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The Prudential Series Fund ProspectusMAY 1, 2006

American Century VP Value Fund ProspectusMAY 1, 2006

Janus Aspen Series Large Cap Growth Portfolio, Institutional Shares ProspectusMAY 1, 2006

MFS® Emerging Growth Series ProspectusMAY 1, 2006

T. Rowe Price International Stock Portfolio ProspectusMAY 1, 2006

Financial Statements of Pruco Life Variable Universal AccountFOR THE PERIODS ENDED DECEMBER 31, 2005

Pruco Life Insurance Company and SubsidiariesConsolidated Statements of Financial PositionFOR THE PERIODS ENDED DECEMBER 31, 2005

Our privacy notice, titled “Important Privacy Information and Choices,” is included at the end of this prospectus.

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ADVANCED SERIES TRUSTAST International Value PortfolioAST Advanced Strategies Portfolio

THE PRUDENTIAL SERIES FUNDGlobal Portfolio

SP International Value Portfolio

PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 2007

SUPPLEMENT DATED JUNE 20, 2007

Robert Vishny has announced his intention to retire from LSV Asset Management, effective on or about December 31, 2007. Josef Lakonishok, Menno Vermeulen and Puneet Mansharamani will continue to serve as portfolio managers following Mr. Vishny’s retirement.

To reflect this change, effective on or about December 31, 2007, all references and information pertaining to Mr. Vishny contained in the Prospectus or Statement of Additional Information are deleted.

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The Prudential Series Fund Natural Resources Portfolio

Supplement dated November 16, 2006

to the Prospectus and Statement of Additional Information dated May 1, 2006 _____________________________________________________________________________

John “Jay” Saunders and Neil P. Brown, CFA, join David A. Kiefer, CFA, as portfolio managers for the Natural Resources Portfolio. Michael Del Balso is no longer a portfolio manager for the Natural Resources Portfolio. To reflect these changes, the indicated sections of the Prospectus and Statement of Additional Information are deleted and replaced or otherwise amended, as explained below. The discussion of portfolio managers for the Natural Resources Portfolio appearing in the section of the Prospectus entitled “How the Fund is Managed—Portfolio Managers” is deleted and replaced with the following:

David A. Kiefer, CFA, John “Jay” Saunders, and Neil P. Brown, CFA, are the portfolio managers of the Portfolio. David A. Kiefer, CFA, is a Managing Director of Jennison, which he joined in September 2000. He was appointed Jennison’s Head of Large Cap Value Equity in January 2004, having managed diversified large capitalization portfolios since 1998 and large cap blend equity assets since 1999. He managed the Prudential Utility Fund, now known as the Jennison Utility Fund, from 1994 to June 2005. He joined Prudential’s management training program in 1986. From 1988 to 1990, Mr. Kiefer worked at Prudential Power Funding Associates, making loans to the utility and power industry. He then left to attend business school, rejoining Prudential in equity asset management in 1992. Mr. Kiefer earned a B.S. from Princeton University and a M.B.A. from Harvard Business School. He has managed the Portfolio since April 2005. John “Jay” Saunders is a Managing Director of Jennison. Prior to joining Jennison in October 2005, Mr. Saunders worked for the Global Oil Team as a Vice President at Deutsche Bank Securities from 2000 to 2005. At Deutsche Bank Securities, he covered North American integrated oils, independent refiners and exploration and production companies. From 1997 to 2000, Mr. Saunders worked at the Energy Intelligence Group and became the Managing Editor for the Oil Market Intelligence newsletter, reporting on a broad range of energy topics. From 1994 to 1997, he was with Hart Publications, Inc./The Oil Daily Co. where he was an Associate Editor responsible for oil-related publications. Mr. Saunders received a B.A. from the College of William and Mary in 1992 and a Masters in Print Journalism from American University in 1998. He was ranked as the number one Refiners analyst by Zach’s Investment Research in 2005. He has managed the Portfolio since November 2006. Neil P. Brown, CFA, is a Principal of Jennison, which he joined in November 2005. Prior to joining Jennison, Mr. Brown worked on the North American Oil and Gas Exploration and Production team as an Equity Research Associate/Analyst at Deutsche Bank Securities from 2000 to 2005. Prior to that, he worked at Donaldson, Lufkin, and Jenrette as a Research Associate covering the Exploration and Production sector. Mr. Brown also worked as an Analyst in Metropolitan Life Insurance Company’s Institutional Finance department from 1997 to 2000. He received a B.A. in Mathematics and History from Duke University in 1997 and is a member of The New York Society of Security Analysts, Inc. He has managed the Portfolio since November 2006. The portfolio managers for the Portfolio are supported by other Jennison portfolio managers, research analysts and investment professionals. Jennison typically follows a team approach in providing such support to the portfolio managers. The teams are generally organized along product strategies (e.g., large cap growth, large cap value) and meet regularly to review the portfolio holdings and discuss security purchase and sales activity of all accounts in the particular product strategy. Team members provide research support, make securities recommendations and support the portfolio managers in all activities. Members of the team may change from time to time.

The table of portfolio managers for the Natural Resources Portfolio appearing in Part I of the Statement of Additional Information in the section entitled “Management & Advisory Arrangements—Additional Information

About the Portfolio Managers—Other Accounts and Fund Ownership” is deleted and replaced with the following new table. Information appearing in the table is as of December 31, 2005 for Mr. Kiefer and September 29, 2006 for Mr. Saunders and Mr. Brown.

Subadviser(s) Portfolio Manager(s)

Registered Investment Companies

Other Pooled Investment Vehicles

Other Accounts Ownership of Fund Securities

Jennison David A. Kiefer, CFA

11 registered investment companies with $9,693.2 million in total assets under management.

5 other pooled investment vehicles with $1,272.9 million in total assets under management.

1 other account with $27.8 million in total assets under management. (Other Accounts excludes the assets and number of accounts in wrap fee programs that are managed using model portfolios and the assets of a non-discretionary institutional account managed using a model portfolio.)

None

John “Jay” Saunders

1 registered investment company with 1,640.8 million total assets under management.

None None None

Neil P. Brown, CFA

1 registered investment company with 1,640.8 million total assets under management.

None None None

The discussion pertaining to portfolio manager compensation and conflicts of interest appearing in Part I of the Statement of Additional Information in the section entitled “Management & Advisory Arrangements—Additional Information About the Portfolio Managers—Compensation and Conflicts of Interest” is hereby amended by removing the reference to Michael A. Del Balso as it pertains to the Natural Resources Portfolio. The discussion is further amended by adding John “Jay” Saunders and Neil P. Brown, CFA, as portfolio managers for the Natural Resources Portfolio and identifying the Lipper Natural Resources Index as the passive index reviewed as part of the compensation determination explanation set out in the discussion.

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THE PRUDENTIAL SERIES FUND

Supplement dated August 25, 2006 to the Prospectus dated May 1, 2006

This supplement sets forth certain changes to the prospectus of The Prudential Series Fund (the “Fund”) dated May 1, 2006 with respect to the indicated Portfolios of the Fund. The Portfolios discussed in this supplement may not be available under your variable contract. For more information about the Portfolios available under your contract, please refer to your contract prospectus. The following should be read in conjunction with the Fund’s Prospectus and should be retained for future reference. I. Changes to Investment Policies Effective on or about August 25, 2006, selected investment policies for certain Portfolios of the Fund will change. The changes are specifically discussed below: SP Strategic Partners Focused Growth Portfolio. The number of securities that may be held by the portion of the Portfolio subadvised by AllianceBernstein is increased. To reflect this change, the indicated sections of the Prospectus are revised as follows:

The explanation of the Portfolio’s investment strategies appearing in the section of the Prospectus entitled “Investment Objectives and Principal Strategies of the Portfolios—SP Strategic Partners Focused Growth Portfolio is deleted and replaced with the following:

We normally invest at least 65% of the Portfolio’s total assets in equity-related

securities of U.S. companies that the advisers believe 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 security selection ideas of both. Each investment adviser to the Portfolio utilizes a growth style: Jennison selects approximately 20 securities and AllianceBernstein, L.P. selects approximately 30 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 is nondiversified, meaning it can invest a relatively high percentage of its assets in a small number of issuers. Investing in a nondiversified portfolio, particularly a portfolio investing in approximately 50 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. While we make every effort to achieve our objective, we cannot guarantee success and it is possible that you could lose money. This Portfolio is subadvised by Jennison and AllianceBernstein L.P.

The second and third paragraphs of the section of the Prospectus entitled “More Detailed Information on How the Portfolios Invest—Investment Objectives and Policies—SP Strategic Partners Focused Growth Portfolio” are deleted and replaced with the following:

The Portfolio normally invests at least 65% of its total assets in equity-related securities of U.S. companies that are believed 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 both. Each investment subadviser to the Portfolio utilizes a growth style: Jennison selects approximately 20 securities and AllianceBernstein selects approximately 30 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

a non-diversified mutual fund portfolio. This means that the Portfolio may invest in a relatively high percentage of net assets in a small number of issuers. Investing in a nondiversified mutual fund, particularly a fund investing in approximately 50 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.

SP PIMCO Total Return Portfolio. The permitted amount of Portfolio assets that may be invested in foreign securities is increased. To reflect this change, the third paragraph of the section of the Prospectus entitled “More Detailed Information on How the Portfolios Invest—Investment Objectives and Policies—SP PIMCO Total Return Portfolio” is deleted and replaced with the following:

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The Portfolio may invest up to 30% 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.

Diversified Conservative Growth Portfolio. Equity Portfolio Jennison Portfolio

Jennison 20/20 Focus Portfolio. Natural Resources Portfolio

Value Portfolio The disclosure for each Portfolio pertaining to American Depositary Receipts (ADRs) is hereby revised to state that for the purpose of investing in foreign securities, as permitted for each Portfolio, we do not consider ADRs and other similar receipts or shares traded in U.S. markets to be foreign securities.

II. Market Capitalization Definition Changes

Effective on or about August 25, 2006, the market capitalization definitions utilized by certain of the Fund’s Portfolios in connection with their investment policies will change. We use market capitalization ranges for the relevant index as of the time of a security’s purchase. The changes are specifically set out in the following table:

Portfolio Name Current Definition New Definition Equity Portfolio Major established companies are those

with over $5 billion in market capitalization.

The Portfolio considers major established companies to be those companies with market capitalizations within the market capitalization range of the Russell 1000 Index.

SP Davis Value Portfolio

The Portfolio invests primarily in stocks of U.S. companies with market capitalizations of at least $5 billion.

The Portfolio invests primarily in stocks of U.S. companies with market capitalizations within the market capitalization range of the Russell 1000 Value Index.

SP Small Cap Value Portfolio

The Portfolio generally defines small capitalization companies as those with market capitalizations that do not exceed the greater of: (i) $4 billion or (ii) the highest month-end market capitalization value of any common stock in the Russell 2000 Index during the preceding 12 months.

The Portfolio generally defines small capitalization companies as those companies with market capitalizations within the market capitalization range of the Russell 2000 Value Index.

SP Mid-Cap Growth Portfolio

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™ Growth Index range at the time of the Portfolio’s investment.

The Portfolio generally defines medium market capitalization companies as those companies with market capitalizations within the market capitalization range of the Russell Midcap Growth Index.

SP Large Cap Value Portfolio

The Portfolio generally defines large capitalization companies as those with a total market capitalization of at least $5 billion or more.

The Portfolio generally defines large capitalization companies as those companies with market capitalizations within the market capitalization range of the Russell 1000 Value Index.

SP Prudential U.S. Emerging Growth Portfolio

The Portfolio considers small and medium-sized companies to be those with market capitalizations that are less than the largest capitalization of the Standard and Poor’s Mid Cap 400 Stock Index as of the end of a calendar quarter.

The Portfolio generally defines small and medium-sized companies to be those companies with market capitalizations within the market capitalization range of the Russell Midcap Growth Index.

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III. Benchmark Index Changes Natural Resources Portfolio. Effective on or about August 25, 2006, the Lipper Natural Resources Fund Index is added as a supplemental benchmark index. To reflect the change, the table of average annual total returns appearing in the section of the Prospectus entitled “Evaluating Performance” is hereby replaced with the following: Natural Resources Portfolio Average Annual Returns* (as of 12/31/05)

1 Year 5 Years 10 Years Since Class II Inception**

Class I Shares 55.91% 23.74% 18.78% N/A Class II Shares N/A N/A N/A 50.56% S&P 500 Index*** 4.91% 0.54% 9.07% 9.28% Lipper Natural Resources Fund Index****

46.37% 15.18% 14.80% 37.48%

Lipper Variable Insurance Products (VIP) Natural Resources Funds Average*****

37.38% 16.90% 13.04% 42.26%

*The Portfolio’s returns are after deduction of expenses and do not include Contract

charges. If Contract charges were included, the annual returns would have been lower than those shown. During certain periods shown, fee waivers and/or expense reimbursements may be in effect. Without such fee waivers and/or expense reimbursements, the returns for the Portfolio would have been lower.

**Returns of Portfolios in existence for less than one year are not annualized. Portfolio (Class I) inception: 5/1/88. Portfolio (Class II) inception: 4/28/05.

***The Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index)—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 have been lower if they included the effect of these expenses. The “Since Inception” return reflects the closest calendar month end return to the inception date of the Portfolio’s Class II shares.

****The Lipper Natural Resources Fund Index is an unmanaged, equally-weighted index of the largest mutual funds in the Lipper Natural Resources category of funds. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses. The “Since Inception” return reflects the closest calendar month end return to the inception date of the Portfolio’s Class II shares.

*****The Lipper Average is calculated by Lipper Analytical Services, Inc. and reflects the return of certain portfolios underlying variable life and annuity products. The returns are net of investment fees and fund expenses but not product charges. These returns would have been lower if they included the effect of product charges. The “Since Inception” return reflects the closest calendar month end return to the inception date of the Portfolio’s Class II shares.

Diversified Conservative Growth Portfolio. Effective on or about August 25, 2006, the current Diversified Conservative Growth Custom Blended Index utilized by the Portfolio will change. The Portfolio is changing the benchmark to create a more neutral custom blend for performance comparison purposes while retaining the underlying 40/60 split between stocks and bonds. To reflect the change, the table of average annual total returns appearing in the section of the Prospectus entitled “Evaluating Performance” is hereby replaced with the following:

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Diversified Conservative Growth Portfolio Average Annual Returns* (as of 12/31/05)

1

Year 5 Years Since

Inception (5/3/99)

Class I Shares 7.04% 6.10% 6.06% S&P 500 Index** 4.91% 0.54% 0.54% Prior Diversified Conservative Growth Custom Blended Index***

3.56% 5.42% 4.83%

Diversified Conservative Growth Custom Blended Index****

4.00% 4.49% 4.61%

Lipper Variable Insurance Products (VIP) Income Funds Average*****

4.13% 5.08% 4.40%

*The Portfolio’s returns are after deduction of expenses and do not include Contract

charges. If Contract charges were included, the annual returns would have been lower than those shown. During certain periods shown, fee waivers and/or expense reimbursements may be in effect. Without such fee waivers and/or expense reimbursements, the returns for the Portfolio would have been lower.

**The Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index)—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 have been lower if they included the effect of these expenses. The “Since Inception” return reflects the closest calendar month-end return to the inception date of the Portfolio.

***The Prior Diversified Conservative Growth Custom Blended Index consists of the Standard & Poor’s Barra Value Index (15%), the Standard & Poor’s Barra Growth Index (15%), the Russell 2000 Value Index (5%), the Russell 2000 Growth Index (5%), the Lehman Brothers Aggregate Bond Index (40%), and the Lehman Brothers High Yield Bond Index (20%). These returns do not include the effect of investment management expenses. These returns would have been lower if they included the effect of these expenses. The “Since Inception” return reflects the closest calendar month-end return to the inception date of the Portfolio.

**** The Diversified Conservative Growth Custom Blended Index consists of the Russell 3000 Index (40%) and the Lehman Brothers Aggregate Index (60%). These returns do not include the effect of investment management expenses. These returns would have been lower if they included the effect of these expenses. The “Since Inception” return reflects the closest calendar month-end return to the inception date of the Portfolio.

*****The Lipper Average is calculated by Lipper Analytical Services, Inc. and reflects the return of certain portfolios underlying variable life and annuity products. The returns are net of investment fees and fund expenses but not product charges. These returns would have been lower if they included the effect of product charges. The “Since Inception” return reflects the closest calendar month-end return to the inception date of the Portfolio.

IV. New Portfolio Manager: Government Income Portfolio Effective on or about August 25, 2006, Peter Cordrey is a co-portfolio manager of the Government Income Portfolio. To reflect this change, the section of the Prospectus entitled “How the Fund is Managed—Investment Subadvisers—Portfolio Managers—Government Income Portfolio” is hereby deleted and replaced with the following:

Robert Tipp, Richard Piccirillo and Peter Cordrey of PIM-Fixed Income co-manage the

Portfolio. Robert Tipp, CFA, is Managing Director and Chief Investment Strategist at PIM-Fixed

Income. He has managed the Portfolio since 2003. Mr. Tipp is also portfolio manager for Asset-Liability, TIPs, and Global Bond strategies, and is co-portfolio manager of Core Plus, US Government, and Municipal Bond strategies. Previously, Mr. Tipp served as co-head of Prudential Financial’s institutional fixed income business. Before joining Prudential

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Financial in 1991, Mr. Tipp was a Director in the Portfolio Strategies Group at First Boston Corporation. Prior to that, he was a senior analyst at the Allstate Research & Planning Center, and managed fixed income and equity derivative strategies at Wells Fargo Investment Advisors. Mr. Tipp has 22 years of investment experience.

Richard Piccirillo, Vice President and portfolio manager for PIM-Fixed Income’s

Global Liquidity Team, has managed the Portfolio since 2003. He has specialized in mortgage-backed securities since joining Prudential Financial in 1993. Mr. Piccirillo also specializes in structured products and is one of the lead portfolio managers for our multi-sector core fixed income accounts. Before joining Prudential Financial, Mr. Piccirillo was a fixed income analyst with Fischer Francis Trees & Watts, and an analyst at Smith Barney. He has 15 years of investment experience.

Peter Cordrey is Managing Director and Head of PIM-Fixed Income’s Global Liquidity

Team, the group responsible for managing U.S. government and foreign government securities, mortgage-backed securities, U.S. agencies and fixed-income derivative products. He has managed the Portfolio since 2006. Mr. Cordrey specializes in government products, including agencies, as well as futures, interest rates, and swaps. Prior to joining Prudential Financial in 1996, he traded Treasuries, agencies and STRIPs for nine years as a Director of Government Securities at Merrill Lynch. Mr. Cordrey also worked as the head trader on the zero coupon desk at Lehman Brothers for two years. He received an AB in Economics from Princeton University and an MBA in Finance from Columbia University.

V. Portfolio Manager: Equity Portfolio Kevin Caliendo is no longer a portfolio manager for the portion of the Portfolio subadvised by Salomon Brothers Asset Management, Inc. All references to Mr. Caliendo are hereby deleted.

VI. New Portfolio Name & New Subadviser: SP LSV International Value Portfolio

The name of the Portfolio will change on or about November 13, 2006 to SP International Value Portfolio. Effective on or about November 13, 2006, all references to SP LSV International Value Portfolio are replaced by references to SP International Value Portfolio. Effective on or about November 17, 2006, Thornburg Investment Management, Inc. (“Thornburg”) will join LSV Asset Management (“LSV”) as a subadviser to the SP International Value Portfolio. To reflect the addition of Thornburg as a subadviser, the indicated sections of the Prospectus are revised effective on or about November 17, 2006: The section of the Prospectus entitled “Investment Objectives and Principal Strategies of the Portfolios” is hereby revised by deleting the discussion pertaining to the SP International Value Portfolio and substituting the following: SP International Value Portfolio

Investment Objective: long-term capital appreciation We normally invest at least 80% of the Portfolio’s investable assets (net assets plus

borrowings made for investment purposes) in the equity securities of companies in developed countries outside the United States that are represented in the MSCI EAFE Index. There is a risk that “value” stocks will perform differently from the market as a whole and other types of stocks and can continue to be undervalued by the markets for long periods of time. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money. This Portfolio is subadvised by LSV Asset Management (LSV) and Thornburg Investment Management, Inc. (Thornburg).

The section of the Prospectus entitled “More Detailed Information on How the Portfolios Invest” is hereby revised by deleting the discussion pertaining to the SP International Value Portfolio and substituting the following:

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The investment objective of this Portfolio is long-term capital appreciation . While we make every effort to achieve our objective, we can’t guarantee success, and it is possible that you could lose money.

The Portfolio invests primarily in equity securities of companies represented in the MSCI EAFE Index. The Portfolio will not change this policy unless it provides 60 days prior written notice to contract owners.

LSV uses proprietary investment models to manage the Portfolio in a bottom-up security selection approach combined with overall portfolio risk management. The primary components of the investment models are: 1) indicators of fundamental undervaluation, such as high dividend yield, low price-to-cash flow ratio or low price-to-earnings ratio, 2) indicators of past negative market sentiment, such as poor past stock price performance, 3) indicators of recent momentum, such as high recent stock price performance, and 4) control of incremental risk relative to the benchmark index. All such indicators are measured relative to the overall universe of non-U.S., developed market equities. This investment strategy can be described as a “contrarian value” approach. The objective of the strategy is to outperform the unhedged U.S. Dollar total return (net of foreign dividend withholding taxes) of the MSCI EAFE Index.

The Portfolio may invest in equity securities from any of the countries comprising the MSCI EAFE Index. The Portfolio will typically hold at least 100 stocks and will generally align its country weightings with those of the MSCI EAFE Index. LSV intends to keep the Portfolio’s assets as fully invested in non-U.S. equities as practicable at all times, except as needed to accommodate the Portfolio’s liquidity needs.

Thornburg uses individual company and industry analysis to make investment

decisions. The principal focus is on traditional or "basic" value stocks. The portfolio may include stocks that in Thornburg's opinion provide value in a broader or different context. The relative proportions of these different types of securities will vary over time. Stocks are grouped into three categories: Basic Value, Consistent Earners, and Emerging Franchises.

• Basic Value stocks are financially sound companies with well-established

businesses that are selling at low valuations relative to the company's net assets or potential earning power.

• Consistent Earners are companies with steady earnings and dividend growth that are selling at attractive valuations and are priced below historical norms.

• Emerging Franchises are value-priced companies in the process of establishing a leading position in a product, service, or market that is expected to grow at an above average rate.

Generally, the majority of the portfolio will be invested in Basic Value and Consistent

Earners. Debt securities are considered for investment when Thornburg believes them to be more attractive than equity alternatives.

Among specific factors considered in identifying undervalued securities for inclusion

in the portfolio are: price/earnings ratio, price to book value, price/cash flow ratio, debt/capital ratio, dividend yield, dividend history, security and consistency of revenue stream, undervalued assets, relative earnings growth potential, industry growth potential, industry leadership, dividend growth potential, franchise value and potential for favorable developments.

Like all equity securities, the market values of securities held by the Portfolio can fluctuate significantly, reflecting the business performance of the issuing company, investor perception or general economic or financial market movements. As a fund that invests primarily in the securities of foreign issuers, the risk and degree of share price fluctuation of the Portfolio may be greater than a fund investing primarily in domestic securities.

Investments in foreign securities involve different risks that U.S. investments, including fluctuations in currency exchange rates, unstable political and economic

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structures, reduced availability of public information, and lack of uniform financial reporting and regulatory practices such as those that apply to U.S. issuers. Foreign investments of the Portfolio may include securities issued by companies locating in developing countries. Developing countries are subject to more economic, political and business risk than major industrialized nations, and the securities they issue are expected to be more volatile and more uncertain as to payment of interest and principal.

The Portfolio may also pursue the following types of investment strategies and/or invest in the following types of securities:

• Convertible securities. • Warrants. • Foreign securities. • Options (on stock, debt, stock indices, foreign currencies, and futures). • Futures contracts. • Forward foreign currency exchange contracts. • Interest rate swaps. • Loan participations. • Reverse repurchase agreements. • Dollar rolls. • When-issued and delayed delivery securities • Short sales. • Illiquid securities.

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 warrants. 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.

The Portfolio is co-managed by LSV and Thornburg. LSV is responsible for managing approximately 60% of the Portfolio, and Thornburg is responsible for managing approximately 40% of the Portfolio.

The section of the Prospectus entitled “How the Fund is Managed—Investment Subadvisers” is hereby revised by deleting the information pertaining to LSV and substituting the following:

LSV Asset Management (LSV) serves as the subadviser for a portion of the SP International Value Portfolio and for approximately 25% of the Global Portfolio. Formed in 1994, LSV is a quantitative value equity manager providing active asset management for institutional clients through the application of proprietary models. As of December 31, 2005, LSV had approximately $51.8 billion in assets under management. The address of LSV is One North Wacker Drive, Suite 4000, Chicago, Illinois 60606.

The section of the Prospectus entitled “How the Fund is Managed—Investment Subadvisers” is hereby revised by adding the following information pertaining to Thornburg:

Thornburg Investment Management, Inc. (“Thornburg”), 119 East Marcy Street, Santa Fe, New Mexico 87501, serves as the subadviser for a portion of the SP International Value Portfolio. Thornburg is an independent, employee-owned investment management firm. The firm was founded in 1982 and began providing investment management services to clients in 1984. Thornburg uses a fundamental, bottom-up approach to investing which centers on the intrinsic value of each investment. Thornburg advises the Thornburg family of mutual funds and manages separate portfolios for select individuals and institutions. As of March 31, 2006, Thornburg had approximately $22.5 billion in assets under management.

The section of the Prospectus entitled “How the Fund is Managed—Portfolio Managers” is hereby revised by deleting the information pertaining to the SP LSV International Value Portfolio and substituting the following:

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The LSV segment of the Portfolio is co-managed by Josef Lakonishok, Robert Vishny, Menno Vermeulen, CFA and Puneet Mansharamani, CFA. Mr. Lakonishok has served as CEO, Partner and Portfolio Manager for LSV since its founding in 1994. He has more than 25 years of investment and research experience. In addition to his duties at LSV, Mr. Lakonishok serves as the William G. Karnes Professor of Finance at the University of Illinois at Urbana-Champaign. Mr. Vishny has served as a Partner and Portfolio Manager of LSV since its founding in 1994. He has more than 18 years of investment and research experience. Mr. Vermeulen has served as a Portfolio Manager and Senior Quantitative Analyst of LSV since 1995 and a Partner since 1998. He has more than 13 years of investment experience. Prior to joining LSV, Mr. Vermuelen served as a portfolio manager for ABP Investments. Mr. Mansharamani is a Partner and Portfolio Manager since January 2006. Mr. Mansharamani has previously served as a Quantitative Analyst of LSV since 2000. He has more than 7 years of investment experience. Prior to joining LSV. Mr. Mansharamani was an Analyst at Institutional Trust National City Corporation. Messrs. Lakonishok, Vishny and Vermeulen have managed the LSV portion of the Portfolio since LSV became a subadviser to the Portfolio in November 2004. Mr. Mansharamani joined the portfolio management team in January 2006.

The portfolio managers responsible for the day-to-day management of the Thornburg portion of the SP International Value Portfolio are William V. Fries, CFA, a Managing Director of Thornburg, Wendy Trevisani, a Managing Director of Thornburg , and Lei Wang, CFA, also a Managing Director of Thornburg, who serve as co-portfolio managers..

Mr. Fries serves as the lead portfolio manager for the segment of the Portfolio advised by Thornburg. Before joining Thornburg in May 1995, Mr. Fries managed equity mutual funds for 16 years with another mutual fund management company.

Before joining Thornburg in March 1999, Ms. Trevisani served as an institutional sales representative for Salomon Smith Barney in both New York City and London. Ms. Trevisani holds an MBA degree with a concentration in Finance from Columbia University, and a BA in International Relations from Bucknell University.

Lei Wang joined Thornburg Investment Management in 2004 as an Associate Portfolio Manager. Prior to joining Thornburg, Mr. Wang served as a research analyst at Enso Capital Management LLC in New York City. He has also worked as a Financial Associate at Deutsche Bank in both London and New York City. Previously, Mr. Wang was an Analyst with The People's Bank of China (China's central bank) in Shanghai, China. He completed his BA and MA at East China Normal University and received his MBA in Finance from New York University. He has earned the right to use the CFA designation and is a member of the CFA Institute and Security Analyst Society of New York.

VII. New Portfolio Name & New Subadviser: SP William Blair International Growth Portfolio The name of the Portfolio will change on or about November 13, 2006 to SP International Growth Portfolio. Effective on or about November 13, 2006, all references to SP William Blair International Growth Portfolio are replaced by references to SP International Growth Portfolio.

Effective on or about November 17, 2006, Marsico Capital Management LLC (“Marsico”) will join William Blair & Company LLC (“William Blair”) as a subadviser to the SP International Growth Portfolio.

To reflect the addition of Marsico as a subadviser, the indicated sections of the Prospectus are

revised effective on or about November 17, 2006:

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The section of the Prospectus entitled “Investment Objectives and Principal Strategies of the Portfolios—SP International Value Portfolio” is hereby revised by deleting the existing information and substituting the following:

SP International Growth Portfolio Investment Objective: long-term growth of capital We invest primarily in equity-related securities of foreign issuers. The Portfolio invests

primarily in the common stock of large and medium-sized foreign companies, although it may also invest in companies of all sizes. 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 or which offer attractive growth potential. 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. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money. This Portfolio is advised by William Blair & Company LLC and Marsico Capital Management LLC.

Principal Risks:

• company risk • derivatives risk • foreign investment risk • leveraging risk • management risk • market risk • growth stock risk • portfolio turnover risk

The section of the Prospectus entitled “More Detailed Information on How the Portfolios Invest—Investment Objectives and Principal Strategies—SP International Growth Portfolio” is hereby revised by deleting all information are substituting the following:

SP International Growth Portfolio The investment objective of this Portfolio is long-term growth of capital . While we

make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

The Portfolio invests primarily in equity related securities of foreign companies. 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 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 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.

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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 Depositary Receipts (ADRs) , which we consider to be equity-related securities. In deciding which stocks to purchase for the Portfolio, William Blair looks for growth

companies that have both strong fundamentals and appear to be attractively valued relative to their growth potential. William Blair 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, William Blair looks 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 William Blair’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, William Blair 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, William Blair 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.

In selecting investments for the portfolio, Marsico uses an approach that combines

“top-down” macro-economic analysis with “bottom-up” stock selection.

The “top-down” approach may take into consideration macro-economic factors such as, without limitation, interest rates, inflation, demographics, the regulatory environment, and the global competitive landscape. In addition, Marsico may also examine other factors that may include, without limitation, the most attractive global investment opportunities, industry consolidation, and the sustainability of financial trends observed. As a result of the “top-down” analysis, Marsico seeks to identify sectors, industries and companies that may benefit from the overall trends Marsico has observed.

Marsico then looks for individual companies or securities with earnings growth potential that may not be recognized by the market at large. In determining whether a particular company or security may be a suitable investment, Marsico may focus on any of a number of different attributes that may include, without limitation, the company’s specific market expertise or dominance; its franchise durability and pricing power; solid fundamentals (e.g., a strong balance sheet, improving returns on equity, the ability to generate free cash flow, apparent use of conservative accounting standards, and transparent financial disclosure); strong and ethical management; commitment to shareholder interests; reasonable valuations in the context of projected growth rates; and other indications that a company or security may be an attractive investment prospect. This process is called “bottom-up” stock selection.

The Portfolio may invest in bonds, money market instruments and other fixed income obligations. Generally, the Portfolio will purchase only “Investment-Grade” fixed income investments. This means the obligations 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

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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.


• Alternative investment strategies — including derivatives — to try to improve the Portfolio’s returns, to protect its assets or for short-term cash management.

• 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.

• Forward foreign currency exchange contracts. • Purchase securities on a when-issued or delayed delivery basis. • Borrow up to 33% of the value of the Portfolio’s total assets. • Short sales against-the-box. • 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, 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 the 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.

This Portfolio is co-managed by William Blair and Marsico. William Blair is

responsible for managing approximately 90% of the Portfolio, and Marsico is responsible for managing approximately 10% of the Portfolio.

The section of the Prospectus entitled “How the Fund is Managed—Investment Subadvisers” is hereby revised by deleting the information pertaining to William Blair and substituting the following:

William Blair & Company LLC (William Blair) serves as the subadviser for a

portion of the SP International Growth Portfolio and approximately 25% of the Global Portfolio. Since the founding of the firm in 1935, William Blair has been dedicated to researching, financing and investing in high quality growth companies through four primary divisions: investment banking, sales and trading, asset management and private capital. As of December 31, 2005, William Blair managed approximately $33.6 billion in assets. The address of William Blair is 222 West Adams Street, Chicago, Illinois 60606.

The section of the Prospectus entitled “How the Fund is Managed—Investment Subadvisers” is hereby revised by deleting the information pertaining to Thornburg and substituting the following:

Marsico Capital Management, LLC (Marsico), 1200 17th Street, Suite 1600, Denver, CO 80202, serves as a subadviser for approximately 25% of the assets of the Global Portfolio and a portion of the SP International Growth Portfolio. Marsico was organized in September 1997 as a registered investment adviser and became a wholly-owned indirect subsidiary of Bank of America Corporation in January 2001. Marsico provides investment management services to other mutual funds and private accounts and, as of December 31, 2005, had approximately $63 billion under management. Thomas F. Marsico is the founder and Chief Executive Officer of Marsico

The section of the Prospectus entitled “How the Fund is Managed—Portfolio Managers” is hereby revised by deleting the information pertaining to the SP William Blair International Growth Portfolio and substituting the following:

SP International Growth Portfolio

W. George Grieg is responsible for the day-to-day management of the segment of the Portfolio managed by William Blair. Mr. Grieg is a principal of William Blair and joined the firm in 1996 as an international portfolio manager. Mr. Grieg has managed the Portfolio since William Blair became the Portfolio’s subadviser in May 2004.

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James G. Gendelman is the portfolio manager for the segment of the Portfolio managed

by Marsico. Prior to joining Marsico in May of 2000, Mr. Gendelman spent thirteen years as a Vice President of International Sales for Goldman, Sachs & Co. He holds a bachelor’s degree in Accounting from Michigan State University and an MBA in Finance from the University of Chicago. Mr. Gendelman was a certified public accountant for Ernst & Young from 1983 to 1985.

VIII. Portfolio Managers: SP Asset Allocation Portfolios The section of the Prospectus entitled “How the Fund is Managed—Portfolio Managers” is supplemented effective on or about September 15, 2006 by adding the following information pertaining to the SP Asset Allocation Portfolios:

PI uses a team to manage each of the SP Asset Allocation Portfolios (the “Portfolios”). The portfolio managers of the Asset Allocation Team with overall responsibility for determining the asset allocation strategy of the Portfolios are listed below.

Christopher D. Piros, Ph.D., CFA, a member of the Asset Allocation Team, has overall responsibility for the management of the Portfolios. Dr. Piros also directs the capital market, investment strategy, and economic research functions of PI’s Strategic Investment Research Group (“SIRG”). Prior to joining Prudential, he was a Senior Vice President and Portfolio Manager with MFS Investment Management (1989-2000) and an Executive-in-Residence at the Boston University School of Management (2001-2002). He has also served on the finance faculty of Duke University’s Fuqua School of Business. He is a graduate of Northwestern University and holds a Ph.D. in Economics from Harvard University.

Michael Lenarcic, PhD, is a member of the Asset Allocation Team. In addition to serving as a portfolio manager for the Portfolios, Dr. Lenarcic is a Managing Director of Quantitative Management Associates LLC (QMA). Previously, he was a vice president at Wilshire Associates, a leading pension consulting firm, where he was head of the Asset Allocation Division. Earlier, Dr. Lenarcic was an assistant professor at Northeastern University where he taught Finance and Economics. He earned a BA in Business Administration from Kent State University, and holds an AM and PhD in Business Economics from Harvard University.

Ted Lockwood is a member of the Asset Allocation Team. In addition to serving

as a portfolio manager for the Portfolios, Ted is a Managing Director of QMA. Previously, Ted was with AT&T and a member of the technical staff at AT&T Bell Laboratories. Ted graduated summa cum laude with a BE in Engineering from Stony Brook University and received an MS in Engineering and an MBA in Finance from Columbia University.

James G. Russell, CIMA, CFA, is head of the Investment Research Team. In addition to serving as a portfolio manager for the Portfolios, Mr. Russell has overall responsibility for PI’s investment research efforts. Prior to joining Prudential Investments in 2000, Mr. Russell managed the asset management and asset allocation businesses at Diversified Investment Advisors, a $60 billion institutional asset management firm, and managed a division of Evaluation Associates Incorporated, a national investment management consulting organization. He is a graduate of Colgate University.

IX. Fees and Expenses The section of the Prospectus entitled “Fees And Expenses Of The Portfolios” is hereby revised by deleting footnote (3) to the table titled “Class I Shares--Annual Fund Operating Expenses” and substituting new footnote (3) as set forth below:

(3) Effective as of July 1, 2006, Prudential Investments LLC has voluntarily agreed

waive a portion of its management fee and/or limit total expenses (expressed as a

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percentage of total assets) for certain Portfolios of the Fund, as set forth in the table below. These arrangements may be discontinued or otherwise modified at any time.

Portfolio Fee Waiver and/or Expense

Limitation Conservative Balanced Limit Portfolio expenses to 0.75% of

total assets Diversified Bond Limit Portfolio expenses to 0.75% of

total assets Equity Limit Portfolio expenses to 0.75% of

total assets Flexible Managed Limit Portfolio expenses to 0.75% of

total assets Government Income Limit Portfolio expenses to 0.75% of

total assets High Yield Bond Limit Portfolio expenses to 0.75% of

total assets Jennison Limit Portfolio expenses to 0.75% of

total assets Money Market Limit Portfolio expenses to 0.75% of

total assets Natural Resources Limit Portfolio expenses to 0.75% of

total assets Small Capitalization Stock Limit Portfolio expenses to 0.75% of

total assets Stock Index Limit Portfolio expenses to 0.75% of

total assets Value Limit Portfolio expenses to 0.75% of

total assets SP AIM Core Equity Limit Portfolio expenses to 1.00% of

total assets SP Large-Cap Value Limit Portfolio expenses to 0.90% of

total assets SP LSV International Value Limit Portfolio expenses to 1.10% of

total assets SP Mid-Cap Growth Limit Portfolio expenses to 1.00% of

total assets SP PIMCO High Yield Limit Portfolio expenses to 0.82% of

total assets SP PIMCO Total Return Limit Portfolio expenses to 0.76% of

total assets SP Prudential U.S. Emerging Growth Limit Portfolio expenses to 0.90% of

total assets SP Small-Cap Growth Limit Portfolio expenses to 1.15% of

total assets SP Small-Cap Value Limit Portfolio expenses to 1.05% of

total assets SP Strategic Partners Focused Growth Limit Portfolio expenses to 1.25% of

total assets SP T. Rowe Price Large-Cap Growth Limit Portfolio expenses to 1.06% of

total assets SP William Blair International Growth Limit Portfolio expenses to 1.24% of

total assets

The section of the Prospectus entitled “Fees And Expenses Of The Portfolios” is hereby revised by deleting footnote (3) to the table titled “Class II Shares--Annual Fund Operating Expenses” and substituting new footnote (3) as set forth below:

(3) Effective as of July 1, 2006, Prudential Investments LLC has voluntarily agreed

waive a portion of its management fee and/or limit total expenses (expressed as a percentage of total assets) for certain Portfolios of the Fund, as set forth in the table below. These expense limitations do not include the Rule 12b-1 fee and the

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administration fee applicable to Class II shares and may be discontinued or otherwise modified at any time.

Portfolio Fee Waiver and/or Expense

Limitation Equity Limit Portfolio expenses to 0.75% of

total assets Jennison Limit Portfolio expenses to 0.75% of

total assets Natural Resources Limit Portfolio expenses to 0.75% of

total assets Value Limit Portfolio expenses to 0.75% of

total assets SP Prudential U.S. Emerging Growth Limit Portfolio expenses to 0.90% of

total assets SP Strategic Partners Focused Growth Limit Portfolio expenses to 1.25% of

total assets SP William Blair International Growth Limit Portfolio expenses to 1.24% of

total assets

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PROSPECTUS May 1, 2006

THE PRUDENTIAL SERIES FUND

Conservative Balanced Portfolio Diversified Bond Portfolio Equity Portfolio Flexible Managed Portfolio Global Portfolio Government Income Portfolio High Yield Bond Portfolio Jennison Portfolio Money Market Portfolio Natural Resources Portfolio Small Capitalization Stock Portfolio Stock Index Portfolio Value Portfolio

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The Fund is an investment vehicle for life insurance companies (“Participating Insurance Companies”) writing variable annuity contracts and variable life insurance policies. Shares of the Fund may also be sold directly to certain tax-deferred retirement plans. Each variable annuity contract and variable life insurance policy involves fees and expenses not described in this Prospectus. Please read the Prospectus for the variable annuity contract or variable life insurance policy for information regarding the contract or policy, including its fees and expenses.

The Fund received an order from the Securities and Exchange Commission permitting its Investment Manager, subject to approval by its Board of Directors, to change subadvisers without shareholder approval. For more information, please see this Prospectus under “How the Fund is Managed.”

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Table of Contents

1 INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES OF THE PORTFOLIOS

6 PRINCIPAL RISKS

10 EVALUATING PERFORMANCE

23 FEES AND EXPENSES OF INVESTING IN THE PORTFOLIOS

25 MORE DETAILED INFORMATION ON HOW THE PORTFOLIOS INVEST

Investment Objectives and Policies Conservative Balanced Portfolio Diversified Bond Portfolio Equity Portfolio Flexible Managed Portfolio Global Portfolio Government Income Portfolio High Yield Bond Portfolio Jennison Portfolio Money Market Portfolio Natural Resources Portfolio Small Capitalization Stock Portfolio Stock Index Portfolio Value Portfolio

39 MORE DETAILED INFORMATION ABOUT OTHER INVESTMENTS AND STRATEGIES USED BY THE PORTFOLIOS

American Depositary Receipts Asset-Backed Securities Collateralized Debt Obligations Convertible Debt and Convertible Preferred Stock Credit Default Swaps Credit-Linked Securities Derivatives Dollar Rolls Equity Swaps Event-Linked Bonds Forward Foreign Currency Exchange Contracts Futures Contracts Interest Rate Swaps Joint Repurchase Account Loans and Assignments Mortgage-Related Securities Options Private Investments in Public Equity Real Estate Investment Trusts Repurchase Agreements Reverse Repurchase Agreements Short Sales Short Sales Against-the-Box Swap Options Swaps Total Return Swaps When-Issued and Delayed Delivery Securities

ii

42 HOW THE FUND IS MANAGED

Board of Directors Investment Adviser Investment Subadvisers Portfolio Managers

51 HOW TO BUY AND SELL SHARES OF THE FUND

Frequent Purchases or Redemptions of Fund Shares Net Asset Value Distributor

54 OTHER INFORMATION

Change in Federal Income Tax Status and Related Reorganization Federal Income Taxes Federal Income Taxes Monitoring for Possible Conflicts Disclosure of Portfolio Holdings

55 FINANCIAL HIGHLIGHTS

(For more information — see back cover)

(This page has been left blank intentionally.)

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This prospectus provides information about The Prudential Series Fund (the Fund), which consists of 32 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, Pruco Life Insurance Company, and Pruco Life Insurance Company of New Jersey (collectively, 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. Not every Portfolio is available under every Contract. The prospectus for each Contract lists the Portfolios currently available through that Contract.

This section highlights key information about each Portfolio. Additional information follows this summary and is also provided in the Fund’s Statement of Additional Information (SAI).

INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES OF THE PORTFOLIOS

The following summarizes the investment objectives, principal strategies and principal risks for each of the Portfolios. A Portfolio may have a similar name or an investment objective and investment policies closely resembling those of a mutual fund managed by the same investment adviser that is sold directly to individual investors. Despite such similarities, there can be no assurance that the investment performance of any Portfolio will track that of its retail fund counterpart.

We describe each of the terms listed as principal risks in the section entitled “Principal Risks” which follows this section. While we make every effort to achieve the investment objective for each Portfolio, we can’t guarantee success and it is possible that you could lose money.

Conservative Balanced Portfolio

Investment Objective: total investment return consistent with a conservatively managed diversified portfolio.

We invest in a mix of equity securities, debt obligations and money market instruments. The Portfolio may invest in foreign securities. We may invest a portion of the Portfolio’s assets in high-yield/high-risk debt securities, which are riskier than high-grade securities. This Portfolio may be appropriate for an investor who wants diversification with a relatively lower risk of loss than that associated with the Flexible Managed Portfolio (see below). While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• company risk • credit risk • derivatives risk • foreign investment risk • high yield risk • interest rate risk • leveraging risk • liquidity risk • management risk • market risk • prepayment risk

Diversified Bond Portfolio

Investment Objective: high level of income over a longer term while providing reasonable safety of capital.

We look for investments that we think will provide a high level of current income, but which are not expected to involve a substantial risk of loss of capital through default. We normally invest at least 80% of the Portfolio’s investable assets (net assets plus any borrowings made for investment purposes) in high-grade debt obligations and high-quality money market investments. We may purchase securities that are issued outside the U.S. by foreign or U.S. issuers. In addition, we may invest a portion of the Portfolio’s assets in high-yield/high-risk debt securities, which are riskier than high-grade

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securities. We may invest up to 20% of the Portfolio’s total assets in debt securities issued outside the U.S. by U.S. or foreign issuers whether or not such securities are denominated in the U.S. dollar. These securities are included in the limits described above for debt obligations that may or may not be high grade. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• credit risk • derivatives risk • foreign investment risk • high yield risk • interest rate risk • leveraging risk • liquidity risk • management risk • market risk • prepayment risk

Equity Portfolio

Investment Objective: long-term growth of capital.

We normally invest at least 80% of the Portfolio’s investable assets (net assets plus any borrowings made for investment purposes) in common stock of major established companies as well as smaller companies that we believe offer attractive prospects of appreciation. The Portfolio may invest up to 30% of its total assets in foreign securities. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• company risk • derivatives risk • foreign investment risk • leveraging risk • management risk • market risk

Flexible Managed Portfolio

Investment Objective: high total return consistent with an aggressively managed diversified portfolio.

