolio. Under the Service

37
<PAGE>

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, 20/20 Focus and Diversified Conservative Growth Portfolios.

For the years ended December 31, 1999, 1998 and 1997, Prudential was paid the
following fees for providing investment management services to the Portfolios:

INVESTMENT MANAGEMENT FEES
YEAR ENDED DECEMBER 31

<TABLE>
<CAPTION>
PORTFOLIO 1999 1998 1997
--------- ---- ---- ----
<S> <C> <C> <C>
Conservative Balanced Portfolio $ 25,195,056 $ 26,224,569 $ 25,757,735
Diversified Bond Portfolio 4,880,364 3,782,116 2,981,884
Diversified Conservative Growth Portfolio(1) 398,516 n/a n/a
Equity Income Portfolio 8,409,886 8,830,161 6,601,602
Equity Portfolio 28,188,640 28,389,539 24,840,379
Flexible Managed Portfolio 31,532,667 33,049,940 31,740,440
Global Portfolio 7,287,427 5,342,945 4,836,302
Government Income Portfolio 1,545,837 1,735,370 1,758,870
High Yield Bond Portfolio 4,421,391 3,782,134 2,679,304
Money Market Portfolio 4,400,851 3,246,494 2,667,947
Natural Resources Portfolio 1,182,863 1,349,743 1,975,906
Prudential Jennison Portfolio 11,126,560 4,662,187 2,063,572
Small Capitalization Stock Portfolio(1) 1,504,880 1,243,051 867,687
Stock Index Portfolio 14,259,131 10,279,903 7,121,699
20/20 Focus Portfolio(1) 151,794 n/a n/a
Zero Coupon Bond 2000 Portfolio 160,235 159,341 161,101
Zero Coupon Bond 2005 Portfolio 179,486 149,980 123,525
Total $144,825,584 $132,227,473 $116,177,953
============ ============ ============
</TABLE>

- - - - - - ----------
(1) Portfolio commenced operations in May of 1999.

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

38
<PAGE>

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, prospectuses and statements of additional information, 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.

Under the Investment Advisory Agreement, Prudential has agreed to refund to a
Portfolio (except the Diversified Conservative Growth, Global and 20/20 Focus
Portfolios) 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 Diversified Conservative Growth, Global or 20/20 Focus
Portfolios.

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 23, 2000, and 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, Small Capitalization Stock, Diversified Conservative Growth
and 20/20 Focus Portfolios. A Supplemental Advisory Agreement regarding the
Prudential Jennison and Small Capitalization Stock Portfolios was approved by
the Funds 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 April 5, 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

39
<PAGE>

Stock Portfolios and the Investment Subadvisory Agreement with Jennison for the
Prudential Jennison Portfolio 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 April 5, 1999. The Service Agreement 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 in a Sub-Advisory Agreement with Jennison in respect of its
20/20 Focus Portfolio. This Sub-Advisory Agreement was ratified by the sole
shareholder of the Portfolio on April 5, 1999. The Fund has also entered into
Sub-Advisory Agreements in respect of its Diversified Conservative Growth
Portfolio with Jennison, PIC, Franklin, Dreyfus and PIMCO. These Sub-Advisory
Agreements were ratified by the sole shareholder of the Portfolio on April 5,
1999. Under each Sub-Advisory Agreement, Prudential has agreed to pay the named
sub-adviser a portion of the fee it receives for providing investment management
services to the Diversified Conservative Growth Portfolio.

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 December 31, 1999,
Franklin and its affiliates managed over $235 billion in assets. Franklin
Advisers, Inc. is subject to a Code of Ethics that permits personnel to invest
in securities, including securities that may be acquired by the Fund. However,
the Code imposes a variety of restrictions on such investing, such as blackout
periods.

THE DREYFUS CORPORATION

Dreyfus 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. As of December 31, 1999, Dreyfus managed over $129 billion in
assets. Dreyfus is subject to a Code of Ethics that permits personnel to invest
in securities, including securities that may be acquired by the Fund. However,
the Code imposes a variety of restrictions on such investing, such as blackout
periods.

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 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, 1999, PIMCO had
approximately $186 million in assets. PIMCO is subject to a Code of Ethics that
permits personnel to invest in securities, including securities that may be
acquired by the Fund. However, the Code imposes a variety of restrictions on
such investing, such as blackout periods.

40
<PAGE>

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 publicly traded
stock company through a process known as "demutualization." On February 10,
1998, the Company's Board of Directors authorized management to take the
preliminary steps necessary to allow the Company to demutualize. On July 1,
1998, legislation was enacted in New Jersey that would permit the conversion to
occur and that specified the process for conversion. Demutualization is a
complex process involving development of a plan of reorganization, adoption of a
plan by the Company's Board of Directors, a public hearing, voting by qualified
policyholders and regulatory approval. Prudential is working toward completing
this process in 2001 and currently expects adoption by the Board of Directors to
take place in the latter part of 2000. However, there is no certainty that the
demutualization will be completed in this timeframe or that the necessary
approvals will be obtained. Also it is possible that after careful review,
Prudential could decide not to demutualize or could decide to delay its plans.

PIFM-Advised Portfolios

Prudential Investments Fund Management LLC (PIFM) serves as adviser and manages
the business affairs of the following Portfolios of the Fund: SP AIM AGGRESSIVE
GROWTH PORTFOLIO, SP AIM GROWTH AND INCOME PORTFOLIO, SP AGGRESSIVE GROWTH ASSET
ALLOCATION PORTFOLIO, SP ALLIANCE LARGE CAP GROWTH PORTFOLIO, SP ALLIANCE
TECHNOLOGY PORTFOLIO, SP BALANCED ASSET ALLOCATION PORTFOLIO, SP CONSERVATIVE
ASSET ALLOCATION PORTFOLIO, SP DAVIS VALUE PORTFOLIO, SP DEUTSCHE INTERNATIONAL
EQUITY PORTFOLIO, SP LARGE CAP VALUE PORTFOLIO, SP SMALL/MID CAP VALUE
PORTFOLIO, SP GROWTH ASSET ALLOCATION PORTFOLIO, SP INVESCO SMALL COMPANY GROWTH
PORTFOLIO, SP JENNISON INTERNATIONAL GROWTH PORTFOLIO, SP MFS CAPITAL
OPPORTUNITIES PORTFOLIO, SP MFS MID CAP GROWTH PORTFOLIO, SP PIMCO HIGH YIELD
PORTFOLIO, SP PIMCO TOTAL RETURN PORTFOLIO, SP PRUDENTIAL U.S. EMERGING GROWTH
PORTFOLIO, AND SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO CAPITAL STOCK (THE
PIFM-ADVISED PORTFOLIOS). PIFM has responsibility for investment advisory
services to the PIFM-Advised Portfolios, and supervises the subadviser that
provides day-to-day portfolio management of the PIFM-Advised Portfolios.

PIFM and its predecessors have served as manager or administrator to investment
companies since 1987. As of January 31, 2000, PIFM served as the manager to 43
mutual funds, and as manager or administrator to 22 closed-end investment
companies, with aggregate assets of approximately $74.9 billion.

With respect to each PIFM-Advised Portfolio, PIFM currently charges the
following annual advisory fees: 0.89% for the SP Aggressive Growth Asset
Allocation Portfolio, 0.95% for the SP AIM Aggressive Growth Portfolio, 0.85%
for the SP AIM Growth and Income Portfolio, 0.90% for the SP Alliance Large Cap
Growth Portfolio, 1.15% for the SP Alliance Technology Portfolio, 0.78% for the
SP Balanced Asset Allocation Portfolio, 0.72% for the SP Conservative Asset
Allocation Portfolio, 0.75% for the SP Davis Value Portfolio, 0.90% for the SP
Deutsche International Equity Portfolio, 0.82% for the SP Growth Asset
Allocation Portfolio, 0.95% for the SP INVESCO Small Company Growth Portfolio,
0.95% for the SP

41
<PAGE>

Jennison International Growth Portfolio, 0.80% for the SP Large Cap Value
Portfolio, 0.75% for the SP MFS Capital Opportunities Portfolio, 0.80% for the
SP MFS Mid Cap Growth Portfolio, 0.60% for the SP PIMCO High Yield Portfolio,
0.60% for the SP PIMCO Total Return Portfolio, 0.85% for the SP Prudential U.S.
Emerging Growth Portfolio, 0.90% for the SP Small/Mid Cap Value Portfolio, and
0.90% for the SP Strategic Partners Focused Growth Portfolio.

PIFM pays each subadviser to a PIFM-Advised Portfolio out of the advisory fee
that it collects from each PIFM-Advised Portfolio. A description of the
subadviser to each PIFM-Advised Portfolio, together with the subadvisory fee
that PIFM pays to such subadviser, follows.

PIFM has entered into sub-advisory agreements with the advisers described below.
Each sub-advisory agreement provides for the sub-advisor to provide investment
advisory services to the various Portfolios. Such advisory services include
managing the investment operations and composition of the Portfolios in
accordance with the Portfolios' investment objectives, supervising the
Portfolios' investments and determining what investments and securities will be
purchased, retained, sold or loaned and what portion of the assets will be
invested or held uninvested as cash, maintaining and preserving the books and
records with respect to transactions, providing the custodian with daily
transaction information concerning the Portfolios' assets, and reconciling its
records to the of those custodian at least once a month and providing
performance reporting.

The sub-advisory agreements may be terminated at any time by the Fund's
directors or by a vote of a majority of the outstanding voting securities of the
Portfolio, or by PIFM or the sub-advisor at any time on not more than 60 days
nor less than 30 days written notice to the parties. The sub-advisory agreements
terminate automatically in the event of assignment.

A I M Capital Management, Inc.

A I M Capital Management, Inc. (A I M Capital) serves as the sub-advisor to the
SP AIM Aggressive Growth and SP AIM Growth and Income Portfolios. A I M Capital
is a wholly owned subsidiary of A I M Management Group Inc.("A I M Management"),
a holding company that has been engaged in the financial services business since
1976. The address of A I M Capital is 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173.

For the services performed, A I M Capital will be compensated by PIFM at the
annual percentage of the average daily net assets of the Portfolios as described
below:

Fee rate
--------

SP AIM Aggressive Growth Portfolio SP AIM Growth and Income Portfolio

.60% first $200 million .55% first $500 million
.55% over $200 million .50% over $500 million

This fee will be computed daily and paid quarterly.

42
<PAGE>

ALLIANCE CAPITAL MANAGEMENT L.P.

Alliance Capital Management L.P., a New York Stock Exchange listed company with
principal offices at 1345 Avenue of the Americas, New York, New York serves as
the sub-advisor to the SP Alliance Large Cap Growth and SP Alliance Technology
Portfolios and the SP Strategic Partners Focused Growth Portfolio.

SP Alliance Large Cap Growth Portfolio

Asset Level Fee Rate
- - - - - - ----------- --------

First $500 million .60%
Assets in excess of $500 million .50%

SP Strategic Partners Focused Growth Portfolio

Asset Level Fee Rate
- - - - - - ----------- --------

First $ 1 billion .60%
Assets in excess of $1 billion .55%

SP Alliance Technology Portfolio: 0.75% of assets

These fees will be computed daily and paid quarterly.

DAVIS SELECTED ADVISERS, LP

Davis Selected Advisers, LP serves as the sub-advisor to the SP Davis Value
Portfolio. The sub-advisor is located at 124 Elvira Street, Santa Fe, New Mexico
87501. Venture Advisers is the sub-adviser's sole general partner.

PIFM compensates Davis Selected Advisers for the services provided and the
expenses assumed pursuant to the subadvisory agreement at an annual rate
expressed as a percent of the average daily net assets of the Portfolio as
follows:

Asset Level Fee rate
$0 to $100 million .45%
above $100 to $500 million .40%
above $500 million .35%

This fee will be computed daily and paid quarterly.

43
<PAGE>

BANKERS TRUST COMPANY

Bankers Trust Company, with headquarters at 130 Liberty Street, New York, New
York 10006, acts as the sub-advisor to the SP Deutsche International Equity
Portfolio. Bankers trust is an indirect wholly-owned subsidiary of Deutsche
International Bank AG.

Asset Level Fee Rate
- - - - - - ----------- --------

First $500 million .55%
Assets exceeding $500 million .50%

These fees are computed daily and paid quarterly.

FIDELITY MANAGEMENT AND RESEARCH COMPANY

Fidelity Management & Research Company (FMR) is the sub-advisor to the SP Large
Cap Value and SP Small/Mid Cap Value Portfolios. The address of FMR is 82
Devonshire Street Boston MA 02109.

PIFM will compensate FMR for the services provided and the expenses assumed
pursuant to the subadvisory agreement at an annual rate expressed as a percent
of the average daily net assets of the Portfolios as follows:

Fee rate

<TABLE>
<CAPTION>
Asset Level SP Large Cap Value Portfolio SP Small/Mid Cap Value Portfolio

<S> <C> <C>
First $250 million .50% .55%
Next $500 million .45% .50%
Over $750 million .35% .40%
</TABLE>

This fee will be computed daily and paid quarterly.

INVESCO FUNDS GROUP, INC.

INVESCO Funds Group, Inc. (INVESCO), located at 7800 East Union Avenue, Denver,
Colorado, is the sub-advisor of the SP INVESCO Small Company Growth Portfolio.
INVESCO is a subsidiary of AMVESCAP PLC, an investment management company that
manages more than $392 billion in assets worldwide. AMVESCAP is based in London,
with money managers located in Europe, North and South America and the Far East.

PIFM will compensate INVESCO for the services provided and the expenses assumed
pursuant to the subadvisory agreement at an annual rate expressed as a percent
of the average daily net assets of the Portfolio as follows:

Asset Level Fee Rate
$0 to $250 million .55%
above $250 to $500 million .52%
above $500 million .47%

This fee will be computed daily and paid quarterly.

44
<PAGE>

JENNISON ASSOCIATES LLC

Jennison Associates LLC (Jennison), a wholly owned subsidiary of Prudential, is
the sub-adviser to the SP Jennison International Growth Portfolio, the SP
Strategic Partners Focused Growth Portfolio, and the SP Prudential U.S. Emerging
Growth Portfolios. Jennison is located at 466 Lexington Avenue, New York, New
York 10017.

PIFM compensates Jennison for the services provided and the expenses assumed
pursuant to the Subadvisory Agreement for the SP Jennison International Growth
Portfolio at an annual rate expressed as a percent of the average daily net
assets of the Portfolio as follows:

Asset level Fee rate
- - - - - - ----------- --------

$0 to $300 million .60%
Above $300 million and up to $1.5 billion .50%
over $1.5 billion .45%

As sub-adviser to the SP Strategic Partners Focused Growth Portfolio, Jennison
will be compensated at an annual rate expressed as a percent of the average
daily net assets of the Portfolio as follows:

Assets Fee
$0 to $300 million .30%
over $300 million .25%

For the SP Prudential U.S. Emerging Growth Portfolio, PIFM will charge an
advisory fee of 0.85%, which it will split equally with Jennison.

These fees will be computed daily and paid quarterly.