We invest in a mix of equity securities, debt obligations and money market instruments. The Portfolio may invest in foreign securities. A portion of the debt portion of the Portfolio may be invested in high-yield/high-risk debt securities, which are riskier than high-grade securities. This Portfolio may be appropriate for an investor who wants diversification and is willing to accept a relatively high level of loss in an effort to achieve greater appreciation. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• company risk • credit risk • derivatives risk • foreign investment risk • high yield risk • interest rate risk • leveraging risk • liquidity risk • management risk

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• market risk • prepayment risk

Global Portfolio


The Portfolio invests primarily in common stocks (and their equivalents) of foreign and U.S. companies. Each subadviser for the Portfolio generally will use either a “growth” approach or a “value” approach in selecting either foreign or U.S. common stocks. The target asset allocation, area of geographic focus, and primary investment style for each subadviser are set forth below.

Subadviser

Target Asset Allocation of

Global Portfolio’s

Assets

Primary Geographic Focus and Asset Class Investment Style

William Blair . . . . . . 25% Foreign Equity Growth-oriented LSV . . . . . . . . . . . . . . 25% Foreign Equity Value-oriented Marsico. . . . . . . . . . . 25% U.S. Equity Growth-oriented T. Rowe Price . . . . . 25% U.S. Equity Value-oriented

Generally, the Portfolio invests in at least three countries, including the U.S., but may invest up to 35% of its assets in companies located in any one country. The 35% limitation does not apply to U.S investments. The Portfolio may invest in emerging markets securities. The actual allocation to each subadviser may vary from the target allocation listed above. The Portfolio may change the target allocations. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• company risk • derivatives risk • foreign investment risk • leveraging risk • management risk • market risk • currency risk

Government Income Portfolio

Investment Objective: a high level of income over the long term consistent with the preservation of capital.

We normally invest at least 80% of the Portfolio’s investable assets (net assets plus any borrowings made for investment purposes) in U.S. Government securities, including intermediate and long-term U.S. Treasury securities and debt obligations issued by agencies or instrumentalities established by the U.S. Government, mortgage-related securities and collateralized mortgage obligations. The Portfolio may invest up to 20% of investable assets in other securities, including corporate debt securities. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• credit risk • derivatives risk • foreign investment risk • interest rate risk • leveraging risk • liquidity risk • management risk

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• market risk • mortgage risk • prepayment risk

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

High Yield Bond Portfolio

Investment Objective: a high total return.

We normally invest at least 80% of the Portfolio’s investable assets (net assets plus any borrowings made for investment purposes) in high-yield/high-risk debt securities. Such securities have speculative characteristics and are riskier than high-grade securities. The Portfolio may invest up to 20% of its total assets in foreign debt obligations. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• credit risk • derivatives risk • foreign investment risk • high yield risk • interest rate risk • leveraging risk • liquidity risk • management risk • market risk • prepayment risk

Jennison Portfolio


We invest primarily in equity securities of major, established corporations that we believe offer above-average growth prospects. The Portfolio may invest up to 30% of its total assets in foreign securities. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• company risk • derivatives risk • foreign investment risk • leveraging risk • management risk • market risk

Money Market Portfolio

Investment Objective: maximum current income consistent with the stability of capital and the maintenance of liquidity.

We invest 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 we make every effort to achieve our objective, we can’t guarantee success.

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Principal Risks:

• credit risk • interest rate risk • 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 (FDIC) 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.

Natural Resources Portfolio


We normally invest at least 80% of the Portfolio’s investable assets (net assets plus any borrowings made for investment purposes) in common stocks and convertible securities of natural resource companies and securities that are related to the market value of some natural resource. The Portfolio is non-diversified. As a non-diversified Portfolio, the Natural Resources Portfolio may hold larger positions in single issuers than a diversified Portfolio. As a result, the Portfolio’s performance may be tied more closely to the success or failure of a smaller group of portfolio holdings. There are additional risks associated with the Portfolio’s investment in the securities of natural resource companies. The market value of these securities may be affected by numerous factors, including events occurring in nature, inflationary pressures, and international politics. Up to 30% of the Portfolio’s total assets may be invested in foreign securities. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• company risk • credit risk • derivatives risk • foreign investment risk • industry/sector risk • interest rate risk • leveraging risk • liquidity risk • management risk • market risk

Small Capitalization Stock Portfolio


We invest primarily in equity securities of publicly-traded companies with small market capitalizations. With the price and yield performance of the Standard & Poor’s Small Capitalization 600 Stock Index (the S&P SmallCap 600 Index) as our benchmark, we normally invest at least 80% of the Portfolio’s investable assets (net assets plus any borrowings made for investment purposes) in all or a representative sample of the stocks in the S&P SmallCap 600 Index. The market capitalization of the companies that make up the S&P SmallCap 600 Index may change from time to time. As of January 31, 2006 the S&P SmallCap 600 Index stocks had market capitalizations of between $54 million and $4.19 billion.

The Portfolio is not “managed” in the traditional sense of using market and economic analyses to select stocks. Rather, the portfolio manager purchases stocks to duplicate the stocks and their weighting in the S&P SmallCap 600 Index. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• company risk • derivatives risk • liquidity risk • market risk • smaller company risk

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Stock Index Portfolio

Investment Objective: investment results that generally correspond to the performance of publicly-traded common stocks.

With the price and yield performance of the Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index) as our benchmark, we normally invest at least 80% of the Portfolio’s investable assets (net assets plus any borrowings made for investment purposes) in S&P 500 stocks. The S&P 500 Index represents more than 70% of the total market value of all publicly-traded common stocks and is widely viewed as representative of publicly-traded common stocks as a whole. The Portfolio is not “managed” in the traditional sense of using market and economic analyses to select stocks. Rather, the portfolio manager purchases stocks in proportion to their weighting in the S&P 500 Index. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• company risk • derivatives risk • market risk

Value Portfolio

Investment Objective: capital appreciation.

We invest primarily in common stocks that we believe are undervalued — those stocks that are trading below their underlying asset value, cash generating ability and overall earnings and earnings growth, and that also have identifiable catalysts which may be able to close the gap between the stock price and what we believe to be the true worth of the company. We normally invest at least 65% of the Portfolio’s total assets in the common stock of companies that we believe will provide investment returns above those of the Russell 1000 Value Index and, over the long term, the Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index). Most of our investments will be securities of large capitalization companies. The Portfolio may invest up to 25% of its total assets in real estate investment trusts (REITs) and up to 30% of its total assets in foreign securities. There is a risk that “value” stocks can perform differently from the market as a whole and other types of stocks and can continue to be undervalued by the markets for long periods of time. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

Principal Risks:

• company risk • derivatives risk • credit risk • foreign investment risk • interest rate risk • leveraging risk • management risk • 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 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.

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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 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 includes 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.

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.

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

Growth stock risk. Investors often expect growth companies to increase their earnings at a certain rate. If these expectations are not met, investors can punish the stocks inordinately, even if earnings do increase. In addition, growth stocks typically lack the dividend yield that can cushion stock prices in market downturns.

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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).

Industry/sector risk. Portfolios that invest in a single market sector or industry can accumulate larger positions in single issuers or an industry sector. As a result, the Portfolio’s performance may be tied more directly to the success or failure of a smaller group of portfolio holdings.

Interest rate risk. Fixed income securities are subject to 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 sometimes offer higher yields, but are subject to greater price shifts as a result of interest rate changes than debt obligations with shorter maturities.

Initial public offering (IPO) risk. The prices of securities purchased in initial public offerings (IPOs) can be very volatile. The effect of IPOs on the performance of a Portfolio depends on a variety of factors, including the number of IPOs the Portfolio invests in relative to the size of the Portfolio and whether and to what extent a security purchased in an IPO appreciates or depreciates in value. As a Portfolio’s asset base increases, IPOs often have a diminished effect on a Portfolio’s performance.

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 volatility occurs 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. Actively managed investment portfolios are subject to management risk. Each subadviser 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 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 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.

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Portfolio turnover risk. A Portfolio’s investments may be bought and sold relatively frequently. A high turnover rate may result in higher brokerage commissions and lower returns.

Prepayment risk. A Portfolio that purchases mortgage-related securities or asset-backed securities is subject to additional risks. The underlying mortgages or assets may be prepaid, partially or completely, generally during periods of falling interest rates, which could adversely affect yield to maturity and could require the Portfolio to reinvest in lower yielding securities.

Short sale risk. A Portfolio that enters into short sales, which involves selling a security it does not own in anticipation that the security’s price will decline, exposes the Portfolio to the risk that it will be required to buy the security sold short (also known as “covering” the short position) at a time when the security has appreciated in value, thus resulting in a loss to the Portfolio.

Small company risk. The shares of small companies tend to trade less frequently than those of larger, more established companies, which can have an adverse effect on the pricing of these securities and on a Portfolio’s ability to sell these securities. In the case of small cap technology companies, the risks associated with technology company stocks, which tend to be more volatile than other sectors, are magnified.

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EVALUATING PERFORMANCE

A number of factors — including risk — can affect how a Portfolio performs. The bar charts and tables below demonstrate the risk of investing in a 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.


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.

Annual Returns* (Class I Shares)

12.63% 13.45% 11.74%

6.69%

-0.48% -2.02% -8.98%

18.77%

8.04%

3.43%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Best Quarter Worst Quarter 10.14% (2nd quarter of 2003) −8.18% (3rd quarter of 2002)

* These annual returns are after deduction of expenses and do not include Contract charges. If Contract charges were included, the annual returns would have been lower than those shown. See the accompanying Contract prospectus. During certain periods shown, fee waivers and/or expense reimbursements may be in effect. Without such fee waivers and/or expense reimbursements, the returns for the Portfolio would have been lower.

Average Annual Returns* (as of 12/31/05)

1 Year 5 Years 10 Years Class I Shares 3.43% 3.43% 6.02 % S&P 500 Index** 4.91% 0.54% 9.07 % Conservative Balanced Custom Blended Index*** 3.82% 3.15% 7.71 % Lipper Variable Insurance Products (VIP) Balanced Funds Average****

4.78% 3.33% 7.47 %

* The Portfolio’s returns are after deduction of expenses and do not include Contract charges. If Contract charges were included, the annual returns would have been lower than those shown. During certain periods shown, fee waivers and/or expense reimbursements may be in effect. Without such fee waivers and/or expense reimbursements, the returns for the Portfolio would have been lower.

** The Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index) — 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 have been lower if they included the effect of these expenses.

*** The Conservative Balanced Custom Blended Index consists of the S&P 500 Index (50%), the Lehman Brothers U.S. Aggregate Bond Index (40%) and the T-Bill 3-Month Blend (10%). These returns do not include the effect of investment management expenses. These returns would have been lower if they included the effect of these expenses.

**** The Lipper Average is calculated by Lipper Analytical Services, Inc. and reflects the return of certain portfolios underlying variable life and annuity products. The returns are net of investment fees and fund expenses but not product charges. These returns would have been lower if they included the effect of product charges.

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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 market index and a group of similar mutual funds. Past performance does not mean that the Portfolio will achieve similar results in the future.


4.40%

8.57%7.15%

-0.74%

9.72%

6.98% 7.07% 7.49%5.59%

3.28%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Best Quarter Worst Quarter 4.39% (2nd quarter of 1997) −2.54% (2nd quarter of 2004)



1 Year 5 Years 10 Years Class I Shares 3.28% 6.07% 5.91 % Lehman Brothers U.S. Aggregate Bond Index** 2.43% 5.87% 6.16 % Lipper Variable Insurance Products (VIP) Intermediate Investment Grade Debt Funds Average***

1.99% 5.60% 5.62 %


** The Lehman Brothers U.S. Aggregate Bond Index is comprised of more than 5,000 government and corporate bonds. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses.

*** The Lipper Average is calculated by Lipper Analytical Services, Inc. and reflects the return of certain portfolios underlying variable life and annuity products. The returns are net of investment fees and fund expenses but not product charges. These returns would have been lower if they included the effect of product charges.

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Equity Portfolio



18.52%

24.66%

9.34% 12.49%

3.28% -11.18% -22.34%

31.65%

9.93%11.47%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005




1 Year 5 Years 10 Years Class I Shares 11.47% 2.16% 7.64 % S&P 500 Index** 4.91% 0.54% 9.07 % Russell 1000 Index*** 6.27% 1.07% 9.29 % Lipper Variable Insurance Products (VIP) Large Cap Core Funds Average****

5.77% −0.48% 7.27 %



*** The Russell 1000 Index consists of the 1000 largest securities in the Russell 3000 Index. The Russell 3000 Index consists of the 3000 largest companies, as determined by market capitalization. These returns do not include the effect of investment management expenses. These returns would have been lower if they included the effect of these expenses.


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13.64% 17.96%

10.24% 7.78%

-1.44% -5.68% -12.74%

23.76%

10.74%

4.16%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005




1 Year 5 Years 10 Years Class I Shares 4.16% 3.28% 6.31 % S&P 500 Index** 4.91% 0.54% 9.07 % Flexible Managed Custom Blended Index*** 4.03% 2.80% 8.12 % Lipper Variable Insurance Products (VIP) Flexible Portfolio Funds Average****

4.88% 3.40% 7.89 %



*** The Flexible Managed Custom Blended Index consists of the S&P 500 Index (60%), the Lehman Brothers U.S. Aggregate Bond Index (35%) and the T-Bill 3-Month Blend (5%). These returns do not include the effect of investment management expenses. These returns would have been lower if they included the effect of these expenses.


Seq 15CopyArea: 44 X 58 TrimSize: 8.25 X 10.75

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Global Portfolio



19.69%

6.98%

25.08%

48.27%

-17.68% -17.64% -25.14%

34.07%

9.59% 16.06%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Best Quarter Worst Quarter 31.05% (4th quarter of 1999) −21.45% (3rd quarter of 2001)



1 Year 5 Years 10 Years Class I Shares 16.06% 1.01% 7.47 % MSCI World Index** 9.49% 2.18% 7.04 % Lipper Variable Insurance Products (VIP) Global Growth Funds Average***

12.92% 2.88% 9.22 %


** The Morgan Stanley Capital International World Index (MSCI World Index) is a weighted index comprised of approximately 1,500 companies listed on the stock exchanges of the U.S., Europe, Canada, Australasia and the Far East. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses.


15




2.22%

9.67% 9.09%

-2.70%

12.78%8.06%

12.05%

2.46% 3.12% 2.51%

-5.00%

0.00%

5.00%

10.00%

15.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Best Quarter Worst Quarter 6.29% (3rd quarter of 2002) −2.61% (1st quarter of 1996)



1 Year 5 Years 10 Years Class I Shares 2.51% 5.57% 5.81 % Lehman Brothers Government Bond Index** 2.65% 5.39% 5.94 % Lipper Variable Insurance Products (VIP) General U.S. Government Funds Average***

2.32% 5.32% 5.44 %


** The Lehman Brothers Government Bond Index is a weighted index comprised of securities issued or backed by the U.S. Government, its agencies and instrumentalities with a remaining maturity of one to 30 years. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses.



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11.39%13.78%

-2.36%4.61%

-7.91% -0.44%1.50%

25.04%

10.30%

3.41%

-10.00%-5.00%0.00%5.00%

10.00%15.00%20.00%25.00%30.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005




1 Year 5 Years 10 Years Class I Shares 3.41% 7.58% 5.56 % Lehman Brothers U.S. Corporate High Yield Bond Index** 2.74% 8.85% 6.54 % Lehman Brothers High Yield 2% Issuer Capped Index*** 2.76% 9.12% 6.70 % Lipper Variable Insurance Products (VIP) High Current Yield Funds Average****

2.56% 7.12% 5.62 %


** The Lehman Brothers U.S. Corporate High Yield Bond Index is made up of over 700 non-investment grade bonds. The index is an unmanaged index that includes the reinvestment of all interest but does not reflect the payment of transaction costs and advisory fees associated with an investment in the Portfolio. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses. The Portfolio no longer uses this index.

*** The Lehman Brothers High Yield 2% Issuer Capped Index is made up of over 700 non-investment grade bonds. However, the representation of any single bond issuer is restricted to a maximum of 2% of the total index. The index is an unmanaged index that includes the reinvestment of all interest but does not reflect the payment of transaction costs and advisory fees associated with an investment in the Portfolio. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses. The Portfolio has changed from the Lehman Brothers U.S. Corporate High Yield Bond Index to Lehman Brothers High Yield 2% Issuer Capped Index because the Lehman Brothers High Yield 2% Issuer Capped Index better represents the composition of the Portfolio. In particular, the Portfolio generally maintains positions of 2% or less per issuer (although the Portfolio may hold positions of greater than that amount).


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Jennison Portfolio



14.41%

31.71% 37.46% 41.76%

-17.38%-18.25%-30.95%

30.25%

9.63%14.55%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005




1 Year 5 Years 10 Years Class I Shares 14.55% −1.58% 8.43 % S&P 500 Index** 4.91% 0.54% 9.07 % Russell 1000 Growth Index*** 5.26% −3.58% 6.73 % Lipper Variable Insurance Products (VIP) Large-Cap Growth Funds Average****

7.33% −3.18% 7.24 %



*** The Russell 1000 Growth Index consists of those securities included in the Russell 1000 Index that have a greater-than-average growth orientation. These returns do not include the effect of investment management expenses. These returns would have been lower if they included the effect of these expenses.


18


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 group of similar mutual funds. Past performance does not assure that the Portfolio will achieve similar results in the future.


5.24% 5.41% 5.39% 4.98% 6.20%

4.22%

1.52%0.84% 1.01%

2.85%

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Best Quarter Worst Quarter 1.59% (3rd quarter of 2000) 0.18% (2nd quarter of 2004)



1 Year 5 Years 10 Years Class I Shares 2.85% 2.05% 3.73 % Lipper Variable Insurance Products (VIP) Money Market Funds Average**

2.69% 1.85% 3.55 %


** The Lipper Average is calculated by Lipper Analytical Services, Inc. and reflects the return of certain portfolios underlying variable life and annuity products. The returns are net of investment fees and fund expenses but not product charges. These returns would have been lower if they included the effect of product charges.

7-Day Yield* (as of 12/31/05)

Money Market Portfolio** . . . . . . . . . . 3.92 %Average Money Market Fund** . . . . . 3.44 %

* The Portfolio’s yield is after deduction of expenses and does not include Contract charges.

** Source: iMoneyNet, Inc. as of 12/27/05, based on the iMoneyNet Prime Retail Universe.


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30.88%

-11.59% -17.10%

45.99%37.66%

-10.08%

18.92%

39.00%

25.17%

55.91%

-20.00%

0.00%

20.00%

40.00%

60.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Best Quarter Worst Quarter 28.51% (3rd quarter of 2005) −21.60% (4th quarter of 1997)



1 Year 5 Years 10 Years Class I Shares 55.91% 23.74% 18.78 % S&P 500 Index** 4.91% 0.54% 9.07 % Lipper Variable Insurance Products (VIP) Natural Resources Funds Average***

37.38% 16.90% 13.04 %




20




19.77%

25.17%

-0.76%12.68%

12.81%5.53%

-14.92%

38.27%

22.04%

7.26%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005




1 Year 5 Years 10 Years Class I Shares 7.26% 10.20% 11.88 % S&P SmallCap 600 Index** 7.68% 10.76% 12.16 % Lipper Variable Insurance Products (VIP) SmallCap Core Funds Average***

5.35% 8.21% 10.77 %


** The Standard & Poor’s SmallCap 600 Index (S&P SmallCap 600 Index) is a capital-weighted index representing the aggregate market value of the common equity of 600 small company stocks. The S&P SmallCap 600 Index is an unmanaged index that includes the reinvestment of all dividends but does not reflect the payment of transaction costs and advisory fees associated with an investment in the Portfolio. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses.


21




22.57%32.83% 28.42%

20.54%

-9.03% -12.05% -22.19%

28.18%

10.45% 4.54%

-30.00%-20.00%-10.00%

0.00%10.00%20.00%30.00%40.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005




1 Year 5 Years 10 Years Class I Shares 4.54% 0.25% 8.79 % S&P 500 Index** 4.91% 0.54% 9.07 % Lipper Variable Insurance Products (VIP) S&P 500 Objective Funds Average***

4.52% 0.16% 8.74 %




22

Value 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.


21.74%

36.61%

-2.38%

12.52% 15.59%

-2.08% -21.97%

28.07%16.31% 16.66%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005




1 Year 5 Years 10 Years Class I Shares 16.66% 5.84% 10.86 % S&P 500 Index** 4.91% 0.54% 9.07 % Russell 1000 Value Index*** 7.05% 5.28% 10.94 % Lipper Variable Insurance Products (VIP) Large Cap Value Funds Average****

4.82% 2.95% 8.60 %

Lipper Variable Insurance Products (VIP) Multi Cap Value Funds Average****

6.30% 4.87% 9.54 %

* The Portfolio’s returns are after deduction of expenses and do not include Contract charge. If Contract charges were included, the annual returns would have been lower than those shown. During certain periods shown, fee waivers and/or expense reimbursements may be in effect. Without such fee waivers and/or expense reimbursements, the returns for the Portfolio would have been lower.


*** The Russell 1000 Value Index consists of those securities included in the Russell 1000 Index that have a less-than-average growth orientation. These returns do not include the effect of investment management expenses. These returns would have been lower if they included the effect of these expenses.

**** The Lipper Average is calculated by Lipper Analytical Services, Inc. and reflects the return of certain portfolios underlying variable life and annuity products. The returns are net of investment fees and fund expenses but not product charges. These returns would have been lower if they included the effect of product charges. Although Lipper classifies the Portfolio in the Multi Cap Value Funds Average, the returns for the Large Cap Value Funds Average are also shown, because the management of the portfolios in the Large Cap Value Funds Average is more consistent with the management of the Portfolio’s Class I shares.


Prospectus (Funds) Prudential - Series Fundaakhadar c:\jms\aabdul\06-6934-6\task1019832\6934-6-DI_T.pdf


23

FEES AND EXPENSES OF INVESTING IN THE PORTFOLIOS

Investors incur certain fees and expenses in connection with an investment in the Fund’s Portfolios. The following table shows the fees and expenses that you may incur if you invest in Class I shares of the Portfolios through a variable Contract. The table does not include Contract charges. Because Contract charges are not included, the total fees and expenses that you will incur will be higher than the fees and expenses set forth in the following table. See the accompanying Contract prospectus for more information about Contract changes.

CLASS I SHARES Annual Portfolio Operating Expenses

(expenses that are deducted from Portfolio assets)

ShareholderFees (fees

paid directlyfrom your

investment) Management

Fees(1)

Distribution (12b-1)

Fees Other

Expenses

Total Annual

PortfolioOperatingExpenses

Conservative Balanced Portfolio N/A 0.55% None 0.03 % 0.58%Diversified Bond Portfolio N/A 0.40 None 0.05 0.45 Equity Portfolio N/A 0.45 None 0.02 0.47 Flexible Managed Portfolio N/A 0.60 None 0.03 0.63 Global Portfolio N/A 0.75 None 0.07 0.82 Government Income Portfolio N/A 0.40 None 0.07 0.47 High Yield Bond Portfolio N/A 0.55 None 0.03 0.58 Jennison Portfolio N/A 0.60 None 0.03 0.63 Money Market Portfolio N/A 0.40 None 0.05 0.45 Natural Resources Portfolio N/A 0.45 None 0.04 0.49 Small Capitalization Stock Portfolio N/A 0.40 None 0.06 0.46 Stock Index Portfolio N/A 0.35 None 0.03 0.38(1)Value Portfolio N/A 0.40 None 0.03 0.43

(1) The management fee rate shown is based on each Portfolio’s net assets as of the close of the Portfolio’s fiscal year, excluding the Asset Allocation Portfolios (see note 4 below). The Stock Index Portfolio’s management fee schedule includes fee breakpoints, which reduce the Portfolio’s effective management fee as assets increase. Changes in Portfolio assets may result in increases or decreases in the Portfolio’s effective management fee. The Portfolio’s management fee, as a percentage of daily net assets, is as follows: 0.35% up to and including $4 billion; and 0.30% over $4 billion.

24

Example

The following Example, which reflects the Portfolio operating expenses listed in the preceding tables, is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The following example does not include the effect of Contract charges. Because Contract Charges are not included, the total fees and expenses that you will incur will be higher than the example set forth in the following table. For more information about Contract charges see the accompanying Contract prospectus.

The Example assumes that you invest $10,000 in a Portfolio for the time periods indicated. The Example also assumes that your investment has a 5% return each year, that the Portfolio’s total operating expenses remain the same, and that no expense waivers and reimbursements are in effect. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

CLASS I SHARES

1 Year 3 Years 5 Years 10 Years Conservative Balanced Portfolio $ 59 $ 186 $ 324 $ 726 Diversified Bond Portfolio 46 144 252 567 Equity Portfolio 48 151 263 591 Flexible Managed Portfolio 64 202 351 786 Global Portfolio 84 262 455 1,014 Government Income Portfolio 48 151 263 591 High Yield Bond Portfolio 59 186 324 726 Jennison Portfolio 64 202 351 786 Money Market Portfolio 46 144 252 567 Natural Resources Portfolio 50 157 274 616 Small Capitalization Stock Portfolio 47 148 258 579 Stock Index Portfolio 39 122 213 480 Value Portfolio 44 138 241 542

25

MORE DETAILED INFORMATION ON 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 More Detailed Information About Other Investments and Strategies Used by the Portfolios. Although we make every effort to achieve each Portfolio’s objective, we can’t guarantee success and it is possible that you could lose money. Unless otherwise stated, each Portfolio’s investment objective is a fundamental policy that cannot be changed without shareholder approval. The Board of Directors can change investment policies that are not fundamental.

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


The investment objective of this Portfolio is to seek a total investment return consistent with a conservatively managed diversified portfolio. While we make every effort to achieve our objective, we can’t guarantee success and it is possible that you could lose money.

We invest in equity, debt and money market securities in order to achieve diversification. We seek to maintain a conservative blend of investments that will have strong performance in a down market and solid, but not necessarily outstanding, performance in up markets. This Portfolio may be appropriate for an investor looking for diversification with less risk than that of the Flexible Managed Portfolio, while recognizing that this reduces the chances of greater appreciation.

Under normal conditions, we will invest within the ranges shown below:

Asset Type Minimum Normal Maximum Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15% 50 % 75 % Debt obligations and money market securities . . . . . . . . . . . . 25% 50 % 85 %

The equity portion of the Portfolio is generally managed as an index fund, designed to perform similarly to the holdings of the Standard & Poor’s 500 Composite Stock Price Index. For more information about the index and index investing, see the investment summary for Stock Index Portfolio included in this prospectus.

Debt securities are basically written promises to repay a debt. There are numerous types of debt securities which vary as to the terms of repayment and the commitment of other parties to honor the obligations of the issuer. Most of the securities in the debt portion of this Portfolio will be rated “investment grade.” This means major rating services, like Standard & Poor’s Ratings Group (S&P) or Moody’s Investors Service, Inc. (Moody’s), have rated the securities within one of their four highest rating categories. The Portfolio also invests in high quality money market instruments.

The Portfolio may invest without limitation in debt obligations issued or guaranteed by the U.S. Government and government-related entities. An example of a debt security that is backed by the full faith and credit of the U.S. Government is Treasury Inflation Protected Securities and obligations of the Government National Mortgage Association (Ginnie Mae). In addition, we may invest in U.S. Government securities issued by other government entities, like the Federal National Mortgage Association (Fannie Mae) and the Student Loan Marketing Association (Sallie Mae) which are not backed by the full faith and credit of the U.S. Government. Instead, these issuers have the right to borrow from the U.S. Treasury to meet their obligations. The Portfolio may also invest in the debt securities of other government-related entities, like the Farm Credit System, which depend entirely upon their own resources to repay their debt.

The Portfolio may also invest in debt securities rated as low as BB, Ba or lower by a major rating service at the time they are purchased. These high-yield or “junk bonds” are riskier than investment grade securities and are considered speculative. We may also invest in instruments that are not rated, but which we believe are of comparable quality to the instruments described above.

The Portfolio may invest up to 30% of its total assets in foreign equity and debt securities that are not denominated in the U.S. dollar. Up to 20% of the Portfolio’s total assets may be invested in debt securities that are issued outside the

26

U.S. by foreign or U.S. issuers, provided the securities are denominated in U.S. dollars. For these purposes, we do not consider American Depositary Receipts (ADRs) as foreign securities.

We may also invest in fixed and floating rate loans (secured or unsecured) arranged through private negotiations between a corporation which is the borrower and one or more financial institutions that are the lenders. Generally, these types of investments are in the form of loans or assignments.

The Portfolio’s investment in debt securities may include investments in mortgage-related securities and asset-backed securities. Up to 5% of the Portfolio’s assets may also be invested in collateralized debt obligations (CDOs) and other credit-related asset-backed securities.



• Purchase and sell options on equity securities, debt securities, stock indexes and foreign currencies. • Purchase and sell exchange-traded fund shares. • Purchase and sell stock index, interest rate, interest rate swap and foreign currency futures contracts and options on

those contracts. • Forward foreign currency exchange contracts. • Purchase securities on a when-issued or delayed delivery basis. • Short sales. No more than 25% of the Portfolio’s net assets may be used as collateral or segregated for purposes of

securing a short sale obligation. The Portfolio may also enter into short sales against-the-box. • Swap agreements, including interest rate, credit default, currency exchange rate and total return swaps. The

Portfolio may also invest in options on swaps. • Credit-linked securities, which may be linked to one or more underlying credit default swaps. No more than 5% of

the Portfolio’s assets may be invested in credit default swaps or credit-linked securities. • Repurchase Agreements. The Portfolio may participate with certain other Portfolios of the Fund and other affiliated

funds in a joint repurchase account under an order obtained from the SEC. • Equity and/or debt securities issued by Real Estate Investment Trusts (REITs). • Reverse repurchase agreements and dollar rolls in the management of the fixed-income portion of the Portfolio.

The Portfolio will not use more than 30% of its net assets in connection with reverse repurchase transactions and dollar rolls.

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

The equity portion of the Portfolio is managed by Quantitative Management Associates LLC, and the fixed income and money market portions of the Portfolio are managed by Prudential Investment Management, Inc. Prior to July 1, 2004, the entire Portfolio was managed by Prudential Investment Management, Inc.


The investment objective of this Portfolio is a high level of income over a longer term while providing reasonable safety of capital. While we make every effort to achieve our objective, we can’t guarantee success, and it is possible that you could lose money.

To achieve our objective, we normally invest at least 80% of the Portfolio’s investable assets in intermediate and long-term debt obligations that are rated investment grade and high quality money market instruments. The Portfolio will not change this policy unless it provides 60 days prior written notice to contract owners.

In general, the value of debt obligations moves in the opposite direction as interest rates — if a bond is purchased and then interest rates go up, newer bonds will be worth more relative to existing bonds because they will have a higher rate of interest. We will adjust the mix of the Portfolio’s short-term, intermediate-term and long-term debt obligations in an attempt to benefit from price appreciation when interest rates go down and to incur smaller declines when interest rates go up.

27

Investment grade debt securities are those that major rating services, like Standard and Poor’s Ratings Group (S&P) or Moody’s Investor Service, Inc. (Moody’s), have rated within one of their four highest rating categories. The Portfolio may continue to hold a debt obligation if it is downgraded below investment grade after it is purchased or if it is no longer rated by a major rating service. We may also invest up to 20% of the Portfolio’s investable assets in lower rated securities which are riskier and considered speculative. These securities are sometimes referred to as “junk bonds.” We may also invest in instruments that are not rated, but which we believe are of comparable quality to the instruments described above. Debt obligations are basically written promises to repay a debt. The terms of repayment vary among the different types of debt obligations, as do the commitments of other parties to honor the obligations of the issuer of the security. The types of debt obligations in which we can invest include U.S. Government securities, mortgage-related securities, asset-backed securities, and corporate bonds.

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

We may invest up to 20% of the Portfolio’s total assets in debt securities issued outside the U.S. by U.S. or foreign issuers whether or not such securities are denominated in the U.S. dollar.

The Portfolio may also invest in convertible debt warrants and convertible and non-convertible preferred stock of any rating. The Portfolio will not acquire any common stock except by converting a convertible security or exercising a warrant. No more than 10% of the Portfolio’s total assets will be held in common stocks, and those will usually be sold as soon as a favorable opportunity arises. The Portfolio may lend its portfolio securities to brokers, dealers and other financial institutions to earn income.

We may also invest in loans or assignments arranged through private negotiations between a corporation which is the borrower and one or more financial institutions that are the lenders.


• Collateralized debt obligations (CDOs) and other credit-related asset-backed securities. No more than 5% of the Portfolio’s assets may be invested in CDOs.


• Purchase and sell options on debt securities and financial indexes; purchase and sell interest rate and interest rate swap futures contracts and options on those contracts.

• Forward foreign currency exchange contracts; and purchase securities on a when-issued or delayed delivery basis. • Short sales. No more than 25% of the Portfolio’s net assets may be used as collateral or segregated for purposes of

securing a short sale obligation. The Portfolio may also enter into short sales against-the-box. • Swap agreements including interest rate, credit default, currency exchange rate and total return swaps. The Portfolio

may also invest in option swaps. • Credit-linked securities, which may be linked to one or more underlying credit default swaps. • 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 also invest up to 30% of its net assets in reverse repurchase agreements and dollar rolls. The Portfolio will not use more than 30% of its net assets in connection with reverse repurchase transactions and dollar rolls.

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

The Portfolio is managed by Prudential Investment Management, Inc.

28

Equity Portfolio

The investment objective of this Portfolio is long term growth of capital. While we make every effort to achieve our objective, we can’t guarantee success, and it is possible that you could lose money.

We normally invest at least 80% of the Portfolio’s investable assets in common stock of major established companies (over $5 billion in market capitalization) as well as smaller companies. The Portfolio will not change this policy unless it provides 60 days prior written notice to contract owners.

Up to 20% of the Portfolio’s investable assets may be invested in short-, intermediate- or long-term debt obligations, convertible and nonconvertible preferred stock and other equity-related securities. Up to 5% of these investable assets may be rated below investment grade. These securities are considered speculative and are sometimes referred to as “junk bonds.”

In deciding which stocks to buy, the advisers use a blend of investment styles. Jennison invests in stocks that may be undervalued given the company’s earnings, assets, cash flow and dividends, and also invests in companies experiencing some or all of the following: a price/earnings ratio lower than earnings per share growth, strong market position, improving profitability and distinctive attributes such as unique marketing ability, strong research and development, new product flow, and financial strength. Although Jennison’s allocation between growth and value will vary over time, it is expected to be approximately 50/50 over a full market cycle. SaBAM will use a “core” approach with respect to 50% of the Portfolio’s assets, which seeks to combine certain aspects of the value approach with certain aspects of the growth approach. As a result, the Portfolio may invest in stocks that may be undervalued given the company’s earnings, assets, cash flow and dividends and also may invest in companies experiencing some or all of the following: a price/ earnings ratio lower than earnings per share growth, strong market position, improving profitability and distinctive attributes such as unique marketing ability, strong research and development, new product flow, and financial strength.

Up to 30% of the Portfolio’s total assets may be invested in foreign securities, including money market instruments, equity securities and debt obligations. For these purposes, we do not consider American Depositary Receipts (ADRs) as foreign securities.

We may also pursue the following types of investment strategies and/or invest in the following types of securities:


• Purchase and sell options on equity securities, stock indexes and foreign currencies. • Purchase and sell stock index and foreign currency futures contracts and options on these futures contracts. • Forward foreign currency exchange contracts. • Purchase securities on a when-issued or delayed delivery basis. • Short sales against-the-box. • 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. • Equity and/or debt securities of Real Estate Investment Trusts (REITs).

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

The Portfolio is co-managed by Jennison and SaBAM. Jennison and SaBAM are each responsible for managing approximately 50% of the Portfolio’s assets. GEAM served as a subadviser to the Portfolio from 2001 to December 5, 2005.


The investment objective of this Portfolio is to seek a high total return consistent with an aggressively managed diversified portfolio. While we make every effort to achieve our objective, we can’t guarantee success, and it is possible that you could lose money.

We invest in a mix of equity and equity-related securities, debt obligations and money market instruments. We adjust the percentage of Portfolio assets in each category depending on our expectations regarding the different markets.

29

We invest in equity, debt and money market securities — in order to achieve diversification in a single Portfolio. We seek to maintain a more aggressive mix of investments than the Conservative Balanced Portfolio. This Portfolio may be appropriate for an investor looking for diversification who is willing to accept a relatively high level of loss in an effort to achieve greater appreciation.

Generally, we will invest within the ranges shown below:

Asset Type Minimum Normal Maximum Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25% 60 % 100 % Fixed income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0% 40 % 75 %

The equity portion of the Fund is generally managed under an “enhanced index style.” Under this style, the portfolio managers utilize a quantitative approach in seeking to outperform the Standard & Poor’s 500 Composite Stock Price Index and to limit the possibility of significantly underperforming that index.

The stock portion of the Portfolio will be invested in a broadly diversified portfolio of stocks generally consisting of large and mid-size companies, although it may also hold stocks of smaller companies. We will invest in companies and industries that, in our judgment, will provide either attractive long-term returns, or are desirable to hold in the Portfolio to manage risk.

The Portfolio may invest without limitation in debt obligations issued or guaranteed by the U.S. Government and government-related entities. An example of a debt security that is backed by the full faith and credit of the U.S. Government is Treasury Inflatio Protected Securities and obligations of the Government National Mortgage Association (Ginnie Mae). In addition, we may invest in U.S. Government securities issued by other government entities, like the Federal National Mortgage Association (Fannie Mae) and the Student Loan Marketing Association (Sallie Mae) which are not backed by the full faith and credit of the U.S. Government. Instead, these issuers have the right to borrow from the U.S. Treasury to meet their obligations. The Portfolio may also invest in the debt securities of other government-related entities, like the Farm Credit System, which depend entirely upon their own resources to repay their debt.

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

The fixed income portion of the Portfolio may also include loans and assignments in the form of loan participations, mortgage-related securities and other asset-backed securities.

The Portfolio may also invest up to 30% of its total assets in foreign equity and debt securities that are not denominated in the U.S. dollar. In addition, up to 20% of the Portfolio’s total assets may be invested in debt securities that are issued outside of the U.S. by foreign or U.S. issuers provided the securities are denominated in U.S. dollars. For these purposes, we do not consider American Depositary Receipts (ADRs) as foreign securities.

We may also pursue the following types of investment strategies and/or invest in the following types of securities:

• Real Estate Investment Trusts (REITs). • Collateralized debt obligations (CDOs) and other credit-related asset-backed securities (up to 5% of the Portfolio’s

assets may be invested in these instruments). • Alternative investment strategies — including derivatives — to try to improve the Portfolio’s returns, to protect its

assets or for short-term cash management. • Purchase and sell options on equity securities, debt securities, stock indexes, and foreign currencies. • Purchase and sell exchange-traded fund shares. • Purchase and sell stock index, interest rate, interest rate swap and foreign currency futures contracts and options on

those contracts. • Forward foreign currency exchange contracts. • Purchase securities on a when-issued or delayed delivery basis. • Short sales. No more than 25% of the Portfolio’s net assets may be used as collateral or segregated for purposes of

securing a short sale obligation. The Portfolio may also enter into short sales against-the-box.

30

• Swap agreements; including interest rate, credit default, currency exchange rate and total return swaps. The Portfolio may also invest in swap options.

• Credit-linked securities, which may be linked to one or more underlying credit default swaps. No more than 5% of the Portfolio’s assets may be invested in credit default swaps or credit-linked securities.

• 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. We may also invest in reverse repurchase agreements and dollar rolls in the management of the fixed-income portion of the Portfolio. The Portfolio will not use more than 30% of its net assets in connection with reverse repurchase transactions and dollar rolls.

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

The stock portion of the Portfolio is managed by Quantitative Management Associates LLC, and the fixed income portion of the Portfolio is managed by Prudential Investment Management, Inc. Prior to July 1, 2004, the entire Portfolio was managed by Prudential Investment Management, Inc.

Global Portfolio

The investment objective of this Portfolio is long-term growth of capital. While we make every effort to achieve our objective, we can’t guarantee success, and it is possible that you could lose money.

The Portfolio invests primarily in common stocks (and their equivalents) of foreign and U.S. companies. Each subadviser for the Portfolio generally will use either a “growth” approach or a “value” approach in selecting either foreign or U.S. common stocks. The target asset allocation, area of geographic focus, and primary investment style for each subadviser are set forth below.

Subadviser

Target AssetAllocation of

Global Portfolio’s

Assets

Primary Geographic Focus and Asset Class Investment Style

William Blair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25% Foreign Equity Growth-orientedLSV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25% Foreign Equity Value-oriented Marsico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25% U.S. Equity Growth-orientedT. Rowe Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25% U.S. Equity Value-oriented

William Blair uses fundamental research to identify foreign companies with market capitalizations over $100 million that have above-average prospective growth, evidence of sustainability of future growth, above-average profitability and reinvestment of internal capital, and conservative capital structure. LSV employs a proprietary model and other quantitative methods in an attempt to pick undervalued stocks with high near-term appreciation potential. Cash flow-to-price ratios, book-to-market ratios and certain past performance measures are some of the important variables reviewed by LSV in its investment process. In selecting investments for the Portfolio, Marsico uses an approach that combines top-down macroeconomic analysis with bottom-up stock selection. The top-down approach may take into consideration macro-economic factors such as interest rates, inflation, demographics, the regulatory environment and the global competitive landscape. As a result of the top-down analysis, Marsico seeks to identify sectors, industries and companies that may benefit from the overall trends Marsico has observed. Marsico then looks for individual companies (generally companies with market capitalizations of a least $4 billion) with earnings growth potential that may not be recognized by the market at large. In particular, Marsico may focus on any of a number of different attributes that may include the company’s specific market expertise or dominance, its franchise durability and pricing power, solid fundamentals, strong and ethical management, commitment to shareholder interests, and reasonable valuations in the context of projected growth rates. This process is called bottom-up stock selection. T. Rowe Price invests primarily in common stocks of large companies that appear to be undervalued, and in securities that are expected to produce dividend income. T. Rowe Price typically employs a “value” approach in selecting investments. T. Rowe Price’s in-house research team seeks to identify companies that appear to be undervalued by various measures and may be temporarily out of favor but have good prospects for capital appreciation and dividend growth. The actual allocation to each subadviser may vary from the target allocation listed above. The Portfolio may change the target allocations.

31

This Portfolio is intended to provide investors with the opportunity to invest in companies located throughout the world. As set forth above, the Portfolio invests approximately 50% of its assets in the equity and equity-related securities of foreign companies and approximately 50% of its assets in the equity and equity-related securities of U.S. companies. Generally, the Portfolio invests in at least three countries, including the U.S., but may invest up to 35% of its assets in companies located in any one country. The 35% limitation does not apply to U.S investments. The Portfolio may invest in emerging markets securities.



• 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. • Forward foreign currency exchange contracts. • Purchase securities on a when-issued or delayed delivery basis. • Equity swaps. The Portfolio may also lend its portfolio securities to brokers, dealers and other financial institutions

to earn income. • Short sales against-the-box. • 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. • Equity and/or debt securities issued by Real Estate Investment Trusts (REITs).

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

The Portfolio is co-managed by William Blair, LSV, Marsico, and T. Rowe Price. William Blair, LSV, Marsico, and T. Rowe Price are each responsible for managing approximately 25% of the Portfolio’s assets. The Global Portfolio was managed by Jennison from 2001 to December 5, 2005.


The investment objective of this Portfolio is a high level of income over the longer term consistent with the preservation of capital. While we make every effort to achieve our objective, we can’t guarantee success, and it is possible that you could lose money.

Normally, we invest at least 80% of the Portfolio’s investable assets in U.S. Government securities, which include Treasury securities, obligations issued or guaranteed by U.S. Government agencies and instrumentalities and mortgage-related securities issued by U.S. Government instrumentalities. The Portfolio will not change this policy unless it provides 60 days prior written notice to contract owners.

U.S. Government securities are considered among the most creditworthy of debt securities. Because they are generally considered less risky, their yields tend to be lower than the yields from corporate debt. Like all debt securities, the values of U.S. Government securities will change as interest rates change.

The Portfolio may normally invest up to 20% of its investable assets in (i) money market instruments, (ii) asset-backed securities rated at least single A by Moody’s or S&P (or if unrated, of comparable quality in our judgment) and (iii) subject to a limit of 10% of its investable assets and a rating of at least single A by Moody’s or S&P (or if unrated, of comparable quality in our judgment), foreign securities (including securities issued by foreign governments, supranational organizations or non-governmental foreign issuers such as banks or corporations) denominated in U.S. dollars or in foreign currencies which may or may not be hedged to the U.S. dollar. The Portfolio may invest up to 15% of its net assets in zero coupon bonds.

32



• Purchase and sell options on debt securities and financial indexes. • Purchase and sell domestic and foreign interest rate and interest rate swap futures contracts and options on these

futures contracts; and purchase securities on a when-issued or delayed delivery basis. • Short sales. No more than 25% of the Portfolio’s net assets may be used as collateral or segregated for purposes of

securing a short sale obligation. The Portfolio may also enter into short sales against-the-box. • Swap agreements, including interest rate, credit-default, total return and index swaps. The Portfolio may also invest

in options on swaps. • Forward foreign currency exchange contracts and foreign currency futures contracts. • 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.

We may also invest in reverse repurchase agreements and dollar rolls. The Portfolio may invest up to 30% of its assets in these instruments.

The Portfolio may invest up to 100% of its assets in money market instruments in response to adverse market conditions or when restructuring the Portfolio. Investing heavily in money market securities limits our ability to achieve capital appreciation, but can help to preserve the Portfolio’s assets when the markets are unstable. The Portfolio may lend its portfolio securities to brokers, dealers and other financial institutions to earn income.



The investment objective of this Portfolio is a high total return. While we make every effort to achieve our objective, we can’t guarantee success and, it is possible that you could lose money.

We invest primarily in high-yield/high risk debt securities, which are often referred to as high-yield bonds or “junk bonds.” High-yield bonds and junk bonds are riskier than higher rated bonds. Normally, we will invest at least 80% of the Portfolio’s investable assets in medium to lower rated debt securities. The Portfolio will not change this policy unless it provides 60 days prior written notice to contract owners.

Lower rated and comparable unrated securities tend to offer better yields than higher rated securities with the same maturities because the issuer’s financial condition may not have been as strong as that of higher rated issuers. Changes in the perception of the creditworthiness of the issuers of lower rated securities tend to occur more frequently and in a more pronounced manner than for issuers of higher rated securities.

The Portfolio may invest up to 20% of its total assets in U.S. dollar denominated debt securities issued outside the U.S. by foreign and U.S. issuers.


• Common stock, debt securities, convertible debt and preferred stock. • Loans or assignments arranged through private negotiations between a corporation which is the borrower and one

or more financial institutions that are the lenders. • Asset-backed securities. • Collateralized debt obligations (CDOs) and other credit-related asset-backed securities. No more than 5% of the

Portfolio’s assets may be invested in CDOs. • Alternative investment strategies — including derivatives — to try to improve the Portfolio’s returns, to protect its

assets or for short-term cash management. • Purchase and sell options on debt securities. • Purchase and sell interest rate and interest rate swap futures contracts and options on these futures contracts. • Purchase securities on a when-issued or delayed delivery basis.

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• PIK bonds. • Short sales. No more than 25% of the Portfolio’s net assets may be used as collateral or segregated for purposes of

securing a short sale obligation. The Portfolio may also enter into short sales against-the-box. • Swap agreements; including interest rate, credit default, currency exchange rate and total return swaps. The

Portfolio may also invest in options on swaps. • Credit-linked securities, which may be linked to one or more underlying credit default swaps. • Repurchase agreements. The Portfolio may participate with certain other Portfolios of the Fund in a joint


We may also invest in Reverse repurchase agreements and dollar rolls. The Portfolio may invest up to 30% of its assets in these instruments.

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


Jennison Portfolio

The investment objective of this Portfolio is to achieve long-term growth of capital. While we make every effort to achieve our objective, we can’t guarantee success, and it is possible that you could lose money.

We normally invest at least 65% of the Portfolio’s total assets in equity-related securities of companies that exceed $1 billion in market capitalization at the time of investment and that we believe have above-average growth prospects. We may also invest in common stocks, preferred stocks and other equity-related securities of companies that are undergoing changes in management, in product and/or in marketing dynamics which we believe have not yet been reflected in reported earnings or recognized by investors.

We select stocks on a company-by-company basis using fundamental analysis and look for companies with 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. Often the companies we choose have a defendable competitive position, enduring business franchise, differentiated product or service and/or proven management team.

In addition to common stocks and preferred stocks, we 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. 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 Depositary Receipts (ADRs) as foreign securities.



• 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. • Forward foreign currency exchange contracts. • Purchase securities on a when-issued or delayed delivery basis. • Equity swap agreements. • Short sales against-the-box. • Repurchase agreements. The Portfolio may participate with certain other Portfolios of the Fund in a joint


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

The Portfolio is managed by Jennison.


The investment objective of this Portfolio is to seek the maximum current income that is consistent with stability of capital and maintenance of liquidity. While we make every effort to achieve our objective, we can’t guarantee success.

We invest in a diversified portfolio of short-term debt obligations of 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 net asset value for the Portfolio will ordinarily remain issued at $10 per share because dividends are declared and reinvested daily. The price of each share remains the same, but when dividends are declared, the value of your investment grows.

We make investments that meet the requirements of specific rules for money market mutual funds, such as Investment Company Act of 1940 (Investment Company Act) Rule 2a-7. As such, we will not acquire any security with a remaining maturity exceeding thirteen months, and we will maintain a dollar-weighted average portfolio maturity of 90 days or less. In addition, we will comply with the diversification, quality and other requirements of Rule 2a-7. This means, generally, that the instruments that we purchase present “minimal credit risk” and are of “eligible quality.” “Eligible quality” for this purpose means a security is: (1) 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 (2) if unrated, of comparable quality in our judgment. All securities that we purchase will be denominated in U.S. dollars.

Commercial paper is short-term debt obligations of banks, corporations and other borrowers. The obligations are usually issued by financially strong businesses and often include a line of credit to protect purchasers of the obligations.

An asset-backed security is a loan or note that pays interest based upon the cash flow of a pool of assets, such as mortgages, loans and credit card receivables. 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.

We may purchase debt securities that include demand features, which allow us to demand repayment of a debt obligation before the obligation is due or matures. This means that longer term securities can be purchased because of our expectation that we can demand repayment of the obligation at 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 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 we may purchase may change over time as new types of money market instruments are developed. We will purchase these new instruments, however, only if their characteristics and features follow the rules governing money market mutual funds.

We may also use alternative investment strategies including derivatives to try to improve the Portfolio’s returns, to 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.

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• Purchase securities on a when-issued or delayed delivery basis. • 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. • Reverse repurchase agreements (the Portfolio may invest up to 10% of its net assets in these instruments).


An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) 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.


The investment objective of this Portfolio is long-term growth of capital. While we make every effort to achieve our objective, we can’t guarantee success and, it is possible that you could lose money.

We normally invest at least 80% of the Portfolio’s investable assets in common stocks and convertible securities of natural resource companies and in securities that are related to the market value of some natural resource (asset-indexed securities). The Portfolio will not change this policy unless it provides 60 days prior written notice to contract owners. Natural resource companies are companies that primarily own, explore, mine, process or otherwise develop natural resources, or supply goods and services to such companies. Natural resources generally include precious metals, such as gold, silver and platinum, ferrous and nonferrous metals, such as iron, aluminum and copper, strategic metals such as uranium and titanium, hydrocarbons such as coal and oil, timberland, undeveloped real property and agricultural commodities.

We seek securities that are attractively priced as compared to the intrinsic value of the underlying natural resource or securities of companies in a position to benefit from current or expected economic conditions. Depending on prevailing trends, we may shift the Portfolio’s focus from one natural resource to another, however, we will not invest more than 25% of the Portfolio’s total assets in a single natural resource industry.

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. As a result, the Portfolio’s performance may be more clearly tied to the success or failure of a smaller group of Portfolio holdings. There are additional risks associated with the Portfolio’s investment in the securities of natural resource companies. The market value of the securities may be affected by numerous factors, including events occurring in nature, inflationary pressures, and international politics.

When acquiring asset-indexed securities, we usually will invest in obligations rated at least BBB by Moody’s or Baa by S&P (or, if unrated, of comparable quality in our judgment). However, we may invest in asset-indexed securities rated as low as CC by Moody’s or Ca by S&P or in unrated securities of comparable quality. These high-risk or “junk bonds” are riskier than higher quality securities.

The Portfolio may also acquire asset-indexed securities issued in the form of commercial paper provided they are rated at least A-2 by S&P or P-2 by Moody’s (or, if unrated, of comparable quality in our judgment).

The Portfolio may invest up to 20% of its investable assets in securities that are not asset-indexed or natural resource-related. These holdings may include common stock, convertible stock, debt securities and money market instruments. When acquiring debt securities, we usually will invest in obligations rated A or better by S&P or Moody’s (or, if unrated, of comparable quality in our judgment). However, we may invest in debt securities rated as low as CC by Moody’s or Ca by S&P or in unrated securities of comparable quality.

Up to 30% of the Portfolio’s total assets may be invested in foreign equity and equity-related securities. For these purposes, we do not consider American Depositary Receipts (ADRs) as foreign securities.

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• Purchase and sell options on equity securities, stock indexes and foreign currencies. • Purchase and sell stock index and foreign currency futures contracts and options on these futures contracts. • Forward foreign currency exchange contracts. • Purchase securities on a when-issued or delayed delivery basis. • Short sales against-the-box. • Repurchase agreements. The Portfolio may participate with certain other Portfolios of the Fund in a joint


Under normal circumstances, the Portfolio may invest up to 20% of its investable assets in money market instruments. In response to adverse market conditions or when restructuring the Portfolio, we may invest up to 100% of the Portfolio’s assets in money market instruments. Investing heavily in money market securities limits our ability to achieve our investment objective, but can help to preserve the Portfolio’s assets when the markets are unstable.



The investment objective of this Portfolio is long-term growth of capital. While we make every effort to achieve our objective, we can’t guarantee success, and it is possible that you could lose money.

We attempt to achieve the investment results of the Standard & Poor’s Small Capitalization 600 Stock Index (S&P SmallCap 600 Index), a market-weighted index which consists of 600 smaller capitalization U.S. stocks. Normally we do this by investing at least 80% of the Portfolio’s investable assets in all or a representative sample of the stocks in the S&P SmallCap 600 Index. The Portfolio will not change this policy unless it provides 60 days prior written notice to contract owners. Because the Portfolio seeks to achieve the performance of a stock index, the Portfolio is not “managed” in the traditional sense of using market and economic analyses to select stocks.

The market capitalization of the companies that make up the S&P SmallCap 600 Index may change from time to time — as of January 31, 2006, the S&P SmallCap 600 Index stocks had market capitalizations of between $54 million and $4.19 billion. They are selected for market size, liquidity and industry group. The S&P SmallCap 600 Index has above-average risk and may fluctuate more than the S&P 500 Index.

The Portfolio may also hold cash or cash equivalents, in which case its performance will differ from that of the Index.

We attempt to minimize these differences 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.

We may also use alternative investment strategies to try to improve the Portfolio’s returns or for short-term cash management. The Portfolio may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. 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.


• Purchase and sell options on equity securities and stock indexes. • Purchase and sell stock index futures contracts and options on those futures contracts. • Purchase and sell exchange-traded fund shares. • Purchase securities on a when-issued or delayed delivery basis. • Short sales and short sales against-the-box. No more than 5% of the Portfolio’s total assets may be used as

collateral or segregated for purposes of securing a short sale obligation. • Repurchase agreements. The Portfolio may participate with certain other Portfolios of the Fund in a joint


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The Portfolio is managed by Quantitative Management Associates LLC. Prior to July 1, 2004, the Portfolio was managed by Prudential Investment Management, Inc.

A stock’s inclusion in the S&P SmallCap 600 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 Small Capitalization Stock Index” and “Standard & Poor’s SmallCap 600” are trademarks of McGraw Hill.


The investment objective of this Portfolio is to achieve investment results that generally correspond to the performance of publicly-traded common stocks. While we make every effort to achieve our objective, we can’t guarantee success, and it is possible that you could lose money.

To achieve our objective, we use the performance of the Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index). Under normal conditions, we attempt to invest in all 500 stocks represented in the S&P 500 Index in proportion to their weighting in the Standard & Poor’s 500 Composite Stock Price Index. The S&P 500 Index is a market-weighted index, which represents more than 70% of the market value of all publicly-traded common stocks.

We will normally invest at least 80% of the Portfolio’s investable assets in S&P 500 Index stocks, but we will attempt to remain as fully invested in the S&P 500 Index stocks as possible in light of cash flow into and out of the Portfolio. The Portfolio will not change this policy unless it provides 60 days prior written notice to contract owners.

To manage investments and redemptions in the Portfolio, we may temporarily hold cash or invest in high-quality money market instruments. To the extent we do so, the Portfolio’s performance will differ from that of the S&P 500 Index. We attempt to minimize differences in the performance of the Portfolio and the S&P 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.

We may also use alternative investment strategies including derivatives 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.


• Purchase and sell options on stock indexes. • Purchase and sell stock futures contracts and options on those futures contracts. • Purchase and sell exchange-traded fund shares. • Short sales and short sales against-the-box. No more than 5% of the Portfolio’s total assets may be used as

collateral or segregated for purposes of securing a short sale obligation. • Repurchase agreements. The Portfolio may participate with certain other Portfolios of the Fund in a joint


The Portfolio is managed by Quantitative Management Associates LLC. Prior to July 1, 2004, the Portfolio was managed by Prudential Investment Management, Inc.

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.

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Value Portfolio

The investment objective of this Portfolio is to seek capital appreciation. While we make every effort to achieve our objective, we can’t guarantee success, and it is possible that you could lose money.

We will normally invest at least 65% of the Portfolio’s total assets in equity and equity-related securities. Most of our investments will be securities of large capitalization companies. When deciding which stocks to buy, we rely on proprietary fundamental research and qualitative analysis. We seek to invest in companies that are undervalued in the market, which means their stocks are trading below their underlying asset value, cash generating ability and overall earnings and earnings growth, and that also have identifiable catalysts which may be able to close the gap between the stock price and what we believe to be the true worth of the company. We also buy equity-related securities — like bonds, corporate notes and preferred stock — that can be converted into a company’s common stock or other equity security.

The following four factors generally will lead the value team to eliminate a holding or reduce the weight of the position in the portfolios: (1) our investment thesis is invalidated by subsequent events; (2) the balance between the team’s estimate of a stock’s upside and downside becomes neutral or unfavorable (stated differently, the stock’s valuation is realized or exceeded); (3) a company trades below our downside price target; or (4) a more attractive portfolio candidate emerges.

Up to 35% of the Portfolio’s total assets may be invested in debt obligations and non-convertible preferred stock. When acquiring these types of securities, we usually invest in obligations rated A or better by Moody’s or S&P. We may also invest in obligations rated as low as CC by Moody’s or Ca by S&P. These securities are considered speculative and are often referred to as “junk bonds.” We may also invest in instruments that are not rated, but which we believe are of comparable quality to the instruments described above.

Up to 30% of the Portfolio’s total assets may be invested in foreign securities, including money market instruments, equity securities and debt obligations. For these purposes, we do not consider American Depositary Receipts (ADRs) as foreign securities.



• Swap agreements, including interest rate and equity swaps. • Purchase and sell options on equity securities. • Purchase and sell exchange traded funds, stock indexes and foreign currencies. • Purchase and sell stock index and foreign currency futures contracts and options on these futures contracts. • Forward foreign currency exchange contracts. • Purchase securities on a when-issued or delayed delivery basis. • Short sales and short sales against-the-box. • Repurchase agreements. The Portfolio may participate with certain other Portfolios of the Fund in a joint


Under normal circumstances, the Portfolio may invest up to 35% of its total assets in high-quality money market instruments. In response to adverse market conditions or when restructuring the Portfolio, we may temporarily invest up to 100% of the Portfolio’s assets in money market instruments. Investing heavily in money market securities limits our ability to achieve our investment objective, but can help to preserve the Portfolio’s assets when the markets are unstable.


* * *

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MORE DETAILED INFORMATION ABOUT OTHER INVESTMENTS AND STRATEGIES USED BY THE PORTFOLIOS

As indicated in the descriptions of the Portfolios above, we may invest in the following types of securities and/or use the following investment strategies to increase a Portfolio’s return or protect its assets if market conditions warrant.

American Depositary Receipts (ADRs) — 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.

Asset-Backed Securities — An asset-backed security is a type of pass-through instrument that pays interest based upon the cash flow of an underlying pool of assets, such as automobile loans or credit card receivables. Asset-backed securities may also be collateralized by a portfolio of corporate bonds, including junk bonds, or other securities.

Collateralized Debt Obligations (CDOs) — A CDO is a security backed by an underlying portfolio of debt obligations, typically including one or more of the following types of investments: high yield securities, investment grade securities, bank loans, futures or swaps. A CDO provides a single security that has the economic characteristics of a diversified portfolio. The cash flows generated by the collateral are used to pay interest and principal to investors.

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, convertible securities 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.

Credit Default Swaps — In a credit default swap, the Portfolio and another party agree to exchange payment of the par (or other agreed-upon) value of a referenced debt obligation in the event of a default on that debt obligation in return for a periodic stream of payments over the term of the contract provided no event of default has occurred. See also “Swaps” defined below.

Credit-Linked Securities — Credit linked securities are securities that are collateralized by one or more credit default swaps on corporate credits. The Portfolio has the right to receive periodic interest payments from the issuer of the credit-linked security at an agreed-upon interest rate, and a return of principal at the maturity date. See also “Credit Default Swaps” defined above.

Derivatives — A derivative is an 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 interest — a security, market index, currency, interest rate or some other benchmark — will go up or down at some future date. We may use derivatives to try to reduce risk or to increase return consistent with a Portfolio’s overall investment objective. The 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.

Equity Swaps — In an equity swap, the Portfolio and another party agree to exchange cash flow payments that are based on the performance of equities or an equity index. See also “Swaps” defined below.

Event-Linked Bonds — Event-linked bonds 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

40

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.

Foreign Currency Forward 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 Contracts — 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. See also “Swaps” defined below.

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.

Loans and Assignments — Loans are privately negotiated between a corporate borrower and one or more financial institutions. The Portfolio acquires interests in loans directly (by way of assignment from the selling institution) or indirectly (by way of the purchase of a participation interest from the selling institution. Purchasers of loans 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. Interests in loans are also subject to additional liquidity risks. Loans are not generally traded in organized exchange markets but are traded by banks and other institutional investors engaged in loan syndications. Consequently, the liquidity of a loan will depend on the liquidity of these trading markets at the time that the Portfolio sells the loan.

In assignments, the Portfolio will have no recourse against the selling institution, and the selling institution generally makes no representations about the underlying loan, the borrowers, the documentation or the collateral. In addition, the rights against the borrower that are acquired by the Portfolio may be more limited than those held by the assigning lender.

Mortgage-Related Securities — 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.

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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.

Private Investments in Public Equity (PIPEs) — A PIPE is an equity security in a private placement that are issued by issuers who have outstanding, publicly-traded equity securities of the same class. Shares in PIPEs generally are not registered with the SEC until after a certain time period from the date the private sale is completed. This restricted period can last many months. Until the public registration process is completed, PIPEs are restricted as to resale and the Fund cannot freely trade the securities. Generally, such restrictions cause the PIPEs to be illiquid during this time. PIPEs may contain provisions that the issuer will pay specified financial penalties to the holder if the issuer does not publicly register the restricted equity securities within a specified period of time, but there is no assurance that the restricted equity securities will be publicly registered, or that the registration will remain in effect.

Real Estate Investment Trusts (REITs) — A REIT is a company that manages a portfolio of real estate to earn profits for its shareholders. Some REITs acquire equity interests in real estate and then receive income from rents and capital gains when the buildings are sold. Other REITs lend money to real estate developers and receive interest income from the mortgages. Some REITs invest in both types of interests.

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.

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Swap Options — A swap option is a contract that gives a counterparty the right (but not the obligation) to enter into a swap agreement or to shorten, extend cancel or otherwise modify an existing swap agreement at some designated future time on specified terms. See also “Options” defined above.

Swaps — Swap agreements are two party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. Credit Default Swaps, Equity Swaps, Interest Rate Swaps and Total Return Swaps are four types of swap agreements.

Total Return Swaps — In a total return swap, payment (or receipt) of an index’s total return is exchanged for the receipt (or payment) of a floating interest rate. See also “Swaps” defined above.

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.

Except for the Money Market Portfolio, each Portfolio also follows certain policies when it borrows money (each Portfolio may borrow up to 5% of the value of its total assets, except that SP Large Cap Value Portfolio and SP Small Cap Value Portfolio may each borrow up to 33% of their total assets); 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. A 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 Statement of Additional Information (SAI).

The Money Market Portfolio also 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. 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.

We will consider other factors (such as cost) in deciding whether to employ any particular strategy or use any particular instrument. For more information about these strategies, see the SAI, “Investment Objectives and Policies of the Portfolios.”

HOW THE FUND IS MANAGED

Board of Directors

The Board of Directors oversees the actions of the Investment Adviser, the Subadvisers 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 Investments LLC (PI), a wholly-owned subsidiary of Prudential Financial, Inc., serves as the overall investment adviser for the Fund. PI is located at Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102. PI and its predecessors have served as manager and administrator to investment companies since 1987. As of December 31, 2005, PI served as the investment manager to all of the Prudential U.S. and offshore investment companies, and as manager or administrator to closed-end investment companies, with aggregate assets of approximately $94.9 billion.

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The Fund uses a “manager-of-managers” structure. Under this structure, PI is authorized to select (with approval of the Fund’s independent directors) one or more subadvisers to handle the actual day-to-day investment management of each Portfolio. PI monitors each subadviser’s performance through quantitative and qualitative analysis, and periodically reports to the Fund’s board of directors as to whether each subadviser’s agreement should be renewed, terminated or modified. PI also is responsible for allocating assets among the subadvisers if a Portfolio has more than one subadviser. In those circumstances, the allocation for each subadviser can range from 0% to 100% of a Portfolio’s assets, and PI can change the allocations without board or shareholder approval. The Fund will notify contract owners of any new subadviser or any material changes to any existing subadvisory agreement.

The following chart lists the total annualized investment advisory fees paid by the Fund to PI in 2005 for each of the Fund’s Portfolios.

Portfolio Total advisory fees as %

of average net assets Conservative Balanced. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.55 Diversified Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.40 Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45 Flexible Managed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60 Global . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75 Government Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.40 High Yield Bond. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.55 Jennison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60 Money Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.40 Natural Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45 Small Capitalization Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.40 Stock Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.35 Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.40

Investment Subadvisers

Each Portfolio has one or more subadvisers providing the day-to-day investment management of the Portfolio. PI pays each subadviser out of the fee that PI receives from the Fund.

Jennison Associates LLC (Jennison) serves as the subadviser for the following Portfolios:

• Natural Resources Portfolio • Jennison Portfolio • Jennison 20/20 Focus Portfolio • SP Prudential U.S. Emerging Growth Portfolio • Value Portfolio • Diversified Conservative Growth Portfolio (portion) • Equity Portfolio (portion) • SP Strategic Partners Focused Growth Portfolio (portion)

Jennison is an indirect, wholly-owned subsidiary of Prudential Financial, Inc. As of December 31, 2005, Jennison managed in excess of $72 billion in assets for institutional, mutual fund and certain other clients. The address of Jennison is 466 Lexington Avenue, New York, New York 10017.

Prudential Investment Management, Inc. (PIM) serves as the subadviser for the following Portfolios:

• Conservative Balanced Portfolio (portion) • Diversified Bond Portfolio • Flexible Managed Portfolio (portion) • Government Income Portfolio • High Yield Bond Portfolio • Money Market Portfolio • Diversified Conservative Growth Portfolio (portion)

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PIM is a wholly owned subsidiary of Prudential Financial, Inc. As of December 31, 2005, PIM had approximately $220.3 billion in assets under management. The address of PIM is Gateway Center Two, 100 Mulberry Street, Newark, New Jersey 07102. PIM’s Fixed Income (PIM-Fixed Income) unit is the principal public fixed income asset management unit of PIM and is responsible for the management of the PIM Portfolios and Portfolio segments.

Quantitative Management Associates LLC (QMA) serves as the subadviser for the following Portfolios:

• Conservative Balanced Portfolio (portion) • Flexible Managed Portfolio (portion) • Small Capitalization Stock Portfolio • Stock Index Portfolio

QMA is a wholly owned indirect subsidiary of Prudential Investment Management, Inc. (PIM). As of December 31, 2005, QMA had approximately $52.4 billion in assets under management. The address of QMA is Gateway Center Two, 100 Mulberry Street, Newark, New Jersey 07102.

LSV Asset Management (LSV) serves as the subadviser for the SP LSV International Value Portfolio and for approximately 25% of the Global Portfolio. Formed in 1994, LSV is a quantitative value equity manager providing active asset management for institutional clients through the application of proprietary models. As of December 31, 2005, LSV had approximately $51.8 billion in assets under management. The address of LSV is One North Wacker Drive, Suite 4000, Chicago, Illinois 60606.

Marsico Capital Management, LLC (“Marsico”), 1200 17th Street, Suite 1600, Denver, CO 80202, serves as a subadviser for approximately 25% of the assets of the Global Portfolio. Marsico was organized in September 1997 as a registered investment adviser and became a wholly-owned indirect subsidiary of Bank of America Corporation in January 2001. Marsico provides investment management services to other mutual funds and private accounts and, as of December 31, 2005, had approximately $63 billion under management. Thomas F. Marsico is the founder and Chief Executive Officer of Marsico.

Salomon Brothers Asset Management Inc (SaBAM) serves as a subadviser for a portion of the assets of the Equity Portfolio and the SP Small Cap Value Portfolio. SaBAM was established in 1988 and together with affiliates in London, Tokyo and Hong Kong, provides a broad range of fixed income and equity investment services to individuals and institutional clients throughout the world. SaBAM is a wholly-owned subsidiary of Legg Mason, Inc. As of December 31, 2005, SaBAM managed over $88.57 billion in total assets. SaBAM’s principal address is 399 Park Avenue, New York, New York 10022.

T. Rowe Price Associates, Inc. (“T. Rowe Price”) 100 East Pratt Street, Baltimore, Maryland 21202, serves as a subadviser for the SP T. Rowe Price Large Cap Growth Portfolio and for approximately 25% of the assets of the Global Portfolio. As of December 31, 2005, the firm and its affiliates managed approximately $269.5 billion in assets.

William Blair & Company LLC (William Blair) serves as the subadviser for the SP William Blair International Growth Portfolio and approximately 25% of the Global Portfolio. Since the founding of the firm in 1935, William Blair has been dedicated to researching, financing and investing in high quality growth companies through four primary divisions: investment banking, sales and trading, asset management and private capital. As of December 31, 2005, William Blair managed approximately $33.6 billion in assets. The address of William Blair is 222 West Adams Street, Chicago, Illinois 60606.

Portfolio Managers

The Statement of Additional Information (SAI) provides additional information about each Portfolio Manager’s compensation, other accounts managed by each Portfolio Manager, and each Portfolio Manager’s ownership of shares of the Fund’s Portfolios.

Conservative Balanced Portfolio and Flexible Managed Portfolio

Fixed-Income Segments

Kay T. Willcox and Malcolm Dalrymple of PIM-Fixed Income manage the fixed income segments of the Portfolios.

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Kay T. Willcox, Principal, has managed the fixed income portion of the Portfolios since 1999. She is also portfolio manager for PIM-Fixed Income’s Core Fixed Income Strategy and is a mortgage portfolio manager. Formerly, Ms. Willcox managed a segment of The Prudential Insurance Company of America’s proprietary portfolio and mutual fund fixed income portfolios, and handled mortgage-backed security analysis and trading. Ms. Willcox joined Prudential Financial in 1987. She has 23 years of investment experience.

Malcolm Dalrymple, Principal, has managed the fixed income portion of the Portfolios with Ms. Willcox since 1999. He is also a portfolio manager for PIM-Fixed Income’s Structured and Short Maturity Strategies and is a corporate bond portfolio manager. He has specialized in corporate bonds since 1990. Earlier, he was a money markets portfolio manager. He joined Prudential Financial in 1979 as a securities lending trader and a bank analyst. Mr. Dalrymple has 22 years of investment experience.

Equity Segments

QMA typically follows a team approach in the management of its portfolios. Margaret Stumpp, John Moschberger, Michael Lenarcic and Stacie Mintz are the members of QMA’s portfolio management team primarily responsible for the day-to-day management of the equity portion of the Conservative Balanced Portfolio.

Margaret S. Stumpp, PhD, is the Chief Investment Officer of QMA. She is a portfolio manager for enhanced index equity portfolios for institutional investors and mutual fund clients. Maggie is extensively involved in quantitative research in asset allocation, security selection and portfolio construction for QMA. Maggie joined QMA’s predecessor in 1987. She has published articles on finance and economics in numerous publications, including, The Financial Analysts Journal, The Journal of Portfolio Management, The Journal of Investment Management and Award Papers in Public Utility Economics. Maggie earned a BA cum laude with distinction in Economics from Boston University, and holds an AM and PhD in Economics from Brown University. She has managed the Conservative Balanced Portfolio since 1998.

John W. Moschberger, CFA, is a Managing Director of QMA. John has managed both retail and institutional account portfolios benchmarked against the S&P 500, S&P 600, Russell 2000, Topix, MSCI EAFE, and MSCI Kokusai. He is also responsible for trading foreign and domestic equities and foreign exchange and derivative instruments. He joined QMA’s predecessor in 1986. John earned a BS in Finance from the University of Delaware and an MBA from Fairleigh Dickinson University. He has managed the Conservative Balanced Portfolio since 1998.

Michael A. Lenarcic, PhD, is a Managing Director of QMA. He manages single client accounts and co-manages two commingled balanced portfolios. He joined QMA’s predecessor in 1985. Previously, Mike was a vice president at Wilshire Associates, a pension consulting firm, where he was head of the Asset Allocation Division. In this capacity, he worked with plan sponsors and investment managers in the selection of appropriate investment policies. Earlier, Mike was an assistant professor at Northeastern University where he taught Finance and Economics. He earned a BA in Business Administration from Kent State University, and holds an AM and PhD in Business Economics from Harvard University. He has managed the Conservative Balanced Portfolio since 2000.

Stacie L. Mintz is a Principal of QMA. Stacie manages the overall asset allocation for several large pension plans. In addition, she manages several retail balanced portfolios and an institutional tax managed equity fund. Stacie started with the Prudential Asset Management Group in 1992 as a member of the Comptroller’s Group. She joined QMA’s predecessor in 1994 to work with the balanced management business. In 1997, she became a member of QMA’s Investment Committee. Stacie earned a BA in Economics from Rutgers University and an MBA in Finance from New York University. She has managed the Conservative Balanced Portfolio since 2006.

Margaret Stumpp, Michael Lenarcic and Stacie Mintz are primarily responsible for the day-to-day management of the equity portion of the Flexible Managed Portfolio. Their backgrounds are discussed above. Ms. Stumpp has managed the Flexible Managed Portfolio since 2000. Mr. Lenarcic and Ms. Mintz began managing the Flexible Managed Portfolio in 2006.


Steven Kellner, Robert Tipp, and David Bessey of PIM-Fixed Income are primarily responsible for the day-to-day management of the Portfolio.

Steven Kellner, CFA, is Managing Director and Head of Credit Related Strategies for PIM-Fixed Income, including U.S. Investment Grade Corporate Bonds, High Yield, Emerging Markets, and Bank Loans. He also is a senior portfolio

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manager for Investment Grade Corporate Bonds and is co-portfolio manager for Core Plus strategies. He has managed the Diversified Bond Portfolio since 1999. Previously, Mr. Kellner managed U.S. corporate bonds for Prudential Financial’s proprietary fixed income portfolios. He joined Prudential Financial in 1986 and has 20 years of investment experience.

Robert Tipp, CFA, is Managing Director and Chief Investment Strategist for PIM-Fixed Income. He has managed the Portfolio since 2003. He is also portfolio manager for Asset-Liability, TIPs, and Global Bond strategies, and is co-portfolio manager of Core Plus, U.S. Government, and Municipal Bond strategies. Previously, Mr. Tipp served as co-head of Prudential Financial’s institutional fixed income business. Before joining Prudential Financial in 1991, Mr. Tipp was a Director in the Portfolio Strategies Group at First Boston Corporation. Prior to that, he was a senior analyst at the Allstate Research & Planning Center, and managed fixed income and equity derivative strategies at Wells Fargo Investment Advisors. Mr. Tipp has 22 years of investment experience.

David Bessey is Managing Director and Head of the Emerging Markets Team. Mr. Bessey is also co-portfolio manager for all Core Plus Fixed Income strategies. He has managed the Diversified Bond Portfolio since 2004. From 1994 to 1999, Mr. Bessey was a senior portfolio manager for emerging markets portfolios and U.S. investment grade assets. Previously, he developed asset allocation strategies for insurance portfolios and managed Prudential Financial’s long-term funding book. Mr. Bessey joined Prudential Financial in 1989 and has 16 years of investment experience.

Equity Portfolio

Spiros “Sig” Segalas, Blair A. Boyer and David A. Kiefer, CFA, are the portfolio managers of the portion of the Portfolio managed by Jennison. Mr. Segalas, Mr. Boyer and Mr. Kiefer generally have final authority over all aspects of the portion of the Portfolio’s investment portfolio managed by Jennison, including but not limited to, purchases and sales of individual securities, portfolio construction, risk assessment and management of cash flows.

Spiros “Sig” Segalas was a founding member of Jennison in 1969 and is currently a Director, President and Chief Investment Officer of Jennison. He received his B.A. from Princeton University in 1955 and is a member of The New York Society of Security Analysts, Inc. He has managed the portion of the Portfolio managed by Jennison since February 2005.

Blair A. Boyer is a Managing Director of Jennison, which he joined in March 1993. In January 2003, Mr. Boyer joined the growth equity team, after co-managing international equity portfolios since joining Jennison. During his tenure as an international equity portfolio manager, he managed the Jennison International Growth Fund from its inception in March 2000. Mr. Boyer managed international equity portfolios at Arnhold & S. Bleichroeder, Inc. from 1989 to 1993. Prior to that, he was a research analyst and then a senior portfolio manager in the Verus Capital division at Bleichroeder. Mr. Boyer graduated from Bucknell University in 1983 with a B.A. in Economics. He received a M.B.A. in Finance from New York University in 1989. He has managed the portion of the Portfolio managed by Jennison since January 2005.

David A. Kiefer, CFA, is a Managing Director of Jennison, which he joined in September 2000. He was appointed Jennison’s Head of Large Cap Value Equity in January 2004, having managed diversified large capitalization portfolios since 1998 and large cap blend equity assets since 1999. He managed the Prudential Utility Fund, now known as the Jennison Utility Fund, from 1994 to June 2005. He joined Prudential’s management training program in 1986. From 1988 to 1990, Mr. Kiefer worked at Prudential Power Funding Associates, making loans to the energy industry. He then left to attend business school, rejoining Prudential in equity asset management in 1992. Mr. Kiefer earned a B.S. from Princeton University and a M.B.A. from Harvard Business School. He has managed the portion of the Portfolio managed by Jennison since August 2000.

The portfolio managers for the portion of the Portfolio managed by Jennison are supported by other Jennison portfolio managers, research analysts and investment professionals. Jennison typically follows a team approach in providing such support to the portfolio managers. The teams are generally organized along product strategies (e.g., large cap growth, large cap value) and meet regularly to review the portfolio holdings and discuss security purchase and sales activity of all accounts in the particular product strategy. Team members provide research support, make securities recommendations and support the portfolio managers in all activities. Members of the team may change from time to time.

Michael Kagan, a Managing Director of SaBAM, has been responsible for the day-to-day management of the portion of the Portfolio advised by SaBAM since February 2001. Mr. Kagan has been with SaBAM since 1994.

Kevin Caliendo, a Managing Director of SaBAM, has co-managed the portion of the Portfolio advised by SaBAM since November 2003. Mr. Caliendo has been with SaBAM since 2002. From 2001 to 2002, Mr. Caliendo was a Healthcare

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Equity Analyst and Convertible Bond Fund Portfolio Manager for SAC Capital Advisors, LLC and from 1998-2001, he was a Convertible Bond Analyst of the Healthcare sector for Wachovia Securities.

Global Portfolio

W. George Greig, is responsible for the day-to-day management of the portion of the Portfolio advised by William Blair. Mr. Greig, a principal of William Blair, has headed the firm’s international investment management team since 1996. He serves as the Portfolio Manager for the William Blair International Growth Fund as well as leading the Portfolio Team on separately managed portfolios. Before joining William Blair, he headed international equities for PNC Bank in Philadelphia from 1995 to 1996 and previously served as Investment Director with London-based Framlington Group PLC as well as managing global and emerging markets funds there. He has over twenty-five years of experience in domestic and international investment research and portfolio management. Education: B.S., Massachusetts Institute of Technology; M.B.A., Wharton School of the University of Pennsylvania.

Josef Lakonishok, Robert Vishny, Menno Vermeulen and Puneet Mansharamani are responsible for the day-to-day management of the portion of the Global Portfolio advised by LSV since December 2005. Mr. Mansharamani joined the portfolio management team in January 2006.

Josef Lakonishok has served as CEO, Partner and Portfolio Manager for LSV since its founding in 1994. He has more than 25 years of investment and research experience. In addition to his duties at LSV, Mr. Lakonishok serves as the William G. Karnes Professor of Finance at the University of Illinois at Urbana-Champaign.

Robert Vishny has served as Partner and Portfolio Manager of LSV since its founding in 1994. He has more than 18 years of investment and research experience.

Menno Vermeulen, CFA, has served as a Portfolio Manager and Senior Quantitative Analyst of LSV since 1995 and a Partner since 1998. He has mpre than 13 years of investment and research experience. Prior to joining LSV, Mr. Vermeulen served as a portfolio manager for ABP Investments.

Puneet Mansharamani, CFA, is a Partner and Portfolio Manager of LSV since January 2006. Mr. Mansharamani has previously served as a Quantitative Analyst of LSV since 2000. He has more than 7 years of investment experience. Prior to joining LSV, Mr. Mansharamani was an Analyst at Institutional Trust National City Corporation.

Thomas F. Marsico is responsible for the day-to-day management of the portion of the Global Portfolio advised by Marsico since December 2005. Mr. Marsico is the Chief Investment Officer of Marsico and has over 20 years of experience as a securities analyst and a portfolio manager.

Brian Rogers, David Giroux, and John Linehan are responsible for the day-to-day management of the portion of the Global Portfolio advised by T. Rowe Price.

Brian Rogers is the Chief Investment Officer of T. Rowe Price Group, Inc. In addition he manages major institutional equity portfolios and serves as President of the Equity Income Fund. He serves on the Board of Directors of T. Rowe Price Group and is a member of the Management Committee. His other responsibilities include serving on the Equity, Fixed Income, International, and Asset Allocation committees. Prior to joining the firm in 1982, Brian was employed by Bankers Trust Company. He earned an A.B. from Harvard College and an M.B.A. from Harvard Business School.

David Giroux is Vice President of T. Rowe Price Group, Inc. He is also a Portfolio Manager and Research Analyst in the Equity Division following automotive, electrical equipment, industrial manufacturing, and building materials/products industries. David is a Vice President and Investment Advisory Committee member of the Dividend Growth Fund, Value Fund, Capital Appreciation Fund, Capital Opportunity Fund, Growth & Income Fund, and Equity Income Fund. Prior to joining the firm in 1998, he worked as a Commercial Credit Analyst with Hillsdale National Bank. David earned a B.A. in Finance and Political Economy with honors from Hillsdale College. He also earned the Chartered Financial Analyst accreditation.

John Linehan is a Vice President of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc. He is also a Portfolio Manager in the Equity Division. John is President of the Value Fund and Chairman of the fund’s Investment Advisory Committee. He also co-manages several of the firm’s separate account portfolios as a member of the Large-Cap Strategy Team and is the Lead Portfolio Manager for the SICAV U.S. Large-Cap Value Equity Fund. In addition, John is also a Vice President and member of the Investment Advisory Committee of the Equity Income Fund, New Era Fund and Global Stock Fund. In addition, he is a Vice President of the Capital Appreciation Fund. John joined the firm in 1998 and has nine years of previous investment experience at Bankers Trust and E.T. Petroleum. He earned a B.A. from Amherst

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College and an M.B.A. from Stanford University where he was the Henry Ford II Scholar, an Arjay Miller Scholar, and the winner of the Alexander A. Robichek Award in Finance. He has also earned the Chartered Financial Analyst accreditation.


Robert Tipp and Richard Piccirillo of PIM-Fixed Income co-manage the Portfolio.

Robert Tipp, CFA, is Managing Director and Chief Investment Strategist at PIM-Fixed Income. He has managed the Portfolio since 2003. Mr. Tipp is also portfolio manager for Asset-Liability, TIPs, and Global Bond strategies, and is co-portfolio manager of Core Plus, US Government, and Municipal Bond strategies. Previously, Mr. Tipp served as co-head of Prudential Financial’s institutional fixed income business. Before joining Prudential Financial in 1991, Mr. Tipp was a Director in the Portfolio Strategies Group at First Boston Corporation. Prior to that, he was a senior analyst at the Allstate Research & Planning Center, and managed fixed income and equity derivative strategies at Wells Fargo Investment Advisors. Mr. Tipp has 22 years of investment experience.

Richard Piccirillo, Vice President and portfolio manager for PIM-Fixed Income’s US Liquidity Team, has managed the Portfolio since 2003. He has specialized in mortgage-backed securities since joining Prudential Financial in 1993. Mr. Piccirillo also specializes in structured products and is one of the lead portfolio managers for our multi-sector core fixed income accounts. Before joining Prudential Financial, Mr. Piccirillo was a fixed income analyst with Fischer Francis Trees & Watts, and an analyst at Smith Barney. He has 15 years of investment experience.


The Portfolio is managed by the High Yield Team at PIM-Fixed Income. The Team is headed by Paul Appleby and also includes portfolio managers David Bessey, Richard Burns, Stephen Haeckel, Terence Wheat, and Michael Collins.

Paul Appleby, CFA, is Managing Director and Head of PIM-Fixed Income’s High Yield Team. He oversees all portfolio management and trading activities for high yield portfolios. Previously, Mr. Appleby was Director of Credit Research and Chief Equity Strategist for Prudential Financial’s proprietary portfolios. He also was a high yield credit analyst and worked in Prudential Financial’s private placement group. Mr. Appleby joined Prudential Financial in 1987 and has 19 years of investment experience. He has managed the Portfolio since 1999.

David Bessey is Managing Director and Head of PIM-Fixed Income’s Emerging Markets Team. Mr. Bessey is also senior portfolio manager for all Core Plus Fixed Income strategies and specializes in the emerging markets sector for the High Yield Team. From 1994 to 1999, Mr. Bessey was a senior portfolio manager for emerging markets portfolios and $US investment grade assets. Previously, he developed asset allocation strategies for insurance portfolios and managed Prudential Financial’s long-term funding book. Prior to joining Prudential Financial in 1989, Mr. Bessey was a project manager on various engineering projects in the United States, Asia, and Latin America. Mr. Bessey joined Prudential Financial in 1989 and has 16 years investment experience and has 23 years of overall investment experience. He has managed the Portfolio since May 2003.

Richard Burns, CFA, is Principal and portfolio manager on PIM-Fixed Income’s High Yield Team. He is responsible for proprietary high yield portfolios and specializes in the telecommunications, energy, and cable sectors. Mr. Burns joined Prudential Financial in 1986 as a research analyst. Prior to joining Prudential Financial, Mr. Burns worked in public accounting at Peat, Marwick, and Mitchell and at Colgate Palmolive. He has managed the Portfolio since 1999 and has 23 years of overall investment experience.

Stephen Haeckel is Principal and portfolio manager on PIM-Fixed Income’s High Yield Team. Mr. Haeckel specializes in the media, industrials, homebuilders, and transportation sectors. Before joining the High Yield Team in 1999, Mr. Haeckel was credit analyst with PIM-Fixed Income. He also worked in the Corporate Finance and Financial Restructuring groups, managing Prudential Financial’s private investments. Mr. Haeckel served on the Board of Directors of three private companies in conjunction with the Financial Restructuring Group. He joined Prudential Financial in 1990. Previously, he was an Investment Officer at MONY Capital Management. Mr. Haeckel has managed the Portfolio since 1999 and has 18 years investment experience.

Terence Wheat, CFA, is Principal and portfolio manager on PIM-Fixed Income’s High Yield Team. Prior to assuming his current position in 2005, Mr. Wheat spent 12 years as a credit analyst in PIM-Fixed Income’s Credit Research Group, where he was responsible for the consumer products, gaming and leisure, retail, supermarkets, and textile/apparel industries. Mr. Wheat covered high yield bonds from 1998 to 2003, and investment grade issues from 1993 to 1998. Earlier,

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he worked for Prudential’s Financial Management Group and Individual Insurance Unit. Mr. Wheat joined Prudential Financial in 1988 and has 18 years of investment experience.

Michael J. Collins, CFA, is Principal on PIM-Fixed Income’s High Yield Team, responsible for investment strategy and risk management. Prior to his current role, Mr. Collins was Senior Investment Strategist, covering all fixed income sectors. Previously, he was a credit research analyst with Prudential. He also developed proprietary quantitative international interest rate and currency valuation models for our global bond unit. Mr. Collins began his career at Prudential Financial in 1986 as a software applications designer. He has managed the Portfolio since 2001 and has 13 years of investments experience.

Jennison Portfolio

Michael A. Del Balso, Spiros “Sig” Segalas and Kathleen A. McCarragher are the portfolio managers of the Portfolio. Mr. Del Balso generally has final authority over all aspects of the Portfolio’s investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction, risk assessment and management of cash flows.

Michael A. Del Balso joined Jennison in May 1972 and is currently a Managing Director of Jennison. He is also Jennison’s Director of Research for Growth Equity. Mr. Del Balso graduated from Yale University in 1966 and received his M.B.A. from Columbia University in 1968. He is a member of The New York Society of Security Analysts, Inc. He has managed the Portfolio since April 2000.

Spiros “Sig” Segalas was a founding member of Jennison in 1969 and is currently a Director, President and Chief Investment Officer of Jennison. He received his B.A. from Princeton University in 1955 and is a member of The New York Society of Security Analysts, Inc. He has managed the Portfolio since February 1999.

Kathleen A. McCarragher joined Jennison in May 1998 and is a Managing Director of Jennison. She is also Jennison’s Head of Growth Equity. Prior to joining Jennison, she was employed at Weiss, Peck & Greer L.L.C. for six years as a Managing Director and the Director of Large Cap Growth Equities. Ms. McCarragher graduated summa cum laude from the University of Wisconsin with a B.B.A. in 1977 and received her M.B.A. from Harvard Business School in 1982. She has managed the Portfolio since February 1999.

The portfolio managers for the Portfolio are supported by other Jennison portfolio managers, research analysts and investment professionals. Jennison typically follows a team approach in providing such support to the portfolio managers. The teams are generally organized along product strategies (e.g., large cap growth, large cap value) and meet regularly to review the portfolio holdings and discuss security purchase and sales activity of all accounts in the particular product strategy. Team members provide research support, make securities recommendations and support the portfolio managers in all activities. Members of the team may change from time to time.


Joseph M. Tully, Manolita Brasil, Robert Browne and Douglas Spratley of PIM-Fixed Income are primarily responsible for the day-to-day management of the Portfolio.

Joseph M. Tully, Managing Director, has managed the Portfolio since 1995. Prior to joining Prudential Financial in 1987, he worked for Merrill Lynch Asset Management as portfolio manager and senior bank credit analyst, and was an assistant national bank examiner for the Office of the Comptroller of the Currency. Mr. Tully has 20 years of experience managing short-term fixed income investments, and 22 years of total investment experience.