MASSACHUSETTS FINANCIAL SERVICES COMPANY

Massachusetts Financial Services Company ("MFS"), located at 500 Boylston
Street, Boston MA, acts as sub-adviser to the SP MFS Capital Opportunities and
SP MFS Mid Cap Growth Portfolios. MFS is an indirect wholly owned subsidiary of
Sun Life Assurance Company of Canada Inc., a publicly owned insurance and
financial services company.

PIFM compensates MFS for the services provided and the expenses assumed pursuant
to the Subadvisory Agreement at an annual rate expressed as a percent of the
average daily net assets of the Portfolios as follows:

Asset level Fee rate
- - - - - - ----------- --------
$0 to $300 million .40%
above $300 to $600 million .375%
above $600 million to $900 million .350%

45
<PAGE>

above $900 million to $1.5 billion .325%
over $1.5 billion .250%

This fee will be computed daily and paid quarterly.

PACIFIC INVESTMENT MANAGEMENT COMPANY

Pacific Investment Management Company ("PIMCO") is the sub-advisor for the SP
PIMCO High Yield and SP PIMCO Total Return Portfolios. PIMCO is located at 840
Newport Center Drive, Suite 300, Newport Beach, California 92660 and is a
subsidiary of PIMCO Advisors L.P.

PIFM will compensate PIMCO for the services performed and the expenses assumed
at the annual rate of .25% of the average daily net assets of each Portfolio.
This fee will be computed daily and paid quarterly.

Fee Rate

PIMCO Total Return 0.25%

PIMCO High Yield 0.25%

All of these Portfolios are new and therefore have not paid any fee yet to these
sub-advisors.

II. DISTRIBUTION ARRANGEMENTS

Prudential Investment Management Services LLC ("PIMS"), a direct wholly-owned
subsidiary of Prudential, acts as the principal underwriter of the Fund by
distributing Fund shares on a continuous basis. 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. Since the Fund's
shares do not carry any sales load, no part of any sales load is paid to PIMS
for its distribution services to the Fund.

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 Fund's
underwriter associated with the sale of Class II shares. Under the Plan, the
Fund pays PIMS 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. The Plan may not be amended to materially increase the
amounts payable thereunder without shareholder approval.

46
<PAGE>

III. CODE OF ETHICS

The Board of Directors of the Fund has adopted a Code of Ethics. In addition,
Prudential, PIC, PIMS, and Jennison have each adopted a Code of Ethics (the
"Codes"). The Codes permit personnel subject to the Codes to invest in
securities, including securities that may be purchased or held by the Fund.
However, the protective provisions of the Codes prohibit certain investments and
limit such personnel from making investments during periods when the Fund is
making such investments. The Codes are on public file with, and are available
from, the Commission. With respect to the Diversified Conservative Growth
Portfolio, the Codes of Ethics that have been adopted by Franklin Advisers,
Inc., The Dreyfus Corporation, and Pacific Investment Management Company are
discussed under "Investment Management Arrangements", immediately above.

OTHER INFORMATION CONCERNING THE 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 seventy-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, High 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, SP AGGRESSIVE GROWTH
ASSET ALLOCATION PORTFOLIO--CLASS I, SP AGGRESSIVE GROWTH ASSET ALLOCATION
PORTFOLIO--CLASS II, SP AIM AGGRESSIVE GROWTH PORTFOLIO--CLASS I, SP AIM
AGGRESSIVE GROWTH PORTFOLIO--CLASS II, SP AIM GROWTH AND INCOME PORTFOLIO--CLASS
I, SP AIM GROWTH AND INCOME PORTFOLIO -CLASS II, SP ALLIANCE LARGE CAP GROWTH
PORTFOLIO--CLASS I, SP ALLIANCE LARGE CAP GROWTH PORTFOLIO--CLASS II, SP
ALLIANCE TECHNOLOGY PORTFOLIO--CLASS I, SP ALLIANCE TECHNOLOGY PORTFOLIO--CLASS
II, SP BALANCED ASSET ALLOCATION PORTFOLIO--CLASS I, SP BALANCED ASSET
ALLOCATION PORTFOLIO--CLASS II, SP CONSERVATIVE ASSET ALLOCATION
PORTFOLIO--CLASS I, SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO--CLASS II, SP
DAVIS VALUE PORTFOLIO--CLASS I, SP DAVIS VALUE PORTFOLIO--CLASS II, SP DEUTSCHE
INTERNATIONAL EQUITY PORTFOLIO--CLASS I, SP DEUTSCHE INTERNATIONAL EQUITY
PORTFOLIO--CLASS II, SP GROWTH ASSET ALLOCATION PORTFOLIO--CLASS I, SP GROWTH
ASSET ALLOCATION PORTFOLIO--CLASS II, SP INVESCO SMALL COMPANY GROWTH
PORTFOLIO--CLASS I, SP INVESCO SMALL COMPANY GROWTH PORTFOLIO--CLASS II, SP
JENNISON INTERNATIONAL GROWTH PORTFOLIO--CLASS I, SP JENNISON INTERNATIONAL
GROWTH PORTFOLIO--CLASS II, SP LARGE CAP VALUE PORTFOLIO--CLASS I, SP LARGE CAP
VALUE PORTFOLIO--CLASS II, SP MFS CAPITAL OPPORTUNITIES PORTFOLIO--CLASS I, SP
MFS CAPITAL OPPORTUNITIES PORTFOLIO--CLASS II, SP MFS MID CAP GROWTH
PORTFOLIO--CLASS I, SP MFS MID CAP GROWTH PORTFOLIO--CLASS II, SP PIMCO HIGH
YIELD PORTFOLIO--CLASS I, SP PIMCO HIGH YIELD PORTFOLIO--CLASS II, SP PIMCO
TOTAL RETURN PORTFOLIO--CLASS I, SP PIMCO TOTAL RETURN PORTFOLIO--CLASS II, SP
PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO--CLASS I, SP PRUDENTIAL U.S. EMERGING
GROWTH PORTFOLIO--CLASS II, SP SMALL/MID CAP VALUE PORTFOLIO--CLASS I, SP
SMALL/MID CAP VALUE PORTFOLIO--CLASS II, SP STRATEGIC PARTNERS FOCUSED GROWTH
PORTFOLIO--CLASS I, SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO--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,

47
<PAGE>

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.

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 differs 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 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 than 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 and PIFM, as the advisers to their respective Portfolios, are
responsible for overseeing decisions to buy and sell securities, options on
securities and indexes, and futures and related options for the Fund.
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).

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.

48
<PAGE>

In placing orders for portfolio securities of the Fund, Prudential's and PIFM's
overriding objective is to obtain the best possible combination of price and
execution. Prudential and PIFM seek to effect each transaction at a price and
commission that provides the most favorable total cost or proceeds reasonably
attainable in the circumstances. The factors that Prudential and PIFM may
consider in selecting a particular broker, dealer or futures commission merchant
firms are: knowledge of negotiated commission rates currently available and
other transaction costs; the nature of the portfolio transaction; the size of
the transaction; the desired timing of the trade; the activity existing and
expected in the market for the particular transaction; confidentiality; the
execution, clearance and settlement capabilities of the firms; the availability
of research and research related services provided through such firms; the
knowledge of the financial stability of the firms; the knowledge of actual or
apparent operational problems of firms; and the amount of capital, if any, that
would be contributed by firms executing the transaction. Given these factors,
the Fund may pay transaction costs in excess of that which another firm might
have charged for effecting the same transaction. The greater a Portfolio's
portfolio turnover (i.e., purchases or sales of securities), the greater the
Portfolio's "other expenses" are likely to be.

When Prudential and PIFM select a firm that executes orders or is a party to
portfolio transactions, relevant factors taken into consideration are whether
that firm has furnished research and research related products and/or services,
such as research reports, research compilations, statistical and economic data,
computer data bases, quotation equipment and services, research oriented
computer-software, hardware and services, reports concerning the performance of
accounts, valuations of securities, investment related periodicals, investment
seminars and other economic services and consultants. Such services are used in
connection with some or all of Prudential's and PIFM's investment activities;
some of such services, obtained in connection with the execution of transactions
for one investment account may be used in managing other accounts, and not all
of these services may be used in connection with the Fund.

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, 1999, 1998, and 1997, the Portfolios paid the
following amounts in brokerage commissions:

COMMISSIONS PAID BY THE PORTFOLIOS
YEAR ENDED DECEMBER 31, 1999

% OF
AGGREGATE COMMISSIONS COMMISSIONS
PORTFOLIO COMMISSIONS PAID TO PSI PAID TO PSI
--------- ----------- ----------- -----------
Conservative Balanced $ 280,871 $ 2,600 93%
Equity 2,503,195 319,224 12.75%
Equity Income 1,751,497 69,381 3.96%
Flexible Managed 782,063 10,257 1.31%
High Yield 11,184 0 0.00%
Natural Resources 467,448 3,431 .73%
Prudential Jennison 1,843,765 188,075 10.20%
Small Cap Stock 258,130 0 0.00%
Stock Index 161,051 0 0.00%
Total $8,059,204 $592,968
========== ========

49
<PAGE>

COMMISSIONS PAID BY THE PORTFOLIOS
YEAR ENDED DECEMBER 31, 1998

% OF
AGGREGATE COMMISSION COMMISSIONS
PORTFOLIO COMMISSIONS PAID TO PSI PAID TO PSI
--------- ----------- ----------- -----------
Conservative Balanced $ 1,320,049 $ 32,490 2.46%
Equity 3,861,374 294,641 7.63%
Equity Income 1,808,503 160,840 8.89%
Flexible Managed 2,176,922 103,021 4.73%
Global 1,891,928 14,247 0.75%
High Yield Bond 6,770 0 0.00%
Natural Resources 331,482 1,800 0.54%
Prudential Jennison 936,449 56,980 6.08%
Small Cap Stock 249,010 0 0.00%
Stock Index 180,781 0 0.00%
Total $12,763,268 $664,019
=========== ========

COMMISSIONS PAID BY THE PORTFOLIOS
YEAR ENDED DECEMBER 31, 1997

% OF
AGGREGATE COMMISSION COMMISSIONS
PORTFOLIO COMMISSIONS PAID TO PSI PAID TO PSI
--------- ----------- ----------- -----------
Diversified Bond $ 54,863 $ 0 0.00%
Government Income 4,971 0 0.00%
Conservative Balanced 3,338,897 256,752 7.69%
Flexible Managed 6,544,428 428,008 6.54%
High Yield Bond 47,273 0 0.00%
Stock Index 200,865 0 0.00%
Equity Income 2,241,887 198,726 8.86%
Equity 1,823,705 189.498 10.39%
Prudential Jennison 484,086 0 0.00%
Small Capitalization Stock 227,781 0 0.00%
Global 2,055,319 7,621 0.37%
Natural Resources 569,768 132 0.02%
Total $17,593,843 $1,080,737
=========== ==========

50
<PAGE>

For 1999, the percentage of the aggregate dollar amount of transactions effected
through PSI on a Portfolio basis was:

PERCENTAGE OF AGGREGATE DOLLAR AMOUNT
PORTFOLIO OF TRANSACTIONS EFFECTED THROUGH PSI
--------- ------------------------------------
Conservative Balanced .13%
Equity .11%
Equity Income .18%
Flexible Managed .13%
Natural Resources .75%
Prudential Jennison .08%

III. TAXATION OF THE FUND

The Fund intends to qualify as regulated investment company under Subchapter M
of the Internal Code of 1986, as amended (the "Code"). The Fund generally will
not be subject to federal income tax to the extent it distributes to
shareholders its net investment income and net capital gains in the manner
required by the Code. There is a 4% excise tax on the undistributed income of a
regulated investment company if that company fails to distribute the required
percentage of its net investment income and net capital gains. The Fund intends
to employ practices that will eliminate or minimize this excise tax.

Federal tax law requires that the assets underlying variable contracts,
including the Fund, meet certain diversification requirements. Each Portfolio is
required to diversify its investments each quarter so that no more than 55% of
the value of its assets is represented by any one investment, no more than 70%
is represented by any two investments, no more than 80% is represented by any
three investments, and no more than 90% is represented by any four investments.
Generally, securities of a single issuer are treated as one investment and
obligations of each U.S. Government agency and instrumentality (such as the
Government National Mortgage Association) are treated as issued by separate
issuers. In addition, any security issued, guaranteed or insured (to the extent
so guaranteed or insured) by the United States or an instrumentality of the U.S.
will be treated as a security issued by the U.S. Government or its
instrumentality, whichever is applicable.

Some foreign securities purchased by the Portfolios may be subject to foreign
taxes which could reduce the return on those securities.

This is a general and brief summary of the tax laws and regulations applicable
to the Fund. The law and regulations may change. You should consult a tax
adviser for complete information and advice.

IV. CUSTODIANS AND TRANSFER AGENT

State Street Bank and Trust Company (State Street), 127 West 10th Street, Kansas
City, MO 64105-1716, is the custodian of the assets held by all the Portfolios.
State Street is also the custodian of the assets held in connection with
repurchase agreements entered into by the Portfolios, and is authorized

51
<PAGE>

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. State Street 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. The
transfer agent is Prudential Mutual Fund Series LLC (PMFS), Raritan Plaza One,
Edison, NJ 08837. For performance by PMFS pursuant to the Transfer Agency and
Service Agreement, the Fund pays to PMFS an annual fee of $125,000 and certain
out-of-pocket expense including, but not limited to; postage, stationery,
printing, allocable communication costs, microfilm or microfiche, and expense
incurred at the specific direction of the Fund.

V. EXPERTS

The financial statements of the Fund as of December 31, 1999 and for each of the
three years in the period then ended included in this statement of additional
information [FINANCIAL STATEMENTS TO BE ADDED IN SUBSEQUENT FILING UNDER RULE
485(B)].

VI. 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 Standard & Poors
("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 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 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 FUND

52
<PAGE>

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 FUND

JOHN R. STRANGFELD*, 46, CHAIRMAN AND PRESIDENT--Executive Vice President,
Global Asset Management since 1998; Chief Executive Officer, Private Asset
Management Group (PAMG) from 1996 to 1998; President, PAMG, from 1994 to 1996.

SAUL K. FENSTER, 67, DIRECTOR--President of New Jersey Institute of Technology.
Address: 323 Martin Luther King, Jr. Boulevard, Newark, New Jersey 07102.

W. SCOTT MCDONALD, JR., 63, DIRECTOR--Vice President, Kaludis Consulting Group
since 1997; 1995 to 1996: Principal, Scott McDonald & Associates. Address: 9
Zamrok Way, Morristown, New Jersey 07960.

JOSEPH WEBER, 76, DIRECTOR--Vice President, Interclass (international corporate
learning). Address: 37 Beachmont Terrace, North Caldwell, New Jersey 07006.

OFFICERS WHO ARE NOT DIRECTORS

LEE D. AUGSBURGER, SECRETARY--Assistant General Counsel of Prudential since
1997; prior to 1997, Consultant with Price Waterhouse LLP.

ROBERT F. GUNIA, VICE PRESIDENT--Executive Vice President, Prudential
Investments, since 1999; Vice President, Prudential from 1997 to 1999; prior to
1997, Senior Vice President, Prudential Securities Incorporated.