Manolita Brasil is Vice President and portfolio manager and has managed the Portfolio since 1996. In addition, Ms. Brasil coordinates credit research for commercial paper and other short-term instruments. She has been managing money market portfolios for PIM-Fixed Income since 1988. Previously, she managed the money markets support staff. Ms. Brasil joined Prudential Financial in 1979 and has 18 years of investment experience.

Robert T. Browne is Vice President and portfolio managerand has managed the Portfolio since 1998. Before assuming his current position in 1995, he spent two years analyzing and trading currency and global bonds, and handling operations, marketing, compliance and business planning functions. Mr. Browne joined Prudential Financial in 1989 and has 12 years of total investment experience.

Douglas Spratley, CFA, is a Senior Associate and portfolio manager, responsible for managing short-term portfolios and trading repurchase agreements. Prior to assuming his current position in 1998, Mr. Spratley was an investment analyst for the Prudential Capital Group. He joined Prudential in 1992 and has 10 years of investment experience.

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David A. Kiefer, CFA, and Michael A. Del Balso are the portfolio managers of the Portfolio. Mr. Kiefer generally has final authority over all aspects of the Portfolio’s investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction, risk assessment and management of cash flows.

David A. Kiefer, CFA, is a Managing Director of Jennison, which he joined in September 2000. He was appointed Jennison’s Head of Large Cap Value Equity in January 2004, having managed diversified large capitalization portfolios since 1998 and large cap blend equity assets since 1999. He managed the Prudential Utility Fund, now known as the Jennison Utility Fund, from 1994 to June 2005. He joined Prudential’s management training program in 1986. From 1988 to 1990, Mr. Kiefer worked at Prudential Power Funding Associates, making loans to the energy industry. He then left to attend business school, rejoining Prudential in equity asset management in 1992. Mr. Kiefer earned a B.S. from Princeton University and a M.B.A. from Harvard Business School. He has managed the Portfolio since April 2005.

Michael A. Del Balso joined Jennison in May 1972 and is currently a Managing Director of Jennison. He is also Jennison’s Director of Research for Growth Equity. Mr. Del Balso graduated from Yale University in 1966 and received his M.B.A. from Columbia University in 1968. He is a member of The New York Society of Security Analysts, Inc. He has managed the Portfolio since April 2004.



QMA typically follows a team approach in the management of its portfolios. Wai C. Chiang is a Managing Director of QMA and is the member of QMA’s portfolio management team primarily responsible for the day-to-day management of the Portfolio. He currently manages and trades domestic equity portfolios, including index funds, quantitative core equity funds, and futures tactical asset allocation accounts on behalf of institutional and retail clients. Wai joined Eagle Rock Asset Management, a former division of the Prudential Insurance Company of America, in 1986. Earlier in his career, Wai was a stock research analyst for Salomon Brothers and a research and development engineer for Westinghouse Electric Corporation. He has developed proprietary computer-based models and authored a number of Salomon and Westinghouse publications. Wai was also a contributing author to Indexing For Maximum Investment Results. Wai graduated summa cum laude with a BS in Engineering from Syracuse University, and earned an MBA in Finance from the Wharton School at the University of Pennsylvania. He has managed the Portfolio since its inception in 1995.


QMA typically follows a team approach in the management of its portfolios. John W. Moschberger, CFA, is a Managing Director of QMA and is the member of QMA’s portfolio management team primarily responsible for the day-to-day management of the Portfolio. John has managed both retail and institutional account portfolios benchmarked against the S&P 500, S&P 600, Russell 2000, Topix, MSCI EAFE, and MSCI Kokusai. He is also responsible for trading foreign and domestic equities and foreign exchange and derivative instruments. He joined QMA’s predecessor in 1986. John earned a BS in Finance from the University of Delaware, and an MBA from Fairleigh Dickinson University. He has managed the Portfolio since 1990.

Value Portfolio

David A. Kiefer, CFA, and Avi Z. Berg are the portfolio managers of the Portfolio. Mr. Kiefer and Mr. Berg generally have final authority over all aspects of the Portfolio’s investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction, risk assessment and management of cash flows.

David A. Kiefer, CFA, is a Managing Director of Jennison, which he joined in September 2000. He was appointed Jennison’s Head of Large Cap Value Equity in January 2004, having managed diversified large capitalization portfolios since 1998 and large cap blend equity assets since 1999. He managed the Prudential Utility Fund, now known as the

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Jennison Utility Fund, from 1994 to June 2005. He joined Prudential’s management training program in 1986. From 1988 to 1990, Mr. Kiefer worked at Prudential Power Funding Associates, making loans to the energy industry. He then left to attend business school, rejoining Prudential in equity asset management in 1992. Mr. Kiefer earned a B.S. from Princeton University and a M.B.A. from Harvard Business School. He has managed the Portfolio since January 2004.

Avi Z. Berg, is a Managing Director of Jennison, which he joined in January 2001. Prior to that, he was with Goldman Sachs Asset Management from 1997 to 2000 as an Equity Research Associate for their small and mid cap value funds. From 1995 to 1997, Mr. Berg worked in equity research at Schroder Wertheim & Co. and Fir Tree Partners. From 1991 to 1995, he was a consultant with Price Waterhouse LLP. Mr. Berg received his A.B. in Economics magna cum laude from Harvard University in 1991 and his M.B.A. in Finance and Accounting with honors and distinctions from Columbia Business School in 1997. He has managed the Portfolio since January 2004.


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 variable annuity and variable life insurance Contracts. Class II is offered only to separate accounts of non-Prudential insurance companies as investment options under certain of their Contracts. Please refer to the accompanying Contract prospectus to see which Portfolios are available through your Contract.

The way to invest in the Portfolios is through certain variable life insurance and variable annuity contracts. Together with this prospectus, you should have received a prospectus for such a Contract. 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% of the average daily net assets of Class II. Under the distribution plan adopted by the Fund for Class II shares, Class II of each Portfolio pays to Prudential Investment Management Services LLC (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 ongoing basis, over time these fees will increase the cost of your investment in Class II shares and may cost you more than paying other types of sales charges. Class II shares are also subject to 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 (NYSE) is closed (other than weekends or holidays), when trading on the NYSE is restricted, or as permitted by the SEC.

Frequent Purchases or Redemptions of Fund Shares

The Fund is part of the group of investment companies advised by PI that seeks to prevent patterns of frequent purchases and redemptions of shares by its investors (the “PI funds”). Each Asset Allocation Portfolio discussed in this prospectus, which invests primarily in one or more Underlying Portfolios, may as a result own a significant portion of the shares of one or more Underlying Portfolios. To the extent shares of the Underlying Portfolios are held by the Asset Allocation Portfolios, the Underlying Portfolios’ policies and procedures designed to discourage or prevent frequent trading by investors are enforced by the Asset Allocation Funds rather than by the Underlying Portfolios. Transactions by the Asset Allocation Portfolios may be disruptive to the management of an Underlying Portfolio. For example, in order to handle large flows of cash in and out of an Asset Allocation Portfolio, the Investment Managers may need to allocate more assets to cash or other short-term investments or redeem shares of an Underlying Portfolio. Reallocations in the Underlying

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Portfolios by an Asset Allocation Portfolio in furtherance of an Asset Allocation Portfolio’s investment objective are not considered to be frequent or short-term trading.

Frequent purchases and redemptions may adversely affect performance and the interests of long-term investors. When an investor engages in frequent or short-term trading, the PI funds may have to sell portfolio securities to have the cash necessary to pay the redemption amounts. This can happen when it is not advantageous to sell any securities, so the PI funds’ performance may be hurt. When large dollar amounts are involved, frequent trading can also make it difficult to use long-term investment strategies because the PI funds cannot predict how much cash they will have to invest. In addition, if a PI fund is forced to liquidate investments due to short-term trading activity, it may incur increased brokerage and tax costs. Similarly, the PI funds may bear increased administrative costs as a result of the asset level and investment volatility that accompanies patterns of short-term trading. Moreover, frequent or short-term trading by certain investors may cause dilution in the value of PI fund shares held by other investors. PI funds that invest in foreign securities may be particularly susceptible to frequent trading, because time zone differences among international stock markets can allow an investor engaging in short-term trading to exploit fund share prices that may be based on closing prices of foreign securities established some time before the fund calculates its own share price. PI funds that invest in certain fixed income securities, such as high-yield bonds or certain asset-backed securities, may also constitute effective vehicles for an investor’s frequent trading strategies.

The Boards of Directors of the PI funds, including the Fund, have adopted policies and procedures designed to discourage or prevent frequent trading by investors. The policies and procedures for the Fund are limited, however, because Prudential and other insurance companies maintain the individual contract owner accounts for investors in the Fund’s Portfolios. In particular, each insurance company submits to the Fund transfer agent aggregate orders combining the transactions of many investors, and therefore the Fund and its transfer agent cannot monitor investments by individual investors. The policies and procedures require the Fund to communicate in writing to each investing insurance company that the Fund expects the insurance company to impose restrictions on transfers by contract owners. In addition, the Fund receives reports on the trading restrictions imposed by Prudential and its affiliates on variable contract owners investing in the Portfolios, and the Fund monitors the aggregate cash flows received from unaffiliated insurance companies. The Fund also employs fair value pricing procedures to deter frequent trading. Finally, the Fund and its transfer agent reserve the right to reject all or a portion of a purchase order from an investing insurance company. If a purchase order is rejected, the purchase amount will be returned to the insurance company.

Investors seeking to engage in frequent trading activities may use a variety of strategies to avoid detection and, despite the efforts of the Fund and the insurance companies to prevent such trading, there is no guarantee that the Fund or the insurance companies will be able to identify these investors or curtail their trading practices. Therefore, some Fund investors may be able to engage in frequent trading, and, if they do, the other Fund investors would bear any harm caused by that frequent trading. The Fund does not have any arrangements intended to permit trading in contravention of the policies described above.

Each SP Asset Allocation Portfolio discussed in this prospectus, which invests primarily in one or more Underlying Portfolios, may, as a result, own a significant portion of the shares of one or more Underlying Portfolios. To the extent shares of the Underlying Portfolios are held by the SP Asset Allocation Portfolios, the Underlying Portfolios’ policies and procedures designed to discourage or prevent frequent trading by investors are enforced by the SP Asset Allocation Portfolios rather than by the Underlying Portfolios. Transactions by the SP Asset Allocation Portfolios may be disruptive to the management of an Underlying Portfolio. For example, in order to handle large flows of cash in and out of an SP Asset Allocation Portfolio, the Managers may need to allocate more assets to cash or other short-term investments or redeem shares of an Underlying Portfolio. Reallocations in the Underlying Portfolios by an Asset Allocation Portfolio in furtherance of an SP Asset Allocation Portfolios’ investment objective are not considered to be frequent or short-term trading.

For information about the trading limitations applicable to you, please see the prospectus for your variable contract or contact your insurance company.

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 is determined on each day the NYSE is open for trading as of the close of the

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exchange’s regular trading session (which is generally 4:00 p.m. New York time). The NYSE is closed on most national holidays and Good Friday. The Fund does not price, and shareholders will not be able to purchase or redeem, the Fund’s shares on days when the NYSE is closed but the primary markets for the Fund’s foreign securities are open, even though the value of these securities may have changed. Conversely, the Fund will ordinarily price its shares, and shareholders may purchase and redeem shares, on days that the NYSE is open but foreign securities markets are closed.

The securities held by each of the Fund’s portfolios are valued based upon market quotations or, if not readily available, at fair value as determined in good faith under procedures established by the Fund’s Board of Directors. The Fund may use fair value pricing if it determines that a market quotation is not reliable based, among other things, on market conditions that occur after the quotation is derived or after the closing of the primary market on which the security is traded, but before the time that the NAV is determined. This use of fair value pricing most commonly occurs with securities that are primarily traded outside of the U.S., because such securities present time-zone arbitrage opportunities when events or conditions affecting the prices of specific securities or the prices of securities traded in such markets generally occur after the close of the foreign markets but prior to the time that a Portfolio determines its NAV.

The Fund may also use fair value pricing with respect to U.S. traded securities if, for example, trading in a particular security is halted and does not resume before a Portfolio calculates its NAV or the exchange on which a security is traded closes early. In addition, fair value pricing is used for securities where the pricing agent or principal market maker does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Manager (or Subadviser) does not represent fair value. Different valuation methods may result in differing values for the same security. The fair value of a portfolio security that a Portfolio uses to determine its NAV may differ from the security’s published or quoted price. If a Portfolio needs to implement fair value pricing after the NAV publishing deadline but before shares of the Portfolio are processed, the NAV you receive or pay may differ from the published NAV price. For purposes of computing the Fund’s NAV, we will value the Fund’s futures contracts 15 minutes after the close of regular trading on the NYSE. Except when we fair value securities, we normally value each foreign security held by the Fund as of the close of the security’s primary market.

Fair value pricing procedures are designed to result in prices for a Portfolio’s securities and its NAV that are reasonable in light of the circumstances which make or have made market quotations unavailable or unreliable, and to reduce arbitrage opportunities available to short-term traders. There is no assurance, however, that fair value pricing will more accurately reflect the market value of a security than the market price of such security on that day or that it will prevent dilution of a Portfolio’s NAV by short-term traders.

The NAV for each of the Portfolios other than the Money Market Portfolio is determined by a simple calculation. It’s the total value of a Portfolio (assets minus liabilities) divided by the total number of shares outstanding. The NAV for the Money Market Portfolio will ordinarily remain at $10 per share. (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 for which the primary market is on an exchange (whether domestic or foreign) shall be valued at the last sale price on such exchange or market on the day of valuation or, if there was no sale on such day, at the mean between the last bid and asked prices on such day or at the last bid price on such day in the absence of an asked price. Securities included within the NASDAQ market shall be valued at the NASDAQ official closing price (NOCP) on the day of valuation, or if there was no NOCP issued, at the last sale price on such day. Securities included within the NASDAQ market for which there is no NOCP and no last sale price on the day of valuation shall be valued at the mean between the last bid and asked prices on such day or at the last bid price on such day in the absence of an asked 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 Money Market Portfolio are valued at amortized cost. Short-term debt securities with remaining maturities of 12 months or less held by the Conservative Balanced and Flexible Managed Portfolios are valued on an amortized cost basis. 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

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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 Money Market Portfolio, and except as discussed above for the Conservative Balanced and Flexible Managed Portfolios, 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 PI or a subadviser, 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 PI or a subadviser 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.

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). A subadviser will monitor the market prices of the securities underlying the OTC options with a view to determining the necessity of obtaining additional bid and ask quotations from other dealers to assess the validity of the prices received from the primary pricing dealer.

Distributor

Prudential Investment Management Services LLC (PIMS) distributes the Fund’s shares under a Distribution Agreement with the Fund. PIMS’ principal business address is Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-3777. The Fund has adopted a distribution plan under Rule 12b-1 of the Investment Company Act covering Class II shares. These 12b-1 fees do not apply to Class I.

OTHER INFORMATION

Change in Federal Income Tax Status and Related Reorganization

Each Portfolio of the Fund recently changed its federal income tax status from a regulated investment company to a partnership. In effecting that conversion, the Fund was reorganized from a Maryland corporation to a Delaware statutory trust. The conversion and the reorganization together are referred to as the “Transactions.”

The investment objectives, policies, restrictions, net asset values per share, service providers, fiscal years, and investment portfolios of the Portfolios did not change as a result of the Transactions. In addition, the Fund obtained opinions of counsel that the Transactions had no adverse federal income tax consequences for the Portfolios or Contract owners. All fees and expenses incurred in connection with the completion of the Transactions were borne by Prudential Investments LLC (the “Manager”) and its affiliates. Additionally, the Manager and its affiliates bore all transitional costs

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and will bear any ongoing incremental increases in Portfolio fees and expenses that are charged to the Fund by its service providers and that are directly attributable to the Transactions.

The Transactions were effected on or about January 1, 2006. The Transactions have not changed each Portfolio’s practice of distributing its net income and capital gains to its shareholders of record (that is, the insurance company separate accounts) as described in the “Taxation of the Fund” section of the SAI.

All references relating to the Portfolios’ status as regulated investment companies and their compliance with related requirements are hereby deleted.

The Fund has been re-named “The Prudential Series Fund.”

The Prudential Series Fund, a Delaware trust, hereby expressly adopts the registration statement of The Prudential Series Fund, Inc., a Maryland corporation.

Federal Income Taxes

Each Asset Allocation Portfolio currently intends to be treated as a partnership for federal income tax purposes. As a result, each Asset Allocation Portfolio’s income, gains, losses, deductions, and credits will be “passed through” pro rata directly to the participating insurance companies and retain the same character for federal income tax purposes. The Asset Allocation Portfolios intend to distribute substantially all their net investment income and gains. Distributions will be made to the various separate accounts of the Participating Insurance Companies in the form of additional shares (not in cash).

Holders of variable annuity contracts or variable life insurance policies should consult the prospectuses of their respective contracts or policies for information on the federal income tax consequences to such holders. In addition, variable contract owners may wish to consult with their own tax advisors as to the tax consequences of investments in the Trust, including the application of state and local taxes.

Monitoring For Possible Conflicts

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.

Disclosure of Portfolio Holdings

A description of the Fund’s policies and procedures with respect to the disclosure of each Portfolio’s portfolio securities is described in the Fund’s SAI and on the Fund’s website at www.prudential.com.

FINANCIAL HIGHLIGHTS

The financial highlights which follow will help you evaluate the financial performance of each Portfolio available under your Contract. The total return in each chart represents the rate that a shareholder earned on an investment in that share class of the Portfolio, assuming reinvestment of all dividends and other distributions. The charts do not reflect any charges under any variable contract. Because Contract Charges are not included, the actual return that you will receive will be lower than the total return in each chart. The information is for Class I shares and for Class II shares as applicable for the periods indicated.

The financial highlights for the years ended December 31, 2005 and 2004 were part of the financial statements audited by KPMG LLP, the Fund’s independent registered public accounting firm, whose reports on these financial statements were unqualified. The financial highlights for the periods presented through December 31, 2003 were part of financial statements audited by another independent registered public accounting firm whose reports on those financial statements were unqualified.

F-1

Financial Highlights


Year Ended

December 31, 2005 2004 2003 2002 2001

Per Share Operating Performance: Net Asset Value, beginning of year . . . . . . . . . . . . . . . . . . . . . . $ 15.10 $ 14.34 $ 12.43 $ 13.69 $ 14.63

Income (Loss) From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.38 0.34 0.28 0.34 0.44 Net realized and unrealized gains (losses) on investments. . . . 0.11 0.78 1.99 (1.57 ) (0.75)

Total from investment operations . . . . . . . . . . . . . . . . . . . . 0.49 1.12 2.27 (1.23 ) (0.31)

Less Distributions: Dividends from net investment income . . . . . . . . . . . . . . . . . . . (0.35) (0.28) (0.36 ) — (0.48) Distributions from net realized gains . . . . . . . . . . . . . . . . . . . . . (0.15) (0.08) — (0.03 ) (0.15)

Total distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.50) (0.36) (0.36 ) (0.03 ) (0.63) Net Asset Value, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15.09 $ 15.10 $ 14.34 $ 12.43 $ 13.69

Total Investment Return(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.43% 8.04% 18.77 % (8.98 )% (2.02)%Ratios/Supplemental Data: Net assets, end of year (in millions) . . . . . . . . . . . . . . . . . . . . . $ 2,749.8 $ 2,893.6 $ 2,895.0 $ 2,660.3 $ 3,259.7 Ratios to average net assets:

Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.58% 0.59% 0.58 % 0.58 % 0.58%Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.45% 2.27% 2.02 % 2.49 % 3.05%

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110% 153% 248 % 260 % 239%

(a) Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns for all periods shown. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Past performance is no guarantee of future results.


Year Ended

December 31, 2005 2004 2003 2002 2001

Per Share Operating Performance: Net Asset Value, beginning of year . . . . . . . . . . . . . . . . . . . . . $ 11.28 $ 11.17 $ 10.82 $ 11.36 $ 11.28

Income From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.55 0.52 0.45 0.57 0.67 Net realized and unrealized gains (losses) on investments. . . (0.20) 0.09 0.35 0.17 0.12

Total from investment operations . . . . . . . . . . . . . . . . . . . 0.35 0.61 0.80 0.74 0.79

Less Dividends and Distributions: Dividends from net investment income . . . . . . . . . . . . . . . . . . (0.59) (0.50) (0.45 ) (1.27 ) (0.71) Distributions from net realized gains . . . . . . . . . . . . . . . . . . . . (0.08) — — — — Tax return of capital distributions . . . . . . . . . . . . . . . . . . . . . . — — — (0.01 ) —

Total dividends and distributions . . . . . . . . . . . . . . . . . . . (0.67) (0.50) (0.45 ) (1.28 ) (0.71) Net Asset Value, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.96 $ 11.28 $ 11.17 $ 10.82 $ 11.36

Total Investment Return(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.28% 5.59% 7.49 % 7.07 % 6.98%Ratios/Supplemental Data: Net assets, end of year (in millions) . . . . . . . . . . . . . . . . . . . . $ 1,230.6 $ 1,283.7 $ 1,418.0 $ 1,370.3 $ 1,400.7 Ratios to average net assets:

Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45% 0.45% 0.44 % 0.44 % 0.44%Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.81% 4.57% 4.02 % 5.25 % 6.35%

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278% 382% 706 % 595 % 257%


F-2


Equity Portfolio Class I

Year Ended

December 31, 2005 2004 2003 2002 2001


Income From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.24 0.28 0.17 0.17 0.18 Net realized and unrealized gains (losses) on investments. . . 2.32 1.75 4.81 (4.75 ) (2.83)

Total from investment operations . . . . . . . . . . . . . . . . . . . 2.56 2.03 4.98 (4.58 ) (2.65)

Less Dividends and Distributions: Dividends from net investment income . . . . . . . . . . . . . . . . . . (0.23) (0.27) (0.18 ) (0.16 ) (0.18) Distributions from net realized gains . . . . . . . . . . . . . . . . . . . . — — — — (1.18)


Total Investment Return(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.47% 9.93% 31.65 % (22.34 )% (11.18)%Ratios/Supplemental Data: Net assets, end of year (in millions) . . . . . . . . . . . . . . . . . . . . $ 4,283.9 $ 4,135.7 $ 4,012.3 $ 3,273.6 $ 4,615.9 Ratios to average net assets:





Year Ended

December 31, 2005(b) 2004 2003 2002 2001

Per Share Operating Performance: Net Asset Value, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 16.58 $ 15.19 $ 12.55 $ 14.79 $ 16.53

Income (Loss) From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 .29 .22 .27 .42 Net realized and unrealized gains (losses) on investments . . . . . . . . .34 1.32 2.70 (2.10 ) (1.35)

Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . .66 1.61 2.92 (1.83 ) (.93)

Less Dividends and Distributions: Dividends from net investment income. . . . . . . . . . . . . . . . . . . . . . . (.32) (.22) (.28 ) (.41 ) (.58) Distributions from net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . — — — — (.23)

Total dividends and distributions. . . . . . . . . . . . . . . . . . . . . . . . (.32) (.22) (.28 ) (.41 ) (.81) Net Asset Value, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16.92 $ 16.58 $ 15.19 $ 12.55 $ 14.79

Total Investment Return(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.16% 10.74% 23.76 % (12.74 )% (5.68)%Ratios/Supplemental Data: Net assets, end of year (000,000) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,543.9 $ 3,883.5 $ 3,693.6 $ 3,181.0 $ 3,896.6 Ratios to average net assets:

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63% .62% .62 % .63 % .64% Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.95% 1.83% 1.55 % 1.92 % 2.61%

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126% 150% 204 % 238 % 236%


(b) Calculated based upon weighted average shares outstanding during the year.

F-3


Global Portfolio

Year Ended

December 31, 2005 2004 2003 2002 2001

Per Share Operating Performance: Net Asset Value, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16.43 $ 15.14 $ 11.35 $ 15.29 $ 23.61

Income (Loss) From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 .11 .10 .07 .09 Net realized and unrealized gains (losses) on investments . . . . . . . . . . . . . . 2.50 1.33 3.74 (3.87 ) (3.58)

Total from investment operations 2.63 1.44 3.84 (3.80 ) (3.49)

Less Dividends and Distributions: Dividends from net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.10) (.15) (.05 ) (.14 ) (.06) Distributions in excess of net investment income . . . . . . . . . . . . . . . . . . . . . — — — — — Distributions from net realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — (4.77)

Total dividends and distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.10) (.15) (.05 ) (.14 ) (4.83) Net Asset Value, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18.96 $ 16.43 $ 15.14 $ 11.35 $ 15.29

Total Investment Return(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.06% 9.59% 34.07 % (25.14 )% (17.64)%Ratios/Supplemental Data: Net assets, end of year (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 814.1 $ 691.1 $ 665.6 $ 514.9 $ 885.0 Ratios to average net assets:

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82% .84% .87 % .82 % .84% Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77% .67% .78 % .47 % .58%

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155% 128% 88 % 75 % 67%



Year Ended

December 31, 2005 2004 2003 2002 2001

Per Share Operating Performance: Net Asset Value, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.65 $ 11.92 $ 12.50 $ 12.26 $ 12.02

Income (Loss) From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 .49 .46 .38 .65 Net realized and unrealized gains (losses) on investments. . . . . . . . . . . (.20) (.13) (.15 ) 1.00 .31

Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 .36 .31 1.38 .96

Less Dividends and Distributions: Dividends from net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . (.54) (.44) (.46 ) (1.06 ) (.72) Distributions from net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (.19) (.43 ) (.08 ) —

Total dividends and distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . (.54) (.63) (.89 ) (1.14 ) (.72) Net Asset Value, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.40 $ 11.65 $ 11.92 $ 12.50 $ 12.26

Total Investment Return(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.51% 3.12% 2.46 % 12.05 % 8.06%Ratios/Supplemental Data: Net assets, end of year (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 378.2 $ 420.2 $ 461.5 $ 484.3 $ 311.0 Ratios to average net assets:

Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47% .47% .46 % .44 % .47%Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.16% 4.07% 3.76 % 4.29 % 5.53%

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507% 617% 695 % 508 % 361%


F-4



Year Ended

December 31, 2005 2004 2003 2002(a) 2001

Per Share Operating Performance: Net Asset Value, beginning of year . . . . . . . . . . . . . . . . . . . . . . $ 5.42 $ 5.29 $ 4.59 $ 5.40 $ 6.14

Income (Loss) From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 .39 .41 .29 .58 Net realized and unrealized gains (losses) on investments. . . . (.20) .13 .71 (.21 ) (.62)

Total from investment operations . . . . . . . . . . . . . . . . . . . . .18 .52 1.12 .08 (.04)

Less Distributions: Dividends from net investment income . . . . . . . . . . . . . . . . . . . (.37) (.39) (.42 ) (.89 ) (.70) Net Asset Value, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5.23 $ 5.42 $ 5.29 $ 4.59 $ 5.40

Total Investment Return(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.41% 10.30% 25.04 % 1.50 % (.44)%Ratios/Supplemental Data: Net assets, end of year (000,000) . . . . . . . . . . . . . . . . . . . . . . . $ 1,635.7 $ 1,595.7 $ 1,466.7 $ 1,128.6 $ 655.8 Ratios to average net assets:

Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58% .59% .60 % .58 % .60%Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.14% 7.42% 8.11 % 9.36 % 10.93%

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56% 65% 93 % 77 % 84%


Jennison Portfolio Class I

Year Ended

December 31, 2005(b) 2004 2003 2002 2001


Income (Loss) From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.02 0.08 0.04 0.03 0.04 Net realized and unrealized gains (losses) on investments. . . 2.62 1.52 3.83 (5.78 ) (4.22)


Less Dividends and Distributions: Dividends from net investment income . . . . . . . . . . . . . . . . . . (0.02) (0.08) (0.04 ) (0.03 ) (0.03) Distributions from net realized gains . . . . . . . . . . . . . . . . . . . . — — — — (0.19)






(b) Calculated based upon average shares during the year.

F-5



Year Ended

December 31, 2005 2004 2003 2002 2001

Per Share Operating Performance: Net Asset Value, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00

Income From Investment Operations: Net investment income and realized gains . . . . . . . . . . . . . . . . . . . . .28 .10 .08 .15 .41 Dividends and distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.28) (.10) (.08 ) (.15 ) (.41) Net Asset Value, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00

Total Investment Return(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.85% 1.01% .84 % 1.52 % 4.22%Ratios/Supplemental Data: Net assets, end of year (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . $ 851.9 $ 885.4 $ 933.7 $ 1,366.6 $ 1,501.9 Ratios to average net assets:

Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45% .45% .44 % .43 % .43%Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.86% 1.01% .84 % 1.52 % 3.86%


Natural Resources Portfolio Class I

Year Ended

December 31, 2005 2004 2003 2002 2001

Per Share Operating Performance: Net Asset Value, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31.88 $ 27.49 $ 22.35 $ 19.11 $ 23.59

Income (Loss) From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.33 0.19 0.25 0.09 0.43 Net realized and unrealized gains (losses) on

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.27 6.28 7.38 3.52 (2.89) Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . 16.60 6.47 7.63 3.61 (2.46)

Less Dividends and Distributions: Dividends from net investment income . . . . . . . . . . . . . . . . . . . . . . . —(b) (1.00) (0.98 ) (0.12 ) (0.55) Distributions from net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . (3.02) (1.08) (1.51 ) (0.25 ) (1.47)

Total dividends and distributions . . . . . . . . . . . . . . . . . . . . . . . . (3.02) (2.08) (2.49 ) (0.37 ) (2.02) Net Asset Value, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45.46 $ 31.88 $ 27.49 $ 22.35 $ 19.11

Total Investment Return(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.91% 25.17% 39.00 % 18.92 % (10.08)%Ratios/Supplemental Data: Net assets, end of year (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,016.3 $ 622.6 $ 498.7 $ 379.2 $ 336.1 Ratios to average net assets:

Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.49% 0.51% 0.51 % 0.50 % 0.52% Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.66% 0.49% 0.80 % 0.47 % 1.94%

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59% 24% 24 % 37 % 23%


(b) Amount is less than $0.01 per share.

F-6



Year Ended

December 31, 2005 2004 2003 2002 2001

Per Share Operating Performance: Net Asset Value, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21.33 $ 17.64 $ 12.91 $ 15.48 $ 17.11

Income (Loss) From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.13 0.12 0.07 0.06 0.06 Net realized and unrealized gains (losses) on investments. . . . . . . . . . . 1.30 3.75 4.82 (2.31 ) 0.67

Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.43 3.87 4.89 (2.25 ) 0.73

Less Dividends and Distributions: Dividends from net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . (0.13) (0.11) (0.07 ) (0.13 ) (0.08) Distributions from net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.25) (0.07) (0.09 ) (0.19 ) (2.28)

Total dividends and distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.38) (0.18) (0.16 ) (0.32 ) (2.36) Net Asset Value, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21.38 $ 21.33 $ 17.64 $ 12.91 $ 15.48

Total Investment Return(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.26% 22.04% 38.27 % (14.92 )% 5.53%Ratios/Supplemental Data: Net assets, end of year (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 738.3 $ 743.2 $ 619.9 $ 467.4 $ 611.1 Ratios to average net assets:

Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.46% 0.47% 0.48 % 0.46 % 0.48%Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.62% 0.62% 0.47 % 0.40 % 0.52%

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16% 18% 15 % 17 % 23%



Year Ended

December 31, 2005 2004 2003 2002 2001


Income (Loss) From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 .50 .36 .37 .36 Net realized and unrealized gains (losses) on investments. . . .88 2.50 6.14 (7.34 ) (5.05)


Less Dividends and Distributions: Dividends from net investment income . . . . . . . . . . . . . . . . . . (.47) (.49) (.37 ) (.36 ) (.35) Distributions from net realized gains . . . . . . . . . . . . . . . . . . . . (.77) (.51) (.93 ) (.22 ) (1.98)

Total dividends and distributions . . . . . . . . . . . . . . . . . . . (1.24) (1.00) (1.30 ) (.58 ) (2.33) Net Asset Value, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . $ 31.41 $ 31.29 $ 29.29 $ 24.09 $ 31.64


Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38% .38% .37 % .37 % .39%Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.52% 1.64% 1.42 % 1.25 % 1.02%



F-7


Value Portfolio Class I

Year Ended

December 31, 2005 2004 2003 2002(b) 2001


Income (Loss) From Investment Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 .28 .23 .22 .25 Net realized and unrealized gains (losses) on investments. . . 3.03 2.55 3.62 (4.15 ) (.69)

Total from Investment Operations . . . . . . . . . . . . . . . . . . 3.32 2.83 3.85 (3.93 ) (.44)

Less Dividends and Distributions: Dividends from net investment income . . . . . . . . . . . . . . . . . . (.30) (.26) (.24 ) (.23 ) (.30) Distributions from net realized gains . . . . . . . . . . . . . . . . . . . . — — — — (1.81) Tax return of capital distributions . . . . . . . . . . . . . . . . . . . . . . — — — (c) — —

Total dividends and distributions . . . . . . . . . . . . . . . . . . . (.30) (.26) (.24 ) (.23 ) (2.11) Net Asset Value, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . $ 22.95 $ 19.93 $ 17.36 $ 13.75 $ 17.91


Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43% .44% .44 % .43 % .44% Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.35% 1.48% 1.49 % 1.39 % 1.32%



(b) Calculated based upon weighted average shares outstanding during the year.

(c) Less than $0.005 per share.

Mailing Address

The Prudential Series Fund Gateway Center Three 100 Mulberry Street Newark, NJ 07102

Investment Manager

Prudential Investments LLC Gateway Center Three 100 Mulberry Street Newark, NJ 07102

Subadvisers

Jennison Associates LLC Prudential Investment Management, Inc. Quantitative Management Associates LLC LSV Asset Management Marsico Capital Management, LLC Salomon Brothers Asset Management Inc T. Rowe Price Associates, Inc. William Blair & Company LLC

Independent Registered Public Accounting Firm

KPMG LLP 345 Park Avenue New York, NY 10154

Legal Counsel

Goodwin Procter LLP 901 New York Avenue, N.W. Washington, DC 20001

Counsel to the Independent Directors

Bell, Boyd & Lloyd LLC 70 West Madison Street Chicago, IL 60602

INVESTOR INFORMATION SERVICES:

Shareholder inquiries should be made by calling (800) 778-2255 or by writing to The Prudential Series Fund at Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102.

Additional information about the Portfolios is included in a Statement of Additional Information, which is incorporated by reference into this Prospectus. Additional information about the Portfolios’ investments is available in the annual and semi-annual reports to holders of variable annuity contracts and variable life insurance policies. In the annual reports, you will find a discussion of the market conditions and investment strategies that significantly affected each Portfolio’s performance during its last fiscal year. The Statement of Additional Information and additional copies of annual and semi-annual reports are available without charge by calling the above number. The Statement of Additional Information and the annual and semi-annual reports are also available without charge on the Fund’s website at www.prudential.com.

Delivery of Prospectus and Other Documents to Households. To lower costs and eliminate duplicate documents sent to your address, the Fund, in accordance with applicable laws and regulations, may begin mailing only one copy of the Fund’s prospectus, prospectus supplements, annual and semi-annual reports, proxy statements and information statements, or any other required documents to your address even if more than one shareholder lives there. If you have previously consented to have any of these documents delivered to multiple investors at a shared address, as required by law, and you wish to revoke this consent or would otherwise prefer to continue to receive your own copy, you should call the number above, or write to the Fund at the above address. The Fund will begin sending individual copies to you within thirty days of revocation.

The information in the Fund’s filings with the Securities and Exchange Commission (including the Statement of Additional Information) is available from the Commission. Copies of this information may be obtained, upon payment of duplicating fees, by electronic request to [email protected] or by writing the Public Reference Section of the Commission, Washington, DC 20549-0102. The information can also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-202-942-8090. Finally, information about the Fund is available on the EDGAR database on the Commission’s internet site at www.sec.gov.

Investment Company File Act No. 811-03623

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

American Century Investment Services, Inc., Distributor

May 1, 2006

American Century Investmentsprospectus

VP Value Fund

Table of Contents

An Overview of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Fund Performance History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Objectives, Strategies and Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Share Price, Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Multiple Class Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

This symbol is used throughout the book to highlight definitions of key investment terms and to provide other helpful information.

American Century Investment Services, Inc., Distributor©2006 American Century Proprietary Holdings, Inc. All rights reserved.

The American Century Investments logo, American Century and American Century Investments are service marks of American Century Proprietary Holdings, Inc.

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An Overview of the Fund

What are the fund’s investment objectives?The fund seeks long-term capital growth. Income is a secondary objective.

What are the fund’s primary investment strategies and principal risks?In selecting stocks for the fund, the portfolio managers look for companies whose stock price may not reflect the company’s value. The managers attempt to purchase the stock of these undervalued companies and hold it until the price has increased to, or is higher than, a level the managers believe more accurately reflects the fair value of the company.

The fund’s principal risks include

• Value Investing - If the market does not consider the individual stocks purchased by the fund to be undervalued, the value of the fund’s shares may decline, even if stock prices generally are rising.

• Foreign Securities -The fund may invest in foreign securities, which may be riskier than investing in U.S. securities.

• Market Risk – The value of the fund’s shares will go up and down based on the perfor-mance of the companies whose securities it owns and other factors generally affecting the securities market.

• Price Volatility – The value of the fund’s shares may fluctuate significantly in the short term.

• Principal Loss – At any given time your shares may be worth more or less than the price you paid for them. In other words, it is possible to lose money by investing in the fund.

A more detailed description of the fund’s investment strategies and risks may be found under the heading Objectives, Strategies and Risks, which begins on page 6.

An investment in the fund is not a bank deposit, and it is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

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Fund Performance History

Annual Total Returns

The following bar chart shows the performance of the fund’s Class I shares for each full calendar year in the life of the class. It indicates the volatility of the fund’s historical returns from year to year. Fees associated with your variable annuity or variable life insurance contract are not reflected in the chart below. Had they been included, returns presented below would have been lower. The returns of the fund’s other classes will differ from those shown in the chart, depending on the expenses of those classes.

VP Value – Class I

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The highest and lowest quarterly returns for the periods reflected in the bar chart are:

Highest Lowest

VP Value 18.09% (2Q 1999) -16.20% (3Q 2002)

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Average Annual Total Returns

The following tables show the average annual total returns of the fund’s classes for the periods indicated. The benchmarks are unmanaged indices that have no operating costs and are included in the table for performance comparison. The S&P 500 is viewed as a broad measure of U.S. stock performance. The Lipper Multicap Value Index is an index of multicap value funds that have management styles similar to the fund’s. The Russell 3000 Value Index measures the performance of the 3,000 largest publicly traded U.S. companies with lower price-to-book ratios and lower forecasted growth values.

Class I

For the calendar year ended December 31, 2005 1 year 5 years Life of Class(1)

VP Value 5.03% 8.83% 10.61%

S&P 500 Index (reflects no deduction for fees, expenses or taxes)

4.91% 0.54% 8.64%

Lipper Multicap Value Index (reflects no deduction for taxes)

6.34% 6.25% 9.43%

Russell 3000 Value Index (reflects no deduction for fees, expenses or taxes)

6.85% 5.86% 10.75%

1 The inception date for Class I is May 1, 1996.

Class II

For the calendar year ended December 31, 2005 1 year Life of Class(1)

VP Value 4.85% 7.82%


4.91% 3.02%(2)


6.34% 6.53%(2)


6.85% 7.13%(2)

1 The inception date for Class II is August 14, 2001.

2 Since August 16, 2001, the date closest to the class’s inception date for which data is available.

Class III

For the calendar year ended December 31, 2005 1 year Life of Class(1)

VP Value 5.03% 8.98%


4.91% 5.79%(2)


6.34% 8.16%(2)


6.85% 8.55%(2)

1 The inception date for Class III is May 6, 2002.

2 Since May 2, 2002, the date closest to the class’s inception for which data is available.

Performance information is designed to help you see how fund returns can vary. Keep in mind that past performance does not predict how the fund will perform in the future.

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Fees and Expenses

Shareholder Fees (fees paid directly from your investment)Class III shares have a 1.0% redemption fee for shares that are redeemed or exchanged within 60 days of purchase. The redemption fee is charged as a percentage of the amount redeemed or exchanged. For an explanation of other fees that may be charged, see your separate account prospectus. Shares held more than 60 days are not subject to a redemption fee.

The following table describes the fees and expenses you may pay if you buy and hold shares of the fund. It only includes fees and expenses of the fund; it does not include the fees and expenses associated with your variable annuity or variable life insurance contract. Had they been included, fees and expenses presented below would have been higher.

Annual Fund Operating Expenses (expenses that are deducted from fund assets)

Management Fee(1)

Distribution and Service (12b-1) Fees(2)

OtherExpenses(3)

Total Annual Fund Operating Expenses

Class I 0.93% None 0.00% 0.93%

Class II 0.83% 0.25% 0.00% 1.08%

Class III 0.93% None 0.00% 0.93%1 The fund pays the advisor a single, unified management fee for arranging all services necessary for the fund to operate.

The fee shown is based on assets during the fund’s most recent fiscal year. The fund has a stepped fee schedule. As a result, the fund’s unified management fee rate generally decreases as strategy assets increase and increases as strategy assets decrease. For more information about the unified management fee, including an explanation of strategy assets, see The Investment Advisor under Management.

2 The 12b-1 fee is used to compensate insurance companies for distribution and other shareholder services. For more information, see Multiple Class Information and Rule 12b-1 Fees, page 14.

3 Other expenses, which include the fees and expenses of the fund’s independent directors and their legal counsel, as well as interest, were less than 0.005% for the most recent fiscal year.

ExampleThe examples in the table below are intended to help you compare the costs of investing in the fund with the costs of investing in other mutual funds. Of course, your actual costs may be higher or lower. They do not include fees and expenses associated with your vari-able annuity or variable life insurance contract. Had they been included, fees and expenses would have been higher. Assuming you . . .

• invest $10,000 in the fund

• redeem all of your shares at the end of the periods shown below

• earn a 5% return each year

• incur the same operating expenses as shown above

. . . your cost of investing in the fund would be:

1 year 3 years 5 years 10 years

Class I $95 $296 $513 $1,139

Class II $110 $342 $593 $1,311

Class III $95 $296 $513 $1,139

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Objectives, Strategies and Risks

What are the fund’s investment objectives?The fund seeks long-term capital growth. Income is a secondary objective.

How does the fund pursue its investment objectives?The portfolio managers look for stocks of companies that they believe are undervalued at the time of purchase. The managers use a value investment strategy that looks for companies that are temporarily out of favor in the market. The managers attempt to purchase the stock of these undervalued companies and hold it until it has returned to favor in the market and the price has increased to, or is higher than, a level the managers believe more accurately reflects the fair value of the company.

Companies may be undervalued due to market declines, poor economic conditions, actual or anticipated bad news regarding the issuer or its industry, or because they have been overlooked by the market. To identify these companies, the portfolio managers look for companies with earnings, cash flows and/or assets that may not be reflected accurately in the companies’ stock prices or may be outside the companies’ historical ranges. The managers also may consider whether the companies’ securities have a favorable income-paying history and whether income payments are expected to continue or increase. Since the fund invests in companies of all sizes on an ongoing basis, it may be best characterized as a multi-capitalization value fund.

The portfolio managers may sell stocks from the fund’s portfolio if they believe:

• a stock no longer meets their valuation criteria

• a stock’s risk parameters outweigh its return opportunity

• more attractive alternatives are identified

• specific events alter a stock’s prospects.

The portfolio managers do not attempt to time the market. Instead, under normal market conditions, they intend to keep at least 65% of the fund’s assets invested in U.S. equity securities at all times.

Equity securities include common stock, preferred stock and equity-equivalent securities, such as securities convertible into common stock, stock futures contracts or stock index futures contracts.

Futures contracts, a type of derivative security, can help the fund’s cash assets remain liquid while performing more like stocks. The fund has a policy governing futures contracts and similar derivative securities to help manage the risk of these types of investments. A complete description of the derivatives policy is included in the statement of additional information.

When the managers believe it is prudent, the fund may invest a portion of its assets in foreign securities, options, debt securities of companies, debt obligations of governments and their agencies and other similar securities.

In the event of exceptional market or economic conditions, the fund may, as a temporary defensive measure, invest all or a substantial portion of its assets in cash, cash equivalent securities or short-term debt securities. To the extent the fund assumes a defensive position, it will not be pursuing its objective of capital growth.

A description of the policies and procedures with respect to the disclosure of the fund’s portfolio securities is available in the statement of additional information.

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What are the principal risks of investing in the fund?If the market does not consider the individual stocks purchased by the fund to be under-valued, the value of the fund’s shares may not rise as high as other funds and may in fact decline, even if stock prices generally are increasing.

Market performance tends to be cyclical, and, in the various cycles, certain investment styles may fall in and out of favor. If the market is not favoring the fund’s style, the fund’s gains may not be as big as, or its losses may be bigger than, other equity funds using different investment styles.

Although the portfolio managers intend to invest the fund’s assets primarily in U.S. stocks, the fund may invest in securities of foreign companies. Foreign investment involves addi-tional risks, including fluctuations in currency exchange rates, less stable political and economic structures, reduced availability of public information, and lack of uniform financial reporting and regulatory practices similar to those that apply in the United States. These factors make investing in foreign securities generally riskier than investing in U.S. stocks.

The value of the fund’s shares depends on the value of the stocks and other securities it owns. The value of the individual securities the fund owns will go up and down depending on the performance of the companies that issued them, general market and economic condi-tions, and investor confidence.

At any given time your shares may be worth more or less than the price you paid for them. In other words, it is possible to lose money by investing in the fund.

The fund is offered only to insurance companies for the purpose of offering the fund as an investment option under variable annuity or variable life insurance contracts. Although the fund does not foresee any disadvantages to contract owners due to the fact that it offers its shares as an investment medium for both variable annuity and variable life products, the interests of various contract owners participating in the fund might, at some time, be in conflict due to future differences in tax treatment of variable products or other considerations. Consequently, the fund’s Board of Directors will monitor events in order to identify any mate-rial irreconcilable conflicts that may possibly arise and to determine what action, if any, should be taken in response to such conflicts. If a conflict were to occur, an insurance company sepa-rate account might be required to withdraw its investments in the fund, and the fund might be forced to sell securities at disadvantageous prices to redeem such investments.