WILLIAM V. HEALEY, ASSISTANT SECRETARY--Vice President and Associate General
Counsel of Prudential and Chief Legal Officer of Prudential Investments since
1998; Director, ICI Mutual Insurance Company since 1999; prior to 1998,
Associate General Counsel of The Dreyfus Corporation.

DAVID R. ODENATH, JR., VICE PRESIDENT--President, Chief Executive Officer and
Chief Operating Officer of Prudential Investments Fund Management LLC (PIFM)
since 1999; prior to 1999, Senior Vice President, PaineWebber Group, Inc.

C. CHRISTOPHER SPRAGUE, ASSISTANT SECRETARY--Assistant General Counsel of
Prudential since 1994.

GRACE C. TORRES, TREASURER AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER--First
Vice President of PIFM since 1996; prior to 1996: First Vice President of
Prudential Securities Inc.

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

- - - - - - ----------
*This member of the Board is an interested person 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.
Strangfeld, one of the four members of the Board, is an interested person of
Prudential and the Fund, as that term is defined in the 1940 Act, because he is
an officer and/or affiliated person of Prudential, the investment advisor to the

53
<PAGE>

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 insurance to its employees.

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. A 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.

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, 1999 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, 1999. Below are
listed all Directors who have served the Fund during its most recent fiscal
year.

54
<PAGE>

COMPENSATION TABLE

<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT ESTIMATED COMPENSATION
AGGREGATE BENEFITS ANNUAL RELATED
COMPENSATION ACCRUED AS BENEFITS TO FUNDS
FROM PART OF SERIES UPON MANAGED BY
NAME AND POSITION SERIES FUND FUND EXPENSES RETIREMENT PRUDENTIAL (**)
- - - - - - ----------------- ----------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
John R. Strangfeld* -- -- -- --
Saul K. Fenster $22,800 None N/A $35,000 (5/21)
W. Scott McDonald $22,800 None N/A $35,000 (5/21)
Joseph Weber $22,800 None N/A $35,000 (5/21)
</TABLE>

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

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

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

As of April 1, 2000, the Directors and officers of the Fund, as a group,
beneficially owned less than one percent of the outstanding shares of the Fund's
capital stock.

FUND PERFORMANCE

Performance for each of the Portfolios is set out below. These performance
figures do not include the effect of charges imposed by variable insurance
contracts investing in the Fund which, when deducted, reduce performance.

For the seven days ended December 31, 1999, the yield and effective yield of
Class I shares of Money Market Portfolio were 5.59% and 5.16%, respectively.

For the 1 year, 5 year and 10 year periods ended on December 31, 1999, the
average annual return of Class I shares of each Portfolio is set out below.

<TABLE>
<CAPTION>
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
CONSERVATIVE BALANCED DIVERSIFIED DIVERSIFIED CONSERVATIVE GROWTH*
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.69% 12.30% 10.28% (0.74%) 7.80% 7.69% N/A N/A N/A
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------

- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
EQUITY EQUITY INCOME FLEXIBLE MANAGED
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
12.49% 18.99% 15.08% 12.52% 17.33% 14.06% 7.78% 14.60% 11.77%
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------

- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
GLOBAL GOVERNMENT INCOME HIGH YIELD MONEY MARKET
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
48.27% 22.44% 13.38% (2.70%) 7.29% 7.09% 4.61% 8.76% 9.78% 4.97% 5.36% 5.18%
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------

- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
NATURAL RESOURCE PRUDENTIAL JENNISON SMALL CAPITALIZATION STOCK STOCK INDEX
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
45.99% 12.19% 9.03% 41.76% N/A N/A 12.68% N/A N/A 20.54% 28.14% 17.75%
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------

- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
20/20 FOCUS ZERO COUPON BOND 2000 ZERO COUPON 2005
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs 1 yr. 5 yrs 10 yrs
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
N/A N/A N/A 2.18% 7.77% 8.00% (5.66%) 8.99% 8.73%
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* The Diversified Conservative Growth and 20/20 Focus Portfolio commenced
operations on May 3, 1999, so there is not a full year of performance to
report.

55
<PAGE>

AVERAGE AMOUNT TOTAL RETURN

The Fund may from time to time advertise its average annual total return.
Average annual total return is determined separately for each class.

A Portfolio's "average annual total return" is computed according to a formula
prescribed by the SEC expressed as follows:

P(1+T)n = ERV

Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years
EVR = Ending Redeemable Value (ERV) at the end of 1-, 5- or 10-year
period (or fractional portion thereof) of a hypothetical $1,000
investment made at the beginning of 1-, 5-, or 10-year period.

AGGREGATE TOTAL RETURN

The Fund may also advertise its aggregate total return. Aggregate total return
is determined separately for each class.

A Portfolio's aggregate total return represents the cumulative change in the
value of an investment in the Portfolio for the specified period and is computed
by the following formula:

ERV-P/P

Where: P = a hypothetical initial payment of $1,000.
EVR = Ending Redeemable Value (ERV) at the end of 1-, 5- or 10-year
period (or fractional portion thereof) of a hypothetical $1,000
investment made at the beginning of 1-, 5-, or 10-year period
assuming reinvestment of all dividends and distributions..

The ERV assumes complete redemption of the hypothetical investment at the end of
the measuring period.

A Portfolio's performance will vary from time to time depending upon market
conditions, the composition of its portfolio and its operation expenses.
Consequently, any given performance quotation should not be considered
representative of a Portfolio's performance for any specified period in the
future.

A Portfolio may include comparative performance information in advertising or
marketing the Portfolio's

56
<PAGE>

shares. Such performance information may include data
from Lipper Inc., Moningstar Publication, Inc. and other industry publications,
business periodicals and market indexes.

CALCULATION OF YIELD

The Money Market Portfolio may from time to time advertise a current quotation
of yield. The yield quoted will be the simple annualized yield for an identified
seven calendar day period. The yield calculation will be based on a hypothetical
account having a balance of exactly one share at the beginning of the seven-day
period. The base period return will be the change in the value of the
hypothetical account during the seven-day period, including dividends declared
on any shares purchase with dividends on the shares, but excluding any capital
changes, divided by the value of the account at the beginning of the base
period. The yield will vary as interest rates and other conditions affecting
money market instruments change. Yield also depends on the quality, length of
maturity and type of instruments in the Portfolio and operating expenses. The
Portfolio also may prepare an effective annual yield computed by compounding the
unannualized seven-day period return as follows: by adding 1 to the unannualized
seven-day period return, raising the sum to a power equal to 365 divided by 7,
and subtracting 1 from the result.

Effective yield = [(base period return + 1)365/7] - 1

Comparative performance information may be used from time to time in advertising
or marketing the Portfolio's shares, including data from Lipper Analytical
Services, Inc., Morningstar Publications, Inc., IBC Financial Data. Inc., The
Bank Rate Monitor, other industry publications, business periodicals and market
indices.

The Money Market Portfolio's yield fluctuates, and an annualized yield quotation
is not a representation by the Portfolio as to what an investment in the
Portfolio will actually yield for any given period. Actual yield will depend
upon not only changes in interest rates generally during the period in which the
investment in the Portfolio is held, but also on changes in the Portfolio's
expenses.

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS

57
<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.

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:

58
<PAGE>

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.

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

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:

59
<PAGE>

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.

60
<PAGE>

THE PRUDENTIAL
SERIES FUND, INC.

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

61
<PAGE>

<TABLE>
<CAPTION>
PART C

OTHER INFORMATION
ITEM 23.

EXHIBITS

<S> <C>

(a) Articles of Restatement of The Prudential Filed herewith
Series Fund, Inc.

(b) By-laws of The Prudential Series Fund, Incorporated by reference to Post-Effective Amendment No. 37
Inc., as amended February 29, 2000. to this Registration Statement, filed April 27, 2000

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

</TABLE>

C-1
<PAGE>

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

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

(4) Subadvisory Agreement between The Incorporated by reference to Post-Effective
Prudential Insurance Company of America Amendment No. 36 to this Registration Statement,
and Jennison Associates LLC. filed April 28, 1999.

(5) Subadvisory Agreement between The Incorporated by reference to Post-Effective
Prudential Insurance Company of America Amendment No. 36 to this Registration Statement,
and The Dreyfus Corporation. filed April 28, 1999.

(6) Subadvisory Agreement between The Incorporated by reference to Post-Effective
Prudential Insurance Company of Amendment No. 36 to this Registration Statement,
America and Franklin Advisers, Inc. filed April 28, 1999.

(7) Subadvisory Agreement between The Incorporated by reference to Post-Effective
Prudential Insurance Company of America Amendment No. 36 to this Registration Statement,
and Pacific Investment Management Company. filed April 28, 1999.

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

(9) Subadvisory Agreement between Prudential Filed herewith.
Investments Fund Management LLC and
the Adviser.

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

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

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

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

(3) Form of Custodian Agreement between Incorporated by reference to Post-Effective
Investors Fiduciary Trust Company and Amendment No. 34 to this Registration Statement,
The Prudential Series Fund, Inc. dated filed April 24, 1998.
May 19, 1997.

(3)(i) Custodian Agreement between Incorporated by reference to Post-Effective
Investors Fiduciary Trust Company Amendment No. 37 to this Registration Statement,
and The Prudential Insurance filed April 27, 2000.
Company of America dated September
16, 1996.

(ii) Assignment of Custodian Agreement Incorporated by reference to Post-Effective
from Investors Fiduciary Trust Amendment No. 37 to this Registration Statement,
Company to State Street effective filed April 27, 2000.
January 1, 2000.

(iii) First Amendment to Custody Incorporated by reference to Post-Effective
Agreement between The Prudential Amendment No. 37 to this Registration Statement,
Insurance Company of America and filed April 27, 2000.
Investors Fiduciary Trust Company
dated December 1, 1996.

(4) Transfer Agent Agreement between Incorporated by reference to Post-Effective
Prudential Mutual Fund Services LLC Amendment No. 36 to this Registration Statement,
and The Prudential Series Fund, Inc. filed April 28, 1999.

(5) Supplement to Custody Agreement between Incorporated by reference to Post-Effective
The Prudential Series Fund, Inc., Amendment No. 37 to this Registration Statement,
Prudential's Gibralter Fund and filed April 27, 2000.
Investors Fiduciary Trust Company dated
August 19, 1998.

(6)(i) Special Custody Agreement between The Incorporated by reference to Post-Effective
Prudential Series Fund, Inc., Natural Amendment No. 37 to this Registration Statement,
Resources Portfolio, Goldman, Sachs & filed April 27, 2000.
Co., and Investors Fiduciary Trust
Company.

(ii) Assignment of Special Custody Incorporated by reference to Post-Effective
Agreement from Investors Fiduciary Trust Amendment No. 37 to this Registration Statement,
Company to State Street effective filed April 27, 2000.
January 1, 2000.

(iii) First Amendment of Custody Agreement Incorporated by reference to Post-Effective
between the Prudential Series Fund, Inc. Amendment No. 37 to this Registration Statement,
and Prudential's Gibraltar Fund and State filed April 27, 2000.
Street Bank and Trust dated March 1, 2000.

</TABLE>

C-2

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
(h) (1) Indemnification Agreement Regarding Reg. Incorporated by reference to Post-Effective Amendment No. 33
to this Registration Statement, filed April 28, 1997.

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

(3)(a) Investment Accounting Agreement Incorporated by reference to Post-Effective Amendment No. 37
between The Prudential Series Fund Inc., to this Registration Statement, filed April 27, 2000.
Prudential's Gibraltor Fund and Investor
Fiduciary Trust Company dated December 31,
1994.

(3)(b) First Amendment to Investment Accounting Incorporated by reference to Post-Effective Amendment No. 37
Agreement between The Prudential Series to this Registration Statement, filed April 27, 2000.
Fund, Inc., Prudential's Gibraltar Fund
and Investors Fiduciary Trust Company dated
June 20, 1995.

(3)(c) Second Amendment to Investment Accounting Incorporated by reference to Post-Effective Amendment No. 37
Agreement between The Prudential Series Fund, to this Registration Statement, filed April 27, 2000.
Inc. and Prudential's Gibraltar Fund and State
Street Bank and Trust dated March 1,2000.

(4)(a) Code of Ethics for The Prudential Incorporated by reference to Post-Effective Amendment No. 37
Insurance Company of America Adopted to this Registration Statement, filed April 27, 2000.
2/29/00.

(b) Code of Ethics for The Prudential Series Incorporated by reference to Post-Effective Amendment No. 37
Fund, Inc. Adopted 2/29/00. to this Registration Statement, filed April 27, 2000.

(c) Code of Ethics for Prudential Investment Incorporated by reference to Post-Effective Amendment No. 37
Management Services LLC Adopted 2/29/00. to this Registration Statement, filed April 27, 2000.

(d) Code of Ethics for Franklin Advisers, Incorporated by reference to Post-Effective Amendment No. 37
Inc. Adopted 2/29/00. to this Registration Statement, filed April 27, 2000.

(e) Code of Ethics for The Dreyfus Corporation Incorporated by reference to Post-Effective Amendment No. 37
Adopted 2/29/00. to this Registration Statement, filed April 27, 2000.

(f) Code of Ethics for Pacific Investment Incorporated by reference to Post-Effective Amendment No. 37
Management Company Adopted 2/29/00. to this Registration Statement, filed April 27, 2000.

(g) Code of Ethics for The Prudential Incorporated by reference to Post-Effective Amendment No. 37
Investment Corporation Adopted 2/29/00. to this Registration Statement, filed April 27, 2000.

(h) Code of Ethics for Jennison Associates Incorporated by reference to Post-Effective Amendment No. 37
LLC Adopted 2/29/00. to this Registration Statement, filed April 27, 2000.

(5)(a) Fund Participation Agreement between Great- Incorporated by reference to Post-Effective Amendment No. 37
West Life & Annuity Insurance Company, The to this Registration Statement, filed April 27, 2000.
Prudential Series Fund, Inc., The Prudential
Insurance Company of America, Prudential
Investment Management Services LLC and Charles
Schwab & Co., Inc. dated May 1, 1999.

(b) Fund Participation Agreement between Incorporated by reference to Post-Effective Amendment No. 37
First Great-West Life & Annuity Insurance to this Registration Statement, filed April 27, 2000.
Company, The Prudential Series Fund, Inc.,
The Prudential Insurance Company of America,
Prudential Investment Management Services
LLC and Charles Schwab & Co., Inc. dated
May 1, 1999

(c) Fund Participation Agreement between The Incorporated by reference to Post-Effective Amendment No. 37
Ohio National Life Insurance Company, The to this Registration Statement, filed April 27, 2000.
Prudential Insurance Company of America, The
Prudential Series Fund, Inc. and Prudential
Investment Management Services LLC.

(6) Procedural Agreement between Merrill Lynch Incorporated by reference to Post-Effective Amendment No. 37
Futures, Inc., The Prudential Series Fund, to this Registration Statement, filed April 27, 2000.
Inc. and Investors Fiduciary Trust Company

(7)(a) Pledge Agreement between Goldman, Sachs Incorporated by reference to Post-Effective Amendment No. 37
& Co., The Prudential Series Fund, Inc. to this Registration Statement, filed April 27, 2000.
and Investors Fiduciary Trust Company,
dated August 15, 1997.