8

Management

Who manages the fund?The Board of Directors, investment advisor and fund management team play key roles in the management of the fund.

The Board of DirectorsThe Board of Directors oversees the management of the fund and meets at least quarterly to review reports about fund operations. Although the Board of Directors does not manage the fund, it has hired an investment advisor to do so. More than three-fourths of the directors are independent of the fund’s advisor; that is, they have never been employed by and have no financial interest in the advisor or any of its affiliated companies (other than as share-holders of American Century funds).

The Investment AdvisorThe fund’s investment advisor is American Century Investment Management, Inc. (the advisor). The advisor has been managing mutual funds since 1958 and is headquartered at 4500 Main Street, Kansas City, Missouri 64111.

The advisor is responsible for managing the investment portfolios of the fund and directing the purchase and sale of its investment securities. The advisor also arranges for transfer agency, custody and all other services necessary for the fund to operate.

For the services it provides to the fund, the advisor receives a unified management fee based on a percentage of the daily net assets of each specific class of shares of the fund. The amount of the fee is calculated daily and paid monthly in arrears. Out of that fee, the advisor pays all expenses of managing and operating the fund except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordi-nary expenses. A portion of the fund’s management fee may be paid by the fund’s advisor to unaffiliated third parties who provide recordkeeping and administrative services that would otherwise be performed by an affiliate of the advisor.

For funds with a stepped fee schedule, the rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account all of the advisor’s assets under management in the fund’s investment strategy (“strategy assets”) to calculate the appropriate fee rate for the fund. The strategy assets include the fund’s assets and the assets of other clients of the advisor that are not in the American Century family of mutual funds (such as subadvised funds and separate accounts) but that have the same investment team and invest-ment strategy. The use of strategy assets, rather than fund assets, in calculating the fee rate for a particular fund could allow a fund to realize scheduled cost savings more quickly if the advisor acquires additional assets under management within a strategy in addition to the fund’s assets. However, it is possible that the strategy assets for a fund will not include assets of other client accounts. In addition, if there are such assets, they may not be sufficient to result in a lower fee rate.

Management Fees Paid by the Fund to the Advisor as a Percentage of Average Net Assets for the Fiscal Year Ended December 31, 2005 Class I Class II Class III

VP Value 0.93% 0.83% 0.93%

A discussion regarding the basis for the Board of Directors’ approval of the fund’s invest-ment advisory contract with the advisor is available in the fund’s report to shareholders dated June 30, 2005.

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The Fund Management TeamThe advisor uses teams of portfolio managers and analysts to manage funds. The teams meet regularly to review portfolio holdings and discuss purchase and sale activity. Team members buy and sell securities for a fund as they see fit, guided by the fund’s investment objective and strategy.

The portfolio managers on the investment team who are jointly and primarily responsible for the day-to-day management of the fund are identified below.

Phillip N. Davidson Mr. Davidson, Chief Investment Officer Value Equity and Senior Vice President, has been a member of the team that manages VP Value since its inception. He joined American Century in September 1993 as a portfolio manager. Prior to joining American Century, he spent 11 years at Boatmen’s Trust Company in St. Louis and served as vice president and portfolio manager responsible for institutional value equity clients. He has a bachelor’s degree in finance and an MBA from Illinois State University. He is a CFA charterholder.

Scott A. Moore Mr. Moore, Vice President and Senior Portfolio Manager, has been a member of the team that manages VP Value since October 1996. He joined American Century in August 1993 and became a portfolio manager in February 1999. He has a bachelor’s degree in finance from Southern Illinois University and an MBA in finance from the University of Missouri – Columbia. He is a CFA charterholder.

Michael LissMr. Liss, Vice President and Portfolio Manager, has been a member of the team that manages VP Value since joining American Century in June 1998. He became a senior investment analyst in August 2003 and then became a portfolio manager in February 2004. He has a bachelor’s degree in accounting and finance from Albright College and an MBA in finance from Indiana University. He is a CFA charterholder.

The statement of additional information provides additional information about the other accounts managed by the portfolio managers, if any, the structure of their compensation and their ownership of fund securities.

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Fund PerformanceVP Value has the same management team and investment policies as another fund in the American Century family of funds. The fees and expenses of the funds are expected to be similar, and they will be managed with substantially the same investment objectives and strategies. Notwithstanding these general similarities, this fund and the retail fund are separate mutual funds that will have different investment performance. Differences in cash flows into the two funds, the size of their portfolios and specific investments held by the two funds, as well as the additional expenses of the insurance product, will cause performance to differ.

Please consult the separate account prospectus for a description of the insurance product through which the fund is offered and its associated fees.

Fundamental Investment PoliciesFundamental investment policies contained in the statement of additional information and the investment objectives of the fund may not be changed without shareholder approval. The Board of Directors and/or the advisor may change any other policies and investment strategies.

Fees and ExpensesThe fees and expenses set forth herein are those of the fund only; for the fees and expenses associated with your variable annuity or variable life insurance contract, please consult your insurance product prospectus.

Because this fund is offered as an investment option under certain types of insurance contracts, the insurance company offering the fund performs recordkeeping and administrative services for fund shareholders that would otherwise be performed by American Century’s transfer agent. In some circumstances, the advisor will pay the insurance company a fee for performing those services. Also, the advisor or the fund’s distributor may make payments for various additional services or other expenses out of their past profits or other available sources. Such payments may be made for one or more of the following: (1) distribution services, which include expenses incurred by intermediaries for their sales activities with respect to the fund, such as preparing, printing and distributing sales literature and advertising materials and compensating registered representatives or other employees of such intermediary for their sales activities; (2) shareholder services, such as providing individual and custom investment advisory services to clients of the intermediary; and (3) marketing and promotional services, including business planning assistance, educating personnel about the fund, and sponsorship of sales meetings, which may include covering costs of providing speakers, meals and other entertainment. The distributor may sponsor seminars and conferences designed to educate intermediaries about the fund and may cover the expenses associated with attendance at such meetings, including travel costs. These payments and activities are intended to provide an incentive to intermediaries to sell the fund by ensuring that they are educated about the fund, and to help such intermediaries defray costs associated with offering the fund. The amount of any payments described by this paragraph is determined by the advisor or the distributor, and all such amounts are paid out of the available assets of the advisor and distributor, and not by you or the fund. As a result, the total expense ratio of the fund will not be affected by any such payments.

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Share Price, Distributions and Taxes

Purchase and Redemption of SharesFor instructions on how to purchase and redeem shares, read the prospectus of your insur-ance company separate account. Your order will be priced at the net asset value next deter-mined after your request is received in the form required by the insurance company separate account. There are no sales commissions or redemption charges unless your shares are redeemed or exchanged within 60 days after your purchase, as described below. In addition, certain sales or deferred sales charges and other charges may apply to the variable annuity or life insurance contracts. Those charges are disclosed in the separate account prospectus.

If you redeem or exchange your Class III shares of the fund within 60 days of their purchase, you will pay a redemption fee of 1.0% of the value of the shares redeemed or exchanged. The redemption fee does not apply to shares purchased through reinvested distributions (dividends and capital gains). The redemption fee is retained by the fund and helps cover transaction fees and other costs that long-term investors may bear due to short-term trading.

We reserve the right to pay part or all of the proceeds for certain large redemptions in readily marketable securities instead of cash. A description of the requirements for large redemptions is included in the statement of additional information.

Abusive Trading PracticesShort-term trading and other so-called market timing practices are not defined or explic-itly prohibited by any federal or state law. However, short-term trading and other abusive trading practices may disrupt portfolio management strategies and harm fund performance. If the cumulative amount of short-term trading activity is significant relative to a fund’s net assets, the fund may incur trading costs that are higher than necessary as securities are first purchased then quickly sold to meet the redemption request. In such case, the fund’s perfor-mance could be negatively impacted by the increased trading costs created by short-term trading if the additional trading costs are significant.

Because of the potentially harmful effects of abusive trading practices, the fund’s Board of Directors has approved American Century’s abusive trading policies and procedures, which are designed to reduce the frequency and effect of these activities in our funds. These policies and procedures include monitoring trading activity, imposing redemption fees on certain funds, and using fair value pricing when current market prices are not readily avail-able. Although these efforts are designed to discourage abusive trading practices, they cannot eliminate the possibility that such activity will occur. American Century seeks to exercise its judgment in implementing these tools to the best of its ability in a manner that it believes is consistent with shareholder interests.

American Century’s policies do not permit us to enter into arrangements with fund share-holders that permit such shareholders to engage in frequent purchases and redemptions of fund shares. However, American Century cannot identify individual investors who are engaging in abusive trading practices because the insurance company offering the fund has the exclusive relationship with, and maintains the account records of, the individual inves-tors in the fund. Therefore, American Century monitors aggregate trades placed in these insurance company separate accounts, and seeks to work with each insurance company to discourage investors from engaging in abusive trading practices and to impose restrictions on the frequency of round-trip trades. As a heightened measure for the fund, the board has approved the imposition of a redemption fee for redemption of shares within a specified number of days of purchase for Class III shares. See Shareholder Fees, page 5, for a complete description of the redemption fee applicable to the fund. There may be limitations on the ability of insurance companies to impose restrictions on the trading practices of their clients. As a result, American Century’s ability to monitor and discourage abusive trading practices in this fund may be limited.

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Modifying or Canceling an InvestmentInvestment instructions are irrevocable. That means that once you have mailed or otherwise transmitted your investment instruction, you may not modify or cancel it. The fund reserves the right to suspend the offering of shares for a period of time, and to reject any specific investment (including a purchase by exchange). Additionally, we may refuse a purchase if, in our judgment, it is of a size that would disrupt the management of the fund.

Right to Change PoliciesWe reserve the right to change any stated investment requirement, including those that relate to purchases, exchanges and redemptions. We also may alter, add or discontinue any service or privilege. Changes may affect all investors or only those in certain classes or groups. In addition, from time to time we may waive a policy on a case-by-case basis, as the advisor deems appropriate.

Share PriceAmerican Century will price the fund shares you purchase, exchange or redeem at the net asset value (NAV) next determined after your order is received and accepted by the fund’s transfer agent, or other financial intermediary with the authority to accept orders on the fund’s behalf. We determine the NAV of each fund as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. On days when the NYSE is closed (including certain U.S. national holidays), we do not calcu-late the NAV. A fund’s NAV is the current value of the fund’s assets, minus any liabilities, divided by the number of shares outstanding.

The fund values portfolio securities for which market quotations are readily available at their market price. As a general rule, equity securities listed on a U.S. exchange are valued at the last current reported sale price as of the time of valuation. Securities listed on the NASDAQ National Market System (Nasdaq) are valued at the Nasdaq Official Closing Price (NOCP), as determined by Nasdaq, or lacking an NOCP, at the last current reported sale price as of the time of valuation. The fund may use pricing services to assist in the determination of market value. Unlisted securities for which market quotations are readily available are valued at the last quoted sale price or the last quoted ask price, as applicable, except that debt obligations with 60 days or less remaining until maturity may be valued at amortized cost. Exchange-traded options, futures and options on futures are valued at the settlement price as deter-mined by the appropriate clearing corporation.

If the fund determines that the market price for a portfolio security is not readily avail-able or that the valuation methods mentioned above do not reflect the security’s fair value, such security is valued at its fair value as determined in good faith by, or in accordance with procedures adopted by, the fund’s board or its designee (a process referred to as “fair valuing” the security). Circumstances that may cause the fund to fair value a security include, but are not limited to:

• for funds investing in foreign securities, if, after the close of the foreign exchange on which a portfolio security is principally traded, but before the close of the NYSE, an event occurs that may materially affect the value of the security;

• for funds that invest in debt securities, a debt security has been declared in default; or

• trading in a security has been halted during the trading day.

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If such circumstances occur, the fund will fair value the security if the fair valuation would materially impact the fund’s NAV. While fair value determinations involve judgments that are inherently subjective, these determinations are made in good faith in accordance with proce-dures adopted by the fund’s board.

The effect of using fair value determinations is that the fund’s NAV will be based, to some degree, on security valuations that the board or its designee believes are fair rather than being solely determined by the market.

With respect to any portion of the fund’s assets that are invested in one or more open-end management investment companies that are registered with the SEC (known as registered investment companies, or RICs), the fund’s NAV will be calculated based upon the NAVs of such RICs. These RICs are required by law to explain the circumstances under which they will use fair value pricing and the effects of using fair value pricing in their prospectuses.

Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.

Trading of securities in foreign markets may not take place every day the NYSE is open. Also, trading in some foreign markets and on some electronic trading networks may take place on weekends or holidays when the fund’s NAV is not calculated. So, the value of the fund’s port-folio may be affected on days when you will not be able to purchase, exchange or redeem fund shares.

DistributionsFederal tax laws require the fund to make distributions to its shareholders in order to qualify as a regulated investment company. Qualification as a regulated investment company means the fund should not be subject to state or federal income tax on amounts distributed. The distribu-tions generally consist of dividends and interest received by the fund, as well as capital gains realized by the fund on the sale of its investment securities. The fund generally pays distribu-tions from net income and capital gains, if any, once a year in March. The fund may make more frequent distributions, if necessary, to comply with Internal Revenue Code provisions.

Capital gains are increases in the values of capital assets, such as stock, from the time the assets are purchased.

You will participate in fund distributions, when they are declared, starting on the next busi-ness day after your purchase is effective. For example, if you purchase shares on a day that a distribution is declared, you will not receive that distribution. If you redeem shares, you will receive any distribution declared on the day you redeem. If you redeem all shares, we will include any distributions received with your redemption proceeds. All distributions from the fund will be invested in additional shares.

Provided that all shareholders agree, the fund may utilize the consent dividend provision of Internal Revenue Code Section 565 which treats the income earned by the fund as distrib-uted to the shareholders as of the end of the taxable year.

TaxesConsult the prospectus of your insurance company separate account for a discussion of the tax status of your variable contract.

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Multiple Class Information

American Century offers three classes of the fund: Class I (the original class), Class II and Class III. All classes are offered exclusively to insurance companies to fund their obligations under the variable annuity and variable life contracts purchased by their clients.

Class I and Class III have the same fees and expenses, with one exception. Class III shares have a 1.0% redemption fee for shares that are redeemed or exchanged within 60 days of purchase. Class II shares have different fees and expenses. The difference in the fee structures between the classes is the result of their separate arrangements for distribution services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. Different fees and expenses will affect performance.

Except as described below, all classes of shares of the fund have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences between the classes are (a) each class may be subject to different expenses specific to that class; (b) each class has a different identifying designation or name; (c) each class has exclusive voting rights with respect to matters solely affecting that class; and (d) each class may have different exchange privileges.

Rule 12b-1 FeesInvestment Company Act Rule 12b-1 permits mutual funds that adopt a written plan to pay certain expenses associated with the distribution of their shares out of fund assets. The fund’s Class II shares have a 12b-1 plan. Under the plan, the fund’s Class II pays the distributor an annual fee of 0.25% of Class II average net assets for distribution services, including past distribution services. The distributor pays all or a portion of such fees to the insurance companies that make Class II shares available. Because these fees are used to pay for services that are not related to prospective sales of the fund, the class will continue to make payments under its plan even if it is closed to new investors. Because these fees are paid out of the fund’s assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. For additional information about the plan and its terms, see Multiple Class Structure – Master Distribution Plan in the statement of additional information.

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Understanding the Financial HighlightsThe tables on the next few pages itemize what contributed to the changes in share price during the most recently ended fiscal year. They also show the changes in share price for this period in comparison to changes over the last five fiscal years (or a shorter period if the share class is not five years old).

On a per-share basis, each table includes as appropriate

• share price at the beginning of the period

• investment income and capital gains or losses

• distributions of income and capital gains paid to investors

• share price at the end of the period

Each table also includes some key statistics for the period as appropriate

• Total Return – the overall percentage of return of the fund, assuming the reinvestment of all distributions

• Expense Ratio – the operating expenses of the fund as a percentage of average net assets

• Net Income Ratio – the net investment income of the fund as a percentage of average net assets

• Portfolio Turnover – the percentage of the fund’s investment portfolio that is replaced during the period

The Financial Highlights have been audited by Deloitte & Touche LLP. The fund’s Report of Independent Registered Public Accounting Firm and the financial statements are included in the fund’s annual report, which is available upon request.

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VP Value FundClass I

For a Share Outstanding Throughout the Years Ended December 31

2005 2004 2003 2002 2001

Per-Share Data

Net Asset Value, Beginning of Period $8.75 $7.79 $6.12 $7.44 $6.67

Income From Investment Operations

Net Investment Income (Loss)(1) 0.13 0.09 0.09 0.08 0.08

Net Realized and Unrealized Gain (Loss) 0.28 1.01 1.65 (0.95) 0.77

Total From Investment Operations 0.41 1.10 1.74 (0.87) 0.85

Distributions

From Net Investment Income (0.08) (0.08) (0.07) (0.06) (0.08)

From Net Realized Gains (0.88) (0.06) .— (0.39) .—

Total Distributions (0.96) (0.14) (0.07) (0.45) (0.08)

Net Asset Value, End of Period $8.20 $8.75 $7.79 $6.12 $7.44

Total Return(2) 5.03% 14.33% 28.96% (12.62)% 12.82%

Ratios/Supplemental Data

Ratio of Operating Expenses to Average Net Assets 0.93% 0.93% 0.95% 0.95% 0.97%

Ratio of Net Investment Income (Loss) to Average Net Assets 1.66% 1.16% 1.37% 1.17% 1.28%

Portfolio Turnover Rate 133% 139% 109% 106% 174%

Net Assets, End of Period (in thousands) $2,297,418 $2,248,902 $1,919,580 $1,465,287 $1,424,235

1 Computed using average shares outstanding throughout the period.

2 Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accor-dance with SEC guidelines and does not result in any gain or loss of value between one class and another.

17

VP Value FundClass II

For a Share Outstanding Throughout the Years Ended December 31 (except as noted)

2005 2004 2003 2002 2001(1)

Per-Share Data

Net Asset Value, Beginning of Period $8.74 $7.78 $6.11 $7.44 $7.19


Net Investment Income (Loss)(2) 0.12 0.08 0.08 0.07 0.02

Net Realized and Unrealized Gain (Loss) 0.27 1.01 1.65 (0.95) 0.23

Total From Investment Operations 0.39 1.09 1.73 (0.88) 0.25

Distributions

From Net Investment Income (0.06) (0.07) (0.06) (0.06) .—

From Net Realized Gains (0.88) (0.06) .— (0.39) .—

Total Distributions (0.94) (0.13) (0.06) (0.45) .—

Net Asset Value, End of Period $8.19 $8.74 $7.78 $6.11 $7.44

Total Return(3) 4.85% 14.17% 28.81% (12.81)% 3.48%


Ratio of Operating Expenses to Average Net Assets 1.08% 1.08% 1.10% 1.10% 1.11%(4)

Ratio of Net Investment Income (Loss) to Average Net Assets 1.51% 1.01% 1.22% 1.02% 0.81%(4)

Portfolio Turnover Rate 133% 139% 109% 106% 174%(5)

Net Assets, End of Period (in thousands) $648,071 $433,465 $218,141 $82,976 $17,145

1 August 14, 2001 (commencement of sale) through December 31, 2001.


3 Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differ-ences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calcula-tion of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another.

4 Annualized.

5 Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended December 31, 2001.

18

VP Value FundClass III

For a Share Outstanding Throughout the Years Ended December 31 (except as noted)

2005 2004 2003 2002(1)

Per-Share Data

Net Asset Value, Beginning of Period $8.75 $7.79 $6.12 $6.92


Net Investment Income (Loss)(2) 0.13 0.09 0.09 0.06

Net Realized and Unrealized Gain (Loss) 0.28 1.01 1.65 (0.86)

Total From Investment Operations 0.41 1.10 1.74 (0.80)

Distributions

From Net Investment Income (0.08) (0.08) (0.07) .—

From Net Realized Gains (0.88) (0.06) .— .—

Total Distributions (0.96) (0.14) (0.07) .—

Net Asset Value, End of Period $8.20 $8.75 $7.79 $6.12

Total Return(3) 5.03% 14.33% 28.96% (11.56)%


Ratio of Operating Expenses to Average Net Assets 0.93% 0.93% 0.95% 0.95%(4)

Ratio of Net Investment Income (Loss) to Average Net Assets 1.66% 1.16% 1.37% 1.50%(4)

Portfolio Turnover Rate 133% 139% 109% 106%(5)

Net Assets, End of Period (in thousands) $8,750 $6,387 $1,819 $356

1 May 6, 2002 (commencement of sale) through December 31, 2002.


3 Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differ-ences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calcula-tion of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another.

4 Annualized.

5 Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended December 31, 2002.

19

Notes

20

Notes

21

Notes

More information about the fund is contained in these documents.

Annual and Semiannual Reports

Annual and semiannual reports contain more information about the fund’s investments and the market conditions and investment strategies that significantly affected the fund’s perfor-mance during the most recent fiscal period.

Statement of Additional Information (SAI)

The SAI contains a more detailed, legal description of the fund’s operations, investment restrictions, policies and practices. The SAI is incorporated by reference into this prospectus. This means that it is legally part of this prospectus, even if you don’t request a copy.

You may obtain a free copy of the SAI or annual and semiannual reports, and ask questions about the fund or your accounts, by contacting the insurance company from which you purchased the fund or American Century at the address or telephone numbers listed below, or online at American Century’s Investment Professionals Web site at ipro.americancentury.com.

You also can get information about the fund (including the SAI) from the Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to provide copies of this information.

In person SEC Public Reference Room Washington, D.C. Call 202-942-8090 for location and hours.

On the Internet • EDGAR database at www.sec.gov • By email request at [email protected]

By mail SEC Public Reference Section Washington, D.C. 20549-0102

This prospectus shall not constitute an offer to sell securities of the fund in any state, terri-tory, or other jurisdiction where the fund’s shares have not been registered or qualified for sale, unless such registration or qualification is not required, or under any circumstances in which such offer or solicitation would be unlawful.

Investment Company Act File No. 811-5188

American Century Investments P.O. Box 419786 Kansas City, Missouri 64141-6786 1-800-378-9878 or 816-531-5575

0605SH-PRS-48105

Janus Aspen Series Institutional Shares Service II Shares

Supplement dated March 23, 2007 to Currently Effective Prospectuses

The following information replaces in its entirety the fifth bullet point under Other Types of Investments in the ‘‘General Portfolio Policies’’ section of the Prospectuses:

• short sales ‘‘against the box’’ and ‘‘naked’’ (uncovered) short sales (no more than 10% of a Portfolio’s assets may be invested in naked short sales)

JANUSSUP106 Ed. 3/2007

▼ May 1, 2006

Janus Aspen SeriesLarge Cap Growth Portfolio

Institutional Shares

Prospectus

The Securities and Exchange Commission has not approved or disapproved of these securities or passed on the accuracy oradequacy of this Prospectus. Any representation to the contrary is a criminal offense.

This Prospectus describes Large Cap Growth Portfolio, a series of Janus Aspen Series (the ‘‘Trust’’). JanusCapital Management LLC (‘‘Janus Capital’’) serves as investment adviser to the Portfolio. The Portfoliocurrently offers two classes of shares. The Institutional Shares (the ‘‘Shares’’) are sold under the name of‘‘Janus Aspen Series’’ and are offered by this Prospectus in connection with investment in and payments undervariable annuity contracts and variable life insurance contracts (collectively, ‘‘variable insurance contracts’’), aswell as certain qualified retirement plans.

Janus Aspen Series – Institutional Shares sells and redeems its Shares at net asset value without sales charges,commissions, or redemption fees. Each variable insurance contract involves fees and expenses that are notdescribed in this Prospectus. See the accompanying contract prospectus for information regarding contractfees and expenses and any restrictions on purchases or allocations.

This Prospectus contains information that a prospective purchaser of a variable insurance contract or planparticipant should consider in conjunction with the accompanying separate account prospectus of the specificinsurance company product before allocating purchase payments or premiums to the Portfolio.

TABLE OF CONTENTS

RISK/RETURN SUMMARYLarge Cap Growth Portfolio ***************************************************************** 2

FEES AND EXPENSES ************************************************************************ 4

PRINCIPAL INVESTMENT STRATEGIES AND RISKSFrequently asked questions about principal investment strategies *********************************** 5Risks ************************************************************************************ 6Frequently asked questions about certain risks ************************************************** 6General portfolio policies ******************************************************************* 7

MANAGEMENT OF THE PORTFOLIOInvestment adviser ************************************************************************* 10Management expenses ********************************************************************** 11Investment personnel ********************************************************************** 11

OTHER INFORMATION *********************************************************************** 12

DISTRIBUTIONS AND TAXES ****************************************************************** 15

SHAREHOLDER’S GUIDEPricing of portfolio shares ******************************************************************* 16Purchases ******************************************************************************** 17Redemptions ***************************************************************************** 17Excessive trading ************************************************************************** 17Shareholder communications **************************************************************** 20

FINANCIAL HIGHLIGHTS ********************************************************************* 21

GLOSSARY OF INVESTMENT TERMS *********************************************************** 22

Table of contents 1

RISK/RETURN SUMMARY

LARGE CAP GROWTH PORTFOLIO

Large Cap Growth Portfolio (the ‘‘Portfolio’’) is designed for long-term investors who primarily seek growth of capitaland who can tolerate the greater risks associated with common stock investments.

Investment Objective

Large Cap Growth Portfolio seeks long-term growth of capital in a manner consistent with the preservation ofcapital.

The Portfolio’s Trustees may change this objective or the Portfolio’s principal investment strategies without ashareholder vote. The Portfolio has a policy of investing at least 80% of its net assets in the type of securitiessuggested by its name, as described below. The Portfolio will notify you in writing at least 60 days before making anychanges to this policy. If there is a material change to the Portfolio’s objective or principal investment strategies, youshould consider whether the Portfolio remains an appropriate investment for you. There is no guarantee that thePortfolio will meet its objective.

Principal Investment Strategies

The Portfolio pursues its objective by investing, under normal circumstances, at least 80% of its net assets plus theamount of any borrowings for investment purposes, in common stocks of large-sized companies. Large-sizedcompanies are those whose market capitalization falls within the range of companies in the Russell 1000˛ Index at thetime of purchase. The market capitalizations within the index will vary, but as of March 31, 2006, they ranged fromapproximately $688 million to $387 billion.

For the Portfolio’s 80% investment policy, assets are measured at the time of purchase.

The portfolio manager applies a ‘‘bottom up’’ approach in choosing investments. In other words, the portfolio managerlooks at companies one at a time to determine if a company is an attractive investment opportunity and if it isconsistent with the Portfolio’s investment policies. If the portfolio manager is unable to find such investments, thePortfolio’s uninvested assets may be held in cash or similar investments, subject to the Portfolio’s specific investmentpolicies.

Within the parameters of its specific investment policies, the Portfolio may invest without limit in foreign equity anddebt securities, which may include investments in emerging markets. The Portfolio will limit its investment in high-yield/high-risk bonds (also called ‘‘junk’’ bonds) to 20% or less of its net assets.

Main Investment Risks

The biggest risk is that the Portfolio’s returns may vary, and you could lose money. The Portfolio is designed for long-term investors interested in an equity portfolio, including common stocks. Common stocks tend to be more volatilethan many other investment choices.

The value of the Portfolio’s holdings may decrease if the value of an individual company or multiple companies in thePortfolio decreases. The value of the Portfolio’s holdings could also decrease if the stock market goes down regardlessof how well the individual companies perform. If the value of the Portfolio’s holdings decreases, the Portfolio’s netasset value (‘‘NAV’’) will also decrease, which means if you sell your shares in the Portfolio you may lose money.

To the extent the Portfolio invests in foreign securities, returns and NAV may be affected to a large degree byfluctuations in currency exchange rates or political or economic changes in a particular country. To the extent thePortfolio invests in high-yield/high-risk bonds, returns and NAV may be affected by factors such as economic changes,political changes, or developments specific to the company that issued the bond.

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

2 Janus Aspen Series

Performance Information

The following information provides some indication of the risks of investing in the Portfolio by showing how thePortfolio’s performance has varied over time. The bar chart depicts the change in performance from year to yearduring the periods indicated, but does not include charges or expenses attributable to any insurance product, whichwould lower the performance illustrated. The Portfolio does not impose any sales or other charges that would affecttotal return computations. Total return figures include the effect of the Portfolio’s expenses. The table compares theaverage annual returns for the Institutional Shares of the Portfolio for the periods indicated to broad-based securitiesmarket indices. The indices are not available for direct investment.

Large Cap Growth Portfolio – Institutional Shares

Annual returns for periods ended 12/31 – 60%

– 45%

– 30%

– 15%(14.55)% (24.73)% (26.51)%

18.45% 22.75%

35.66%43.98%

31.73%

4.57% 4.23%0%

– (15)%

– (30)%1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Best Quarter: 4th-1998 27.71% Worst Quarter: 3rd-2001 (24.79)%

Average annual total return for periods ended 12/31/05

Since Inception1 year 5 years 10 years (9/13/93)

Large Cap Growth Portfolio – Institutional Shares 4.23% (4.50)% 6.78% 8.31%Russell 1000˛ Growth Index(1) 5.26% (3.58)% 6.73% 8.78%

(reflects no deduction for fees or expenses)S&P 500˛ Index(2) 4.91% 0.54% 9.07% 10.41%

(reflects no deduction for fees or expenses)

(1) The Russell 1000˛ Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higherforecasted growth values.

(2) The S&P 500˛ Index is the Standard & Poor’s Composite Index of 500 stocks, a widely recognized, unmanaged index of common stock prices.

The Portfolio’s past performance does not necessarily indicate how it will perform in the future.

Risk/return summary 3

FEES AND EXPENSES

The following table describes the shareholder fees and annual fund operating expenses that you may pay if you buyand hold Shares of the Portfolio. All of the fees and expenses shown were determined based on net assets as of thefiscal year ended December 31, 2005. All expenses are shown without the effect of expense offset arrangements.

Shareholder fees are those paid directly from your investment and may include sales loads, redemption fees, orexchange fees. The Portfolio is a no-load investment, so you will generally not pay any shareholder fees when you buyor sell Shares of the Portfolio. However, each variable insurance contract involves fees and expenses not described inthis Prospectus. See the accompanying contract prospectus for information regarding contract fees and expenses andany restrictions on purchases or allocations.

Annual fund operating expenses are paid out of the Portfolio’s assets and include fees for portfolio management,maintenance of shareholder accounts, shareholder servicing, accounting, and other services. You do not pay these feesdirectly but, as the example shows, these costs are borne indirectly by all shareholders.

This table and the example are designed to assist participants in qualified plans that invest in the Shares of thePortfolio in understanding the fees and expenses that you may pay as an investor in the Shares. Owners of variableinsurance contracts that invest in the Shares should refer to the variable insurance contract prospectus for adescription of fees and expenses, as the table and example do not reflect deductions at the separate accountlevel or contract level for any charges that may be incurred under a contract. Inclusion of these charges wouldincrease the fees and expenses described below.

Annual Fund Operating Expenses (deducted from Portfolio assets)Management Other Total Annual Fund

Fee(1) Expenses Operating ExpensesLarge Cap Growth Portfolio 0.64% 0.02% 0.66%

(1) The ‘‘Management Fee’’ is the investment advisory fee paid by the Portfolio to Janus Capital.

EXAMPLE:This example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds. Theexample assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of eachperiod. The example also assumes that your investment has a 5% return each year, and that the Portfolio’s operating expenses remain the same.Since no sales load applies, the results apply whether or not you redeem your investment at the end of each period. Although your actual costsmay be higher or lower, based upon these assumptions your costs would be as follows:

1 Year 3 Years 5 Years 10 Years

Large Cap Growth Portfolio $ 67 $ 211 $ 368 $ 822


PRINCIPAL INVESTMENT STRATEGIES AND RISKS

The Portfolio has a similar investment objective and similar principal investment strategies to Janus Fund. Although itis anticipated that the Portfolio and its corresponding retail fund will hold similar securities, differences in asset size,cash flow needs, and other factors may result in differences in investment performance. The expenses of the Portfolioand its corresponding retail fund are expected to differ. The variable contract owner will also bear various insurancerelated costs at the insurance company level. You should review the accompanying separate account prospectus for asummary of fees and expenses. The Portfolio invests, under normal circumstances, at least 80% of its net assets incommon stocks of large-sized companies. Janus Fund can invest in companies of any size, although it generally investsin larger, more established companies.

This section takes a closer look at the Portfolio’s principal investment strategies and certain risks of investing in thePortfolio. Strategies and policies that are noted as ‘‘fundamental’’ cannot be changed without a shareholder vote. Other,nonfundamental strategies and policies can be changed by the Trustees without prior notice to shareholders.

Please carefully review the ‘‘Risks’’ section of this Prospectus for a discussion of risks associated with certain investmenttechniques. We have also included a ‘‘Glossary of Investment Terms’’ with descriptions of investment terms usedthroughout this Prospectus.

FREQUENTLY ASKED QUESTIONS ABOUT PRINCIPAL INVESTMENT STRATEGIES

The following questions and answers are designed to help you better understand the Portfolio’s principal investmentstrategies.

1. How are common stocks selected for the Portfolio?

Unless its investment objective or policies prescribe otherwise, the Portfolio may invest substantially all of its assets incommon stocks if the investment personnel believe that common stocks will appreciate in value. The investmentpersonnel generally take a ‘‘bottom up’’ approach to selecting companies. This means that they seek to identifyindividual companies with earnings growth potential that may not be recognized by the market at large. Theinvestment personnel make this assessment by looking at companies one at a time, regardless of size, country oforganization, place of principal business activity, or other similar selection criteria. The Portfolio may sell a holding if,among other things, the security reaches the investment personnel’s price target, if the company has a deterioration offundamentals such as failing to meet key operating benchmarks, or if the investment personnel find a betterinvestment opportunity. The Portfolio may also sell a holding to meet redemptions.

Realization of income is not a significant consideration when choosing investments for the Portfolio. Income realizedon the Portfolio’s investments may be incidental to its objective.

2. Are the same criteria used to select foreign securities?

Generally, yes. The investment personnel seek companies that meet their selection criteria, regardless of where acompany is located. Foreign securities are generally selected on a stock-by-stock basis without regard to any definedallocation among countries or geographic regions. However, certain factors such as expected levels of inflation,government policies influencing business conditions, the outlook for currency relationships, and prospects foreconomic growth among countries, regions, or geographic areas may warrant greater consideration in selecting foreignsecurities. There are no limitations on the countries in which the Portfolio may invest and the Portfolio may at timeshave significant foreign exposure.

3. What does ‘‘market capitalization’’ mean?

Market capitalization is the most commonly used measure of the size and value of a company. It is computed bymultiplying the current market price of a share of the company’s stock by the total number of its shares outstanding.As noted previously, market capitalization is an important investment criterion for the Portfolio.

Principal investment strategies and risks 5

RISKS

Because the Portfolio may invest substantially all of its assets in common stocks, the main risk is the risk that thevalue of the stocks it holds might decrease in response to the activities of an individual company or in response togeneral market and/or economic conditions. If this occurs, the Portfolio’s share price may also decrease. The Portfolio’sperformance may also be significantly affected, positively or negatively, by certain types of investments, such as foreignsecurities, derivative investments, non-investment grade bonds, initial public offerings (‘‘IPOs’’), or companies withrelatively small market capitalizations. IPOs and other types of investments may have a magnified performance impacton a portfolio with a small asset base. A portfolio may not experience similar performance as its assets grow.

Janus Capital manages accounts which may engage in short sales. The simultaneous management of long and shortportfolios creates potential conflicts of interest, including the risk that short sale activity could adversely affect themarket value of long positions (and vice versa), the risk arising from sequential orders in long and short positions, andthe risks associated with receiving opposing orders at the same time.

FREQUENTLY ASKED QUESTIONS ABOUT CERTAIN RISKS

The following questions and answers are designed to help you better understand some of the risks of investing in thePortfolio.

1. The Portfolio may invest in smaller or newer companies. Does this create any special risks?

Many attractive investment opportunities may be smaller, start-up companies offering emerging products or services.Smaller or newer companies may suffer more significant losses as well as realize more substantial growth than larger ormore established issuers because they may lack depth of management, be unable to generate funds necessary forgrowth or potential development, or be developing or marketing new products or services for which markets are notyet established and may never become established. In addition, such companies may be insignificant factors in theirindustries and may become subject to intense competition from larger or more established companies. Securities ofsmaller or newer companies may have more limited trading markets than the markets for securities of larger or moreestablished issuers, or may not be publicly traded at all, and may be subject to wide price fluctuations. Investments insuch companies tend to be more volatile and somewhat more speculative.

2. How could the Portfolio’s investments in foreign securities affect its performance?

Unless otherwise limited by its specific investment policies, the Portfolio may invest without limit in foreign securitieseither indirectly (e.g., depositary receipts) or directly in foreign markets, including emerging markets. Investments inforeign securities, including those of foreign governments, may involve greater risks than investing in domesticsecurities because the Portfolio’s performance may depend on factors other than the performance of a particularcompany. These factors include:

) Currency Risk. As long as the Portfolio holds a foreign security, its value will be affected by the value of the localcurrency relative to the U.S. dollar. When the Portfolio sells a foreign denominated security, its value may be worthless in U.S. dollars even if the security increases in value in its home country. U.S. dollar-denominated securities offoreign issuers may also be affected by currency risk due to the overall impact of exposure to the issuer’s localcurrency.

) Political and Economic Risk. Foreign investments may be subject to heightened political and economic risks,particularly in emerging markets which may have relatively unstable governments, immature economic structures,national policies restricting investments by foreigners, different legal systems, and economies based on only a fewindustries. In some countries, there is the risk that the government may take over the assets or operations of acompany or that the government may impose taxes or limits on the removal of the Portfolio’s assets from thatcountry.


) Regulatory Risk. There may be less government supervision of foreign markets. As a result, foreign issuers may notbe subject to the uniform accounting, auditing, and financial reporting standards and practices applicable todomestic issuers and there may be less publicly available information about foreign issuers.

) Market Risk. Foreign securities markets, particularly those of emerging market countries, may be less liquid andmore volatile than domestic markets. Certain markets may require payment for securities before delivery and delaysmay be encountered in settling securities transactions. In some foreign markets, there may not be protection againstfailure by other parties to complete transactions. Such factors may hinder the Portfolio’s ability to buy and sellemerging market securities in a timely manner, affecting the Portfolio’s investment strategies and potentially affectingthe value of the Portfolio.

) Transaction Costs. Costs of buying, selling, and holding foreign securities, including brokerage, tax, and custodycosts, may be higher than those involved in domestic transactions.

3. Are there special risks associated with investments in high-yield/high-risk bonds?

High-yield/high-risk bonds (or ‘‘junk’’ bonds) are bonds rated below investment grade by the primary rating agenciessuch as Standard & Poor’s, Fitch, and Moody’s or are unrated bonds of similar quality. The value of lower qualitybonds generally is more dependent on credit risk and default risk than investment grade bonds. Issuers of high-yield/high-risk bonds may not be as strong financially as those issuing bonds with higher credit ratings and are morevulnerable to real or perceived economic changes, political changes, or adverse developments specific to the issuer. Inaddition, the junk bond market can experience sudden and sharp price swings.

The secondary market on which high-yield securities are traded may be less liquid than the market for investmentgrade securities. The lack of a liquid secondary market may have an adverse impact on the market price of thesecurity. When secondary markets for high-yield securities are less liquid than the market for investment gradesecurities, it also may be more difficult to value the securities because valuation may require more research, andelements of judgment may play a larger role in the valuation because there is less reliable, objective data available.

Please refer to the ‘‘Explanation of Rating Categories’’ section of the Statement of Additional Information for adescription of bond rating categories.

4. How does the Portfolio try to reduce risk?

The Portfolio may use futures, options, swap agreements, and other derivative instruments individually or incombination to ‘‘hedge’’ or protect its portfolio from adverse movements in securities prices and interest rates. ThePortfolio may also use a variety of currency hedging techniques, including the use of forward currency contracts, tomanage currency risk. There is no guarantee that derivative investments will benefit the Portfolio. The Portfolio’sperformance could be worse than if the Portfolio had not used such instruments.

5. What is ‘‘industry risk’’?

Industry risk is the possibility that a group of related stocks will decline in price due to industry-specificdevelopments. Companies in the same or similar industries may share common characteristics and are more likely toreact similarly to industry-specific market or economic developments. The Portfolio’s investments, if any, in multiplecompanies in a particular industry increase the Portfolio’s exposure to industry risk.

GENERAL PORTFOLIO POLICIES

Unless otherwise stated, the following general policies apply to the Portfolio. Except for the Portfolio’s policies withrespect to investments in illiquid securities and borrowing, the percentage limitations included in these policies andelsewhere in this Prospectus normally apply only at the time of purchase of a security. So, for example, if the Portfolioexceeds a limit as a result of market fluctuations or the sale of other securities, it will not be required to dispose ofany securities.


Cash PositionThe Portfolio may not always stay fully invested in stocks or bonds. For example, when the investment personnelbelieve that market conditions are unfavorable for profitable investing, or when they are otherwise unable to locateattractive investment opportunities, the Portfolio’s cash or similar investments may increase. In other words, cash orsimilar investments generally are a residual – they represent the assets that remain after the Portfolio has committedavailable assets to desirable investment opportunities. When the Portfolio’s investments in cash or similar investmentsincrease, it may not participate in market advances or declines to the same extent that it would if the Portfolioremained more fully invested in stocks or bonds.

In addition, the Portfolio may temporarily increase its cash position under certain unusual circumstances, such as toprotect its assets or maintain liquidity in certain circumstances, for example, to meet unusually large redemptions. ThePortfolio’s cash position may also increase temporarily due to unusually large cash inflows. Under unusualcircumstances such as these, the Portfolio may invest up to 100% of its assets in cash or similar investments. In thiscase, the Portfolio may not achieve its investment objective.

Other Types of InvestmentsUnless otherwise stated within its specific investment policies, the Portfolio may also invest in other types of domesticand foreign securities and use other investment strategies, as described in the ‘‘Glossary of Investment Terms.’’ Thesesecurities and strategies are not principal investment strategies of the Portfolio. If successful, they may benefit thePortfolio by earning a return on the Portfolio’s assets or reducing risk; however, they may not achieve the Portfolio’sobjective. These securities and strategies may include:

) debt securities

) indexed/structured securities

) high-yield/high-risk bonds (20% or less of the Portfolio’s assets)

) options, futures, forwards, swap agreements, participatory notes, exchange-traded funds, and other types ofderivatives individually or in combination for hedging purposes or for nonhedging purposes such as seeking toenhance return; such techniques may also be used to gain exposure to the market pending investment of cashbalances or to meet liquidity needs

) short sales ‘‘against the box’’ and ‘‘naked’’ short sales (no more than 8% of the Portfolio’s assets may be invested innaked short sales)

) securities purchased on a when-issued, delayed delivery, or forward commitment basis

Illiquid InvestmentsThe Portfolio may invest up to 15% of its net assets in illiquid investments. An illiquid investment is a security orother position that cannot be disposed of quickly in the normal course of business. For example, some securities arenot registered under U.S. securities laws and cannot be sold to the U.S. public because of SEC regulations (these areknown as ‘‘restricted securities’’). Under procedures adopted by the Portfolio’s Trustees, certain restricted securities maybe deemed liquid, and will not be counted toward this 15% limit.

Foreign SecuritiesUnless otherwise stated within its specific investment policies, the Portfolio may invest without limit in foreign equityand debt securities. The Portfolio may invest directly in foreign securities denominated in a foreign currency and notpublicly traded in the United States. Other ways of investing in foreign securities include depositary receipts or sharesand passive foreign investment companies.


Special SituationsThe Portfolio may invest in companies that demonstrate special situations or turnarounds, meaning companies thathave experienced significant business problems but are believed to have favorable prospects for recovery. For example,a special situation or turnaround may arise when, in the opinion of the Portfolio’s investment personnel, the securitiesof a particular issuer will be recognized and appreciate in value due to a specific development with respect to thatissuer. Special situations may include significant changes in a company’s allocation of its existing capital, arestructuring of assets, or a redirection of free cash flows. For example, issuers undergoing significant capital changesmay include companies involved in spin-offs, sales of divisions, mergers or acquisitions, companies emerging frombankruptcy, or companies initiating large changes in their debt to equity ratio. Developments creating a specialsituation might include, among others, a new product or process, a technological breakthrough, a management changeor other extraordinary corporate event, or differences in market supply of and demand for the security. The Portfolio’sperformance could suffer if the anticipated development in a ‘‘special situation’’ investment does not occur or does notattract the expected attention.

Securities LendingThe Portfolio may seek to earn additional income through securities lending. The Portfolio may lend its portfoliosecurities to parties (typically brokers or other financial institutions) who need to borrow securities in order tocomplete certain transactions such as covering short sales, avoiding failures to deliver securities, or completingarbitrage activities. There is a risk of delay in recovering a loaned security and/or a risk of loss in collateral rights ifthe borrower fails financially.

Portfolio TurnoverIn general, the Portfolio intends to purchase securities for long-term investment, although, to a limited extent, thePortfolio may purchase securities in anticipation of relatively short-term price gains. Short-term transactions may alsoresult from liquidity needs, securities having reached a price or yield objective, changes in interest rates or the creditstanding of an issuer, or by reason of economic or other developments not foreseen at the time of the investmentdecision. The Portfolio may also sell one security and simultaneously purchase the same or a comparable security totake advantage of short-term differentials in bond yields or securities prices. Portfolio turnover is affected by marketconditions, changes in the size of the Portfolio, the nature of the Portfolio’s investments, and the investment style ofthe investment personnel. Changes are made in the Portfolio’s holdings whenever the investment personnel believesuch changes are desirable. Portfolio turnover rates are generally not a factor in making buy and sell decisions.

Increased portfolio turnover may result in higher costs for brokerage commissions, dealer mark-ups, and othertransaction costs. Higher costs associated with increased portfolio turnover may offset gains in the Portfolio’sperformance. The ‘‘Financial Highlights’’ section of this Prospectus shows the Portfolio’s historical turnover rates.