(b) Pledge Agreement between Lehman Brothers Incorporated by reference to Post-Effective Amendment No. 37
Inc., The Prudential Series Fund, Inc. and to this Registration Statement, filed April 27, 2000.
Investors Fiduciary Trust Company, dated
August 29, 1997.

(c) Pledge Agreement between J.P. Morgan Incorporated by reference to Post-Effective Amendment No. 37
Futures Inc., The Prudential Series Fund, to this Registration Statement, filed April 27, 2000.
Inc. and Investors Fiduciary Trust Company
dated September 1997.

(d) Pledge Agreement between PaineWebber Incorporated by reference to Post-Effective Amendment No. 37
Inc., The Prudential Series Fund, Inc. and to this Registration Statement, filed April 27, 2000.
Investors Fiduciary Trust Company, dated
September 25, 1997.

(e) Pledge Agreement between Credit Suisse Incorporated by reference to Post-Effective Amendment No. 37
First Boston Corp., The Prudential Series to this Registration Statement, filed April 27, 2000.
Fund, Inc. and Investors Fiduciary Trust
Company dated November 11, 1997.

(j) (1) Consent of PricewaterhouseCoopers LLP Incorporated by reference to Post-Effective Amendment No. 37
Independent accountants. to this Registration Statement, filed April 27, 2000.

(2) Shea & Gardner Legal Opinion. Incorporated by reference to Post-Effective Amendment No. 37
to this Registration Statement, filed April 27, 2000.

(m) Rule 12b-1 Plan. Incorporated by reference to Post-Effective Amendment No. 36
to this Registration Statement, filed April 28, 1999.

(n) Financial Data Schedules. Incorporated by reference to Post-Effective Amendment No. 37
to this Registration Statement, filed April 27, 2000.

(o) Rule 18f-3 Plan. [February 15, 1999] Incorporated by reference to Post-Effective Amendment No. 36
to this Registration Statement, filed April 28, 1999.
</TABLE>
C-3

<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-4

<PAGE>

<TABLE>
<CAPTION>
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Do Insurer's
Admitted
Assets
NAIC Include
NAIC Valuation Intangible
Company Method(See Assets
Code or SVO Connected
Alien Purposes with Holding
CUSIP Description Insurer and of Such
Identifica- Name of Subsidiary, Controlled or Identification Procedures Company's
TAB # tion Affiliated Company Number manual) Stock?
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
18 ..74429#-12-0 Prudential of America Life Ins. Co. (Canada) A ..................AA-1560018 ............3(f) .........No
18 ..74429#-13-8 Prudential of America Life Ins. Co. (Canada) B ..................AA-1560018 ............3(f) .........No
18 ..74429#-14-6 Prudential of America Life Ins. Co. (Canada) C ..................AA-1560018 ............3(f) .........No
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
0499999 - Preferred Stock - Alien Insurer
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
23 ..000000-00-0 Prudential Realty Securities ...........................................................3(f) .........No
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
0699999 - Preferred.Stock.-.Investment.Subsidiary
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
23 ..74438*-11-5 Prudential Timber Investments, Inc. ....................................................3(f) .........No
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
0799999 - Preferred Stock - Other Affiliates
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
0899999 - Total Preferred Stocks
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
10 ..37465@-10-8 Gibraltar Casualty Company ...........................................35947 ............3(c) .........No
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1099999 - Common Stock - U.S. P&C Insurer
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
3 ...74408#-10-9 Pruco Life Insurance Company .........................................79227 ............3(c) .........No
7 ...74445@-10-6 Prudential HealthCare and Life Insurance Co. of America ..............74020 ............3(c) .........No
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1199999 - Common Stock - U S LAH Insurer
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
12 ..T7415#-10-9 Prumerica Life, S.p.A. ..........................................AA-1360003 ............3(g) .........No
18 ..74429#-10-4 Prudential of America Life Ins. (Canada) Series.1 ...............AA-1560018 ............3(g) .........No
18 ..74429#-11-2 Prudential of America Life Ins. (Canada) Series.2 ...............AA-1560018 ............3(g) .........No
12 ..Y7443@-10-1 The Prudential Life Insurance Company of Korea, Ltd. ............AA-0130001 ............3(g) .........No
12 ..J7443#-10-6 The Prudential Life Insurance Company, Ltd. .....................AA-1580001 ............3(g) .........No
12 ..AMPRU1-23-2 The Prumerica Life Insurance Company, Inc. ......................AA-5660025 ............3(g) .........No
12 ..POLAND-12-8 Prumerica Towarzystwo Ubezpieczen na Zycie, S.A. ................AA-9640003 ............3(g) .........No
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1299999 - Common Stock - Alien Insurer
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
11 ..74408@-10-1 PRUCO, Inc. ............................................................................3(b) .........Yes
14 ..744400-10-2 Prudential Select Holdings, Inc. .......................................................3(b) .........No
12 ..000000-00-0 Prudential International Insurance Holdings, Ltd .......................................3(b) .........No
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1399999 - Common Stock - Non-Insurer Which Controls Insurer
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
23 ..BREE00-07-9 BREE Investors Inc. ....................................................................3(b) .........No
7 ...42223@-10-1 Health Ventures Partner, Inc. ..........................................................3(a) .........No
5 ...69337*-10-9 PIC Realty Canada, Ltd. ................................................................3(b) .........No
23 ..74430*-10-5 Prudential Mortgage Asset Corporation II ...............................................3(b) .........No
23 ..744355-2#-4 Prudential Realty Securities, Inc. .....................................................3(a) .........No
23 ..74390@-10-1 Prudential Realty Securities II, Inc. ..................................................3(a) .........No
1 ...GATWAY-00-5 Gateway Holdings, Inc. .................................................................3(a) .........No
23 ..26244*-10-1 Dryden Holdings, Inc. ..................................................................3(a) .........No
23 ..26243*-10-2 Dryden Finance, Inc. ...................................................................3(a) .........No
23 ..37475X-10-5 Gibraltar Properties, Inc. .............................................................3(a) .........No
23 ..78487@-10-6 SVIIT Holdings, Inc. ...................................................................3(a) .........No
23 ..78457#-10-0 SMP Holdings, Inc. .....................................................................3(a) .........No
8 ...000000-00-0 Prudential Human Resources Management Co., Inc. ........................................3(a) .........No
23 ..000000-00-0 PIC Realty Corporation. ................................................................3(b) .........Yes
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1499999 - Common Stock.- Investment.Subsidiary
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
23 ..69332#-10-0 PGR Advisors I, Inc. ...................................................................3(a) .........Yes
23 ..PGA100-AB-0 PGA European Holdings, Inc. ............................................................3(a) .........No
23 ..71953K-69-9 PIC Holdings, Ltd. .....................................................................3(b) .........Yes
23 ..PLA100-12-9 Prudential Latin American Investments, Ltd. ............................................3(b) .........No
23 ..PPC100-12-8 Prudential Private Capital Management ..................................................3(b) .........No
11 ..74408@-10-1 PRUCO, Inc. ............................................................................3(b) .........No
14 ..744400-10-2 Prudential Select Holdings, Inc. .......................................................3(b) .........Yes
21 ..74445#-10-4 Prudential Direct Distributors, Inc. ...................................................3(a) .........No
6 ...744299-20-7 Prudential Global Funding ..............................................................3(a) .........No
23 ..74442@-10-9 Prudential Private Placement Investors, Inc. ...........................................3(a) .........No
23 ..76111#-10-2 Residential Services Corporation of America ............................................3(d) .........No
4 ...74437#-10-4 The Prudential Investment Corporation ..................................................3(b) .........No
16 ..74390*-10-3 The Prudential Real Estate Affiliates, Inc. ............................................3(b) .........Yes
21/23..91204*-10-3 U.S. High Yield Management Company .....................................................3(a) .........No
21 ..74446@-10-5 Prudential Assigned Settlement Services, Inc. ..........................................3(a) .........No
2 ...000000-00-0 Prudential Funding Corporation .........................................................3(b) .........No
7 ...PHDENT-17-8 Prudential Health and Dental Group Holdings, Inc. ......................................3(b) .........No
14 ..000000-00-0 Pvrudential Direct, Inc. ...............................................................3(a) .........No
17 ..000000-00-0 Prudential, Inc. .......................................................................3(a) .........No
19 ..000000-00-0 The Prudential Bank and Trust Company ..................................................3(a) .........No
19 ..000000-00-0 The Prudential Savings Bank, F.S.B. ....................................................3(a) .........No
22 ..000000-00-0 Hochman and Baker ......................................................................3(a) .........Yes
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
000000-00-0 Pru Investment Planning, Inc. ..........................................................3(a) .........No
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
12 ..000000-00-0 Prudential International Insurance Holdings, Ltd. ......................................3(b) .........No
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
1599999 - Common Stock - Other Affiliates
1699999 - Total Common Stocks
1799999 - Total Preferred and Common Stocks
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Amount of insurer's capital and surplus from the prior year's annual statement $...8,536,314,197
</TABLE>

C-5

<PAGE>

<TABLE>
<CAPTION>
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Stock of Such Company Owned
by Insurer on Statement Date
-----------------------------
If Yes,
Amount of
CUSIP Description Such
Identifica- Name of Subsidiary, Controlled or Intangible Statement Number of % of
TAB # tion Affiliated Company Assets Value Shares Outstanding
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
18 ..74429#-12-0 Prudential of America Life Ins. Co. (Canada) A .........................16,000,000 ......160,000.000 ...100.0
18 ..74429#-13-8 Prudential of America Life Ins. Co. (Canada) B ..........................8,875,000 .......88,750.000 ...100.0
18 ..74429#-14-6 Prudential of America Life Ins. Co. (Canada) C .........................10,000,000 ......100,000.000 ...100.0
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
0499999 - Preferred Stock - Alien Insurer 34,875,000 XXX XXX
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
23 ..000000-00-0 Prudential Realty Securities ..............................................126,000 ..........126.000 ...100.0
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
0699999 - Preferred.Stock.-.Investment.Subsidiary 126,000 XXX XXX
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
23 ..74438*-11-5 Prudential Timber Investments, Inc. .......................................875,461 ............7.000 ...100.0
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
0799999 - Preferred Stock - Other Affiliates 875,461 XXX XXX
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
0899999 - Total Preferred Stocks 35,876,461 XXX XXX
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
10 ..37465@-10-8 Gibraltar Casualty Company ......................................................0 ........2,000.000 ...100.0
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
1099999 - Common Stock - U.S. P&C Insurer 0 XXX XXX
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
3 ...74408#-10-9 Pruco Life Insurance Company ..........................................888,713,262 ......250,000.000 ...100.0
7 ...74445@-10-6 Prudential HealthCare and Life Insurance Co. of America.................11,756,421 ......500,000.000 ...100.0
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
1199999 - Common Stock - U S LAH Insurer 900,469,683 XXX XXX
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
12 ..T7415#-10-9 Prumerica Life, S.p.A. .................................................18,668,137 ...20,000,000.000 ...100.0
18 ..74429#-10-4 Prudential of America Life Ins. (Canada) Series.1 .....................-13,678,798 .......25,000.000 ...100.0
18 ..74429#-11-2 Prudential of America Life Ins. (Canada) Series.2 ........................-683,653 .......12,500.000 ....50.0
12 ..Y7443@-10-1 The Prudential Life Insurance Company of Korea, Ltd. ...................24,271,950 ....2,640,000.000 ...100.0
12 ..J7443#-10-6 The Prudential Life Insurance Company, Ltd. ...........................353,984,196 ......100,000.000 ...100.0
12 ..AMPRU1-23-2 The Prumerica Life Insurance Company, Inc. ..............................8,057,809 ...24,999,995.000 ...100.0
12 ..POLAND-12-8 Prumerica Towarzystwo Ubezpieczen na Zycie, S.A. ........................2,321,303 ....1,000,000.000 ...100.0
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
1299999 - Common Stock - Alien Insurer 392,940,944 XXX XXX
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
11 ..74408@-10-1 PRUCO, Inc. ............................................10,968,701 ..1,625,418,725 ...........94.000 ...100.0
14 ..744400-10-2 Prudential Select Holdings, Inc. .......................................14,367,333 .......44,977.000 ...100.0
12 ..000000-00-0 Prudential International Insurance Holdings, Ltd .......................24,196,950 ..........100.000 ...100.0
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
1399999 - Common Stock - Non-Insurer Which Controls Insurer 10,968,701 1,663,983,008 XXX XXX
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
23 ..BREE00-07-9 BREE Investors Inc. .....................................................3,665,491 ............1.000 ....50.0
7 ...42223@-10-1 Health Ventures Partner, Inc. ..........................................34,150,662 ........1,000.000 ...100.0
5 ...69337*-10-9 PIC Realty Canada, Ltd. .................................................1,991,361 ....2,561,003.000 ...100.0
23 ..74430*-10-5 Prudential Mortgage Asset Corporation II ...................................39,847 ..........500.000 ....50.0
23 ..744355-2#-4 Prudential Realty Securities, Inc. ....................................567,999,538 ...........92.000 ...100.0
23 ..74390@-10-1 Prudential Realty Securities II, Inc. ..................................73,724,554 ..........132.000 ....87.0
1 ...GATWAY-00-5 Gateway Holdings, Inc. .................................................67,378,937 ..........810.000 ...100.0
23 ..26244*-10-1 Dryden Holdings, Inc. ..................................................86,590,268 ..........234.000 ...100.0
23 ..26243*-10-2 Dryden Finance, Inc. ...................................................53,072,599 ..........278.000 ...100.0
23 ..37475X-10-5 Gibraltar Properties, Inc. .............................................46,271,772 ........1,000.000 ...100.0
23 ..78487@-10-6 SVIIT Holdings, Inc. ..................................................154,915,156 ........1,000.000 ...100.0
23 ..78457#-10-0 SMP Holdings, Inc. .....................................................62,169,950 ..........500.000 ...100.0
8 ...000000-00-0 Prudential Human Resources Management Co., Inc. ........................44,299,292 ..........100.000 ...100.0
23 ..000000-00-0 PIC Realty Corporation. .................................3,962,915 ....161,392,166 ..........236.000 ...100.0
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
1499999 - Common Stock.- Investment.Subsidiary 3,962,915 1,357,661,593 XXX XXX
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
23 ..69332#-10-0 PGR Advisors I, Inc. ....................................5,361,774 .....11,212,107 ..........100.000 ...100.0
23 ..PGA100-AB-0 PGA European Holdings, Inc. .............................................7,908,927 ..........100.000 ...100.0
23 ..71953K-69-9 PIC Holdings, Ltd. ........................................920,735 .....81,717,485 ...32,810,256.000 ...100.0
23 ..PLA100-12-9 Prudential Latin American Investments, Ltd. ...............................420,519 ..........100.000 ...100.0
23 ..PPC100-12-8 Prudential Private Capital Management ...........................................0 ............1.000 .....1.0
11 ..74408@-10-1 PRUCO, Inc. ...........................................................998,691,529 ...........94.000 ...100.0
14 ..744400-10-2 Prudential Select Holdings, Inc. ..........................878,990 ......6,182,572 .......44,977.000 ...100.0
21 ..74445#-10-4 Prudential Direct Distributors, Inc. .......................................23,624 ..........100.000 ...100.0
6 ...744299-20-7 Prudential Global Funding ..............................................14,782,185 ..........100.000 ...100.0
23 ..74442@-10-9 Prudential Private Placement Investors, Inc. ...............................43,336 .......40,000.000 ...100.0
23 ..76111#-10-2 Residential Services Corporation of America ............................15,957,974 ........1,000.000 ...100.0
4 ...74437#-10-4 The Prudential Investment Corporation ..................................60,857,633 ...........83.000 ...100.0
16 ..74390*-10-3 The Prudential Real Estate Affiliates, Inc. ...............337,938 .....48,758,329 ...........99.000 ...100.0
21/23 .91204*-10-3 U.S. High Yield Management Company ..........................................1,000 ..........100.000 ...100.0
21 ..74446@-10-5 Prudential Assigned Settlement Services, Inc. .............................123,281 ..........100.000 ...100.0
2 ...000000-00-0 Prudential Funding Corporation .........................................27,055,371 ..........100.000 ...100.0
7 ...PHDENT-17-8 Prudential Health and Dental Group Holdings, Inc. ......................20,101,877 ..........100.000 ...100.0
14 ..000000-00-0 Pvrudential Direct, Inc. ................................................3,561,102 ..........150.000 ...100.0
17 ..000000-00-0 Prudential, Inc. ..............................................................500 ..........500.000 ...100.0
19 ..000000-00-0 The Prudential Bank and Trust Company .................................104,648,698 ......203,996.000 ...100.0
19 ..000000-00-0 The Prudential Savings Bank, F.S.B. ....................................41,657,253 .......10,000.000 ...100.0
22 ..000000-00-0 Hochman and Baker ......................................13,275,489 ......1,724,511 ..........800.000 ....80.0
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
000000-00-0 Pru Investment Planning, Inc. ...........................................2,938,296 ........6,000.000 ...100.0
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
12 ..000000-00-0 Prudential International Insurance Holdings, Ltd. .........................594,979 ..........100.000
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
1599999 - Common Stock - Other Affiliates 20,774,926 1,448,963,088 XXX XXX
1699999 - Total Common Stocks 35,706,542 5,764,018,316 XXX XXX
1799999 - Total Preferred and Common Stocks 35,706,542 5,799,894,777 XXX XXX
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

C-6

<PAGE>

<TABLE>
<CAPTION>
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Name of Company
CUSIP Listed in Section 1
Identifica- Which Controls
TAB # tion Name of Lower-tier Company Lower-tier Company
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
23 ...000000-00-0 ...PRICOA Investment Company ............................................PIC Holdings, Ltd
23 ...000000-00-0 ...PRICOA Mezzanine Investment Co. ......................................PIC Holdings, Ltd.
24 ...000000-00-0 ...Prudential Capital and Investment Services, Inc. .....................PRUCO, Inc.
13 ...000000-00-0 ...Lapine Holding Company ...............................................PRUCO, Inc.
23 ...000000-00-0 ...Prudential Asia Investments, Ltd .....................................PRUCO, Inc.
23 ...000000-00-0 ...Prudential Asia Investments, Ltd .....................................Prudential Investment Company
12 ...000000-00-0 ...Prudential-Bradesco Seguros, S.A. ....................................Prudential International Insurance
Holdings, Ltd.
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
0199999 - Preferred Stock
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
16 ...000000-00-0 ...ML/MSB Acquisition, Inc ..............................................Prudential Residential Services, L.P.
16 ...000000-00-0 ...PRICOA Relocation Management, Ltd. ...................................Prudential Residential Services, L.P.
16 ...000000-00-0 ...Prudential Community Interaction Consulting, Inc. ....................Prudential Residential Services, L.P.
16 ...000000-00-0 ...Prudential Relocation Canada Ltd. ...................................Prudential Residential Services, L.P.
16 ...000000-00-0 ...Prudential Relocation, Ltd. ..........................................Prudential Residential Services, L.P.
16 ...000000-00-0 ...The Relocation Funding Corporation of America ........................Prudential Residential Services, L.P.
23 ...000000-00-0 ...PRICOA Capital Group, Ltd. ...........................................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA Funding, Ltd. .................................................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA Investment Company ............................................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA Property Investment Management Ltd.............................PIC Holdings, Ltd.
23 ...000000-00-0 ...Euro Invest (General Partner) Ltd. ...................................PIC Holdings, Ltd.
23 ...000000-00-0 ...Industrial Properties (Gen Partner), Ltd. ............................PIC Holdings, Ltd.
23 ...000000-00-0 ...Industrial Properties (Gen Partner) II, Ltd. .........................PIC Holdings, Ltd.
23 ...000000-00-0 ...Northern Retail Properties (General Partner) Ltd. ....................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA P.I.M. (Regulated) Ltd. .......................................PIC Holdings, Ltd.
23 ...000000-00-0 ...South Downs Properties (General Partner) Ltd. ........................PIC Holdings, Ltd.
23 ...000000-00-0 ...South Downs Trading (General Partner) Ltd. ...........................PIC Holdings, Ltd.
23 ...000000-00-0 ...TransEuropean Properties (General Partner) Ltd. ......................PIC Holdings, Ltd.
23 ...000000-00-0 ...TransEuropean Properties (General Partner) II Ltd. ...................PIC Holdings, Ltd.
21/23 ..000000-00-0 ...PRICOA Asset Management, Ltd. ........................................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA Capital Management ............................................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA General Partner Ltd ...........................................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA Management Partner Ltd. .......................................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA Mezzanine Funding, Ltd. .......................................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA Mezzanine Investment Co........................................PIC Holdings, Ltd.
23 ...000000-00-0 ...Argus General Partner, Ltd............................................PIC Holdings, Ltd.
23 ...000000-00-0 ...Argus Capital Limited.................................................PIC Holdings, Ltd.
23 ...000000-00-0 ...Argus Capital International Ltd. .....................................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA Property PLC ..................................................PIC Holdings, Ltd.
23 ...000000-00-0 ...PRICOA Property Private Equity Ltd. ..................................PIC Holdings, Ltd.
16 ...000000-00-0 ...Prudential Resources Management Asia, Limited ........................PRUCO, Inc.
23 ...000000-00-0 ...BREE Investments Ltd. ................................................PRUCO, Inc.
23 ...000000-00-0 ...Capital Agricultural Property Services, Inc. .........................PRUCO, Inc.
23 ...000000-00-0 ...Flor-Ag Corporation ..................................................PRUCO, Inc.
22 ...000000-00-0 ...Pruco Securities Corporation .........................................PRUCO, Inc.
23 ...000000-00-0 ...Prudential Agricultural Credit, Inc. .................................PRUCO, Inc.
13/24 ..000000-00-0 ...Prudential Capital and Investment Services, Inc. .....................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities Group Inc. - Series A ..........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities Group Inc. - Series B ..........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Securities (Germany) Inc. ...........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Management GmbH .....................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Management GmbH & Co. KG. ...........................PRUCO, Inc.
13 ...000000-00-0 ...BraeLoch Successor Corporation .......................................PRUCO, Inc.
13 ...000000-00-0 ...BraeLoch Holdings, Inc. ..............................................PRUCO, Inc.
13 ...000000-00-0 ...Graham Resources, Inc. ...............................................PRUCO, Inc.
13 ...000000-00-0 ...Graham Depository Company II .........................................PRUCO, Inc.
13 ...000000-00-0 ...Graham Energy, Ltd. ..................................................PRUCO, Inc.
13 ...000000-00-0 ...Graham Exploration, Ltd. .............................................PRUCO, Inc.
13 ...000000-00-0 ...Graham Royalty, Ltd. .................................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Global Markets ......................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache International (Hong Kong) Ltd. ......................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Finance (Hong Kong) Ltd. ............................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Bache Futures (Hong Kong) Ltd. ............................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Bache Nominees (Hong Kong) Ltd. ...........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Bache Securities (Hong Kong) Ltd. .........................PRUCO, Inc.
13 ...000000-00-0 ...PB Financial Services, Inc. ..........................................PRUCO, Inc.
13 ...000000-00-0 ...P-B Finance Ltd. .....................................................PRUCO, Inc.
13 ...000000-00-0 ...PGR Advisors, Inc. ...................................................PRUCO, Inc.
13 ...000000-00-0 ...PBML Custodian Limited ...............................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Capital Funding BV ..................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Energy Corp. ........................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Energy Production, Inc. .............................PRUCO, Inc.
13 ...000000-00-0 ...Commodity Admin Services, Inc. .......................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Commodities de Mexico, S, de RL de CV .....................PRUCO, Inc.
13 ...000000-00-0 ...Mexico Commodity Funding Corp. .......................................PRUCO, Inc.
13 ...000000-00-0 ...Mexico Commodity Sourcing Corp. ......................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Commodities de Mexico, S, de RL de CV .....................PRUCO, Inc.
13 ...000000-00-0 ...PSI. Partners Inc. ...................................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache International Banking Corporation ...................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache International Bank Ltd. .............................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Holdings Limited ....................................PRUCO, Inc.
</TABLE>
C-7

<PAGE>

<TABLE>
<CAPTION>
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Name of Company
CUSIP Listed in Section 1
Identifica- Which Controls
TAB # tion Name of Lower-tier Company Lower-tier Company
- - - - - - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
13 ...000000-00-0 ...PBI Investment Management Limited ....................................PRUCO, Inc.
13 ...000000-00-0 ...PBI Management Limited ...............................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Limited .............................................PRUCO, Inc.
13 ...000000-00-0 ...PBI Fund Managers Limited ............................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Nominees Limited ....................................PRUCO, Inc.
13 ...000000-00-0 ...Saffron Nominees Limited .............................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache International, (U.K.) Ltd. ..........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Bache International Ltd. ..................................PRUCO, Inc.
13 ...000000-00-0 ...Circle (Nominees) Limited. ...........................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Forex, (U.K.) Ltd. ..................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Bache International Trust Co. (Cayman) ....................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Bache Corp. Director Services, Inc. .......................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Bache Corp. Trustee Services, Inc. ........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Investor Services Inc. ..............................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Investor Services II, Inc. ..........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Leasing Inc. ........................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Program Services Inc. ...............................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Properties Inc. .....................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Securities, (Australia) Ltd. ........................PRUCO, Inc.
13 ...000000-00-0 ...Bache Nominees Ltd. ..................................................PRUCO, Inc.
13 ...000000-00-0 ...Corcarr Funds Management Limited .....................................PRUCO, Inc.
13 ...000000-00-0 ...Corcarr Nominees Pty. Limited ........................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Bache Funds Management, Ltd ...............................PRUCO, Inc.
13 ...000000-00-0 ...Divsplit Nominees Pty. Limited .......................................PRUCO, Inc.
13 ...000000-00-0 ...PruBache Nominees Pty. Limited .......................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Trade Services Inc. .................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Transfer Agent Services, Inc. .......................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities Capmark Inc. ...................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities Credit Corp. ...................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities Municipal Derivatives, Inc. ....................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities Secured Financing Corporation. .................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities Structured Assets, Inc. ........................PRUCO, Inc.
13 ...000000-00-0 ...Seaport Futures Management, Inc. .....................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities (Taiwan) Co., Ltd. .............................PRUCO, Inc.
13 ...000000-00-0 ...Vector Securities International, Inc. ................................PRUCO, Inc.
13 ...000000-00-0 ...XBW Acquisition Corporation ..........................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities Incorporated ...................................PRUCO, Inc.
13 ...000000-00-0 ...Lapine Holding Company ...............................................PRUCO, Inc.
13 ...000000-00-0 ...Lapine Development Corporation .......................................PRUCO, Inc.
13 ...000000-00-0 ...Lapine Technology Corporation ........................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Investments Fund Management, L.L.C. .......................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Mutual Fund Distributors, Inc. ............................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Mutual Fund Services, L.L.C. ..............................PRUCO, Inc.
13 ...000000-00-0 ...Bache & Co. (Lebanon) S.A.L. .........................................PRUCO, Inc.
13 ...000000-00-0 ...Bache & Co. S.A. de C.V. (Mexico) ....................................PRUCO, Inc.
13 ...000000-00-0 ...Bache Insurance Agency Inc. ..........................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities (Japan) Ltd. ...................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Futures Asia Pacific Ltd. ...........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Securities Agencia de Valores S.A. ..................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Securities Asia Pacific Ltd. ........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Securities (Holland) Inc. ...........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Securities (Monaco) Inc. ............................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Securities (Switzerland) Inc. .......................PRUCO, Inc.
13 ...000000-00-0 ...Prudential-Bache Securities (U.K.) Inc. ..............................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities (Brazil) LTDA ..................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities (Chile) Inc. ...................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities CMO Issuer Inc. ................................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities Futures Management Inc. ........................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities (Argentina) Inc. ...............................PRUCO, Inc.
13 ...000000-00-0 ...Prudential Securities (Uruguay) S.A. .................................PRUCO, Inc.
13 ...000000-00-0 ...Wexford Clearing Services Corporation ................................PRUCO, Inc.
23 ...000000-00-0 ...Prudential Equity Investors, Inc. ....................................PRUCO, Inc.
15 ...000000-00-0 ...Prudential Property and Casualty Holdings, Inc. ......................PRUCO, Inc.
15 ...000000-00-0 ...Prudential Property and Casualty Insurance ...........................PRUCO, Inc.
15 ...000000-00-0 ...Prudential Commercial Insurance Company ..............................PRUCO, Inc.
15 ...000000-00-0 ...Prudential General Insurance Company .................................PRUCO, Inc.
15 ...000000-00-0 ...Merastar Corporation .................................................PRUCO, Inc.
15 ...000000-00-0 ...Merastar Insurance Company ...........................................PRUCO, Inc.
15 ...000000-00-0 ...Prudential Insurance Brokerage, Inc. .................................PRUCO, Inc.
15 ...000000-00-0 ...The Prudential Property and Casualty General Agency, Inc. ............PRUCO, Inc.
15 ...000000-00-0 ...The Prudential Property and Casualty of New Jersey Holdings, Inc. ...PRUCO, Inc.
15 ...000000-00-0 ...The Prudential Property and Casualty Insurance Co. of New Jersey .....PRUCO, Inc.
15 ...000000-00-0 ...The Prudential General Insurance Company of New Jersey ...............PRUCO, Inc.
15 ...000000-00-0 ...The Prudential Commercial Insurance Co. of New Jersey ................PRUCO, Inc.
15 ...000000-00-0 ...Prudential General Agency of Florida, Inc. ...........................PRUCO, Inc.
15 ...000000-00-0 ...Prudential General Agency of Kentucky, Inc. ..........................PRUCO, Inc.
15 ...000000-00-0 ...Prudential General Agency of Massachusetts, Inc. .....................PRUCO, Inc.
15 ...000000-00-0 ...Prudential General Agency of Mississippi, Inc. .......................PRUCO, Inc.
15 ...000000-00-0 ...Prudential General Agency of Nevada, Inc. ............................PRUCO, Inc.
15 ...000000-00-0 ...Prudential General Agency of Wyoming, Inc. ...........................PRUCO, Inc.
15 ...000000-00-0 ...Prudential General Agency of New Mexico, Inc. ........................PRUCO, Inc.
</TABLE>