MANAGEMENT OF THE PORTFOLIO

INVESTMENT ADVISER

Janus Capital Management LLC, 151 Detroit Street, Denver, Colorado 80206-4805, is the investment adviser to thePortfolio. Janus Capital is responsible for the day-to-day management of the Portfolio’s investment portfolio andfurnishes continuous advice and recommendations concerning the Portfolio’s investments. Janus Capital providescertain administrative and other services, and is responsible for the other business affairs of the Portfolio.

Janus Capital (together with its predecessors) has served as investment adviser to Janus Fund since 1970 and currentlyserves as investment adviser to all of the Janus funds, acts as subadviser for a number of private-label mutual funds,and provides separate account advisory services for institutional accounts.

Janus Capital furnishes certain administrative, compliance, and accounting services for the Portfolio, and may bereimbursed by the Portfolio for its costs in providing those services. In addition, employees of Janus Capital and/or itsaffiliates serve as officers of the Trust and Janus Capital provides office space for the Portfolio and pays the salaries,fees, and expenses of all Portfolio officers and those Trustees who are considered interested persons of Janus Capital.

From its own assets, Janus Capital or its affiliates may make payments based on current assets to selected insurancecompanies, qualified plan service providers, or other financial intermediaries that were instrumental in the acquisitionor retention of accounts for the Portfolio or that performed services with respect to contract owners and planparticipants. The amount of these payments is determined from time to time by Janus Capital, may be substantial, andmay differ among such intermediaries. Eligibility requirements for such payments to institutional intermediaries aredetermined by Janus Capital and/or its affiliates.

Janus Capital or its affiliates may pay fees, from their own assets, to selected insurance companies, qualified planservice providers, and other financial intermediaries for providing recordkeeping, subaccounting, transactionprocessing, and other shareholder or administrative services (including payments for processing transactions viaNational Securities Clearing Corporation (‘‘NSCC’’) or other means) in connection with investments in the Janus funds.These fees are in addition to any fees that may be paid by the Janus funds for these types of or other services.

In addition, Janus Capital or its affiliates may also share certain marketing expenses with, or pay for or sponsorinformational meetings, seminars, client awareness events, support for marketing materials, or business buildingprograms for such intermediaries to raise awareness of the Portfolio.

Participating insurance companies that purchase the Portfolio’s Shares may perform certain administrative servicesrelating to the Portfolio and Janus Capital or the Portfolio may pay those companies for such services.

The receipt of (or prospect of receiving) payments described above are not intended to, but may provide a financialintermediary and its salespersons with an incentive to favor sales of Janus funds’ shares over sales of other mutualfunds (or non-mutual fund investments), or to favor sales of one class of Janus funds’ shares over sales of anotherJanus funds’ share class, with respect to which the financial intermediary does not receive such payments or receivesthem in a lower amount. These payment arrangements will not, however, change the price a contract owner or planparticipant pays for shares or the amount that a Janus fund receives to invest on behalf of the contract owner or planparticipant. You may wish to consider whether such arrangements exist when evaluating any recommendations topurchase or sell Shares of the Portfolio.


MANAGEMENT EXPENSES

The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The Portfolio’sadvisory agreement details the investment advisory fee and other expenses that the Portfolio must pay.

The Portfolio incurs expenses not assumed by Janus Capital, including transfer agent and custodian fees and expenses,legal and auditing fees, printing and mailing costs of sending reports and other information to existing shareholders,and Independent Trustees’ fees and expenses. The Portfolio is subject to the following investment advisory fee schedule(expressed as an annual rate).

Average Daily Investment AdvisoryNet Assets Fee (%)

Portfolio of Portfolio (annual rate)

Large Cap Growth Portfolio All Asset Levels 0.64

For the fiscal year ended December 31, 2005, the Portfolio paid Janus Capital an investment advisory fee of 0.64%based on the Portfolio’s average net assets.

A discussion regarding the basis for the Board of Trustees’ approval of the Portfolio’s investment advisory agreement isincluded in the Portfolio’s semiannual and annual reports to shareholders.

INVESTMENT PERSONNEL

PORTFOLIO MANAGER

David J. Corkins

is Executive Vice President and Portfolio Manager of Large Cap Growth Portfolio, which he has managed sinceFebruary 2006. Mr. Corkins was Portfolio Manager of Growth and Income Portfolio from May 1998 toDecember 2003. He is also Portfolio Manager of other Janus accounts. He joined Janus Capital in 1995 as aresearch analyst. Mr. Corkins holds a Bachelor of Arts degree in English and Russian from Dartmouth and hereceived his Master’s degree in Business Administration from Columbia University.

Information about the compensation structure, other accounts managed, and the range of ownership of securities forthe Portfolio’s investment personnel is included in the SAI.

Management of the Portfolio 11

OTHER INFORMATION

Classes of Shares

The Portfolio currently offers two classes of shares, one of which, the Institutional Shares, is offered pursuant to thisProspectus and sold under the name Janus Aspen Series. The Shares offered by this Prospectus are available only inconnection with investment in and payments under variable insurance contracts, as well as certain qualified retirementplans. Service Shares of the Portfolio are offered only in connection with investment in and payments under variableinsurance contracts, as well as certain qualified retirement plans that require a fee from Portfolio assets to procuredistribution and administrative services to contract owners and plan participants. Because the expenses of each classmay differ, the performance of each class is expected to differ. If you would like additional information about theService Shares, please call 1-800-525-0020.

Closed Fund Policies

The Portfolio may discontinue sales of its shares to new investors if its management and the Trustees believe thatcontinued sales may adversely affect the Portfolio’s ability to achieve its investment objective. If sales of the Portfolioare discontinued to new investors, it is expected that existing shareholders invested in the Portfolio would bepermitted to continue to purchase shares through their existing Portfolio accounts and to reinvest any dividends orcapital gains distributions in such accounts, absent highly unusual circumstances. In addition, it is expected thatexisting or new participants in employer-sponsored retirement plans, including employees of Janus Capital Group Inc.(‘‘JCGI’’) and any of its subsidiaries covered under the JCGI retirement plan, that currently offer one or more portfoliosas an investment option would be able to direct contributions to that portfolio through their plan, regardless ofwhether they invested in such portfolio prior to its closing. In addition, in the case of certain mergers orreorganizations, retirement plans would be able to add a closed portfolio as an investment option. Such mergers,reorganizations, acquisitions, or other business combinations are those in which one or more companies involved insuch transaction currently offers the Portfolio as an investment option, and any company that as a result of suchtransaction becomes affiliated with the company currently offering the Portfolio (as a parent company, subsidiary,sister company, or otherwise). Such companies may request to add the Portfolio as an investment option under itsretirement plan. In addition, new accounts may be permitted in a closed portfolio for certain plans and programsoffered in connection with employer-sponsored retirement plans where the retirement plan has an existing account inthe closed portfolio. Requests will be reviewed by management on an individual basis, taking into considerationwhether the addition of the Portfolio may negatively impact existing Portfolio shareholders. Janus Capital encouragesits employees, particularly members of the investment team, to own shares of the Janus funds. Accordingly, upon priorapproval of Janus Capital’s senior management team, members of the Janus investment team may open new accountsin a closed fund.

Pending Legal Matters

In the fall of 2003, the Securities and Exchange Commission (‘‘SEC’’), the Office of the New York State AttorneyGeneral (‘‘NYAG’’), the Colorado Attorney General (‘‘COAG’’), and the Colorado Division of Securities (‘‘CDS’’)announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18,2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and theCDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.

A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and relatedentities and individuals based on allegations similar to those announced by the above regulators and were filed inseveral state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limitedto, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines.

The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District ofMaryland (the ‘‘Court’’) for coordinated proceedings. On September 29, 2004, five consolidated amended complaintswere filed in that Court that generally include: (i) claims by a putative class of investors in certain Janus funds


asserting claims on behalf of the investor class; (ii) derivative claims by investors in certain Janus funds ostensibly onbehalf of such funds; (iii) claims on behalf of participants in the Janus 401(k) plan; (iv) claims brought on behalf ofshareholders of Janus Capital Group Inc. (‘‘JCGI’’) on a derivative basis against the Board of Directors of JCGI; and(v) claims by a putative class of shareholders of JCGI asserting claims on behalf of the shareholders. Each of the fivecomplaints initially named JCGI and/or Janus Capital as a defendant. In addition, the following were also named asdefendants in one or more of the actions: Janus Investment Fund (‘‘JIF’’), Janus Aspen Series (‘‘JAS’’), Janus AdviserSeries (‘‘JAD’’), Janus Distributors LLC, Enhanced Investment Technologies, LLC (‘‘INTECH’’), Bay Isle Financial LLC(‘‘Bay Isle’’), Perkins, Wolf, McDonnell and Company, LLC (‘‘Perkins’’), the Advisory Committee of the Janus 401(k)plan, and the current or former directors of JCGI.

On August 25, 2005, the Court entered orders dismissing most of the claims asserted against Janus Capital and itsaffiliates by fund investors (actions (i) and (ii) described above), except certain claims under Section 10(b) of theSecurities Exchange Act of 1934 and under Section 36(b) of the Investment Company Act of 1940. The complaint inthe 401(k) plan class action (action (iii) described above) was voluntarily dismissed, but was refiled using a newnamed plaintiff and asserting claims similar to the initial complaint. On February 27, 2006, the court issued an orderannouncing its intent to dismiss the claims asserted against Janus Capital and its affiliates that were brought on behalfof JCGI’s corporate shareholders (action (v) above). As a result of the above events, JCGI, Janus Capital, the AdvisoryCommittee of the Janus 401(k) plan, and the current or former directors of JCGI are the remaining defendants in oneor more of the actions.

The Attorney General’s Office for the State of West Virginia filed a separate market timing related civil action againstJanus Capital and several other non-affiliated mutual fund companies, claiming violations under the West VirginiaConsumer Credit and Protection Act. The civil action requests certain monetary penalties, among other relief. Thisaction has been removed to federal court and transferred to the Multidistrict Litigation case in the U.S. District Courtof Baltimore, Maryland described above. In addition, the Auditor of the State of West Virginia, in his capacity assecurities commissioner, has issued an order indicating an intent to initiate administrative proceedings against most ofthe defendants in the market timing cases (including Janus Capital) and seeking disgorgement and other monetaryrelief based on similar market timing allegations.

In addition to the ‘‘market timing’’ actions described above, Janus Capital is a defendant in a consolidated lawsuit inthe U.S. District Court for the District of Colorado challenging the investment advisory fees charged by Janus Capitalto certain Janus funds. The action was filed in 2004 by fund investors asserting breach of fiduciary duty underSection 36(b) of the Investment Company Act of 1940. The plaintiffs seek declaratory and injunctive relief and anunspecified amount of damages.

In 2001, Janus Capital’s predecessor was also named as a defendant in a class action suit in the U.S. District Court forthe Southern District of New York, alleging that certain underwriting firms and institutional investors violated antitrustlaws in connection with initial public offerings. The U.S. District Court dismissed the plaintiff’s antitrust claims inNovember 2003, however, the U.S. Court of Appeals vacated that decision and remanded it for further proceedings.

Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future.Janus Capital does not currently believe that these pending actions will materially affect its ability to continueproviding services it has agreed to provide to the Janus funds.

Conflicts of Interest

The Shares offered by this Prospectus are available only to variable annuity and variable life separate accounts ofinsurance companies that are unaffiliated with Janus Capital and to certain qualified retirement plans. Although thePortfolio does not currently anticipate any disadvantages to policy owners because the Portfolio offers its Shares tosuch entities, there is a possibility that a material conflict may arise. The Trustees monitor events in an effort toidentify any disadvantages or material irreconcilable conflicts and to determine what action, if any, should be taken inresponse. If a material disadvantage or conflict is identified, the Trustees may require one or more insurance company

Other information 13

separate accounts or qualified plans to withdraw its investments in the Portfolio or substitute Shares of anotherPortfolio. If this occurs, the Portfolio may be forced to sell its securities at disadvantageous prices. In addition, thePortfolio may refuse to sell its Shares to any separate account or qualified plan or may suspend or terminate theoffering of the Portfolio’s Shares if such action is required by law or regulatory authority or is in the best interests ofthe Portfolio’s shareholders. It is possible that a qualified plan investing in the Portfolio could lose its qualified planstatus under the Internal Revenue Code, which could have adverse tax consequences on insurance company separateaccounts investing in the Portfolio. Janus Capital intends to monitor such qualified plans and the Portfolio maydiscontinue sales to a qualified plan and require plan participants with existing investments in the Portfolio to redeemthose investments if a plan loses (or in the opinion of Janus Capital is at risk of losing) its qualified plan status.

Distribution of the Portfolio

The Portfolio is distributed by Janus Distributors LLC (‘‘Janus Distributors’’), which is a member of the NationalAssociation of Securities Dealers, Inc. (‘‘NASD’’). To obtain information about NASD member firms and their associatedpersons, you may contact NASD Regulation, Inc. at www.nasdr.com, or the Public Disclosure Hotline at800-289-9999. An investor brochure containing information describing the Public Disclosure Program is available fromNASD Regulation, Inc.


DISTRIBUTIONS AND TAXES

DISTRIBUTIONS

To avoid taxation of the Portfolio, the Internal Revenue Code requires the Portfolio to distribute all or substantially allof its net investment income and any net capital gains realized on its investments at least annually. The Portfolio’sincome from certain dividends, interest, and any net realized short-term capital gains are paid to shareholders asordinary income dividends. Net realized long-term capital gains are paid to shareholders as capital gains distributions,regardless of how long you have held shares of the Portfolio. Distributions are made at the class level, so they mayvary from class to class within a single Portfolio.

Distribution Schedule

Dividends for the Portfolio are normally declared and distributed in June and December. Capital gains distributions arenormally declared and distributed in June. However, in certain situations it may be necessary for a Portfolio to declareand distribute capital gains distributions in December. If necessary, dividends and net capital gains may be distributedat other times as well.

How Distributions Affect the Portfolio’s NAV

Distributions are paid to shareholders as of the record date of a distribution of the Portfolio, regardless of how longthe shares have been held. Undistributed dividends and net capital gains are included in the Portfolio’s daily NAV. Theshare price of the Portfolio drops by the amount of the distribution, net of any subsequent market fluctuations. Forexample, assume that on December 31, the Portfolio declared a dividend in the amount of $0.25 per share. If thePortfolio’s share price was $10.00 on December 30, the Portfolio’s share price on December 31 would be $9.75,barring market fluctuations.

TAXES

Taxes on Distributions

Because Shares of the Portfolio may be purchased only through variable insurance contracts and qualified plans, it isanticipated that any income dividends or net capital gains distributions made by the Portfolio will be exempt fromcurrent taxation if left to accumulate within the variable insurance contract or qualified plan. Generally, withdrawalsfrom such contracts or plans may be subject to ordinary income tax and, if made before age 591/2, a 10% penalty taxmay be imposed. The tax status of your investment depends on the features of your qualified plan or variableinsurance contract. Further information may be found in your plan documents or in the prospectus of the separateaccount offering such contract.

Taxation of the Portfolio

Dividends, interest, and some gains received by the Portfolio on foreign securities may be subject to foreign taxwithholding or other foreign taxes. If the Portfolio is eligible, it may from year to year make the election permittedunder Section 853 of the Internal Revenue Code to pass through such taxes to shareholders as a foreign tax credit. Ifsuch an election is not made, any foreign taxes paid or accrued will represent an expense to the Portfolio.

The Portfolio does not expect to pay any federal income taxes because it intends to meet certain requirements of theInternal Revenue Code. In addition, because the Shares of the Portfolio are sold in connection with variable insurancecontracts, the Portfolio intends to qualify under the Internal Revenue Code with respect to the diversificationrequirements related to the tax-deferred status of insurance company separate accounts.

Distributions and taxes 15

SHAREHOLDER’S GUIDE

Investors may not purchase or redeem Shares of the Portfolio directly. Shares may be purchased or redeemed onlythrough variable insurance contracts offered by the separate accounts of participating insurance companies or throughqualified retirement plans. Refer to the prospectus for the participating insurance company’s separate account oryour plan documents for instructions on purchasing or selling of variable insurance contracts and on how toselect the Portfolio as an investment option for a contract or a qualified plan.

With certain limited exceptions, the Portfolio is available only to U.S. citizens or residents.

PRICING OF PORTFOLIO SHARES

The per share NAV for each class is computed by dividing the total value of assets allocated to the class, less liabilitiesallocated to that class, by the total number of shares outstanding for the class. The Portfolio’s NAV is calculated as ofthe close of the regular trading session of the New York Stock Exchange (‘‘NYSE’’) (normally 4:00 p.m. New Yorktime) each day that the NYSE is open (‘‘business day’’). However, the NAV may be calculated earlier if trading on theNYSE is restricted, or as permitted by the SEC. Because foreign securities markets may operate on days that are notbusiness days in the United States, the value of the Portfolio’s holdings may change on days when you will not be ableto purchase or redeem the Portfolio’s shares to the extent that Portfolio is invested in such markets.

All purchases and sales will be duly processed at the NAV next calculated after your request is received in good orderby the Portfolio or its agent. In order to receive a day’s price, your order must be received in good order by thePortfolio (or insurance company or plan sponsor) or its agent by the close of the regular trading session of the NYSE.

Securities held by the Portfolio are generally valued at market value. Certain short-term instruments maturing within60 days or less are valued at amortized cost, which approximates market value. If a market quotation is not readilyavailable or is deemed unreliable, or if an event that is expected to affect the value of a portfolio security occurs afterthe close of the principal exchange or market on which that security is traded, and before the close of the NYSE, thefair value of a security (except for short-term instruments maturing within 60 days or less) will be determined in goodfaith under policies and procedures established by and under the supervision of the Portfolio’s Board of Trustees.Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) when significant eventsoccur which may affect the securities of a single issuer, such as mergers, bankruptcies, or significant issuer-specificdevelopments; (ii) when significant events occur which may affect an entire market, such as natural disasters orsignificant governmental actions; and (iii) when non-significant events occur such as markets closing early or notopening, security trading halts, or pricing of nonvalued securities and restricted or nonpublic securities. The Portfoliomay use a systematic fair valuation model provided by an independent pricing service to value foreign equity securitiesin order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and of the NYSE.While fair value pricing may be more commonly used with foreign equity securities, it may also be used with, amongother things, thinly-traded domestic securities or fixed-income securities.

Due to the subjective nature of fair value pricing, the Portfolio’s value for a particular security may be different fromthe last quoted market price. Fair value pricing may reduce arbitrage activity involving the frequent buying and sellingof mutual fund shares by investors seeking to take advantage of a perceived lag between a change in the value of amutual fund’s portfolio securities and the reflection of such change in the Portfolio’s NAV, as further described in the‘‘Excessive Trading’’ section of this Prospectus. While mutual funds that invest in foreign securities may be at a greaterrisk for arbitrage activity, such activity may also arise in mutual funds which do not invest in foreign securities, forexample, when trading in a security held by a Portfolio is halted and does not resume prior to the time the Portfoliocalculates its NAV (referred to as ‘‘stale pricing’’). Portfolios that hold thinly-traded securities, such as certain small-capitalization securities, may be subject to attempted use of arbitrage techniques. To the extent that a Portfolio’svaluation of a security is different from the security’s market value, short-term arbitrage traders may dilute the NAV ofa Portfolio, which negatively impacts long-term shareholders. The Portfolio’s fair value pricing and excessive tradingpolicies and procedures may not completely eliminate short-term trading in certain omnibus accounts and otheraccounts traded through intermediaries.


The value of the securities of other open-end funds held by the Portfolio, if any, will be calculated using the NAV ofsuch underlying funds, and the prospectuses for such open-end funds explain the circumstances under which they usefair value pricing and the effects of using fair value pricing.

PURCHASES

Purchases of Shares may be made only by the separate accounts of insurance companies for the purpose of fundingvariable insurance contracts or by qualified plans. Refer to the prospectus of the appropriate insurance companyseparate account or your plan documents for information on how to invest in the Shares of the Portfolio. Participatinginsurance companies and certain other designated organizations are authorized to receive purchase orders on thePortfolio’s behalf. As discussed under ‘‘Investment Adviser,’’ Janus Capital and its affiliates may make payments toselected insurance companies, qualified plan service providers, or other financial intermediaries that were instrumentalin the acquisition of the accounts in the Portfolio or that provide services in connection with investments in thePortfolio. You may wish to consider such arrangements when evaluating any recommendation of the Portfolio.

The Portfolio reserves the right to reject any purchase order, including exchange purchases, for any reason. ThePortfolio is not intended for excessive trading. For more information about the Portfolio’s policy on excessive trading,see ‘‘Excessive Trading.’’

The Portfolio may discontinue sales to a qualified plan and require plan participants with existing investments in theShares to redeem those investments if the plan loses (or in the opinion of Janus Capital, is at risk of losing) itsqualified plan status.

REDEMPTIONS

Redemptions, like purchases, may be effected only through the separate accounts of participating insurance companiesor through qualified plans. Please refer to the appropriate separate account prospectus or plan documents for details.

Shares of the Portfolio may be redeemed on any business day on which the Portfolio’s NAV is calculated. Redemptionsare duly processed at the NAV next calculated after your redemption order is received in good order by the Portfolioor its agent. Redemption proceeds will normally be sent the business day following receipt of the redemption order,but in no event later than seven days after receipt of such order.

Redemptions In-Kind

Shares normally will be redeemed for cash, although the Portfolio retains the right to redeem some or all of its sharesin-kind under unusual circumstances, in order to protect the interests of remaining shareholders, or to accommodate arequest by a particular shareholder that does not adversely affect the interest of the remaining shareholders, bydelivery of securities selected from its assets at its discretion. However, the Portfolio is required to redeem shares solelyfor cash up to the lesser of $250,000 or 1% of the NAV of the Portfolio during any 90-day period for any oneshareholder. Should redemptions by any shareholder exceed such limitation, the Portfolio will have the option ofredeeming the excess in cash or in-kind. In-kind payment means payment will be made in portfolio securities ratherthan cash. If this occurs, the redeeming shareholder might incur brokerage or other transaction costs to convert thesecurities to cash.

EXCESSIVE TRADING

Excessive Trading Policies and Procedures

The Board of Trustees has adopted policies and procedures with respect to short-term and excessive trading ofPortfolio shares (‘‘excessive trading’’). The Portfolio is intended for long-term investment purposes only and thePortfolio will take reasonable steps to attempt to detect and deter excessive trading. Transactions placed in violation ofthe Portfolio’s excessive trading policies may be cancelled or revoked by the Portfolio by the next business dayfollowing receipt by the Portfolio. The trading history of accounts determined to be under common ownership or

Shareholder’s guide 17

control within any of the Janus funds may be considered in enforcing these policies and procedures. As describedbelow, however, the Portfolio may not be able to identify all instances of excessive trading or completely eliminate thepossibility of excessive trading. In particular, it may be difficult to identify excessive trading in certain omnibusaccounts and other accounts traded through intermediaries (such as insurance companies or plan sponsors). By theirnature, omnibus accounts, in which purchases and sales of the Portfolio’s shares by multiple investors are aggregatedby the intermediary and presented to the Portfolio on a net basis, may effectively conceal the identity of individualinvestors and their transactions from the Portfolio and its agent.

The Portfolio attempts to deter excessive trading through at least the following methods:

) fair valuation of securities as described under ‘‘Pricing of Portfolio Shares;’’ and

) redemption fees as described under ‘‘Redemption Fee’’ (where applicable on certain classes of certain Portfolios).

The Portfolio monitors Portfolio share transactions, subject to the limitations described below. Generally, a purchase ofthe Portfolio’s shares followed by the redemption of the Portfolio’s shares within a 90-day period may result inenforcement of the Portfolio’s excessive trading policies and procedures with respect to future purchase orders,provided that the Portfolio reserves the right to reject any purchase request as explained above.

If the Portfolio detects excessive trading, the Portfolio may suspend or permanently terminate the exchange privilege(if permitted by your insurance company or plan sponsor) of the account and may bar future purchases into thePortfolio and any of the other Janus funds by such investor. The Portfolio’s excessive trading policies generally do notapply to a money market portfolio, although money market portfolios at all times reserve the right to reject anypurchase request (including exchange purchases, if permitted by your insurance company or plan sponsor) for anyreason without prior notice.

The Portfolio’s Board of Trustees may approve from time to time a redemption fee to be imposed by any Janus fund,subject to 60 days’ notice to shareholders of that fund.

Investors who place transactions through the same insurance company or plan sponsor on an omnibus basis may bedeemed part of a group for the purpose of the Portfolio’s excessive trading policies and procedures and may berejected in whole or in part by the Portfolio. The Portfolio, however, cannot always identify or reasonably detectexcessive trading that may be facilitated by insurance companies or plan sponsors or made difficult to identify throughthe use of omnibus accounts by those intermediaries that transmit purchase, exchange, and redemption orders to thePortfolio, and thus the Portfolio may have difficulty curtailing such activity. Transactions accepted by an insurancecompany or plan sponsor in violation of the Portfolio’s excessive trading policies may be cancelled or revoked by thePortfolio by the next business day following receipt by the Portfolio.

In an attempt to detect and deter excessive trading in omnibus accounts, the Portfolio or its agent may requireintermediaries to impose restrictions on the trading activity of accounts traded through those intermediaries. Suchrestrictions may include, but are not limited to, requiring that trades be placed by U.S. mail, prohibiting purchases fora designated period of time (typically 30 to 90 days) by investors who have recently redeemed Portfolio shares,requiring intermediaries to report information about customers who purchase and redeem large amounts, and similarrestrictions. The Portfolio’s ability to impose such restrictions with respect to accounts traded through particularintermediaries may vary depending on the systems capabilities, applicable contractual and legal restrictions, andcooperation of those intermediaries.

Certain transactions in Portfolio shares, such as periodic rebalancing (no more frequently than quarterly) or thosewhich are made pursuant to systematic purchase, exchange, or redemption programs generally do not raise excessivetrading concerns and normally do not require application of the Portfolio’s methods to detect and deter excessivetrading.

The Portfolio also reserves the right to reject any purchase request (including exchange purchases) by any investor orgroup of investors for any reason without prior notice, including, in particular, if the trading activity in the account(s)


is deemed to be disruptive to the Portfolio. For example, the Portfolio may refuse a purchase order if the Portfolio’sinvestment personnel believe they would be unable to invest the money effectively in accordance with the Portfolio’sinvestment policies or the Portfolio would otherwise be adversely affected due to the size of the transaction, frequencyof trading, or other factors.

The Portfolio’s policies and procedures regarding excessive trading may be modified at any time by the Portfolio’sBoard of Trustees.

Excessive Trading Risks

Excessive trading may present risks to the Portfolio’s long-term shareholders. Excessive trading into and out of thePortfolio may disrupt portfolio investment strategies, may create taxable gains to remaining Portfolio shareholders, andmay increase Portfolio expenses, all of which may negatively impact investment returns for all remaining shareholders,including long-term shareholders.

Portfolios that invest in foreign securities may be at a greater risk for excessive trading. Investors may attempt to takeadvantage of anticipated price movements in securities held by a portfolio based on events occurring after the close ofa foreign market that may not be reflected in the portfolio’s NAV (referred to as ‘‘price arbitrage’’). Such arbitrageopportunities may also arise in portfolios which do not invest in foreign securities, for example, when trading in asecurity held by a portfolio is halted and does not resume prior to the time the portfolio calculates its NAV (referredto as ‘‘stale pricing’’). Portfolios that hold thinly-traded securities, such as certain small-capitalization securities, may besubject to attempted use of arbitrage techniques. To the extent that the Portfolio’s valuation of a security differs fromthe security’s market value, short-term arbitrage traders may dilute the NAV of the Portfolio, which negatively impactslong-term shareholders. Although the Portfolio has adopted fair valuation policies and procedures intended to reducethe Portfolio’s exposure to price arbitrage, stale pricing, and other potential pricing inefficiencies, under suchcircumstances there is potential for short-term arbitrage trades to dilute the value of Portfolio shares.

Although the Portfolio takes steps to detect and deter excessive trading pursuant to the policies and proceduresdescribed in this Prospectus and approved by the Board of Trustees, there is no assurance that these policies andprocedures will be effective in limiting excessive trading in all circumstances. For example, the Portfolio may be unableto completely eliminate the possibility of excessive trading in certain omnibus accounts and other accounts tradedthrough intermediaries. Omnibus accounts may effectively conceal the identity of individual investors and theirtransactions from the Portfolio and its agent. This makes the Portfolio’s identification of excessive trading transactionsin the Portfolio through an omnibus account difficult and makes the elimination of excessive trading in the accountimpractical without the assistance of the intermediary. Moreover, the contract between an insurance company and theowner of a variable insurance contract may govern the frequency with which the contract owner may cause theinsurance company to purchase or redeem shares of the Portfolio. Although the Portfolio encourages intermediaries totake necessary actions to detect and deter excessive trading, some intermediaries may be unable or unwilling to do so,and accordingly, the Portfolio cannot eliminate completely the possibility of excessive trading.

Shareholders that invest through an omnibus account should be aware that they may be subject to the policies andprocedures of their insurance company or plan sponsor with respect to excessive trading in the Portfolio.

AVAILABILITY OF PORTFOLIO HOLDINGS INFORMATION

The non-money market portfolios’ portfolio holdings (excluding cash equivalents, derivatives, and short positions),consisting of at least the names of the holdings, are generally available monthly, with a 30-day lag, onwww.janus.com. They are posted to the website within approximately two business days after month-end. The moneymarket portfolio’s portfolio holdings are generally available monthly, with no lag, on www.janus.com. They are postedto the website within approximately six business days after month-end. All of the portfolios’ holdings remain availableuntil a Form N-CSR or Form N-Q is filed with the SEC for the period that includes the date as of which the website

Shareholder’s guide 19

information is current. The portfolios’ portfolio holdings can be found on www.janus.com in Profiles & Performanceunder the Characteristics tab.

In addition, the Portfolio’s top portfolio holdings in order of position size and as a percentage of the total portfolio,are published monthly with a 30-day lag, and quarterly with a 15-day lag, on www.janus.com. The Portfolio disclosesits top ten portfolio holdings. Security breakdowns (such as industry, sector, regional, market capitalization, and assetallocation breakdowns, as applicable) for the Portfolio are published monthly with a 30-day lag, and quarterly with a15-day lag, on www.janus.com. The Portfolio’s top portfolio holdings, as well as the non-money market portfolios’security breakdowns, are posted to the website within approximately two business days after the end of the applicableperiod and remain available until the following period’s information is posted.

Specific portfolio level performance attribution information and statistics for the Portfolio will be made available to anyperson monthly upon request, with a 30-day lag, following the posting of the Portfolio’s portfolio holdings onwww.janus.com.

Notwithstanding the foregoing, Janus Capital may exclude from publication all or any portion of portfolio holdings orchange the time periods of disclosure as deemed necessary to protect the interests of the portfolios. A summary of theportfolio holdings disclosure policies and procedures, which includes a discussion of any exceptions, is contained inthe Portfolio’s SAI.

Complete schedules of the Portfolio’s holdings as of the end of the Portfolio’s first and third fiscal quarters are filedwith the SEC within 60 days of the end of such quarters on Form N-Q. The Portfolio’s Form N-Q: (i) is available onthe SEC’s website at http://www.sec.gov; (ii) may be reviewed and copied at the SEC’s Public Reference Room inWashington, D.C. (information on the Public Reference Room may be obtained by calling 1-800-SEC-0330); and(iii) is available without charge, upon request, by calling Janus at 1-800-525-0020 (toll free). Complete schedules ofthe Portfolio’s holdings as of the end of the Portfolio’s second and fourth fiscal quarters are included in the Portfolio’ssemiannual and annual reports which are filed with the SEC within 60 days of the end of such quarters. Thesemiannual reports are filed on Form type N-CSRS and the annual reports are filed on Form type N-CSR. Shareholderreports containing such portfolio holdings are available to shareholders through their insurance company or plansponsor and are also available at www.janus.com.

SHAREHOLDER COMMUNICATIONS

Your insurance company or plan sponsor is responsible for providing annual and semiannual reports, including thefinancial statements of the Portfolio that you have authorized for investment. These reports show the Portfolio’sinvestments and the market value of such investments, as well as other information about the Portfolio and itsoperations. Please contact your insurance company or plan sponsor to obtain these reports. The Trust’s fiscal year endsDecember 31.



The financial highlights table is intended to help you understand the Institutional Shares financial performancethrough December 31 of the fiscal years shown. Items ‘‘Net asset value, beginning of period’’ through ‘‘Net asset value,end of period’’ reflect financial results for a single Portfolio Share.

The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in theInstitutional Shares of the Portfolio (assuming reinvestment of all dividends and distributions) but do not includecharges and expenses attributable to any insurance product. If these charges and expenses had been included, theperformance for the periods shown would be lower.

Large Cap Growth Portfolio – Institutional Shares

Years ended December 312005 2004 2003 2002 2001

Net asset value, beginning of period $20.08 $19.23 $14.61 $19.89 $26.48

Income from investment operations:Net investment income/(loss) 0.09 0.04 0.02 0.01 0.02Net gain/(loss) on securities (both realized and unrealized) 0.76 0.84 4.62 (5.29) (6.56)

Total from investment operations 0.85 0.88 4.64 (5.28) (6.54)

Less distributions:Dividends (from net investment income) (0.07) (0.03) (0.02) — (0.01)Distributions (from capital gains) — — — — (0.04)

Total distributions (0.07) (0.03) (0.02) — (0.05)

Net asset value, end of period $20.86 $20.08 $19.23 $14.61 $19.89

Total return 4.23% 4.57% 31.73% (26.51)% (24.73)%

Net assets, end of period (in thousands) $730,374 $1,177,145 $1,666,317 $1,484,889 $2,490,954Average net assets for the period (in thousands) $857,660 $1,462,102 $1,533,995 $1,967,021 $2,911,331Ratio of gross expenses to average net assets(1)(2) 0.66% 0.67% 0.67% 0.67% 0.66%Ratio of net expenses to average net assets(3) 0.66% 0.66% 0.67% 0.67% 0.66%Ratio of net investment income/(loss) to average net assets 0.31% 0.14% 0.12% (0.08)% 0.07%Portfolio turnover rate 87% 33% 24% 36% 48%

(1) The expense ratio reflects expenses prior to any expense offset arrangements. (2) The effect of non-recurring costs assumed by Janus Capital is included in the ratio of gross expenses to average net assets and was less than 0.01%. (3) The expense ratio reflects expenses after any expense offset arrangements.

Financial highlights 21

GLOSSARY OF INVESTMENT TERMS

This glossary provides a more detailed description of some of the types of securities, investment strategies, and otherinstruments in which the Portfolio may invest. The Portfolio may invest in these instruments to the extent permittedby its investment objective and policies. The Portfolio is not limited by this discussion and may invest in any othertypes of instruments not precluded by the policies discussed elsewhere in this Prospectus.

I. EQUITY AND DEBT SECURITIES

Bank loans include institutionally-traded floating and fixed-rate debt securities generally acquired as a participationinterest in a loan originated by a lender or other financial institution, or as an assignment of a portion of a loanpreviously attributable to a different lender.

Bonds are debt securities issued by a company, municipality, government, or government agency. The issuer of a bondis required to pay the holder the amount of the loan (or par value of the bond) at a specified maturity and to makescheduled interest payments.

Commercial paper is a short-term debt obligation with a maturity ranging from 1 to 270 days issued by banks,corporations, and other borrowers to investors seeking to invest idle cash. A Portfolio may purchase commercial paperissued in private placements under Section 4(2) of the Securities Act of 1933.

Common stocks are equity securities representing shares of ownership in a company and usually carry voting rightsand earn dividends. Unlike preferred stock, dividends on common stock are not fixed but are declared at thediscretion of the issuer’s board of directors.

Convertible securities are preferred stocks or bonds that pay a fixed dividend or interest payment and are convertibleinto common stock at a specified price or conversion ratio.

Debt securities are securities representing money borrowed that must be repaid at a later date. Such securities havespecific maturities and usually a specific rate of interest or an original purchase discount.

Depositary receipts are receipts for shares of a foreign-based corporation that entitle the holder to dividends andcapital gains on the underlying security. Receipts include those issued by domestic banks (American DepositaryReceipts), foreign banks (Global or European Depositary Receipts), and broker-dealers (depositary shares).

Equity securities generally include domestic and foreign common stocks; preferred stocks; securities convertible intocommon stocks or preferred stocks; warrants to purchase common or preferred stocks; and other securities with equitycharacteristics.

Exchange-traded funds are index-based investment companies which hold substantially all of their assets in securitieswith equity characteristics. As a shareholder of another investment company, the Portfolio would bear its pro rataportion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfoliobears directly in connection with its own operations.

Fixed-income securities are securities that pay a specified rate of return. The term generally includes short- and long-term government, corporate, and municipal obligations that pay a specified rate of interest, dividends, or coupons fora specified period of time. Coupon and dividend rates may be fixed for the life of the issue or, in the case ofadjustable and floating rate securities, for a shorter period.

High-yield/high-risk bonds are bonds that are rated below investment grade by the primary rating agencies (i.e., BB+or lower by Standard & Poor’s and Fitch, and Ba or lower by Moody’s). Other terms commonly used to describe suchbonds include ‘‘lower rated bonds,’’ ‘‘non-investment grade bonds,’’ and ‘‘junk bonds.’’

Mortgage- and asset-backed securities are shares in a pool of mortgages or other debt. These securities are generallypass-through securities, which means that principal and interest payments on the underlying securities (less servicingfees) are passed through to shareholders on a pro rata basis. These securities involve prepayment risk, which is therisk that the underlying mortgages or other debt may be refinanced or paid off prior to their maturities during periodsof declining interest rates. In that case, the Portfolio may have to reinvest the proceeds from the securities at a lower


rate. Potential market gains on a security subject to prepayment risk may be more limited than potential market gainson a comparable security that is not subject to prepayment risk.

Mortgage dollar rolls are transactions in which a Portfolio sells a mortgage-related security, such as a security issuedby GNMA, to a dealer and simultaneously agrees to purchase a similar security (but not the same security) in thefuture at a pre-determined price. A ‘‘dollar roll’’ can be viewed as a collateralized borrowing in which a Portfoliopledges a mortgage-related security to a dealer to obtain cash.

Pass-through securities are shares or certificates of interest in a pool of debt obligations that have been repackaged byan intermediary, such as a bank or broker-dealer.

Passive foreign investment companies (PFICs) are any foreign corporations which generate certain amounts of passiveincome or hold certain amounts of assets for the production of passive income. Passive income includes dividends,interest, royalties, rents, and annuities. To avoid taxes and interest that a Portfolio must pay if these investments areprofitable, the Portfolio may make various elections permitted by the tax laws. These elections could require that aPortfolio recognize taxable income, which in turn must be distributed, before the securities are sold and before cash isreceived to pay the distributions.

Pay-in-kind bonds are debt securities that normally give the issuer an option to pay cash at a coupon payment date orgive the holder of the security a similar bond with the same coupon rate and a face value equal to the amount of thecoupon payment that would have been made.

Preferred stocks are equity securities that generally pay dividends at a specified rate and have preference over commonstock in the payment of dividends and liquidation. Preferred stock generally does not carry voting rights.

Real estate investment trust (REIT) is an investment trust that operates through the pooled capital of many investorswho buy its shares. Investments are in direct ownership of either income property or mortgage loans.

Rule 144A securities are securities that are not registered for sale to the general public under the Securities Act of1933, but that may be resold to certain institutional investors.

Standby commitment is a right to sell a specified underlying security or securities within a specified period of timeand at an exercise price equal to the amortized cost of the underlying security or securities plus accrued interest, ifany, at the time of exercise, that may be sold, transferred, or assigned only with the underlying security or securities.A standby commitment entitles the holder to receive same day settlement, and will be considered to be from the partyto whom the investment company will look for payment of the exercise price.

Step coupon bonds are high-quality issues with above-market interest rates and a coupon that increases over the life ofthe bond. They may pay monthly, semiannual, or annual interest payments. On the date of each coupon payment, theissuer decides whether to call the bond at par, or whether to extend it until the next payment date at the new couponrate.

Strip bonds are debt securities that are stripped of their interest (usually by a financial intermediary) after thesecurities are issued. The market value of these securities generally fluctuates more in response to changes in interestrates than interest-paying securities of comparable maturity.

Tender option bonds are relatively long-term bonds that are coupled with the option to tender the securities to a bank,broker-dealer, or other financial institution at periodic intervals and receive the face value of the bond. Thisinvestment structure is commonly used as a means of enhancing a security’s liquidity.

U.S. Government securities include direct obligations of the U.S. Government that are supported by its full faith andcredit. Treasury bills have initial maturities of less than one year, Treasury notes have initial maturities of one to tenyears, and Treasury bonds may be issued with any maturity but generally have maturities of at least ten years. U.S.Government securities also include indirect obligations of the U.S. Government that are issued by federal agencies andgovernment sponsored entities. Unlike Treasury securities, agency securities generally are not backed by the full faith

Glossary of investment terms 23

and credit of the U.S. Government. Some agency securities are supported by the right of the issuer to borrow from theTreasury, others are supported by the discretionary authority of the U.S. Government to purchase the agency’sobligations, and others are supported only by the credit of the sponsoring agency.

Variable and floating rate securities have variable or floating rates of interest and, under certain limitedcircumstances, may have varying principal amounts. Variable and floating rate securities pay interest at rates that areadjusted periodically according to a specified formula, usually with reference to some interest rate index or marketinterest rate (the ‘‘underlying index’’). The floating rate tends to decrease the security’s price sensitivity to changes ininterest rates.

Warrants are securities, typically issued with preferred stock or bonds, which give the holder the right to buy aproportionate amount of common stock at a specified price. The specified price is usually higher than the marketprice at the time of issuance of the warrant. The right may last for a period of years or indefinitely.

Zero coupon bonds are debt securities that do not pay regular interest at regular intervals, but are issued at a discountfrom face value. The discount approximates the total amount of interest the security will accrue from the date ofissuance to maturity. The market value of these securities generally fluctuates more in response to changes in interestrates than interest-paying securities.

II. FUTURES, OPTIONS, AND OTHER DERIVATIVES

Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third party credit riskfrom one party to the other. One party in the swap is a lender and faces credit risk from a third party, and thecounterparty in the credit default swap agrees to insure this risk in exchange of regular periodic payments.

Equity-linked structured notes are debt securities which combine the characteristics of common stock and the sale ofan option. The return component is based on the performance of a single equity security, a basket of equity securities,or an equity index and the sale of an option which is recognized as income. Equity-linked structured notes aretypically offered in limited transactions to financial institutions by investment banks, examples of which includeperformance equity-linked redemption quarterly pay securities (‘‘PERQS’’), yield-enhanced securities (‘‘YES’’), and yield-enhanced equity-linked debt securities (‘‘YEELDS’’). There is no guaranteed return of principal with these securities.The appreciation potential of these securities may be limited by a maximum payment or call right and can beinfluenced by many unpredictable factors.

Forward contracts are contracts to purchase or sell a specified amount of a financial instrument for an agreed uponprice at a specified time. Forward contracts are not currently exchange-traded and are typically negotiated on anindividual basis. A Portfolio may enter into forward currency contracts for investment purposes or to hedge againstdeclines in the value of securities denominated in, or whose value is tied to, a currency other than the U.S. dollar orto reduce the impact of currency appreciation on purchases of such securities. It may also enter into forward contractsto purchase or sell securities or other financial indices.

Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at aspecified price on a specified date. The Portfolio may buy and sell futures contracts on foreign currencies, securities,and financial indices including indices of U.S. Government, foreign government, equity, or fixed-income securities. APortfolio may also buy options on futures contracts. An option on a futures contract gives the buyer the right, but notthe obligation, to buy or sell a futures contract at a specified price on or before a specified date. Futures contracts andoptions on futures are standardized and traded on designated exchanges.

Indexed/structured securities are typically short- to intermediate-term debt securities whose value at maturity orinterest rate is linked to currencies, interest rates, equity securities, indices, commodity prices, or other financialindicators. Such securities may be positively or negatively indexed (e.g., their value may increase or decrease if thereference index or instrument appreciates). Indexed/structured securities may have return characteristics similar to


direct investments in the underlying instruments and may be more volatile than the underlying instruments. ThePortfolio bears the market risk of an investment in the underlying instruments, as well as the credit risk of the issuer.

Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest(e.g., an exchange of floating rate payments for fixed rate payments).

Inverse floaters are debt instruments whose interest rate bears an inverse relationship to the interest rate on anotherinstrument or index. For example, upon reset, the interest rate payable on the inverse floater may go down when theunderlying index has risen. Certain inverse floaters may have an interest rate reset mechanism that multiplies theeffects of change in the underlying index. Such mechanism may increase the volatility of the security’s market value.

Options are the right, but not the obligation, to buy or sell a specified amount of securities or other assets on orbefore a fixed date at a predetermined price. A Portfolio may purchase and write put and call options on securities,securities indices, and foreign currencies. A Portfolio may purchase or write such options individually or incombination.

Participatory notes are derivative securities which are linked to the performance of an underlying Indian security andwhich allow investors to gain market exposure to Indian securities without trading directly in the local Indian market.

III. OTHER INVESTMENTS, STRATEGIES, AND/OR TECHNIQUES

Repurchase agreements involve the purchase of a security by the Portfolio and a simultaneous agreement by the seller(generally a bank or dealer) to repurchase the security from the Portfolio at a specified date or upon demand. Thistechnique offers a method of earning income on idle cash. These securities involve the risk that the seller will fail torepurchase the security, as agreed. In that case, the Portfolio will bear the risk of market value fluctuations until thesecurity can be sold and may encounter delays and incur costs in liquidating the security.

Reverse repurchase agreements involve the sale of a security by the Portfolio to another party (generally a bank ordealer) in return for cash and an agreement by the Portfolio to buy the security back at a specified price and time.This technique will be used primarily to provide cash to satisfy unusually high redemption requests, or for othertemporary or emergency purposes.

Short sales in which the Portfolio may engage may be of two types, short sales ‘‘against the box’’ or ‘‘naked’’ shortsales. Short sales against the box involve selling either a security that the Portfolio owns, or a security equivalent inkind or amount to the security sold short that the Portfolio has the right to obtain, for delivery at a specified date inthe future. Naked short sales involve selling a security that the Portfolio borrows and does not own. The Portfolio mayenter into a short sale to hedge against anticipated declines in the market price of a security or to reduce portfoliovolatility. If the value of a security sold short increases prior to the scheduled delivery date, the Portfolio loses theopportunity to participate in the gain. For naked short sales, the Portfolio will incur a loss if the value of a securityincreases during this period because it will be paying more for the security than it has received from the purchaser inthe short sale. If the price declines during this period, the Portfolio will realize a short-term capital gain. Although thePortfolio’s potential for gain as a result of a short sale is limited to the price at which it sold the security short less thecost of borrowing the security, its potential for loss is theoretically unlimited because there is no limit to the cost ofreplacing the borrowed security.

When-issued, delayed delivery, and forward commitment transactions generally involve the purchase of a securitywith payment and delivery at some time in the future – i.e., beyond normal settlement. A Portfolio does not earninterest on such securities until settlement and bears the risk of market value fluctuations in between the purchase andsettlement dates. New issues of stocks and bonds, private placements, and U.S. Government securities may be sold inthis manner.

Glossary of investment terms 25

You can make inquiries and request other information, including aStatement of Additional Information, Annual Report, or SemiannualReport, free of charge, by contacting your insurance company or plansponsor, or by contacting a Janus representative at 1-800-525-0020.The Portfolio’s Statement of Additional Information and most recentAnnual and Semiannual Reports are also available, free of charge, onwww.janus.com. Additional information about the Portfolio’s invest-ments is available in the Portfolio’s Annual and Semiannual Reports.In the Portfolio’s Annual and Semiannual Reports, you will find adiscussion of the market conditions and investment strategies thatsignificantly affected the Portfolio’s performance during its last fiscalperiod. Other information is also available from financialintermediaries that sell Shares of the Portfolio.

The Statement of Additional Information provides detailed informa-tion about the Portfolio and is incorporated into this Prospectus byreference. You may review and copy information about the Portfolio(including the Portfolio’s Statement of Additional Information) at thePublic Reference Room of the SEC or get text only copies, after payinga duplicating fee, by sending an electronic request by e-mail [email protected] or by writing to or calling the Public ReferenceRoom, Washington, D.C. 20549-0102 (1-202-942-8090). Informationon the operation of the Public Reference Room may also be obtainedby calling this number. You may also obtain reports and otherinformation about the Portfolio from the Electronic Data GatheringAnalysis and Retrieval (EDGAR) Database on the SEC’s website athttp://www.sec.gov.

www.janus.com

151 Detroit StreetDenver, CO 80206-48051-800-525-0020

The Trust’s Investment Company Act File No. is 811-7736.

MFS® VARIABLE INSURANCE TRUST:

MFS Capital Opportunities Series MFS New Discovery Series MFS Emerging Growth Series MFS Research Bond Series MFS Global Equity Series MFS Research International Series MFS High Income Series MFS Research Series MFS Investors Growth Stock Series MFS Strategic Income Series MFS Investors Trust Series MFS Total Return Series MFS Mid Cap Growth Series MFS Utilities Series MFS Money Market Series MFS Value Series

Supplement to Current Prospectus:

Effective immediately, the sub-section entitled “IV – Management of the Series – Investment Adviser –Disclosure of Portfolio Holdings” is restated in its entirety as follows:

Disclosure of Portfolio Holdings. The MFS funds have established a policy with respect to the disclosure of fund portfolio holdings. A description of this policy is provided in the Statement of Additional Information. In addition, by clicking on a fund name under “Select a fund” on the MFS website, mfs.com, the following information is generally available to you:

Information Approximate Date of Posting to Web Site Fund’s full securities holdings as of each month’s end 24 days after month end Fund’s top 10 securities holdings as of each month’s end 14 days after month end

If a fund has substantial investments in both equity securities and debt instruments, the fund’s top ten equity holdings and top ten debt holdings will be made available. Note that the funds or MFS may suspend the posting of this information or modify the elements of this web posting policy without notice to shareholders. Once posted, the above information will remain available on the website until at least the date on which the series files a Form N-CSR or Form N-Q for the period that includes the date as of which the information is current.

Effective immediately, the sub-sections entitled “Right to Reject or Restrict Share Transaction Orders” and “Excessive Trading Practices” under the main heading entitled “VI – Other Information” are replaced in their entirety by the following:

Frequent Trading

• Right to Reject or Restrict Purchase and Exchange Orders. The Board of Trustees of the MFS funds has adopted the purchase and exchange limitation policies described below, which it believes are reasonably designed to discourage frequent fund share transactions. MFSC seeks to monitor and enforce these policies, subject to oversight by the Board of Trustees, pursuant to procedures approved by the Board of Trustees. The MFS funds may alter their policies at any time without notice to shareholders.

• Purchase and Exchange Limitation Policies. The MFS funds reserve the right to restrict or reject, without any prior notice, any purchase or exchange order, including transactions believed to represent frequent trading activity. For example, MFSC may in its discretion restrict or reject a purchase or exchange order even if the transaction is not subject to specific exchange or other limitations described in this prospectus if MFSC determines that accepting the order could interfere with the efficient management of a fund, increase costs to the fund, dilute the value of an investment in the fund to long-term

MFSSUP111Ed3/2007 1

shareholders, or otherwise not be in the fund's best interests. In the event that MFSC rejects an exchange request, neither the redemption nor the purchase side of the exchange will be processed. Each MFS fund reserves the right to delay for one business day the processing of exchange requests in the event that, in MFSC’s judgment, such delay would be in the funds' best interest, in which case both the redemption and purchase side of the exchange will receive the funds' net asset values at the conclusion of the delay period. The MFS funds may rely upon the insurance company, plan or eligible investor’s policy to restrict frequent trading and its monitoring of such policy in lieu of the MFS fund’s policy if MFSC believes that such policy is reasonably designed to identify and curtail trading activity that is not in the best interests of the fund. The insurance company, plan or other eligible investor through which your investment in a fund is made may impose transfer limitations and other limitations designed to curtail frequent trading which may be more or less restrictive than the MFS fund’s policy. In addition, the terms of a particular insurance company, plan or other eligible investment vehicle may also limit the ability of the insurance company, plan or other eligible investor to address frequent trading. Please refer to your insurance company contract, plan or other material for the investment vehicle through which your investment in a fund is made for details.

• Limitations on the Ability to Detect and Curtail Frequent Trading Practices. Shareholders seeking to engage in frequent trading practices may deploy a variety of strategies to avoid detection, and, despite the efforts of MFSC to prevent frequent trading, there is no assurance that MFSC will be able to identify such shareholders or curtail their trading practices. The ability of MFSC to detect and curtail frequent trading practices may also be limited by operational systems and technological limitations. The MFS funds receive purchase, exchange, and redemption orders through insurance company and retirement plans which maintain omnibus accounts with the funds. Omnibus account arrangements are common forms of holding shares of a fund, particularly among certain insurance companies offering variable insurance products and retirement plans. MFSC is generally not able to identify frequent trading by a particular underlying shareholder within an omnibus account which makes it difficult or impossible to determine if a particular underlying shareholder is engaged in frequent trading. However, MFSC reviews trading activity at the omnibus level to detect suspicious trading activity. If MFSC detects suspicious trading activity at the omnibus level it will contact the financial intermediary to request underlying shareholder level activity to determine whether there is underlying shareholder level frequent trading. In certain instances, a financial intermediary may be unwilling or unable to provide MFSC with information about underlying shareholder level activity. If frequent trading is identified, MFSC will take appropriate action. MFSC’s ability to monitor and deter frequent trading in omnibus accounts at the underlying shareholder level is dependent upon the capability and cooperation of the financial intermediary. Accordingly, depending upon the composition of a fund’s shareholder accounts and the level of cooperation provided by the financial intermediary, and in light of efforts made by certain shareholders to evade these policies, MFSC may not be in a position to monitor and deter frequent trading with respect to a significant percentage of a fund’s shareholders.

• Frequent Trading Risks. To the extent that the MFS funds or their agents are unable to curtail excessive trading practices in a fund, these practices may interfere with the efficient management of the fund, may result in increased transaction and administrative costs, and may adversely impact the fund’s performance. In addition, to the extent that the fund invests in foreign securities, the interests of long-term shareholders may be diluted as a result of time-zone arbitrage, a short-term trading practice that seeks to exploit changes in the value of the fund’s investments that result from events occurring after the close of the foreign markets on which the investments trade, but prior to the time the fund determines its net asset value. The fund’s use of fair valuation can serve to reduce arbitrage opportunities available to short-term traders, but there is no assurance that the fund’s fair valuation policies and procedures will prevent dilution of the fund’s net asset value by short-term traders.

2

To the extent that the fund invests in securities that trade infrequently or are difficult to value, such as the securities of smaller companies, high yield debt instruments, and floating rate loans, the interests of long-term shareholders may be diluted as a result of price arbitrage, a short-term trading strategy that seeks to exploit perceived pricing inefficiencies in the fund’s investments. Such short-term trading strategies may interfere with efficient management of the fund's portfolio to a greater degree than funds that invest in more frequently traded or liquid securities, in part because the fund may have difficulty selling these portfolio securities at advantageous times or prices to satisfy large and/or frequent redemption requests. Any successful price arbitrage may also cause dilution in the value of fund shares held by other shareholders.

The date of this supplement is March 8, 2007.

3

MFS® VARIABLE INSURANCE TRUST:

MFS Capital Opportunities Series MFS New Discovery Series MFS Emerging Growth Series MFS Research Bond Series MFS Global Equity Series MFS Research International Series MFS High Income Series MFS Research Series MFS Investors Growth Stock Series MFS Strategic Income Series MFS Investors Trust Series MFS Total Return Series MFS Mid Cap Growth Series MFS Utilities Series MFS Money Market Series MFS Value Series

Supplement to Current Prospectus:

Effective immediately, the following two paragraphs under the sub-section entitled “IV. Management of the Series – Investment Adviser,” are hereby restated in their entirety:

MFS Fund Distributors, Inc. or one or more of its affiliates (for purposes of this section only, collectively, “MFD”), out of their own resources, may make additional cash payments to insurance companies, plan sponsors and other eligible investors to whom shares of the series are offered (collectively, together with their affiliates, “Record Owners”) as incentives to market the series or to cooperate with MFD’s promotional efforts or in recognition of their marketing and/or administrative support. This compensation, which is paid by MFD, is not reflected in the fees and expenses listed in the fee table section of the series’ prospectus. MFD compensates Record Owners based on criteria established by MFD from time to time that consider, among other factors, the level and/or type of marketing and administrative support provided by the Record Owner, the level of assets attributable to and/or sales by the Record Owner, and the quality of the overall relationship with the Record Owner. These payments may provide an additional incentive to Record Owners to actively promote the series or cooperate with MFD’s promotional efforts. Depending on the arrangements in place at any particular time, a Record Owner may have a financial incentive to recommend a particular series or a share class. You can find further details in the SAI about the payments made by MFD and the services provided by Record Owners. In addition, you can ask your Record Owner for information about any payments it receives from MFD and any services provided, as well as about any fees and/or commissions it charges in addition to those disclosed in this prospectus. Record Owners that market the series may also act as, or be affiliated with, a broker or dealer in connection with a series’ purchase or sale of portfolio securities. However, the series and MFS do not consider a Record Owner’s purchases of shares of a series as a factor when choosing brokers or dealers to effect portfolio transactions for the series.

The date of this supplement is January 1, 2007.

MFSSUP110 Ed. 1/2007

MFSSUP109 Ed. 10/2006

MFS® Variable Insurance Trust

MFS® CAPITAL OPPORTUNITIES SERIES MFS® NEW DISCOVERY SERIES MFS® EMERGING GROWTH SERIES MFS® RESEARCH BOND SERIES MFS® GLOBAL EQUITY SERIES MFS® RESEARCH INTERNATIONAL SERIES MFS® HIGH INCOME SERIES MFS® RESEARCH SERIES MFS® INVESTORS GROWTH STOCK SERIES MFS® STRATEGIC INCOME SERIES MFS® INVESTORS TRUST SERIES MFS® TOTAL RETURN SERIES MFS® MID CAP GROWTH SERIES MFS® UTILITIES SERIES MFS® MONEY MARKET SERIES MFS® VALUE SERIES

Supplement to Current Prospectus

This prospectus supplement supersedes and replaces the funds’ prospectus supplement dated May 1, 2006. Effective immediately, the following is added to the prospectus: Legal Proceedings. Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center, Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various MFS funds, certain current and/or former Trustees of the MFS funds, and certain officers of MFS have been named as defendants in multiple lawsuits filed in federal and state courts. The various lawsuits generally allege that some or all of the defendants (i) permitted or acquiesced in market timing and/or late trading in some of the MFS funds, and inadequately disclosed MFS’ internal policies concerning market timing and such matters, (ii) received excessive compensation as fiduciaries with respect to the MFS funds, or (iii) permitted or acquiesced in the improper use of fund assets by MFS to support the distribution of MFS fund shares and inadequately disclosed MFS’ use of fund assets in this matter. The lawsuits assert that some or all of the defendants violated the federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934, the Investment Company Act of 1940 and the Investment Advisers Act of 1940, the Employee Retirement Income Security Act of 1974 (ERISA), as well as fiduciary duties and other violations of common law. The lawsuits variously have been commenced as class actions or individual actions on behalf of investors who purchased, held or redeemed shares of the MFS funds during specified periods, as ERISA actions by participants in certain retirement plan accounts on behalf of those accounts, or as derivative actions on behalf of the MFS funds. The lawsuits relating to market timing and related matters have been transferred to, and consolidated before, the United States District Court for the District of Maryland, as part of a multi-district litigation of market timing and related claims involving several other fund complexes (In re Mutual Funds Investment Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner), No. 1:04-md-15863 (transfer began March 19, 2004)). The market timing cases related to the MFS funds include Riggs v. MFS et al., Case No. 04-CV-01162-JFM (direct), Hammerslough v. MFS et al., Case No. 04-MD-01620 (derivative), Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA), and Reaves v. MFS Series Trust I, et al., Case No. 1:05-CV-02220-JFM (Class B Shares). The plaintiffs in these consolidated lawsuits generally seek injunctive relief including removal of the named Trustees, adviser and distributor, rescission of contracts and 12b-1 Plans, disgorgement of fees and profits, monetary damages, punitive damages, attorney’s fees and costs and other equitable and declaratory relief. Two lawsuits alleging improper brokerage allocation practices and excessive compensation are pending in the United States District Court for the District of Massachusetts (Forsythe v. Sun Life Financial Inc., et al., No. 04cv10584 (GAO) (a consolidated action, first filed on March 25, 2004) and Marcus Dumond, et al. v. Massachusetts Financial Servs. Co., et al., No. 04cv11458 (GAO) (filed on May 4, 2004)). The plaintiffs in these lawsuits generally seek compensatory damages, punitive damages, recovery of fees, rescission of contracts, an accounting, restitution, declaratory relief, equitable and/or injunctive relief and attorney’s fees and costs. Insofar as any of the actions is appropriately brought derivatively on behalf of any of the MFS funds, any recovery will inure to the benefit of the MFS funds. Several claims of the various lawsuits have been dismissed; MFS and other named defendants continue to defend the various lawsuits.

The date of this supplement is October 1, 2006.

ProspectusM A Y 1 , 2 0 0 6 Initial Class

MFS® EMERGING GROWTH SERIES

This Prospectus describes one series of the MFS Variable Insurance Trust (referred to as the trust), which offers Initial Class shares.1. MFS Emerging Growth Series seeks to provide long-term growth of capital (referred to as the Emerging Growth Series).

The Securities and Exchange Commission has not approved or disapproved the series’ shares or determined whether thisprospectus is accurate or complete. Anyone who tells you otherwise is committing a crime.

MFS® VARIABLE INSURANCE TRUSTSM

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Page

I Expense Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II Risk Return Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1. Emerging Growth Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

III Certain Investment Strategies and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

IV Management of the Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

V Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

VI Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

VII Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Appendix A — Investment Techniques and Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

TABLE OF CONTENTS

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The trust offers Initial Class shares of its 16 series to separate accounts established by insurance companies in order to serve as investmentvehicles for variable annuity and variable life insurance contracts, to qualified pension and retirement plans and to other eligible investors. Eachof these series is managed by Massachusetts Financial Services Company (referred to as MFS or the adviser). One of these is described below.

Expense TableThis table describes the fees and expenses that you may pay when you hold initial class shares of each series. These expenses do not take intoaccount the fees and expenses imposed by the investment vehicle through which an investment in a series is made. If these fees and expenseswere included, expenses shown would be higher.

Annual Series Operating Expenses (expenses that are deducted from a series’ assets):EmergingGrowthSeries

Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%Other Expenses(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.13%Total Annual Series Operating Expenses(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.88%

Fee Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/ANet Expenses(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.88%

(1) Each series has an expense offset arrangement that reduces the series’ custodian fee based upon the amount of cash maintained by the series with its custodian anddividend disbursing agent, and may have entered into brokerage arrangements that reduced or recaptured series’ expenses. Any such fee reductions are not reflected inthe table. Had these fee reductions been taken into account, “Net Expenses” would be lower.

Example of Expenses—Initial ClassThese examples are intended to help you compare the cost of investing in the series with the cost of investing in other mutual funds. These examplesdo not take into account the fees and expenses imposed by the investment vehicle through which your investment in a series is made. If these feesand expenses were included, expenses shown would be higher.

This example assumes that:

• You invest $10,000 in the series for the time periods indicated and you redeem your shares at the end of the time periods;

• Your investment has a 5% return each year and dividends and other distributions are reinvested; and

• The series’ operating expenses remain the same, except that total operating expenses are assumed to be the series’ “Net Expenses” for theperiod during which any written fee reductions are in effect (see “Expense Summary—Expense Table” above).

Although your actual costs may be higher or lower, under these assumptions your costs would be:Period

1 Year 3 Years 5 Years 10 Years

Emerging Growth Series $90 $281 $488 $1,084

I EXPENSE SUMMARY

1

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Investment strategies which are common to all series are described under the caption “Certain Investment Strategies.”

1: Emerging Growth Series

Investment ObjectiveThe series’ investment objective is long-term growth of capital. This objective may be changed without shareholder approval.

Principal Investment Policies and StrategiesThe series invests, under normal market conditions, at least 65% of its net assets in common stocks and related securities, such as preferredstocks, convertible securities and depositary receipts for those securities, of emerging growth companies. Emerging growth companies arecompanies which MFS believes are either:

• early in their life cycle but which have the potential to become major enterprises, or

• major enterprises which MFS believes have above-average growth prospects or whose rates of earnings growth are expected to acceleratebecause of special factors, such as rejuvenated management, new products, changes in consumer demand, or basic changes in theeconomic environment.

Emerging growth companies may be of any size, and MFS would expect these companies to have products, technologies, management,markets and opportunities which will facilitate earnings growth over time that is well above the growth rate of the overall economy and therate of inflation. The series’ investments may include securities listed on a securities exchange or traded in the over-the-counter (OTC) markets.

MFS uses a bottom-up, as opposed to a top-down, investment style in managing the equity-oriented funds (such as the series) it advises. Thismeans that securities are selected based upon fundamental analysis (such as an analysis of earnings, cash flows, competitive position andmanagement’s abilities) performed by the series’ portfolio manager and MFS’ large group of equity research analysts.

The series may invest in foreign securities (including emerging market securities), through which it may have exposure to foreign currencies.

The series has engaged and may engage in active and frequent trading to achieve its principal investment strategies.

Principal Risks of an InvestmentThe principal risks of investing in the series and the circumstances reasonably likely to cause the value of your investment in the series todecline are described below. The share price of the series generally changes daily based on market conditions and other factors. Please notethat there are many circumstances which could cause the value of your investment in the series to decline, and which could prevent the seriesfrom achieving its objective, that are not described here.

The principal risks of investing in the series are:

• Market Risk: This is the risk that the price of a security held by the series will fall due to changing economic, political or market conditionsor disappointing earnings results.

• Emerging Growth Risk: Prices of securities react to the economic condition of the company that issued the security. The series’ equityinvestments in an issuer may rise and fall based on the issuer’s actual and anticipated earnings, changes in management and the potentialfor takeovers and acquisitions. Investments in emerging growth companies may be subject to more abrupt or erratic market movements andmay involve greater risks than investments in other companies. Emerging growth companies often:

� have limited product lines, markets and financial resources

� are dependent on management by one or a few key individuals

� have shares which suffer steeper than average price declines after disappointing earnings reports and are more difficult to sell atsatisfactory prices

• Over-the-Counter Risk: OTC transactions involve risks in addition to those incurred by transactions in securities traded on exchanges. OTC-listed companies may have limited product lines, markets or financial resources. Many OTC stocks trade less frequently and in smallervolume than exchange-listed stocks. The values of these stocks may be more volatile than exchange-listed stocks, and the series mayexperience difficulty in purchasing or selling these securities at a fair price.

• Foreign Securities Risk: Investments in foreign securities involve risks relating to political, social and economic developments abroad, as wellas risks resulting from the differences between the regulations to which U.S. and foreign issuers and markets are subject:

� These risks may include the seizure by the government of company assets, excessive taxation, withholding taxes on dividends andinterest, limitations on the use or transfer of portfolio assets, and political or social instability.

II RISK RETURN SUMMARY

2

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� Enforcing legal rights may be difficult, costly and slow in foreign countries, and there may be special problems enforcing claimsagainst foreign governments.

� Foreign companies may not be subject to accounting standards or governmental supervision comparable to U.S. companies, and theremay be less public information about their operations.

� Foreign markets may be less liquid and more volatile than U.S. markets.

� Foreign securities often trade in currencies other than the U.S. dollar, and the series may directly hold foreign currencies and purchaseand sell foreign currencies through forward exchange contracts. Changes in currency exchange rates will affect the series’ net assetvalue, the value of dividends and interest earned, and gains and losses realized on the sale of securities. An increase in the strengthof the U.S. dollar relative to these other currencies may cause the value of the series to decline. Certain foreign currencies may beparticularly volatile, and foreign governments may intervene in the currency markets, causing a decline in value or liquidity in theseries’ foreign currency holdings. By entering into forward foreign currency exchange contracts, the series may be required to foregothe benefits of advantageous changes in exchange rates and, in the case of forward contracts entered into for the purpose ofincreasing return, the series may sustain losses which will reduce its gross income. Forward foreign currency exchange contractsinvolve the risk that the party with which the series enters into the contract may fail to perform its obligations to the series.

• Emerging Markets Risk: Emerging markets are generally defined as countries in the initial stages of their industrialization cycles with lowper capita income. The markets of emerging markets countries are generally more volatile than the markets of developed countries withmore mature economies. All of the risks of investing in foreign securities described above are heightened when investing in emergingmarkets countries.

• Active and Frequent Trading Risk: The series has engaged and may engage in active and frequent trading to achieve its principal investmentstrategies. Frequent trading increases transaction costs, which could detract from the series’ performance.

• As with any mutual fund, you could lose money on your investment in the series.

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

Bar Chart and Performance TableThe bar chart and performance table below are intended to indicate some of the risks of investing in the series by showing changes in theseries’ performance over time. The performance table also shows how the series’ performance over time compares with that of one or morebroad measures of market performance. The chart and table provide past performance information. The series’ past performance does notnecessarily indicate how the series will perform in the future. The returns shown do not reflect fees and expenses imposed by the investmentvehicle through which an investment in the series is made. If these fees and expenses were included, they would reduce these returns.

Bar ChartThe bar chart shows changes in the annual total returns of the series’ Initial Class shares, assuming the reinvestment of distributions.

^ The series’ 2003 total return includes proceeds received by the series from a non-recurring litigation settlement. Excluding the effect of this payment, the series’ 2003annual total return would have been 29.48% (see Financial Highlights for more information).

During the period shown in the bar chart, the highest quarterly return was 55.05% (for the calendar quarter ended December 31, 1999) andthe lowest quarterly return was (29.03)% (for the calendar quarter ended September 30, 2001).

-60

20

40

60

100

-20

0

80

1996

17.02%

1997

21.90%

1998

34.16%

(33.76)%(33.49)%

2004 2005200320022001

76.71%

1999

(19.61)%

2000

-40

12.96% 9.19%

30.23%^

3


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Performance TableThis table shows how the average annual total returns of the series’ shares compare to a broad measure of market performance and one ormore other market indicators and assumes the reinvestment of distributions.

Average Annual Total Returns (for the periods ended December 31, 2005)

1 Year 5 Year^ 10 Year^

Emerging Growth Series—Initial Class Shares 9.19% (6.68)% 6.76%Russell 3000 Growth Index*† 5.17% (3.15)% 6.48%

^ A portion of the returns shown is attributable to the receipt of a non-recurring payment in settlement of a class action lawsuit (see ”Financial Highlights”).* Source: Standard & Poor’s Micropal, Inc.† The Russell 3000 Growth Index measures U.S. growth stocks.

All performance results reflect any applicable expense subsidies and waivers in effect during the periods shown; without these, the resultswould have been less favorable.

Portfolio ManagersInformation regarding the portfolio managers of the Series is set forth below. Further information regarding the series’ portfolio managers,including other accounts managed, compensation, ownership of series shares and possible conflicts of interest, is available in the series’Statement of Additional Information. The portfolio managers are primarily responsible for the day-to-day management of the series.

Portfolio Manager Primary Role Since Title and Five Year History

Senior Vice President of MFS; employedin the investment management area ofMFS since 1995.

2000Portfolio ManagerDavid E. Sette-Ducati

Vice President of MFS; employed in theinvestment management area of MFSsince 2000. Prior to 2000 Mr. Fischmanwas employed as an Equity ResearchAnalyst for State Street Research &Management Co.

2002Lead PortfolioManager

Eric B. Fischman

4



Further Information on Investment Strategies and RisksEach series may invest in various types of securities and engage in various investment techniques and practices that are not the principal focusof the series and therefore are not described in this prospectus. The types of securities and investment techniques and practices in which aseries may engage, including the principal investment techniques and practices described above, are identified in Appendix A to thisProspectus, and are discussed, together with their risks, in the trust’s Statement of Additional Information (referred to as the SAI), which youmay obtain by contacting the series’ transfer agent, MFS Service Center, Inc. (please see back cover for address and telephone number).

Temporary Defensive PoliciesEach series may depart from its principal investment strategies by temporarily investing for defensive purposes when adverse market,economic or political conditions exist. While a series invests defensively, it may not be able to pursue its investment objective. A seriesdefensive investment position may not be effective in protecting its value.

Active and Frequent TradingEach series, except for the Money Market Series, may engage in active and frequent trading to achieve its principal investment strategies. Thismay result in the realization of a higher percentage of short-term capital gains and a lower percentage of long-term capital gains, as comparedto a series with less active trading policies. Frequent trading also increases transaction costs, which could detract from the series’performance.

Investment AdviserMassachusetts Financial Services Company (referred to as MFS or the adviser) is the investment adviser to each series. MFS is America’soldest mutual fund organization. MFS and its predecessor organizations have a history of money management dating from 1924 and thefounding of the first mutual fund, Massachusetts Investors Trust. Net assets under the management of the MFS organization wereapproximately $163 billion as of December 31, 2005. MFS is located at 500 Boylston Street, Boston, Massachusetts 02116.

MFS provides investment management and related administrative services and facilities to each series, including portfolio management andtrade execution. For these services, each series pays MFS an annual management fee, based on the series’ average daily net assets.

For the fiscal year ended December 31, 2005, each series paid MFS an effective management fee rate as set forth under “Expense Summary—Expense Table” above, except for the following series, which paid MFS an effective management fee for this period as follows:

EffectiveManagement

Fee—FYESeries 2005

MFS Research Bond Series………………………………………………………….0.53%

The management fee set forth in each series’ Investment Advisory Agreement, as a percentage of such series’ average daily net assets, equalsits effective fee as set forth under “Expense Summary—Expense Table” above.

Effective May 1, 2005, MFS agreed in writing to reduce its management fee from 0.60% to 0.50% annually of the series’ average daily netassets for MFS Research Bond Series.

IV MANAGEMENT OF THE SERIES

III CERTAIN INVESTMENT STRATEGIES AND RISKS

5

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Effective August 1, 2005, MFS agreed in writing to reduce its management fee as a percentage annually of each series’ average daily netassets for each series shown as follows:

Series Management Fee

MFS Capital Opportunities Series From 0.75% to 0.65% on average daily net assets over $1 billionMFS Emerging Growth SeriesMFS High Income SeriesMFS Investors Growth Stock SeriesMFS Investors Trust SeriesMFS Research SeriesMFS Strategic Income SeriesMFS Value Series

MFS New Discovery Series From 0.90% to 0.80% on average daily net assets over $1 billion

MFS Total Return Series From 0.75% to 0.65% on average daily net assets over $3 billion

MFS Mid Cap Growth Series From 0.75% to 0.70% on average daily net assets over $1 billionMFS Utilities Series

MFS Global Equity Series From 1.00% to 0.90% on average daily net assets over $1 billion

These written agreements will remain in effect until modified by the series’ Board of Trustees and MFS.

A discussion regarding the basis for the Board of Trustees’ approval of the Investment Advisory Agreement between the series and MFS isavailable in each series’ Annual Report to shareholders for the fiscal year ended December 31, 2005.

MFS Fund Distributors, Inc. or one or more of its affiliates (for purposes of this section only, collectively, “MFD”), out of their own resources,may make additional cash payments to insurance companies, plan sponsors and other eligible investors to whom shares of the series areoffered (collectively, together with their affiliates, “Record Owners”) as incentives to market the series or to cooperate with MFD’s promotionalefforts or in recognition of their marketing and/or administrative support. This compensation, which is paid by MFD, is not reflected in the feesand expenses listed in the fee table section of the series’ prospectus. In the case of any one Record Owner, marketing and administrativesupport payments generally will not exceed 0.25% of the total assets of the series attributable to the Record Owner, on an annual basis. Thisrestriction is subject to certain limited exceptions and may be increased or otherwise modified by MFD from time to time. To the extentpermitted by SEC and NASD rules and other applicable laws and regulations, MFD may pay or allow other promotional incentives or paymentsto Record Owners.

These payments may provide an additional incentive to Record Owners to actively promote the series or cooperate with MFD’s promotionalefforts. Depending on the arrangements in place at any particular time, a Record Owner may have a financial incentive to recommend aparticular series or a share class. You can find further details in the SAI about the payments made by MFD and the services provided by RecordOwners. In addition, you can ask your Record Owner for information about any payments it receives from MFD and any services provided, aswell as about any fees and/or commissions it charges in addition to those disclosed in this prospectus. Record Owners that market the seriesmay also act as, or be affiliated with, a broker or dealer in connection with a series’ purchase or sale of portfolio securities. However, the seriesand MFS do not consider a Record Owner’s purchases of shares of a series as a factor when choosing brokers or dealers to effect portfoliotransactions for the series.

DISCLOSURE OF PORTFOLIO HOLDINGS. The MFS funds have established a policy with respect to the disclosure of series portfolioholdings. A description of this policy is provided in the Statement of Additional Information. In addition, by clicking on a series name under“Select a fund” on the MFS website, mfs.com, the following information is generally available to you:

INFORMATION APPROXIMATE DATE OF POSTING TO WEBSITE

Series’ top 10 securities holdings as of each month’s end 14 days after month endSeries’ full securities holdings as of each month’s end 29 days after month end

Note that the series or MFS may suspend the posting of this information or modify the elements of this web posting policy without notice toshareholders. Once posted, the above information will remain available on the website until at least the date on which the series files a Form N-CSR or Form N-Q for the period that includes the date as of which the information is current.

AdministratorMFS provides each series with certain financial, legal, compliance, shareholder communications and other administrative services. MFS isreimbursed by each series for a portion of the costs it incurs in providing these services.

6



DistributorMFS Fund Distributors, Inc. (referred to as MFD), a wholly owned subsidiary of MFS, is the distributor of shares of each series.

Shareholder Servicing AgentMFS Service Center, Inc. (referred to as MFSC), a wholly owned subsidiary of MFS, performs transfer agency and certain other services for eachseries, for which it receives compensation from each series.

The trust offers Initial and Service Class shares of each fund (except the Money Market Series which only offers Initial Class shares). InitialClass shares are offered through this prospectus. If you would like to receive a copy of the prospectus for Service Class shares, please call theMFS Service Center. These shares are offered to separate accounts established by insurance companies in order to serve as investmentvehicles for variable annuity and variable life insurance contracts and to qualified pension and retirement plans. All purchases, redemptionsand exchanges of shares are made through these insurance company separate accounts, plans, and other eligible investors, which are therecord owner of the shares. Contract holders and plan beneficiaries seeking to purchase, redeem or exchange interests in the trust’s sharesshould consult with the insurance company which issued their contracts or their plan sponsor.

Pricing of Series’ SharesThe price of each class of the series’ shares is based on its net asset value. The net asset value of each class of shares is determined once eachday during which the New York Stock Exchange is open for trading as of the close of regular trading on the New York Stock Exchange (generally,4:00 p.m., Eastern time) (referred to as the valuation time). Net asset value per share is computed by dividing the net assets allocated to eachshare class by the number of series shares outstanding for that class. On holidays or other days (such as Good Friday) when the New York StockExchange is closed, net asset value is not calculated, and the series’ do not transact purchase, exchange or redemption orders.

To determine net asset value, each series’ investments, except for MFS Money Market Series, for which reliable market quotations are readilyavailable are valued at market value. Certain short term debt instruments are valued at amortized cost.

The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the series’ investments(including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines thatreliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser inaccordance with such procedures under the oversight of the Board of Trustees.

Under the series’ valuation policies and procedures, market quotations are not considered to be readily available for many types of debtinstruments. These investments are generally valued at fair value based on information from independent pricing services. These valuations canbe based on both dealer-supplied valuations and electronic data processing techniques, which take into account factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data.

In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by eventsoccurring after the close of the exchange or market on which the investment is principally traded (such as a foreign exchange or market) andprior to the determination of the series’ net asset value, or after the halting of trading of a specific security where trading does not resumeprior to the close of the exchange or market on which the security is principally traded. Events that occur on a frequent basis after foreignmarkets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of theseries’ net asset value may be deemed to have a material affect on the value of securities traded in foreign markets. Accordingly, the series’foreign equity securities may often be valued at fair value. The adviser may rely on independent pricing services or other information (such asthe correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of thesecurity; the business and financial condition of the issuer, and trading and other market data) to assist in determining whether to fair valueand at what value to fair value an investment. The value of an investment for purposes of calculating the series’ net asset value can differdepending on the source and method used to determine value. When fair valuation is used, the value of investments used to determine theseries’ net asset value may differ from quoted or published prices for the same investments.

To determine net asset value, the MFS Money Market Series’ investments are generally valued at amortized cost.

Certain series invest in securities which are primarily listed on foreign exchanges that trade on weekends and other days when the series doesnot price its shares. Therefore, the value of these series’ shares may change on days when you will not be able to purchase or redeem their shares.

VI OTHER INFORMATION

V DESCRIPTION OF SHARES

7



All purchases, redemptions, and exchanges of shares are made through insurance company separate accounts, Plans, and other eligibleinvestors, which are the record owner of the shares. Contract holders, plan beneficiaries, and other investors seeking to purchase, redeem, orexchange interests in the series’ shares should consult with the insurance company, plan sponsor or other eligible investor through which theirinvestment in the series is made.

Insurance companies, plan sponsors and other eligible investors are the designees of the trust for receipt of purchase, exchange andredemption orders from contractholders and plan beneficiaries. An order submitted to the trust’s designee by the valuation time will receivethe net asset value next calculated; provided that the trust receives notice of the order generally by 10:00 a.m. Eastern time on the next dayon which the New York Stock Exchange is open for trading.

DistributionsEach series (except the Money Market Series) intends to pay substantially all of its net income (including any capital gains) to shareholders atleast annually.

The Money Market Series intends to declare daily as dividends substantially all of its net income (excluding any realized net capital gains) andto pay these dividends to shareholders at least monthly. The series intends to distribute any realized net capital gains at least annually.

Tax ConsiderationsThe following discussion is very general. You are urged to consult your tax adviser regarding the effect that an investment in a series may haveon your tax situation. Each series of the trust is treated as a separate corporation for federal tax purposes. As long as a series qualifies fortreatment as a regulated investment company (which each series has done in the past and intends to do in the future), it pays no federal incometax on the net earnings and net realized gains it distributes to shareholders. In addition, each series also intends to continue to diversify itsassets to satisfy the federal diversification tax rules applicable to separate accounts that fund variable insurance and annuity contracts.

Shares of the series are offered to insurance company separate accounts and to qualified retirement and pension plans. You should consultwith the insurance company that issued your contract or your plan sponsor to understand the federal tax treatment of your investment.

Right to Reject or Restrict Share Transaction OrdersRight to Reject or Restrict Share Transaction Orders. Purchases and exchanges should be made primarily for investment purposes. TheBoard of Trustees of the MFS funds has adopted the policies described below, which are designed to discourage frequent fund share transactions.MFS seeks to monitor and enforce these policies, subject to the oversight by the Board of Trustees, pursuant to procedures adopted by MFS.

Excessive Trading PracticesPurchase and Exchange Limitation Policies. As a matter of policy adopted by the Trustees, the series reserve the right to restrict, reject orcancel (with respect to cancellations, within one day of the order), without any prior notice, any purchase or exchange order, including transactionsdeemed to represent excessive trading (e.g., trading, which in the reasonable judgment of the series or its agents, may disrupt portfolio investmentstrategies or otherwise adversely affect the series). This policy applies to transactions accepted by an insurance company or retirement plan sponsorthrough which the transaction is placed. In the event that the series reject or cancel an exchange request, neither the redemption nor the purchaseside of the exchange will be processed.

Limitations on Ability to Detect and Curtail Excessive Trading Practices. Shareholders seeking to engage in excessive trading practicesmay deploy a variety of strategies to avoid detection, and there is no guarantee that the series or their agents will be able to identify suchshareholders or curtail their trading practices. The ability of the series and their agents to detect and curtail excessive trading practices mayalso be limited by operational systems and technological limitations. In addition, the series receive purchase, exchange and redemption ordersfrom insurance companies and retirement plans which maintain omnibus accounts with the series. Omnibus account arrangements are commonforms of holding shares of a series, particularly among insurance companies offering variable insurance products and retirement plans. Thesearrangements often permit the intermediaries to aggregate their clients’ transactions and ownership positions. In these circumstances, theidentity of the particular shareholder(s) is not known to a series or its agents. Therefore, the ability of the series or its agents to detectexcessive trading practices with respect to shares held through omnibus arrangements is limited, and trading patterns representing asignificant percentage of shareholders’ account activity may not be monitored by the series or its agents. The insurance company, plan or othereligible investor through which your investment in the series is made may impose transfer limitations and other limitations designed to curtailexcessive trading. In addition, the terms of a particular insurance company contract, plan, or other investment vehicle may also limit the abilityof the insurance company, plan or other eligible investor to address excessive trading. Please refer to your insurance company contract, plan,or other material for the investment vehicle through which your investment in the series is made for details. Given the limitations of the seriesor its agents to detect and curtail excessive trading activity and their reliance on an insurance company, plan or other eligible investor to

8



effectively address potential excessive trading activity, there is a risk that the series’ policies may not be applied uniformly and may beineffective to detect or prevent excessive trading practices. As a result, the series can give no assurances that excessive trading practices willnot occur in the series, and shareholders may be subject to the risks associated with excessive trading practices as described below.

Excessive Trading Risks. To the extent that the series or their agents are unable to curtail excessive trading practices in a series, thesepractices may interfere with the efficient management of the series’ portfolio, and may result in the series engaging in certain activities to agreater extent then it otherwise would, such as maintaining higher cash balances, using its line of credit and engaging in portfolio transactions.Increased portfolio transactions and use of the line of credit would correspondingly increase the series’ operating costs and decrease theseries’ investment performance, and maintenance of a high level of cash balances would likewise result in lower series investmentperformance during periods of rising markets.

For series that significantly invest in foreign securities traded on markets which may close prior to when the series determines its net assetvalue (referred to as valuation time), excessive trading by certain shareholders may cause dilution in the value of series shares held by othershareholders. Because events may occur after the close of these foreign markets and before the series’ valuation time that influence the valueof these foreign securities, investors may seek to trade shares in an effort to benefit from their understanding of the value of these foreignsecurities as of the series’ valuation time (referred to as price arbitrage). The series have procedures designed to adjust closing market pricesof foreign securities under certain circumstances to reflect what they believe to be the fair value of the securities as of the series’ valuationtime. To the extent that a series does not accurately value foreign securities as of its valuation time, investors engaging in price arbitrage maycause dilution in the value of shares of that series held by other shareholders.

For series that significantly invest in high yield (commonly known as junk bonds) or small cap equity securities, because these securities areoften infrequently traded, investors may seek to trade series shares in an effort to benefit from their understanding of the value of thesesecurities (referred to as price arbitrage). Any such frequent trading strategies may interfere with efficient management of the series’ portfolioto a greater degree than series which invest in highly liquid securities, in part because the series may have difficulty selling these portfoliosecurities at advantageous times or prices to satisfy large and/or frequent redemption requests. Any successful price arbitrage may also causedilution in the value of series shares held by other shareholders.

Unique Nature of SeriesMFS may serve as the investment adviser to other funds which have investment goals and principal investment policies and risks similar tothose of the series, and which may be managed by the series’ portfolio manager(s). While a series may have many similarities to these otherfunds, its investment performance will differ from their investment performance. This is due to a number of differences between a series andthese similar products, including differences in sales charges, expense ratios and cash flows.

Potential ConflictsShares of the series are offered to the separate accounts of insurance companies that may be affiliated or unaffiliated with MFS and eachother (“shared funding”) and may serve as the underlying investments for both variable annuity and variable life insurance contracts (“mixedfunding”). Due to differences in tax treatment or other considerations, the interests of various contract owners might at some time be inconflict. The trust currently does not foresee any such conflict. Nevertheless, the Board of Trustees which oversees the series intends to monitorevents in order to identify any material irreconcilable conflicts which may possibly arise and to determine what action, if any, should be taken inresponse. If such a conflict were to occur, one or more separate accounts of the insurance companies might be required to withdraw itsinvestments in one or more series. This might force a series to sell securities at disadvantageous prices.

The financial highlights tables are intended to help you understand the series’ financial performance for the past five years, or, if a series hasnot been in operation that long, since the time it commenced investment operations. Certain information reflects financial results for a singleseries’ share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in a series(assuming reinvestment of all distributions). The per share data in the financial highlights tables, including total returns, do not reflect fees andcharges imposed under the variable annuity and variable life insurance contracts through which an investment may be made. If these fees andcharges were included, they would reduce total return. This information has been audited by the trust’s independent registered publicaccounting firm , whose report, together with the trust’s financial statements, are included in the trust’s Annual Report to shareholders. Theseries’ Annual Report is available upon request by contacting MFSC (please see back cover for address and telephone number). The financialstatements contained in the Annual Report are incorporated by reference into the SAI. The trust’s independent registered public accountingfirm is Deloitte & Touche LLP.

VII FINANCIAL HIGHLIGHTS

9



10

1. Emerging Growth Series—Initial Class

Years Ended 12/31

2005 2004 2003 2002 2001

Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 17.52 $ 15.51 $ 11.91 $ 17.98 $ 28.85Income (loss) from investment operationsNet investment loss(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.05) $ (0.03) $ (0.03) $ (0.04) $ (0.03)Net realized and unrealized gain (loss) on investmentsand foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.66 2.04 3.63 (6.03) (9.44)Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . $ 1.61 $ 2.01 $ 3.60 $ (6.07) $ (9.47)Less distributions declared to shareholdersFrom net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ — $ — $ (1.04)From net realized gain on investments and foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — (0.36)Total distributions declared to shareholders . . . . . . . . . . . . . . . . $ — $ — $ — $ — $ (1.40)Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19.13 $ 17.52 $ 15.51 $ 11.91 $ 17.98Total return (%) (k)(s)(r) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.19 12.96(b) 30.23(j) (33.76) (33.49)Ratios (%) (to average net assets) and Supplemental data:Expenses before expense reductions(f) . . . . . . . . . . . . . . . . . . . . 0.88 0.87 0.87 0.86 0.87Expenses after expense reductions(f) . . . . . . . . . . . . . . . . . . . . . 0.88 0.87 0.87 0.86 0.87Net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.29) (0.17) (0.22) (0.24) (0.14)Portfolio turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 99 103 111 231Net assets at end of period (000 Omitted) . . . . . . . . . . . . . . . . . $761,444 $830,410 $849,718 $757,499 $1,462,469

(b) The series’ net asset value and total return calculation include a non-recurring accrual recorded as a result of an administrative proceeding regarding disclosure ofbrokerage allocation practices in connection with fund sales. The non-recurring accrual resulted in an increase in the net asset value of $0.01 per share based on sharesoutstanding on the day the proceeds were recorded.

(d) Per share data are based on average shares outstanding.(f) Ratios do not reflect reductions from fees paid indirectly.(j) The series’ net asset value and total return calculation include proceeds received on March 26, 2003 for the partial payment of a non-recurring litigation settlement

from Cendant Corporation, recorded as a realized gain on investment transactions. The proceeds resulted in an increase in the net asset value of $0.09 per share basedon shares outstanding on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value per share, the Initial Class andService Class shares total returns for the year ended December 31, 2003 would have each been lower by approximately 0.75%.

(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total return figures for all periods shown.(r) Certain expenses have been reduced without which performance would have been lower.(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.

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Investment Techniques and PracticesIn pursuing its investment objective and investment policies, the Emerging Growth Series may engage in the following principal and non-principal investment techniques and practices to the extent to which these techniques and practices are consistent with the series’ investmentobjective. Investment techniques and practices which the series will use or currently anticipates using are denoted by a check (�) mark.However, the series may not use all of these techniques and practices. Investment techniques and practices which the series does not currentlyanticipate using but which the series reserves the freedom to use are denoted by a dash (—) mark. Investment techniques and practices whichare the principal focus of the series are also described, together with their risks, in the Risk Return Summary of the Prospectus. Both principaland non-principal investment techniques and practices are described, together with their risks, in the SAI.