C-8

<PAGE>

<TABLE>
<CAPTION>
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Name of Company
CUSIP Listed in Section 1
Identifica- Which Control
TAB # tion Name of Lower-tier Company Lower-tier Company
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
15 ...000000-00-0 ...Prudential General Agency of Ohio, Inc. ..............................PRUCO, Inc.
15 ...000000-00-0 ...The.Prudential Property and Casualty New Jersey Insurance ............PRUCO, Inc.
23 ...000000-00-0 ...Prudential Realty Partnerships, Inc. .................................PRUCO, Inc.
20/23 ..000000-00-0 ...Prudential Trust Company .............................................PRUCO, Inc.
20/23 ..000000-00-0 ...PTC Services, Inc. ...................................................PRUCO, Inc.
7 ....000000-00-0 ...Prudential Uniformed Services Administrators, Inc. ...................PRUCO, Inc.
19 ...000000-00-0 ...PBT Home Equity Holdings .............................................PRUCO, Inc.
3 ....000000-00-0 ...Pruco Life Insurance Company of New Jersey ...........................Pruco Life Insurance Company
3 ....000000-00-0 ...The Prudential Life Insurance Company of Arizona .....................Pruco Life Insurance Company
14 ...000000-00-0 ...Prudential Select Life Insurance Company of America ..................Prudential Select Holdings, Inc.
23 ...000000-00-0 ...Private Label Mortgage Services Corporation ..........................Residential Services Corp of America
23 ...000000-00-0 ...Residential Information Services, Inc. ...............................Residential Services Corp of America
23 ...000000-00-0 ...Securitized Asset Sales, Inc. ........................................Residential Services Corp of America
23 ...000000-00-0 ...PHMC Services Corporation ............................................Residential Services Corp of America
23 ...000000-00-0 ...The Prudential Home Mortgage Company, Inc. ...........................Residential Services Corp of America
23 ...000000-00-0 ...The Prudential Home Mortgage Securities Co., Inc. ....................Residential Services Corp of America
21/23 ..000000-00-0 ...Gateway Holdings, S.A. ...............................................The Prudential Investment Corporation
21/23 ..000000-00-0 ...Amicus Investment Company ............................................The Prudential Investment Corporation
21/23 ..000000-00-0 ...Global Income Fund Management Company, S.A. ..........................The Prudential Investment Corporation
21/23 ..000000-00-0 ...Prumerica Global Asset Management Company, S.A. ......................The Prudential Investment Corporation
23 ...000000-00-0 ...Prudential Home Building Investors, Inc. .............................The Prudential Investment Corporation
21/23 ..000000-00-0 ...The Prudential Asset Management Company, Inc. ........................The Prudential Investment Corporation
21/23 ..000000-00-0 ...Enhanced Investment Technologies, Inc. ...............................The Prudential Investment Corporation
21 ...000000-00-0 ...PCM International, Inc. ..............................................The Prudential Investment Corporation
23 ...000000-00-0 ...Prudential Asia Investments Limited ..................................The Prudential Investment Corporation
21/23 ..000000-00-0 ...Prudential Asia Management Ltd. (BVI) ................................The Prudential Investment Corporation
21/23 ..000000-00-0 ...Prudential Asia Fund Management Ltd. .................................The Prudential Investment Corporation
21/23 ..000000-00-0 ...Prudential Asia Fund Managers (HK) Ltd. ..............................The Prudential Investment Corporation
23 ...000000-00-0 ...Prudential Asset Management Ltd. (BVI) ...............................The Prudential Investment Corporation
23 ...000000-00-0 ...PAMA (Indonesia) Limited .............................................The Prudential Investment Corporation
23 ...000000-00-0 ...PAMA (Singapore) Private Ltd. ........................................The Prudential Investment Corporation
23 ...000000-00-0 ...Prudential Asset Management Asia H.K.Ltd. ............................The Prudential Investment Corporation
23 ...000000-00-0 ...PT PAMA Indonesia ....................................................The Prudential Investment Corporation
23 ...000000-00-0 ...Prudential Asia Infrastructure Investors Ltd. ........................The Prudential Investment Corporation
23 ...000000-00-0 ...Prudential Asia Infrastructure Investors (H.K.) Ltd. .................The Prudential Investment Corporation
23 ...000000-00-0 ...Asian Infrastructure Mezzanine Capital Management Co., Ltd. ..........The Prudential Investment Corporation
23 ...000000-00-0 ...Prudential Timber Investments, Inc. ..................................The Prudential Investment Corporation
23 ...000000-00-0 ...Texas Rio Grande Other Asset Group Company, Inc. .....................The Prudential Investment Corporation
21/23 ..000000-00-0 ...The Prudential Investment Advisory Company, Ltd. .....................The Prudential Investment Corporation
23 ...000000-00-0 ...The Prudential Property Company, Inc. ................................The Prudential Investment Corporation
23 ...000000-00-0 ...The Prudential Realty Advisors, Inc. .................................The Prudential Investment Corporation
16 ...000000-00-0 ...Countrywide International Realty, Ltd. ...............................Prudential Real Estate Affiliates, Inc.
16 ...000000-00-0 ...Prudential Referral Services, Inc. ...................................Prudential Real Estate Affiliates, Inc.
16 ...000000-00-0 ...The Prudential Real Estate Financial Services of America, Inc. .......Prudential Real Estate Affiliates, Inc.
16 ...000000-00-0 ...Preferred Coastal Realty, Inc. .......................................Prudential Real Estate Affiliates, Inc.
16 ...000000-00-0 ...Real Estate Connecticut, Inc. ........................................Prudential Real Estate Affiliates, Inc.
16 ...000000-00-0 ...Prudential Homes Corporation .........................................Prudential Real Estate Affiliates, Inc.
16 ...000000-00-0 ...Prudential Texas Residential Services Corporation. ...................Prudential Real Estate Affiliates, Inc.
7 ....000000-00-0 ...Prudential Dental Maintenance Organization of California, Inc. .......Prudential Health and Dental Group
Holdings, Inc.
7 ....000000-00-0 ...Prudential HealthCare Group Inc. .....................................Prudential Health and Dental Group
Holdings, Inc.
8 ....000000-00-0 ...Human Resource Finance Company, Inc. .................................Prudential Human Resources
Management Co.,, Inc.
12 ...000000-00-0 ...Prudential-Bradesco Seguros, S.A. ....................................Prudential International Insurance
Holdings, Ltd.
12 ...000000-00-0 ...Gibraltar Servicos Ltda. .............................................Prudential International Insurance
Holdings, Ltd.
12 ...000000-00-0 ...Prudential Seguros, S.A. .............................................Prudential International Insurance
Holdings, Ltd.
12 ...000000-00-0 ...PruServicos Participacoes, S.A. ......................................Prudential International Insurance
Holdings, Ltd.
14 ...000000-00-0 ...Prudential Direct Insurance Agency of Alabama, Inc. ..................Prudential Direct, Inc.
14 ...000000-00-0 ...Prudential Direct Insurance Agency of Massachusetts, Inc. ............Prudential Direct, Inc.
14 ...000000-00-0 ...Prudential Direct Insurance Agency of New Mexico, Inc. ...............Prudential Direct, Inc.
14 ...000000-00-0 ...Prudential Direct Insurance Agency of Ohio, Inc. .....................Prudential Direct, Inc.
14 ...000000-00-0 ...Prudential Direct Insurance Agency of Wyoming, Inc. ..................Prudential Direct, Inc.
23 ...000000-00-0 ...PBT Mortgage Corporation .............................................PIC Realty Corporation
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
0299999 - Common Stock
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
0399999 Total
- - - - - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

C-9

<PAGE>

- - - - - - --------------------------------------------------------------------------------------------------------------
0199999 - Preferred Stock 0 XXX XXX
- - - - - - --------------------------------------------------------------------------------------------------------------
16 ...000000-00-0 .................1,000.000 ................100.0
16 ...000000-00-0 ....................99.000 ................100.0
16 ...000000-00-0 .................1,000.000 ................100.0
16 ...000000-00-0 .................1,000.000 ................100.0
16 ...000000-00-0 ....................49.000 ................100.0
16 ...000000-00-0 .................1,000.000 ................100.0
23 ...000000-00-0 .............6,751,000.000 ................100.0
23 ...000000-00-0 ............11,213,375.000 ................100.0
23 ...000000-00-0 ................15,000.000 ................100.0
23 ...000000-00-0 ....................920,735 .....................2.000 ................100.0
23 ...000000-00-0 ................49,998.000 .................99.0
23 ...000000-00-0 ................30,000.000 .................75.0
23 ...000000-00-0 ................49,998.000 .................99.0
23 ...000000-00-0 ................40,000.000 .................80.0
23 ...000000-00-0 ................10,000.000 ................100.0
23 ...000000-00-0 ....................99.000 .................99.0
23 ...000000-00-0 ....................99.000 .................99.0
23 ...000000-00-0 ................40,000.000 ................100.0
23 ...000000-00-0 ................30,000.000 .................75.0
21/23 ..000000-00-0 .............1,500,000.000 ................100.0
23 ...000000-00-0 ...............100,000.000 ................100.0
23 ...000000-00-0 .................1,000.000 ................100.0
23 ...000000-00-0 .................1,000.000 ................100.0
23 ...000000-00-0 ...............873,985.000 ................100.0
23 ...000000-00-0 .................1,000.000 ................100.0
23 ...000000-00-0 ................50,000.000 ................100.0
23 ...000000-00-0 .....................2.000 ................100.0
23 ...000000-00-0 .....................2.000 ................100.0
23 ...000000-00-0 ................49,998.000 ................100.0
23 ...000000-00-0 .....................2.000 ................100.0
16 ...000000-00-0 .................9,999.000 ................100.0
23 ...000000-00-0 .....................1.000 .................50.0
23 ...000000-00-0 ...................995.000 ................100.0
23 ...000000-00-0 ....................50.000 ................100.0
22 ...000000-00-0 ...................995.000 ................100.0
23 ...000000-00-0 ...................999.000 .................99.9
13/24 ..000000-00-0 ....................99.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ....................57.020 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ................50,000.000 ................100.0
13 ...000000-00-0 .....................0.000 ..................0.0
13 ...000000-00-0 ...............330,000.000 ................100.0
13 ...000000-00-0 .............7,758,803.000 ................100.0
13 ...000000-00-0 .............7,734,234.000 ................100.0
13 ...000000-00-0 .................1,000.000 ................100.0
13 ...000000-00-0 ....................90.000 ................100.0
13 ...000000-00-0 ...................130.000 ................100.0
13 ...000000-00-0 ....................20.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 .................1,502.000 ................100.0
13 ...000000-00-0 .....................3.000 ................100.0
13 ...000000-00-0 .................1,500.000 ................100.0
13 ...000000-00-0 .................1,750.000 ................100.0
13 ...000000-00-0 ...............550,000.000 ................100.0
13 ...000000-00-0 ....................50.000 ................100.0
13 ...000000-00-0 .....................3.000 ................100.0
13 ...000000-00-0 .................1,000.000 ................100.0
13 ...000000-00-0 .............5,000,000.000 ................100.0
13 ...000000-00-0 ................40,000.000 ................100.0
13 ...000000-00-0 .....................1.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ....................50.000 ................100.0
13 ...000000-00-0 .................2,999.000 .................99.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 .....................1.000 ..................1.0
13 ...000000-00-0 .....................1.000 ................100.0
13 ...000000-00-0 .................1,000.000 ................100.0
13 ...000000-00-0 ............35,000,000.000 ................100.0
13 ...000000-00-0 .............3,010,000.000 ................100.0
</TABLE>

C-10

<PAGE>

<TABLE>
<CAPTION>
- - - - - - --------------------------------------------------------------------------------------------------------------
Stock in Lower-tier Company Owned
Indirectly by Insurer on Statement Date
------------------------------------------
Amount of Intangible
CUSIP Assets Included in
Identifica- Amount Shown in
TAB # tion Column 5, Section 1 Number of Shares % of Outstanding
- - - - - - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13 ...000000-00-0 .............4,051,000.000 ................100.0
13 ...000000-00-0 ...............300,000.000 ................100.0
13 ...000000-00-0 ............12,200,000.000 ................100.0
13 ...000000-00-0 ................25,000.000 ................100.0
13 ...000000-00-0 ....................11.000 ................100.0
13 ...000000-00-0 .....................9.000 ................100.0
13 ...000000-00-0 ............41,400,211.000 ................100.0
13 ...000000-00-0 .............7,500,000.000 ................100.0
13 ...000000-00-0 .....................2.000 ................100.0
13 ...000000-00-0 .............3,000,000.000 ................100.0
13 ...000000-00-0 ...................500.000 ................100.0
13 ...000000-00-0 .................1,000.000 ................100.0
13 ...000000-00-0 .................1,000.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................500.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 .....................1.000 ................100.0
13 ...000000-00-0 ................10,000.000 ................100.0
13 ...000000-00-0 .....................4.000 ................100.0
13 ...000000-00-0 ................50,050.000 ................100.0
13 ...000000-00-0 .....................4.000 ................100.0
13 ...000000-00-0 .....................4.000 ................100.0
13 ...000000-00-0 .....................4.000 ................100.0
13 ...000000-00-0 .....................2.000 ................100.0
13 ...000000-00-0 .................1,000.000 ................100.0
13 ...000000-00-0 ................10,000.000 ................100.0
13 ...000000-00-0 ....................20.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ....................99.000 ................100.0
13 ...000000-00-0 ................46,350.000 ................100.0
13 ...000000-00-0 ............19,999,994.000 .................99.9
13 ...000000-00-0 ....................10.000 ................100.0
13 ...000000-00-0 ....................10.000 ................100.0
13 ...000000-00-0 ...................664.000 ................100.0
13 ...000000-00-0 ............12,500,000.000 .................71.0
13 ...000000-00-0 .............4,650,000.000 ................100.0
13 ...000000-00-0 .....................1.000 ................100.0
13 ...000000-00-0 .....................0.000 ..................0.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 .....................0.000 ..................0.0
13 ...000000-00-0 .................2,000.000 ................100.0
13 ...000000-00-0 ....................96.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...............200,000.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...............150,000.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................200.000 ................100.0
13 ...000000-00-0 ...............750,000.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
13 ...000000-00-0 ...................100.000 ................100.0
23 ...000000-00-0 .................1,000.000 ................100.0
15 ...000000-00-0 ....................10.000 ................100.0
15 ...000000-00-0 ...................800.000 ................100.0
15 ...000000-00-0 .................2,000.000 ................100.0
15 ...000000-00-0 .................2,000.000 ................100.0
15 ...000000-00-0 .................10,968,701 ...............100,000.000 ................100.0
15 ...000000-00-0 ................25,000.000 ................100.0
15 ...000000-00-0 ................25,000.000 ................100.0
15 ...000000-00-0 ...................100.000 ................100.0
15 ...000000-00-0 .....................1.000 ................100.0
15 ...000000-00-0 ...................400.000 ................100.0
15 ...000000-00-0 ...................240.000 ................100.0
15 ...000000-00-0 ...................240.000 ................100.0
15 ...000000-00-0 ...................100.000 ................100.0
15 ...000000-00-0 ...................100.000 ................100.0
15 ...000000-00-0 ...................100.000 ................100.0
15 ...000000-00-0 ...................100.000 ................100.0
15 ...000000-00-0 ...................100.000 ................100.0
15 ...000000-00-0 ...................100.000 ................100.0
15 ...000000-00-0 ...................100.000 ................100.0
</TABLE>

C-11

<PAGE>

7 ....000000-00-0 .................1,000.000 ................100.0

8 ....000000-00-0 ...................100.000 ................100.0

12 ...000000-00-0 ................54,772.000 .................48.0

12 ...000000-00-0 .................1,020.000 .................51.0

12 ...000000-00-0 ...............422,168.000 ................100.0

12 ...000000-00-0 ...............100,000.000 ................100.0

14 ...000000-00-0 ...................150.000 ................100.0
14 ...000000-00-0 ...................150.000 ................100.0
14 ...000000-00-0 ...................150.000 ................100.0
14 ...000000-00-0 ....................90.000 .................90.0
14 ...000000-00-0 ...................150.000 ................100.0
23 ...000000-00-0 .................2,250.000 ................100.0
- - - - - - -------------------------------------------------------------------------------------------------------------.
0299999 - Common Stock ....12,227,374 ....................XXX ....................XXX
- - - - - - --------------------------------------------------------------------------------------------------------------
0399999 Total .............12,227,374 ....................XXX ....................XXX
- - - - - - --------------------------------------------------------------------------------------------------------------
</TABLE>

C-12

<PAGE>

ITEM 25. INDEMNIFICATION

Article VI, paragraph (4) of Registrant's Articles of Incorporation provides
that "each 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 "no
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 conjunction 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
Post-Effective Amendment No. 22 to the Registration Statement of The Prudential
Variable Appreciable Account, Registration No. 33-20000, filed on April 26,
2000, the text of which is hereby incorporated by reference.

C-13

<PAGE>

ITEM 27. PRINCIPAL UNDERWRITERS

(a) Prudential Investment Management Services LLC (PIMS) is the distributor for
the following open-end management companies: Cash Accumulation Trust, COMMAND
Money Fund, COMMAND Government Fund, COMMAND Tax-Free Fund, Global Utility Fund,
Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund),
Prudential Balanced Fund, Prudential California Municipal Fund, Prudential
Diversified Bond Fund, Inc., Prudential Diversified Funds, 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 Total Return Fund, Inc., Prudential Government Income Fund,
Inc., Prudential Government Securities Trust, Prudential High Yield Fund, Inc.,
Prudential High Yield Total Return Fund, Inc., Prudential Index Series Fund,
Prudential Institutional Liquidity Portfolio, Inc., Prudential International
Bond Fund, Inc., Prudential Mid-Cap Value Fund, Prudential MoneyMart Assets,
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 Estate Securities
Fund, Prudential Sector Funds, Inc., 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 Tax-Managed Funds, Prudential 20/20 Focus Fund, Prudential
World Fund, Inc., The Prudential Investment Portfolios, Inc., Strategic Partners
Series, Target Funds and The Target Portfolio Trust.

PIMS is also distributor of the following unit investment trusts: Separate
Accounts; 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
Variable Contract GI-2, The Prudential Discovery Select Group Variable Contract
Account, The Pruco Life Flexible Premium Variable Annuity Account, The Pruco
Life of New Jersey Flexible Premium Variable Annuity Account, The Prudential
Individual Variable Contract Account and The Prudential Qualified Individual
Variable Contract Account.

(b) NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
---------------- ---------------- ---------------
<S> <C> <C>

Robert F. Gunia*** President None
Jean D. Hamilton* Executive Vice President None
John R. Strangfeld, Jr.*** Executive Vice President None
William V. Healey*** Sr. Vice President, Secretary and Chief Legal
Officer None
Margaret M. Deverell*** Sr. Vice President, Comptroller and Chief
Financial None
C. Edward Chaplin * Treasurer None
Kevin B. Frawley ** Sr. Vice President and Chief Compliance Officer None

</TABLE>

* 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

C-14

<PAGE>

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 Custodian, Investors Fiduciary Trust Company,
127 West 10th Street, Kansas City, MO 64105-1716.

The Fund has entered into Sub-Advisory Agreements with Jennison Associates LLC,
466 Lexington Avenue, New York, New York 10017; Prudential Investment
Corporation, 751 Broad Street, Newark, New Jersey 07102; Franklin Advisers,
Inc., 777 Mariners Island Blvd., San Mateo, California 94404; The Dreyfus
Corporation, 200 Park Avenue, New York, NY 10266; and Pacific Investment
Management Company, 840 Newport Center Drive, Newport Beach, California 92660.

ITEM 29. MANAGEMENT SERVICES

Not Applicable.

ITEM 30. UNDERTAKINGS

Not Applicable.

C-15

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Newark, and State of New Jersey, on the 24th day of May, 2000.

THE PRUDENTIAL SERIES FUND, INC.

By: /s/ JOHN R. STRANGFELD
----------------------------
John R. Strangfeld
President and Director

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 38 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/ John R. Strangfeld May 24, 2000
- - - - - - ---------------------------------
John R. Strangfeld
President and Director

/s/ Grace C. Torres May 24, 2000
- - - - - - ---------------------------------
Grace C. Torres
Treasurer and Principal Financial
and Accounting Officer

*By: /s/ Lee D. Augsburger
--------------------------
Lee D. Augsburger
(Attorney-in-Fact)

/s/* May 24, 2000
- - - - - - ---------------------------------
Saul K. Fenster
Director

/s/* May 24, 2000
- - - - - - ---------------------------------
W. Scott McDonald, Jr.
Director

/s/* May 24, 2000
- - - - - - ---------------------------------
Joseph Weber
Director

C-16

<PAGE>

EXHIBIT INDEX PAGE

(a) Form of Articles of Restatement of The Prudential Series Fund, Inc.

(d)(9) Form of Subadvisory Agreement between Prudential Investments Fund
Management LLC and the Adviser.

C-17

THE PRUDENTIAL SERIES FUND, INC.

ARTICLES SUPPLEMENTARY
TO
ARTICLES OF RESTATEMENT

THE PRUDENTIAL SERIES FUND, INC., a Maryland corporation having its
principal office in this State c/o Prentice Hall Corporation System, Maryland,
11 E. Chase Street, Baltimore, Maryland 21201 (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:

FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940, as amended.

SECOND: The Corporation has authority to issue two billion five hundred
million (2,500,000,000) shares of capital stock, par value $0.01 per share, and
such shares are allocated among seventeen classes of capital stock (each, a
"Series"), each of which is further divided into two classes (each, a "Class"),
each Series and Class having the designations indicated, and the number of
shares of Stock of each Class of each Series, the par value of the shares of
each Class of each Series, and the aggregate par value of the shares of all
Series and Classes being as follows:
<TABLE>
<CAPTION>
CLASS I CLASS II
------------------------ ---------------------
Number of Par Value Number of Par Value
SERIES Shares Shares
- - - - - - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Portfolio Capital Stock 170,000,000 $1,700,000 5,000,000 $50,000
Diversified Bond Portfolio Capital Stock 170,000,000 $1,700,000 5,000,000 $50,000
Equity Portfolio Capital Stock 295,000,000 $2,950,000 5,000,000 $50,000
Flexible Managed Portfolio Capital Stock 370,000,000 $3,700,000 5,000,000 $50,000
Conservative Balanced Portfolio Capital Stock 370,000,000 $3,700,000 5,000,000 $50,000
Zero Coupon Bond-2000 Portfolio Capital Stock 10,000,000 $100,000 5,000,000 $50,000
Zero Coupon Bond-2005 Portfolio Capital Stock 10,000,000 $100,000 5,000,000 $50,000
High Yield Bond Portfolio Capital Stock 195,000,000 $1,950,000 5,000,000 $50,000
Stock Index Portfolio Capital Stock 170,000,000 $1,700,000 5,000,000 $50,000
Equity Income Portfolio Capital Stock 170,000,000 $1,700,000 5,000,000 $50,000
Natural Resources Portfolio Capital Stock 30,000,000 $300,000 5,000,000 $50,000
Global Portfolio Capital Stock 70,000,000 $700,000 5,000,000 $50,000
Government Income Portfolio Capital Stock 65,000,000 $650,000 5,000,000 $50,000
Prudential Jennison Portfolio Capital Stock 110,000,000 $1,100,000 5,000,000 $50,000
Small Capitalization Stock Portfolio Capital Stock 70,000,000 $700,000 5,000,000 $50,000
Diversified Conservative Growth Portfolio Capital 70,000,000 $700,000 5,000,000 $50,000
Stock
20/20 Focus Portfolio Capital Stock 70,000,000 $700,000 5,000,000 $50,000
========================================================================================================
TOTAL 2,415,000,000 $24,150,000 85,000,000 $850,000
TOTAL SHARES, ALL SERIES AND CLASSES 2,500,000,000
TOTAL PAR VALUE, ALL SERIES AND CLASSES $25,000,000
</TABLE>

THIRD: The Board of Directors of the Corporation, at a meeting duly
convened and held on May __, 2000, adopted resolutions:

(A) to increase by one billion (1,000,000,000) the number of shares of
capital stock, par value $0.01 per share, that the Corporation has
authority to issue, to a total of three billion five hundred million
(3,500,000,000) shares.

<PAGE>

(B) to establish twenty (20) new Series of capital stock designated as SP
AIM Aggressive Growth Portfolio Capital Stock, SP AIM Growth and
Income Portfolio Capital Stock, SP Aggressive Growth Asset Allocation
Portfolio Capital Stock, SP Alliance Large Cap Growth Portfolio
Capital Stock, SP Alliance Technology Portfolio Capital Stock, SP
Balanced Asset Allocation Portfolio Capital Stock, SP Conservative
Asset Allocation Portfolio Capital Stock, SP Davis Value Portfolio
Capital Stock, SP Deutsche International Equity Portfolio Capital
Stock, SP Large Cap Value Portfolio Capital Stock, SP Small/Mid Cap
Value Portfolio Capital Stock, SP Growth Asset Allocation Portfolio
Capital Stock, SP INVESCO Small Company Growth Portfolio Capital
Stock, SP Jennison International Growth Portfolio Capital Stock,
SP MFS Capital Opportunities Portfolio Capital Stock, SP MFS Mid Cap
Growth Portfolio Capital Stock, SP PIMCO High Yield Portfolio Capital
Stock, SP PIMCO Total Return Portfolio Capital Stock, SP Prudential
U.S. Emerging Growth Portfolio Capital Stock, and SP Strategic
Partners Focused Growth Portfolio Capital Stock, each of which is
further divided into two Classes;

(C) to classify the newly authorized one billion shares of the Corporation
so that each newly established Series is allocated fifty million
(50,000,000) shares, of which forty million (40,000,000) shares are
allocated to Class I of that Series and ten million (10,000,000)
shares are allocated to Class II of that Series, with the preferences,
conversion and other rights, voting powers, restrictions, limitations
as to dividends, qualifications, or terms or conditions of redemption
of the shares as set forth below:

The holder of each share of stock of the Corporation shall be
entitled to one vote for each full share, and a fractional vote
for each fractional share of stock, irrespective of the Class or
Series, then standing in his name on the books of the
Corporation. On any matter submitted to a vote of stockholders,
all shares of the Corporation then issued and outstanding and
entitled to vote shall be voted in the aggregate and not by
Series or Class except that (1) when otherwise expressly required
by the Maryland General Corporation Law or the Investment Company
Act of 1940, as amended, shares shall be voted by individual
Series or Class; (2) only shares of the respective Series or
Class are entitled to vote on matters concerning only that Series
or Class; and (3) fundamental investment policies may be changed,
with respect to any Series, if such change is approved by a
majority (as defined under the Investment Company Act of 1940) of
the capital stock of such Series.

Each Class of each Series of stock of the Corporation shall have
the following powers, preferences or other special rights, and
the qualifications, restrictions, and limitations thereof shall
be as follows:

(1) The shares of each Class, when issued, will be fully
paid and non-assessable, have no preference,
preemptive, conversion, exchange, or similar rights,
except as set forth in (2) below, and will be freely
transferable.

(2) The consideration received by the Corporation for the
sale of capital stock of a Class of a Series shall
become part of the assets of that Series. Each share of
each Class of a Series shall represent an equal
proportionate interest in that Class, and each share of
any Class shall be equal to each other share of that
Class. Each Series shall have no interest in the assets
of any other Series. Each share of each Class of a
Series shall represent the same interest in the Series
and have the same powers, rights, and preferences,
except that:

2
<PAGE>

(i) expenses related to the distribution of, and
other identified expenses that should
properly be allocated to, the shares of a
particular Class shall be borne solely by
such Class;

(ii) the bearing of such expenses solely by
shares of each Class shall be appropriately
reflected (in the manner determined by the
Board of Directors) in the net asset value,
dividends, distribution and liquidation
rights of the shares of such Class;

(iii) the Class II stock shall be subject to a
distribution fee pursuant to Rule 12b-1
under the Investment Company of 1940, as
amended, and an administration fee as
determined by the Board of Directors from
time to time;

(iv) each Class shall have exclusive voting
rights on any matter submitted to
shareholders that, in the judgment of the
Board of Directors (which shall be
conclusive), relates solely to its
shareholders; and

(v) each Class shall have separate voting rights
on any matter submitted to shareholders in
which, in the judgment of the Board of
Directors (which shall be conclusive), the
interests of one Class differ from the
interests of any other Class.

(3) The Board of Directors may from time to time declare
and pay dividends or distributions, in stock or in
cash, on any or all Classes of any or all Series of
stock, the amount of such dividends and distributions
and the payment of them being wholly in the discretion
of the Board of Directors.

(i) Dividends or distributions on shares of any
Class of stock shall be paid only out of
earned surplus or other lawfully available
assets belonging to such Class.

(ii) Inasmuch as one goal of the Corporation is
to qualify as a "regulated investment
company" under the Internal Revenue Code of
1954, as amended, or any successor or
comparable statute thereto, and Regulations
promulgated thereunder, and inasmuch as the
computation of net income and gains for
Federal income tax purposes may vary from
the computation thereof on the books of the
Corporation, the Board of Directors shall
have the power in its discretion to
distribute in any fiscal years as dividends,
including dividends designated in whole or
in part as capital gains distributions,
amounts sufficient in the opinion of the
Board of Directors to enable the Corporation
to qualify as a regulated investment company
and to avoid liability for the Corporation
for Federal income tax in respect of that
year. In furtherance, and not in limitation
of the foregoing, in the event that a Class
of shares has a net capital loss for a
fiscal year, and to the extent that a net
capital loss for a fiscal year offsets net
capital gains from one or more of the other
Classes, the amount to be deemed available
for distribution to the Class or Classes
with the net capital gain may be reduced by
the amount offset.