E m e r g i n g G r o w t h S e r i e sA p p e n d i x A

A-1

Debt SecuritiesAsset-Backed Securities

Collateralized Mortgage Obligations and MulticlassPass-Through Securities —

Corporate Asset-Backed Securities —Mortgage Pass-Through Securities —Stripped Mortgage-Backed Securities —

Corporate Securities �

Loans and Other Direct Indebtedness —Lower Rated Bonds �

Municipal Bonds —U.S. Government Securities �

Variable and Floating Rate Obligations �

Zero Coupon Bonds, Deferred Interest Bondsand PIK Bonds —

Equity Securities �

Foreign Securities ExposureBrady Bonds —Depositary Receipts �

Dollar-Denominated Foreign Debt Securities —Emerging Markets �

Foreign Securities �

Forward Contracts �

Futures Contracts �

Indexed Securities/Structured Products —Inverse Floating Rate Obligations —

Investment in Other Investment CompaniesOpen-End Funds �

Closed-End Funds �

Lending of Portfolio Securities �

Leveraging TransactionsBank Borrowings —Mortgage “Dollar-Roll” Transactions �

Reverse Repurchase Agreements —OptionsOptions on Foreign Currencies �

Options on Futures Contracts �

Options on Securities �

Options on Stock Indices �

Reset Options —“Yield Curve” Options —

Repurchase Agreements �

Short Sales �

Short Term Instruments �

Swaps and Related Derivative Instruments —Temporary Borrowings �

Temporary Defensive Positions �

“When-Issued” Securities �

Investment Techniques/Practices

Symbols � series uses, or currently — permitted, but series does notanticipates using currently anticipate using

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MFS® VARIABLE INSURANCE TRUSTSM

Shareholder Communications with the Board of Trustees. The Board of Trustees of the MFS funds has adopted procedures by whichshareholders may send communications to the Board, Shareholders may mail written communications to the Board to the attention of the Boardof Trustees, MFS Variable Insurance Trust—[name of series], c/o Massachusetts Financial Services Company, 500 Boylston Street, Boston, MA02116, Attention: Frank Tarantino, Independent Chief Compliance Officer of the series. Shareholder communications must (i) be in writing and besigned by the shareholder, (ii) identify the MFS fund to which they relate and (iii) identify the class and number of shares held by the shareholder.

To get free copies of the annual/semiannual reports, the SAI and other information about the series, and to make inquiriesabout the series, please contact the Insurance or Annuity company through which you have purchased your contract or:

MFS Service Center, Inc. 500 Boylston StreetBoston, MA 02116Telephone: 1-800-637-8730Internet: mfs.com

Annual/Semiannual Reports. These reports contain information about the series’ actual investments. Annual reports discuss the effect ofrecent market conditions and the series’ investment strategy on the series’ performance during their last fiscal year.

Statement of Additional Information (SAI). The SAI, dated May 1, 2006, provides more detailed information about the trust and its seriesand is incorporated into this prospectus by reference.

Information about the trust and its series (including its prospectus, SAI and shareholder reports) can be reviewed and copied at the:

Public Reference RoomSecurities and Exchange Commission Washington, D.C., 20549-0102

Information on the operation of the Public Reference Room may be obtained by calling the Commission at 202-942-8090. Reports and otherinformation about the trust and its series are available on the EDGAR Databases on the Commission’s Internet website at http://www.sec.gov,and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address:[email protected], or by writing the Public Reference Section at the above address.

The trust’s Investment Company Act file number is 811-8326

MVI-PRO-5/06

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May 1, 2006

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

PROSPECTUS

T. ROWE PRICE

InternationalStock PortfolioA stock fund seeking long-term capital growth

through investments in non-U.S. companies.

T. Rowe Price International Series, Inc. T. Rowe Price International Stock Portfolio

T. Rowe Price International,

Inc. managed $26.3 billion in

foreign stocks and bonds as of

December 31, 2005, through

its offices in Baltimore,

London, Singapore, Hong

Kong, and Buenos Aires.

Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve, or any other government agency, and are subject to investment risks, including possible loss of the principal amount invested.

1 ABOUT THE FUND

Objective, Strategy, Risks, and Expenses 1

Other Information About the Fund 4

2T. ROWE PRICE ACCOUNT

INFORMATION

Pricing Shares and Receiving Sale Proceeds 5

Rights Reserved by the Funds 7

Dividends and Other Distributions 8

3 MORE ABOUT THE FUND

Organization and Management 9

Understanding Performance Information 11

Investment Policies and Practices 11

Disclosure of Fund Portfolio Information 15

Financial Highlights 15

ABOUT THE FUND 1OBJECTIVE, STRATEGY, RISKS, AND EXPENSES

The fund should be used as an investment option for variable annuity and variable life insurance contracts.

What is the fund’s objective?

The fund seeks long-term growth of capital through investments primarily in the common stocks of established, non-U.S. companies.

What is the fund’s principal investment strategy?

The fund expects to invest substantially all of its assets in stocks outside the U.S. and to diversify broadly among developed and emerging countries throughout the world. Stock selection reflects a growth style. We may purchase the stocks of companies of any size, but our focus will typically be on large and, to a lesser extent, medium-sized companies. Normally, at least 80% of the fund’s net assets will be invested in stocks.

T. Rowe Price International, Inc. (T. Rowe Price International), employs in-depth fundamental research in an effort to identify companies capable of achieving and sustaining above-average, long-term earnings growth. We seek to purchase such stocks at reasonable prices in relation to present or anticipated earnings, cash flow, or book value, and valuation factors often influence our allocations among large-, mid-, or small-cap shares.

While we invest with an awareness of the global economic backdrop and our outlook for industry sectors and individual countries, bottom-up stock selection is the focus of our decision-making. Country allocation is driven largely by stock selection, though we may limit investments in markets that appear to have poor overall prospects.

In selecting stocks, we generally favor companies with one or more of the following characteristics:

• leading market position;• attractive business niche;• strong franchise or monopoly;• technological leadership or proprietary advantages;• seasoned management;• earnings growth and cash flow sufficient to support growing dividends; and• healthy balance sheet with relatively low debt.

While the fund invests primarily in common stocks, it may also purchase other securities, including futures and options, in keeping with the fund’s objective.

The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities.

Certain investment restrictions, such as a required minimum or maximum investment in a particular type of security, are measured at the time the fund purchases a security. The status, market value, maturity, credit quality, or other characteristics of the fund’s securities may change after they are pur-chased, and this may cause the amount of the fund’s assets invested in such securities to exceed the stated maximum restriction or fall below the stated minimum restriction. If this occurs, it would not be considered a violation of the investment restriction. However, purchases by the fund during the time it is above or below the stated percentage restriction would be made in compliance with applica-ble restrictions.

T. ROWE PRICE 2

What are the main risks of investing in the fund?

Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets. Even investments in countries with highly developed economies are subject to significant risks. Some par-ticular risks affecting this fund include the following:

• Currency risk This refers to a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency. The overall impact on a fund’s holdings can be significant, unpredictable, and long-lasting, depending on the currencies repre-sented in the portfolio and how each one appreciates or depreciates in relation to the U.S. dollar and whether currency positions are hedged. Under normal conditions, the fund does not engage in exten-sive foreign currency hedging programs. Further, exchange rate movements are volatile, and it is not possible to effectively hedge the currency risks of many developing countries.

• Geographic risk The economies and financial markets of certain regions–such as Latin America and Asia–can be interdependent and may all decline at the same time.

• Emerging market risk To the extent the fund invests in emerging markets, it is subject to greater risk than a fund investing only in developed markets. The economic and political structures of develop-ing nations, in most cases, do not compare favorably with the U.S. or other developed countries in terms of wealth and stability, and their financial markets often lack liquidity. Fund performance will likely be hurt by exposure to nations in the midst of hyperinflation, currency devaluation, trade dis-agreements, sudden political upheaval, or interventionist government policies. Significant buying or selling by a few major investors may also heighten the volatility of emerging markets. These factors make investing in such countries significantly riskier than in other countries, and any one of the fac-tors could cause the fund’s share price to decline.

• Other risks of foreign investing Risks can result from varying stages of economic and political develop-ment, differing regulatory environments, trading days, and accounting standards, uncertain tax laws, and higher transaction costs of non-U.S. markets. Investments outside the United States could be subject to governmental actions such as capital or currency controls, nationalization of a company or industry, expropriation of assets, or imposition of high taxes.

3 While certain countries have made progress in economic growth, liberalization, fiscal discipline, and political and social stability, there is no assurance these trends will continue.

• Futures/options risk To the extent the fund uses futures and options, it is exposed to additional vola-tility and potential losses.

As with all stock funds, the fund’s share price can fall because of weakness in one or more of its pri-mary equity markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse political or economic developments, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment. In addition, our assessment of companies held in the fund may prove incorrect, resulting in losses or poor performance, even in rising markets.

As with any mutual fund, there can be no guarantee the fund will achieve its objective.

3 The fund’s share price may decline, so when you sell your shares, you may lose money.

ABOUT THE FUND 3

How can I tell if the fund is appropriate for me?

Consider your investment goals, your time horizon for achieving them, and your tolerance for risk. If you want to diversify your domestic stock portfolio by adding foreign investments, seek the long-term capital appreciation potential of growth stocks, and are comfortable with the risks that accom-pany foreign investments, the fund could be an appropriate part of your overall investment strategy.

3 The fund should not represent your complete investment program or be used for short-term trading purposes.

How has the fund performed in the past?

The bar chart showing calendar year returns and the average annual total returns table indicate risk by illustrating how much returns can differ from one year to the next and over time. Fund past perfor-mance is no guarantee of future returns.

The fund can also experience short-term performance swings, as shown by the best and worst calen-dar quarter returns during the years depicted.

These figures include changes in principal value, reinvested dividends, and capital gain distributions, if any.

Figures do not reflect fees at the insurance product or contract level; if those fees were included, returns would be lower.

MSCI EAFE Index tracks the stocks of about 1,000 companies in Europe, Australasia, and the Far East (EAFE).

What fees and expenses will I pay?

The fees and expenses set forth below are paid by the portfolio and borne indirectly by contract holders. There are additional expenses charged by insurance companies, which apply to your insurance contract or policy, and these are described in the variable annuity and variable life contract prospectuses.

Table 1 Average Annual Total Returns

Periods ended December 31, 2005

1 year 5 years 10 years

International Stock Portfolio 16.03% 1.84% 5.09%

MSCI EAFE Index 14.02 4.94 6.18

Lipper Variable Annuity Underlying International Growth Funds Average 15.36 2.23 6.92

T. ROWE PRICE 4

Example. The following table gives you an idea of how expense ratios may translate into dollars and helps you to compare the cost of investing in this fund with that of other mutual funds. Although your actual costs may be higher or lower, the table shows how much you would pay if operating expenses remain the same, you invest $10,000, earn a 5% annual return, hold the investment for the following periods, and then redeem:

OTHER INFORMATION ABOUT THE FUND

What are some of the potential rewards of investing overseas through the fund?

Investing abroad increases the opportunities available to you. Some foreign countries may have greater potential for economic growth than the U.S. Investing a portion of your overall portfolio in foreign stock funds can enhance your diversification while providing the opportunity to boost long-term returns.

How does the portfolio manager try to reduce risk?

The principal tools we use to try to reduce risk are intensive research and limiting exposure to any one industry or company. Currency hedging techniques may be used from time to time.

Portfolio managers keep close watch on individual investments as well as on political and economic trends in each country and region. Holdings are adjusted according to the manager’s analysis and outlook.

The impact on the fund’s share price from a drop in the price of a particular stock is reduced sub-stantially by investing in a portfolio with dozens of different companies. Likewise, the impact of unfa-vorable developments in a particular country is reduced when investments are spread among many countries. However, the economies and financial markets of countries in a certain region may be influenced heavily by one another.

Is there other information I can review before making a decision?

Investment Policies and Practices in Section 3 discusses various types of portfolio securities the fund may purchase as well as types of management practices the fund may use.

Table 2 Fees and Expenses of the Fund

Annual fund operating expenses(expenses that are deducted from fund assets)

Management fee 1.05%

Other expenses —

Total annual fund operating expenses 1.05%

1 year 3 years 5 years 10 years

$107 $334 $579 $1,283

2T. ROWE PRICE ACCOUNT INFORMATION

As an investor in a T. Rowe Price fund through your variable annuity or variable life insurance con-tract, you will want to know about the following policies and procedures that apply to the funds. For instructions on how to purchase and redeem shares, read the insurance contract prospectus.

PRICING SHARES AND RECEIVING SALE PROCEEDS

Shares of the fund are designed to be offered to insurance company separate accounts established for the purpose of funding variable annuity and life insurance contracts. Variable annuity and variable life contract holders or participants are not the shareholders of the fund. Rather, the separate account of the insurance company is the shareholder. The variable annuity and variable life contracts are described in separate prospectuses issued by the insurance companies. The fund assumes no responsi-bility for such prospectuses, or variable annuity or variable life contracts.

Shares of the fund are sold and redeemed without the imposition of any sales commission or redemp-tion charge. However, certain other charges may apply to annuity or life contracts. Those charges are disclosed in the insurance contract prospectus.

Your ability to exchange from this fund to any other T. Rowe Price fund that serves as an investment option under your insurance contract is governed by the terms of that contract and the insurance con-tract prospectus, as well as the fund’s excessive trading policy described in this section.

How and When Shares Are Priced

The share price (also called “net asset value” or NAV per share) for a fund is calculated at the close of the New York Stock Exchange, normally 4 p.m. ET, each day that the exchange is open for business. To calculate the NAV, the fund’s assets are valued and totaled, liabilities are subtracted, and the balance, called net assets, is divided by the number of shares outstanding. Market values are used to price stocks and bonds. Market values represent the prices at which securities actually trade or evaluations based on the judgment of the fund’s pricing services. If a market value for a security is not available, the fund will make a good faith effort to assign a fair value to the security. This value may differ from the value the fund receives upon sale of the securities. Amortized cost is used to price securities held by money market funds. Investments in mutual funds are valued at the closing NAV per share of the mutual fund on the day of valuation.

Non-U.S. equity securities are valued on the basis of their most recent closing market prices at 4 p.m. ET except under the circumstances described below. Most foreign markets close before 4 p.m. For securities primarily traded in the Far East, for example, the most recent closing prices may be as much as 15 hours old at 4 p.m. If a fund determines that developments between the close of the for-eign market and 4 p.m. ET will, in its judgment, materially affect the value of some or all of the fund’s securities, the fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of 4 p.m. ET. In deciding whether to make these adjustments, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. secu-rities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. A fund may also fair value securities in other situations, for example, when a particular foreign market is closed but the fund is open. The fund uses outside pricing services to provide it with closing market prices and information used for adjusting those prices. The fund cannot predict how often it will use closing prices and how often it will adjust those prices. As a means of evaluating its fair value process, the fund routinely compares closing market prices, the next day’s opening prices in the same markets, and adjusted prices.

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How Your Purchase, Sale, or Exchange Price Is Determined

PurchasesThe insurance companies purchase shares of the fund for their separate accounts, using premiums allocated by the contract holders or participants. Shares are purchased at the NAV next determined after the insurance company receives the premium payment in acceptable form. Initial and subsequent payments allocated to the fund are subject to the limits stated in the insurance contract prospectus issued by the insurance company.

RedemptionsThe insurance companies redeem shares of the fund to make benefit or surrender payments under the terms of its contracts. Redemptions are processed on any day on which the New York Stock Exchange is open and are priced at the fund’s NAV next determined after the insurance company receives a sur-render request in acceptable form.

Note: The time at which transactions and shares are priced and the time until which orders are accepted may be changed in case of an emergency or if the New York Stock Exchange closes at a time other than 4 p.m. ET.

How You Can Receive the Proceeds From a Sale

Payment for redeemed shares will be made promptly, but in no event later than seven days after receipt of your redemption order. However, the right of redemption may be suspended or the date of payment postponed in accordance with the Investment Company Act of 1940 (“1940 Act”). The amount received upon redemption of the shares of the fund may be more or less than the amount paid for the shares, depending on the fluctuations in the market value of the assets owned by the fund.

Excessive and Short-Term Trading

3 T. Rowe Price may bar excessive and short-term traders from purchasing shares.

Excessive or short-term trading in fund shares may disrupt management of a fund and raise its costs. Short-term traders in funds investing in foreign securities may seek to take advantage of an anticipated difference between the price of the fund’s shares and price movements in overseas markets (see Pricing Shares and Receiving Sale Proceeds—“How and When Shares Are Priced”). While there is no assur-ance that T. Rowe Price can prevent all excessive and short-term trading, the Board of Directors/Trust-ees of each fund has adopted the policy set forth below to deter such activity. Persons trading directly with T. Rowe Price or indirectly through intermediaries in violation of this policy or persons believed to be short-term traders may be barred permanently from further purchases of T. Rowe Price funds. Purchase transactions placed by such persons are subject to rejection without notice. These policies apply to contract holders notwithstanding any provisions in your insurance contract.

• All persons purchasing shares held directly with a T. Rowe Price fund who make more than one pur-chase and one sale or one sale and one purchase involving the same fund within any 90-day calendar period will violate the policy.

• All persons purchasing fund shares held through an insurance company who hold the shares for less than 90 calendar days will violate the policy.

Omnibus AccountsIntermediaries often establish omnibus accounts in the T. Rowe Price funds for their customers. In such situations, T. Rowe Price cannot always monitor trading activity by individual contract holders. However, T. Rowe Price reviews trading activity at the omnibus account level and looks for activity that indicates potential excessive or short-term trading. If it detects suspicious trading activity,

T. ROWE PRICE ACCOUNT INFORMATION 7

T. Rowe Price contacts the intermediary to determine whether the excessive trading policy has been violated and, if so, asks the intermediary to take action with respect to the underlying contract holder in accordance with the policy.

Exceptions to PolicySystematic purchases and redemptions are exempt from these policies. In addition, transactions in automated, nondiscretionary rebalancing and asset allocation programs may be exempt from the excessive trading policy subject to prior written approval by designated persons at T. Rowe Price.

T. Rowe Price generally seeks to enforce its excessive trading policies against individual contract holders when violations of its policies are discovered. The terms of your insurance contract may also restrict your ability to trade between the investment options available under your contract. T. Rowe Price reserves the right to modify the 90-day policy set forth above and apply your insurance com-pany’s excessive trading policy (for example, in situations where an insurance contract or insurance company has restrictions on trading that differ from the T. Rowe Price fund’s policy). These modifica-tions would be authorized only if the T. Rowe Price believes that the modified policy would provide protection to the fund that is reasonably equivalent to the fund’s regular policy.

There may be limitations on the ability of insurance companies to impose restrictions on the trading practices of certain contract holders. As a result, T. Rowe Price’s ability to discourage excessive trad-ing practices in this fund may be limited.

3 There is no guarantee that T. Rowe Price will be able to detect or prevent excessive or short-term trading. In addition, T. Rowe Price cannot always detect excessive or short-term trading through intermediaries with omnibus accounts.

RIGHTS RESERVED BY THE FUNDS

T. Rowe Price funds and their agents reserve the following rights: (1) to waive or lower investment minimums; (2) to accept initial purchases by telephone or telegram; (3) to refuse any purchase or exchange order; (4) to cancel or rescind any purchase or exchange order placed through an intermedi-ary, no later than the business day after the order is received by the intermediary (including, but not limited to, orders deemed to result in excessive trading, market timing, or 5% ownership); (5) to cease offering fund shares at any time to all or certain groups of investors; (6) to freeze any account and sus-pend account services when notice has been received of a dispute between the registered or beneficial account owners or there is reason to believe a fraudulent transaction may occur; (7) to otherwise mod-ify the conditions of purchase and any services at any time; (8) to waive any wire fees charged to a group of shareholders; (9) to act on instructions reasonably believed to be genuine; and (10) to invol-untarily redeem your account at the net asset value calculated the day the account is redeemed, in cases of threatening conduct, suspected fraudulent or illegal activity, or if the fund or its agent is unable, through its procedures, to verify the identity of the person(s) or entity opening an account. These actions will be taken when, in the sole discretion of management, they are deemed to be in the best interest of the fund or required by law.

In an effort to protect T. Rowe Price funds from the possible adverse effects of a substantial redemp-tion in a large account, as a matter of general policy, no contract holder or participant or group of con-tract holders or participants controlled by the same person or group of persons will knowingly be permitted to purchase in excess of 5% of the outstanding shares of the fund, except upon approval of the fund’s management.

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DIVIDENDS AND OTHER DISTRIBUTIONS

For a discussion of the tax status of your variable annuity contract, please refer to the insurance con-tract prospectus.

Dividends and Other Distributions

The policy of the fund is to distribute all of its net investment income and net capital gains each year to its shareholders, which are the separate accounts established by the various insurance companies in connection with their issuance of variable annuity and variable life contracts. Dividends from net investment income are declared daily and paid monthly for the Limited-Term Bond and Prime Reserve Portfolios; declared and paid quarterly for the Equity Income, Equity Index 500, and Personal Strategy Balanced Portfolios; and declared and paid annually for all other portfolios. All fund distribu-tions made to a separate account will be reinvested automatically in additional fund shares, unless a shareholder (separate account) elects to receive distributions in cash. Under current law, dividends and distributions made by the fund to separate accounts generally are not taxable to the separate accounts, the insurance company, or the contract holder, provided that the separate account meets the diversification requirements of Section 817(h) of the Internal Revenue Code of 1986, as amended, and other tax-related requirements are satisfied. The fund intends to diversify its investments in the manner required under Code Section 817(h).

3MORE ABOUT THE FUND

ORGANIZATION AND MANAGEMENT

How is the fund organized?

T. Rowe Price International Series, Inc. (the “corporation”), was incorporated in Maryland in 1994. Currently, the corporation consists of one series, the International Stock Portfolio.

International Stock Portfolio is managed in a manner similar to the T. Rowe Price International Stock Fund, a fund with the same investment objective and program as the portfolio but offered to the gen-eral public and not to insurance company separate accounts. However, investors should be aware that the portfolio is not the same as the fund and will not have the same performance. Investments made by the portfolio at any given time may not be the same as those made by T. Rowe Price International Stock Fund. Different performance will result due to factors such as differences in the cash flows into and out of the portfolio and fund, different fees and expenses, and differences in net assets and size of holdings.

What is meant by “shares”?

Contract holders and participants indirectly (through the insurance company separate account) pur-chase shares when they put money in a fund offered as an investment option in their insurance con-tracts. These shares are part of a fund’s authorized capital stock, but share certificates are not issued.

Each share and fractional share entitles the shareholder (the insurance company separate account) to cast one vote per share on certain fund matters, including the election of fund directors/trustees, changes in fundamental policies, or approval of changes in the fund’s management contract.

The shares of the fund have equal voting rights. The various insurance companies own the outstand-ing shares of the fund in their separate accounts. These separate accounts are registered under the 1940 Act or are excluded from registration thereunder. Under current law, the insurance companies must vote the shares held in registered separate accounts in accordance with voting instructions received from variable contract holders or participants having the right to give such instructions.

Do T. Rowe Price funds have annual shareholder meetings?

The funds are not required to hold annual meetings and, to avoid unnecessary costs to fund shareholders, do not do so except when certain matters, such as a change in fundamental policies, must be decided. In addition, shareholders representing at least 10% of all eligible votes may call a special meeting, if they wish, for the purpose of voting on the removal of any fund director or trustee. If a meeting is held and you cannot attend, you can vote by proxy. Before the meeting, the insurance company will send you the fund’s proxy materials that explain the issues to be decided and include instructions on voting.

Who runs the fund?

General OversightThe fund is governed by a Board of Directors/Trustees that meets regularly to review fund invest-ments, performance, expenses, and other business affairs. The Board elects the fund’s officers. At least 75% of Board members are independent of T. Rowe Price International.

3 All decisions regarding the purchase and sale of fund investments are made by T. Rowe Price International—specifically by the fund’s portfolio managers.

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Investment ManagerT. Rowe Price International is responsible for the selection and management of fund portfolio investments. The U.S. office of T. Rowe Price International is located at 100 East Pratt Street, Baltimore, Maryland 21202.

Portfolio ManagementThe fund has an Investment Advisory Committee with the following members: Mark C.J. Bickford-Smith, Chairman, Dean Tenerelli and David J.L. Warren (co-managers), and M. Kamran Baig. Mark C.J. Bickford-Smith, Dean Tenerelli, and David J.L. Warren have day-to-day responsibility for managing the fund and work with the committee in developing and executing the fund’s investment program. Mr. Bickford-Smith has been chairman of the fund’s committee since 2005. He joined T. Rowe Price International in 1995 and has been managing investments since that time. Mr. Tener-elli joined T. Rowe Price International in 1999 and has been managing investments since 2002. Mr. Warren joined T. Rowe Price International in 1983 and has been managing investments since 1984. The Statement of Additional Information provides additional information about the portfolio manag-ers’ compensation, other accounts managed by the portfolio manager, and the portfolio managers’ ownership of securities in the fund.

The Management FeeThe fund pays T. Rowe Price International an annual fee that includes investment management ser-vices and ordinary, recurring operating expenses, but does not cover interest, taxes, brokerage, nonre-curring and extraordinary items or fees and expenses for the fund’s independent directors. The fee is based on fund average daily net assets and is calculated and accrued daily. The fee for the fund for the most recent fiscal year was 1.05%.

In addition, from time to time, T. Rowe Price International may make payments from its own resources to eligible insurance companies for recordkeeping and administrative services they provide to the fund for contract holders. These payments range from 0.15% to 0.25% of the average annual total assets invested by the separate accounts of the insurance company in the fund. T. Rowe Price may also reimburse insurance companies, broker-dealers, and other distributors for certain bona fide selling expenses associated with distribution of the insurance contracts in which the fund serves as an investment option. All payments described by this paragraph are paid by T. Rowe Price and not by the fund. As a result, the total expense ratio of the fund will not be affected by any such payments.

A discussion about the factors and conclusions considered by the Board in approving the fund’s investment management contract with T. Rowe Price appears in the fund’s semiannual report to con-tract holders for the period ended June 30.

Variable Annuity and Variable Life ChargesVariable annuity and variable life fees and charges imposed on contract holders and participants by the insurance companies are in addition to those described previously and are described in the vari-able annuity and variable life contract prospectuses.

Variable Annuity and Variable Life ConflictsThe fund may serve as an investment medium for both variable annuity contracts and variable life insurance policies. Shares of the fund may be offered to separate accounts established by any number of insurance companies. The fund currently does not foresee any disadvantages to variable annuity contract owners due to the fact that the fund may serve as an investment medium for both variable life insurance policies and annuity contracts; however, due to differences in tax treatment or other consid-erations, it is theoretically possible that the interests of owners of annuity contracts and insurance pol-icies for which the fund serves as an investment medium might at some time be in conflict. However, the fund’s Board of Directors/Trustees is required to monitor events to identify any material conflicts between variable annuity contract owners and variable life policy owners, and will determine what

MORE ABOUT THE FUND 11

action, if any, should be taken in the event of such a conflict. If such a conflict were to occur, an insur-ance company participating in the fund might be required to redeem the investment of one or more of its separate accounts from the fund. This might force the fund to sell securities at disadvantageous prices.

UNDERSTANDING PERFORMANCE INFORMATION

This section should help you understand the terms used to describe fund performance. You may see these terms used in shareholder reports you receive from your insurance company.

Total Return

This tells you how much an investment has changed in value over a given period. It reflects any net increase or decrease in the share price and assumes that all dividends and capital gains (if any) paid during the period were reinvested in additional shares. Therefore, total return numbers include the effect of compounding.

Advertisements may include cumulative or average annual total return figures, which may be com-pared with various indices, other performance measures, or other mutual funds.

Cumulative Total Return

This is the actual return of an investment for a specified period. A cumulative return does not indicate how much the value of the investment may have fluctuated during the period. For example, an investment could have a 10-year positive cumulative return despite experiencing some negative years during that time.

Average Annual Total Return

This is always hypothetical and should not be confused with actual year-by-year results. It smooths out all the variations in annual performance to tell you what constant year-by-year return would have produced the investment’s actual cumulative return. This gives you an idea of an investment’s annual contribution to your portfolio, provided you held it for the entire period.

Total returns quoted for the fund include the effect of deducting the fund’s expenses, but may not include charges and expenses attributable to any particular insurance product. Since you can only purchase shares of the fund through an insurance product, you should carefully review the prospec-tus of the insurance product you have chosen for information on relevant charges and expenses. Excluding these charges from quotations of the fund’s performance has the effect of increasing the performance quoted.

INVESTMENT POLICIES AND PRACTICES

This section takes a detailed look at some of the types of fund securities and the various kinds of investment practices that may be used in day-to-day portfolio management. Fund investments are subject to further restrictions and risks described in the Statement of Additional Information.

Shareholder approval is required to substantively change fund objectives. Shareholder approval is also required to change certain investment restrictions noted in the following section as “fundamental pol-icies.” The managers also follow certain “operating policies” that can be changed without shareholder approval. Shareholders will receive at least 60 days’ prior notice of any change in the policy requiring the fund to normally invest at least 80% of net assets in common stocks. Fund investment restrictions

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and policies apply at the time of purchase. A later change in circumstances will not require the sale of an investment if it was proper at the time it was made. (This exception does not apply to the fund’s borrowing policy.)

Fund holdings of certain kinds of investments cannot exceed maximum percentages of total assets, which are set forth in this prospectus. For instance, fund investments in certain derivatives are limited to 10% of total assets. While these restrictions provide a useful level of detail about fund investments, investors should not view them as an accurate gauge of the potential risk of such investments. For example, in a given period, a 5% investment in derivatives could have significantly more of an impact on a fund’s share price than its weighting in the portfolio. The net effect of a particular investment depends on its volatility and the size of its overall return in relation to the performance of all other fund investments.

Changes in fund holdings, fund performance, and the contribution of various investments are dis-cussed in the shareholder reports sent to you by your insurance company.

3 Fund managers have considerable leeway in choosing investment strategies and selecting securities they believe will help achieve fund objectives.

Types of Portfolio Securities

In seeking to meet its investment objective, fund investments may be made in any type of security or instrument (including certain potentially high-risk derivatives described in this section) whose invest-ment characteristics are consistent with its investment program. The following pages describe various types of fund securities and investment management practices.

Fundamental policy The fund will not purchase a security if, as a result, with respect to 75% of its total assets, more than 5% of the fund’s total assets would be invested in securities of a single issuer or more than 10% of the outstanding voting securities of the issuer would be held by the fund.

Fund investments are primarily in common stocks and, to a lesser degree, other types of securities as described below.

Common and Preferred StocksStocks represent shares of ownership in a company. Generally, preferred stock has a specified divi-dend and ranks after bonds and before common stocks in its claim on income for dividend payments and on assets should the company be liquidated. After other claims are satisfied, common stockhold-ers participate in company profits on a pro-rata basis; profits may be paid out in dividends or rein-vested in the company to help it grow. Increases and decreases in earnings are usually reflected in a company’s stock price, so common stocks generally have the greatest appreciation and depreciation potential of all corporate securities. While most preferred stocks pay a dividend, preferred stock may be purchased where the issuer has omitted, or is in danger of omitting, payment of its dividend. Such investments would be made primarily for their capital appreciation potential.

Convertible Securities and WarrantsInvestments may be made in debt or preferred equity securities convertible into, or exchangeable for, equity securities. Traditionally, convertible securities have paid dividends or interest at rates higher than common stocks but lower than nonconvertible securities. They generally participate in the appre-ciation or depreciation of the underlying stock into which they are convertible, but to a lesser degree. Some convertibles combine higher or lower current income with options and other features. Warrants are options to buy a stated number of shares of common stock at a specified price anytime during the life of the warrants (generally, two or more years). Warrants can be highly volatile, have no voting rights, and pay no dividends.


Fixed-Income SecuritiesFrom time to time, we may invest in corporate and government fixed-income securities. These securi-ties would be purchased in companies that meet fund investment criteria. The price of a bond fluctu-ates with changes in interest rates, generally rising when interest rates fall and falling when interest rates rise.

Hybrid InstrumentsThese instruments (a type of potentially high-risk derivative) can combine the characteristics of secu-rities, futures, and options. For example, the principal amount, redemption, or conversion terms of a security could be related to the market price of some commodity, currency, or securities index. Such securities may bear interest or pay dividends at below market or even relatively nominal rates. Under certain conditions, the redemption value of a hybrid could be zero.

3 Hybrids can have volatile prices and limited liquidity, and their use may not be successful.

Operating policy Fund investments in hybrid instruments are limited to 10% of total assets.

Illiquid SecuritiesThese securities include private placements that are sold directly to a small number of investors, usu-ally institutions. Unlike public offerings, such securities are not registered with the SEC. Although cer-tain of these securities may be readily sold, for example, under Rule 144A, others may have resale restrictions and be illiquid. The sale of illiquid securities may involve substantial delays and additional costs, and the fund may only be able to sell such securities at prices substantially less than what the fund believes they are worth.

Operating policy Fund investments in illiquid securities are limited to 15% of net assets.

Types of Investment Management Practices

Reserve PositionA certain portion of fund assets will be held in money market reserves. Fund reserve positions are expected to consist primarily of shares of one or both T. Rowe Price internal money market funds. Short-term, high-quality U.S. and foreign dollar-denominated money market securities, including repurchase agreements, may also be held. For temporary, defensive purposes, there is no limit on fund investments in money market reserves. Significant investments in reserves could compromise the ability to achieve fund objectives. The reserve position provides flexibility in meeting redemptions, paying expenses, and in the timing of new investments, and can serve as a short-term defense during periods of unusual market volatility.

Borrowing Money and Transferring AssetsFund borrowings may be made from banks and other T. Rowe Price funds for temporary emergency purposes to facilitate redemption requests, or for other purposes consistent with fund policies as set forth in this prospectus. Such borrowings may be collateralized with fund assets, subject to restric-tions.

Fundamental policy Borrowings may not exceed 331/3% of total assets.

Operating policy Fund transfers of portfolio securities as collateral will not be made except as neces-sary in connection with permissible borrowings or investments, and then such transfers may not exceed 331/3% of total assets. Fund purchases of additional securities will not be made when borrow-ings exceed 5% of total assets.

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Foreign Currency TransactionsThe fund will normally conduct its foreign currency exchange transactions, if any, either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through enter-ing into forward contracts to purchase or sell foreign currencies. The fund will generally not enter into a forward contract with a term greater than one year.

The fund will generally enter into forward foreign currency exchange contracts only under two circumstances. First, when the fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, it may desire to “lock in” the U.S. dollar price of the security. Second, when T. Rowe Price International believes that the currency of a particular foreign country may move substantially against another currency, it may enter into a forward contract to sell or buy the former foreign currency (or another currency that acts as a proxy for that currency). The contract may approximate the value of some or all of the fund’s portfolio securities denominated in such foreign currency. Under unusual circumstances, the fund may commit a substantial portion or the entire value of its portfolio to the consummation of these contracts. T. Rowe Price International will consider the effect such a commitment to forward contracts would have on the fund’s investment program and the flexibility of the fund to purchase additional securities. Although forward contracts will be used primarily to protect the fund from adverse currency movements, they also involve the risk that anticipated currency movements will not be accurately predicted, and fund total return could be adversely affected as a result.

There are some markets where it is not possible to engage in effective foreign currency hedging. This is generally true, for example, for the currencies of various emerging markets where the foreign exchange markets are not sufficiently developed to permit hedging activity to take place.

Futures and OptionsFutures, a type of potentially high-risk derivative, are often used to manage or hedge risk because they enable the investor to buy or sell an asset in the future at an agreed-upon price. Options, another type of potentially high-risk derivative, give the investor the right (where the investor purchases the option), or the obligation (where the investor “writes” or sells the option), to buy or sell an asset at a predetermined price in the future. Futures and options contracts may be bought or sold for any num-ber of reasons, including: to manage exposure to changes in securities prices and foreign currencies; as an efficient means of increasing or decreasing fund overall exposure to certain markets; in an effort to enhance income; to protect the value of portfolio securities; and to serve as a cash management tool. Call or put options may be purchased or sold on securities, financial indices, and foreign currencies.

Futures contracts and options may not always be successful hedges; their prices can be highly volatile; using them could lower fund total return; and the potential loss from the use of futures can exceed a fund’s initial investment in such contracts.

Operating policies Futures: Initial margin deposits on futures and premiums on options used for non-hedging purposes will not exceed 5% of net asset value. Options on securities: The total market value of securities covering call or put options may not exceed 25% of total assets. No more than 5% of total assets will be committed to premiums when purchasing call or put options.

Tax Consequences of HedgingHedging may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in an increase (or decrease) in the amount of taxable div-idends paid by the fund and could affect whether dividends paid are classified as capital gains or ordi-nary income.


Lending of Portfolio SecuritiesFund securities may be lent to broker-dealers, other institutions, or other persons to earn additional income. Risks include the potential insolvency of the broker-dealer or other borrower that could result in delays in recovering securities and capital losses. Additionally, losses could result from the reinvest-ment of collateral received on loaned securities in investments that default or do not perform well.

Fundamental policy The value of loaned securities may not exceed 33 1/3% of total assets.

Portfolio TurnoverTurnover is an indication of frequency of trading. We will not generally trade in securities for short-term profits, but, when circumstances warrant, securities may be purchased and sold without regard to the length of time held. Each time the fund purchases or sells a security, it incurs a cost. This cost is reflected in the fund’s net asset value but not in its operating expenses. The higher the turnover rate, the higher the transaction costs and the greater the impact on the fund’s total return. Higher turnover can also increase the possibility of taxable capital gain distributions. The fund’s portfolio turnover rates are shown in the Financial Highlights table.

DISCLOSURE OF FUND PORTFOLIO INFORMATION

The fund’s portfolio holdings are disclosed on a regular basis in its semiannual and annual reports to shareholders, and on Form N-Q, which is filed with the SEC within 60 days of the fund’s first and third fiscal quarter-end. In addition, the fund discloses its calendar quarter-end portfolio holdings on troweprice.com 15 calendar days after each quarter. Under certain conditions, up to 5% of the fund’s holdings may be included in this portfolio list without being individually identified. Generally, securities would not be individually identified if they are being actively bought or sold and it is determined that the quarter-end disclosure of the holding could be harmful to the fund. A security will not be excluded from identification for more than one year. The fund also discloses its largest 10 holdings on troweprice.com seven days after each month-end. These holdings are listed in alphabetical order along with the aggregate percentage of the fund’s total assets they represent. The quarter-end portfolio will remain on the Web site for one year. The top 10 list is replaced every six months. A description of the fund’s policy and procedures with respect to the disclosure of portfolio information is in the Statement of Additional Information.


Table 3, which provides information about the fund’s financial history, is based on a single share outstanding throughout the periods shown. The table is part of the fund’s financial statements, which are included in its annual report and are incorporated by reference into the Statement of Additional Information (available upon request). The total returns in the table represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions and no payment of account or [if applicable] redemption fees). The financial statements in the annual report were audited by the fund’s independent registered public accounting firm, PricewaterhouseCoopers LLP.

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* Per share amounts calculated using average shares outstanding method.

Table 3 Financial Highlights

Year ended December 31

2001 2002 2003 2004 2005*

Net asset value,beginning of period $ 15.07 $ 11.47 $ 9.26 $ 11.94 $ 13.44


Net investment income 0.24 0.10 0.13 0.14 0.19

Net gains or losses on securities (both realized and unrealized) (3.59) (2.20) 2.69 1.50 1.96

Total from investment operations (3.35) (2.10) 2.82 1.64 2.15

Less Distributions

Dividends (from net investment income) (0.25) (0.10) (0.13) (0.14) (0.23)

Distributions (fromcapital gains) — (0.01) (0.01) — (0.05)

In excess of netrealized gain — — — — —

Returns of capital — — — — —

Total distributions (0.25) (0.11) (0.14) (0.14) (0.28)

Net asset value,end of period $ 11.47 $ 9.26 $ 11.94 $ 13.44 $ 15.31

Total return (22.21)% (18.29)% 30.52% 13.77% 16.03%


Net assets, end of period (in thousands) $550,329 $439,350 $508,876 $518,106 $467,533

Ratio of expenses to average net assets 1.05% 1.05% 1.05% 1.05% 1.05%

Ratio of net income to average net assets 1.90% 0.93% 1.22% 1.11% 1.41%

Portfolio turnover rate 27.7% 28.8% 26.9% 30.4% 71.3%

A fund Statement of Additional Information has been filed with the Securities and Exchange Commission and is incorporated by reference into this prospectus. Further information about fund investments, including a review of market conditions and the manager’s recent strategies and their impact on performance, is available in the annual and semiannual shareholder reports. To obtain a free copy of a fund report or Statement of Additional Information, or for inquiries, contact your insurance company. The Statement of Additional Information is also available at troweprice.com.

Fund information and Statements of Additional Information are also available from the Public Reference Room of the Securities and Exchange Commission. Information on the operation of the Public Reference Room may be obtained by calling the SEC at1-202-942-8090. Fund reports and other fund information are available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at [email protected], or by writing the Public Reference Room, Washington D.C. 20549-0102.

1940 Act File No.: 811-07145

E301-040 5/1/06

FINANCIAL STATEMENTS OFPRUCO LIFE VARIABLE UNIVERSAL ACCOUNT

A1

The accompanying notes are an integral part of these financial statements.

STATEMENT OF NET ASSETSDecember 31, 2005

SUBACCOUNTS

PrudentialMoney Market

Portfolio

PrudentialDiversified Bond

PortfolioPrudential Equity

Portfolio

PrudentialFlexible

ManagedPortfolio

PrudentialConservative

BalancedPortfolio

ASSETSInvestment in the portfolios, at value . . . . . . . . . . . . . . $158,650,146 $91,954,170 $74,885,307 $4,257,132 $49,125,581

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $158,650,146 $91,954,170 $74,885,307 $4,257,132 $49,125,581

NET ASSETS, representing:Accumulation units . . . . . . . . . . . . . . . . . . . . . . . . . . $158,650,146 $91,954,170 $74,885,307 $4,257,132 $49,125,581

$158,650,146 $91,954,170 $74,885,307 $4,257,132 $49,125,581

Units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,502,114 45,623,554 44,549,096 3,345,352 22,180,516

Portfolio shares held . . . . . . . . . . . . . . . . . . . . . . . . . 15,865,015 8,389,979 3,039,176 251,604 3,255,506

Portfolio net asset value per share. . . . . . . . . . . . . . . . $ 10.00 $ 10.96 $ 24.64 $ 16.92 $ 15.09

Investment in portfolio shares, at cost . . . . . . . . . . . . . $158,650,146 $93,569,736 $63,968,384 $3,822,855 $46,826,178

STATEMENT OF OPERATIONSFor the period ended December 31, 2005

SUBACCOUNTS

PrudentialMoney Market

Portfolio

PrudentialDiversified Bond

PortfolioPrudential Equity

Portfolio

PrudentialFlexible

ManagedPortfolio

PrudentialConservative

BalancedPortfolio

INVESTMENT INCOMEDividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,886,310 $ 4,923,725 $ 694,113 $ 72,995 $ 1,437,990

EXPENSESCharges to contract owners for assuming mortality risk

and expense risk . . . . . . . . . . . . . . . . . . . . . . . . . . 590,344 451,899 266,267 28,923 319,089

NET EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590,344 451,899 266,267 28,923 319,089

NET INVESTMENT INCOME (LOSS) . . . . . . . . . . . . . . . 3,295,966 4,471,826 427,846 44,072 1,118,901

NET REALIZED AND UNREALIZED GAIN (LOSS) ONINVESTMENTS

Capital gains distributions received . . . . . . . . . . . . . . . 0 667,019 0 0 618,199Realized gain (loss) on shares redeemed . . . . . . . . . . . 0 123,445 1,078,836 20,324 231,637

Net change in unrealized gain (loss) on investments . . . . 0 (2,687,657) 6,039,622 81,052 (335,495)

NET GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . 0 (1,897,193) 7,118,458 101,376 514,341

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . $ 3,295,966 $ 2,574,633 $ 7,546,304 $145,448 $ 1,633,242

A2


SUBACCOUNTS (Continued)

Prudential HighYield Bond

Portfolio

PrudentialStock Index

PortfolioPrudential Value

Portfolio

PrudentialNatural

ResourcesPortfolio

PrudentialGlobal Portfolio

PrudentialGovernment

IncomePortfolio

PrudentialJennisonPortfolio

PrudentialSmall

CapitalizationStock Portfolio

$ 9,284,901 $208,637,275 $ 14,569,789 $ 3,440,044 $ 17,159,800 $ 69,208,990 $ 46,418,929 $ 25,327,987

$ 9,284,901 $208,637,275 $ 14,569,789 $ 3,440,044 $ 17,159,800 $ 69,208,990 $ 46,418,929 $ 25,327,987

$ 9,284,901 $208,637,275 $ 14,569,789 $ 3,440,044 $ 17,159,800 $ 69,208,990 $ 46,418,929 $ 25,327,987

$ 9,284,901 $208,637,275 $ 14,569,789 $ 3,440,044 $ 17,159,800 $ 69,208,990 $ 46,418,929 $ 25,327,987

6,876,987 128,179,403 6,521,346 378,012 14,792,848 25,075,993 48,383,715 7,320,883

1,775,316 6,642,384 634,849 75,672 905,053 6,070,964 2,235,979 1,184,658$ 5.23 $ 31.41 $ 22.95 $ 45.46 $ 18.96 $ 11.40 $ 20.76 $ 21.38

$ 9,484,559 $197,220,962 $ 11,512,855 $ 1,759,564 $ 13,950,788 $ 73,699,229 $ 37,679,904 $ 18,307,577


Prudential HighYield Bond

Portfolio

PrudentialStock Index

PortfolioPrudential Value

Portfolio

PrudentialNatural

ResourcesPortfolio

PrudentialGlobal Portfolio

PrudentialGovernment

IncomePortfolio

PrudentialJennisonPortfolio

PrudentialSmall

CapitalizationStock Portfolio

$ 609,936 $ 3,087,115 $ 189,853 $ 103 $ 87,502 $ 3,296,727 $ 43,122 $ 148,491

24,561 874,347 72,167 16,783 52,620 432,671 125,939 143,565

24,561 874,347 72,167 16,783 52,620 432,671 125,939 143,565

585,375 2,212,768 117,686 (16,680) 34,882 2,864,056 (82,817) 4,926

0 4,925,036 0 219,910 0 0 0 1,394,371

(29,143) 1,506,585 914,704 234,469 341,566 (372,801) 488,888 137,134(278,407) (541,784) 1,388,825 831,486 2