3
<PAGE>

(4) The assets belonging to any Class of a Series of stock
shall be charged with the liabilities in respect to
such Class and Series, and shall also be charged with
their share of the general liabilities of the
Corporation in proportion to the asset values of the
respective Class. The determination of the Board of
Directors shall be conclusive as to the amount of
liabilities or the amount of any general assets of the
Corporation, as to whether such liabilities or assets
are allocable to one or more Series or Classes, and as
to the allocation of such liabilities or assets to a
given Series or Class or among several Series or
Classes.

(5) With the approval of a majority of the stockholders of
each of the affected Classes of capital stock, the
Board of Directors may transfer the assets of any Class
to another Class in that Series or to a Class in
another Series. Upon such a transfer, the Corporation
shall issue shares of capital stock representing
interests in the Class to which the assets were
transferred in exchange for all shares of capital stock
representing interests in the Class from which the
assets were transferred. Such shares shall be exchanged
at their respective net asset values.

FOURTH: When these Articles Supplementary are effective, the total number
of shares of all Series and Classes that the Corporation has authority to issue,
the number of shares of Stock of each Class of each Series, the par value of the
shares of each Class of each Series and the aggregate par value of the shares of
all Series and Classes will be as follows:

[Remainder of this page intentionally left blank]

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<PAGE>

<TABLE>
<CAPTION>
CLASS I CLASS II
------------------------ --------------------
Number of Par Value Number of Par Value
SERIES Shares Shares
- - - - - - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Portfolio Capital Stock 170,000,000 $1,700,000 5,000,000 $50,000
Diversified Bond Portfolio Capital Stock 170,000,000 $1,700,000 5,000,000 $50,000
Equity Portfolio Capital Stock 295,000,000 $2,950,000 5,000,000 $50,000
Flexible Managed Portfolio Capital Stock 370,000,000 $3,700,000 5,000,000 $50,000
Conservative Balanced Portfolio Capital Stock 370,000,000 $3,700,000 5,000,000 $50,000
Zero Coupon Bond-2000 Portfolio Capital Stock 10,000,000 $100,000 5,000,000 $50,000
Zero Coupon Bond-2005 Portfolio Capital Stock 10,000,000 $100,000 5,000,000 $50,000
High Yield Bond Portfolio Capital Stock 195,000,000 $1,950,000 5,000,000 $50,000
Stock Index Portfolio Capital Stock 170,000,000 $1,700,000 5,000,000 $50,000
Equity Income Portfolio Capital Stock 170,000,000 $1,700,000 5,000,000 $50,000
Natural Resources Portfolio Capital Stock 30,000,000 $300,000 5,000,000 $50,000
Global Portfolio Capital Stock 70,000,000 $700,000 5,000,000 $50,000
Government Income Portfolio Capital Stock 65,000,000 $650,000 5,000,000 $50,000
Prudential Jennison Portfolio Capital Stock 110,000,000 $1,100,000 5,000,000 $50,000
Small Capitalization Stock Portfolio Capital Stock 70,000,000 $700,000 5,000,000 $50,000
Diversified Conservative Growth Portfolio Capital Stock 70,000,000 $700,000 5,000,000 $50,000
20/20 Focus Portfolio Capital Stock 70,000,000 $700,000 5,000,000 $50,000
SP Aggressive Growth Asset Allocation Portfolio Capital 40,000,000 $400,000 10,000,000 $100,000
Stock
SP AIM Aggressive Growth Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP AIM Growth and Income Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP Alliance Large Cap Growth Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP Alliance Technology Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP Balanced Asset Allocation Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP Conservative Asset Allocation Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP Davis Value Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP Deutsche International Equity Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP Growth Asset Allocation Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP INVESCO Small Company Growth Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000

SP Jennison International Growth Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000

SP Large Cap Value Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP MFS Capital Opportunities Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP MFS Mid Cap Growth Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP PIMCO High Yield Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP PIMCO Total Return Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP Prudential U.S. Emerging Growth Portfolio Capital 40,000,000 $400,000 10,000,000 $100,000
Stock
SP Small/Mid Cap Value Portfolio Capital Stock 40,000,000 $400,000 10,000,000 $100,000
SP Strategic Partners Focused Growth Portfolio Capital 40,000,000 $400,000 10,000,000 $100,000
Stock
===========================================================================================================
TOTAL 3,215,000,000 $32,150,000 285,000,000 $2,850,000
TOTAL SHARES, ALL SERIES AND CLASSES 3,500,000,000
TOTAL PAR VALUE, ALL SERIES AND CLASSES $35,000,000
</TABLE>

FIFTH: The total number of shares of capital stock that the Corporation has
authority to issue has been increased by the Board of Directors in accordance
with Section 2-105(c) of the Maryland General Corporation Law.

SIXTH: The newly authorized shares of the Corporation have been duly
classified by the Board of Directors pursuant to authority and power contained
in Article V of the Articles of Restatement of the Corporation.

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<PAGE>

IN WITNESS WHEREOF, THE PRUDENTIAL SERIES FUND, INC. has caused these
presents to be signed in its name and on its behalf by its Chairman and its
corporate seal to be hereunder affixed and attested by its Secretary, as of
_____ __, 2000.

THE PRUDENTIAL SERIES FUND, INC.

BY: ___________________________
John R. Strangfeld
Chairman

Attest:

- - - - - - --------------------
Lee D. Augsburger
Secretary

THE UNDERSIGNED, Chairman of the Board of THE PRUDENTIAL SERIES FUND, INC.,
who executed on behalf of said Corporation the foregoing Articles Supplementary
to the Articles of Restatement, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the foregoing
Articles Supplementary to the Articles of Restatement to be the corporate act of
said Corporation and further certifies that, to the best of his knowledge,
information, and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.

-------------------------
John R. Strangfeld
Chairman

THE PRUDENTIAL SERIES FUND, INC.
SUBADVISORY AGREEMENT

Agreement made as of the ____ day of ____________, 2000, between Prudential
Investments Fund Management LLC (the "Manager"), and ______________________ (the
"Adviser") a ____________ [corporation] [partnership] organized under the laws
of the State of _________________________.

WHEREAS, the Manager has entered into a management agreement (the
"Management Agreement") with The Prudential Series Fund, Inc. (the "Fund"), a
Maryland corporation and a diversified open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"), pursuant
to which the Manager will act as manager of the Fund.

WHEREAS, shares of the Fund are divided into separate series or portfolios,
each of which is established pursuant to a resolution of the Directors of the
Fund, and the Directors may from time to time terminate such portfolios or
establish and terminate additional portfolios.

WHEREAS, the Manager desires to retain the Adviser to provide investment
advisory services to the ____________________ portfolio of the Fund (the
"Portfolio") in connection with the management of the Fund and to manage such
portion of the Portfolio as the Manager shall from time to time direct, and the
Adviser is willing to render such investment advisory services.

NOW, THEREFORE, the Parties agree as follows:

<PAGE>
2

1. (a) Subject to the supervision of the Manager and of the Directors of
the Fund, the Adviser shall manage investment operations of the Portfolio as the
Manager shall direct and shall manage the composition of the Portfolio,
including the purchase, retention and disposition thereof, in accordance with
the Portfolio's investment objective, policies and restrictions as stated in the
Prospectus (such Prospectus and Statement of Additional Information as currently
in effect and as amended or supplemented from time to time being herein called
the "Prospectus") as delivered to the Adviser from time to time by the Manager
and subject to the following understandings:

(i) The Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments and securities
will be purchased, retained, sold or loaned by the Portfolio, and what
portion of the assets it manages will be invested or held uninvested as
cash.

(ii) In the performance of its duties and obligations under this
Agreement, the Adviser shall act in conformity with the Agreement and
Articles of Incorporation, By-Laws and Prospectus of the Fund and the
Portfolio as provided to the Adviser by the Manager and with the written
instructions and directions of the Manager and of the Directors of the Fund
and will conform to and comply with the requirements of the 1940 Act, the
Internal Revenue Code of 1986, as amended (including the diversification
requirements of section 817(h) of the Code), and all other applicable
federal and state laws and regulations.

(iii) The Adviser shall determine the securities, futures, commodities
or other assets to be purchased or sold by the Portfolio, and will place
orders pursuant to its determination with or through such persons, brokers,
dealers or futures commission merchants (including but not limited to
Prudential Securities Incorporated) to carry out the policy with respect to
brokerage as set forth in the Fund's Registration Statement and Prospectus
or as the Directors may direct from

<PAGE>
3

time to time. In providing the Portfolio with investment supervision, it is
recognized that the Adviser will give primary consideration to securing the
most favorable price and best execution. Within the framework of this
policy, the Adviser may consider the financial responsibility, research and
investment information and other services provided by brokers, dealers or
futures commission merchants who may effect or be a party to any such
transaction or other transactions to which the Adviser's other clients may
be a party. It is understood that Prudential Securities Incorporated may be
used as broker for securities transactions but that no formula has been
adopted for allocation of the Portfolio's investment transaction business.
It is also understood that it is desirable for the Fund that the Adviser
have access to supplemental investment and market research and security and
economic analysis provided by brokers or futures commission merchants who
may execute brokerage transactions at a higher cost to the Fund than may
result when allocating brokerage to other brokers on the basis of seeking
the most favorable price and best execution. Therefore, the Adviser is
authorized to place orders for the purchase and sale of securities and
commodities or other assets for the Portfolio with such brokers or futures
commission merchants, subject to review by the Directors from time to time
with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers or futures commission
merchants may be useful to the Adviser in connection with the Adviser's
services to other clients.

On occasions when the Adviser deems the purchase or sale of a
security, commodity or other asset to be in the best interest of one
Portfolio as well as other clients of the Adviser, the Adviser, to the
extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities, commodities or other
assets to be sold or purchased in order to obtain the most favorable price
or lower brokerage commissions and best execution. In

<PAGE>
4

such event, allocation of the securities, commodities or other assets so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Adviser in the manner the Adviser considers to be the
most equitable and consistent with its fiduciary obligations to the Fund
and to such other clients.

(iv) The Adviser shall maintain all books and records with respect to
the portfolio transactions required by subparagraphs (b)(5), (6), (7), (9),
(10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act and shall
render to the Directors such periodic and special reports as the Board may
reasonably request.

(v) The Adviser shall provide the Fund's custodian (the "Custodian")
on each business day with information relating to all transactions
concerning the Portfolio's assets it manages and shall provide the Manager
with such information upon request of the Manager. The Adviser shall
reconcile its records of the Portfolio's securities and cash managed by the
Adviser with statements provided by the Custodian at least once each month.
The Adviser shall provide the Manager with a written report on each such
reconciliation, including information on any material discrepancies noted
and actions taken by the Adviser in response thereto, by the tenth business
day of the following month.

(vi) The investment management services provided by the Adviser
hereunder are not exclusive, and the Adviser shall be free to render
similar services to others.

(b) Services to be furnished by the Adviser under this Agreement may be
furnished through the medium of any of its partners, officers or employees.

(c) The Adviser shall keep the Portfolio's books and records required to be
maintained by the Adviser pursuant to paragraph 1(a)(iv) hereof and shall timely
furnish to the Manager all information relating to the Adviser's services
hereunder needed by the Manager to keep the other books and records of the Fund
required by Rule 31a-1 under the 1940 Act. The Adviser agrees that all records
which it maintains for the

<PAGE>
5

Portfolio are the property of the Fund and the Adviser will surrender promptly
to the Fund any of such records upon the Fund's request. The Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any such records as are required to be maintained by it pursuant to paragraph
1(a) hereof.

(d) The Adviser agrees to maintain adequate compliance procedures to ensure
its compliance with the 1940 Act, the Investment Advisers Act of 1940 ("Advisers
Act") and other applicable state and federal laws and regulations.

(e) The Adviser shall furnish to the Manager copies of all records prepared
in connection with (i) the performance of this Agreement and (ii) the
maintenance of reports prepared in accordance with the compliance procedures
maintained pursuant to paragraph 1(d) hereof as the Manager may reasonably
request.

(f) The Adviser shall furnish to the Manager, within 15 days after the end
of each calendar quarter, a report detailing (i) the average annual total return
of the Portfolio for the preceding quarter and for the preceding 1, 5 and 10
year periods (the "Portfolio Return"); and (ii) a comparison of the Portfolio
Return with the return of an appropriate securities index and with an
appropriate mutual fund peer group.

(g) At least once annually, the Adviser, at its expense, shall require
those of its personnel who are primarily responsible for managing the Portfolio
to make a presentation at such regular or special meeting of the Fund's Board
that the Fund may convene.

2. The Manager shall continue to have responsibility for all services to be
provided to the Portfolio pursuant to the Management Agreement and shall oversee
and review the Adviser's performance of its duties under this Agreement.

3. For the Portfolio, the Manager shall compensate the Adviser for the
services provided and the expenses assumed pursuant to this Subadvisory
Agreement at the annual rate of .___ of 1% of the average daily net assets of
the Portfolio managed by the Adviser. This fee will be computed daily and paid
quarterly.

<PAGE>
6

4. The Adviser shall not be liable for any error of judgment or for any
loss suffered by the Portfolio, the Fund or the Manager in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Adviser's part in the
performance of its duties or from its reckless disregard of its obligations and
duties under this Agreement.

5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Directors or by vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Portfolio, or by the Manager or the Adviser at any time, without the payment
of any penalty, on not more than 60 days' nor less than 30 days' written notice
to the other party. This Agreement shall terminate automatically in the event of
its assignment (as defined in the 1940 Act) or upon the termination of the
Management Agreement. Adviser shall promptly notify Manager in the event that
there is a change in the ownership of Adviser that may constitute an assignment
of this Agreement.

6. Nothing in this Agreement shall limit or restrict the right of any of
the Adviser's partners, officers or employees to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit
the Adviser's right to engage in any other business or to render services of any
kind to any other corporation, firm, individual or association.

7. During the term of this Agreement, the Manager agrees to furnish the
Adviser at its principal office all prospectuses, proxy statements, reports to
shareholders, sales literature or other material prepared for distribution to
shareholders of the Fund or the public, which refer to the Adviser in any way;
provided, however, that any such item

<PAGE>
7

which describes or characterizes the Adviser's investment process with respect
to a Portfolio, the names of any of its clients (other than the Fund or advisory
clients of the Manager and its affiliates) or any of its performance results
shall be furnished to the Adviser by first class or overnight mail, facsimile
transmission equipment or hand delivery prior to use thereof, and such item
shall not be used if the Adviser reasonably objects to such use in writing
within twenty-four (24) hours (or such other time as may be mutually agreed)
after receipt thereof (provided, however, that if such item is not received by
the Adviser during normal business hours on a business day, such period shall
end twenty-four (24) hours after the start of normal business hours on the next
succeeding business day).

8. Any written notice required by or pertaining to this Agreement shall be
personally delivered to the party for whom it is intended, at the address stated
below, or shall be sent to such party by prepaid first class mail or facsimile.

If to Prudential: The Prudential Series Fund Inc.
3 Gateway Center, 4th Floor
Newark, NJ 07102-4077
Fax: (973) 367-8064
Attention: General Counsel

If to the Adviser:

Attention:

10. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.

11. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

<PAGE>
8

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC

By________________________________________
Name:
Title:

[ADVISER]

By________________________________________
Name:
Title: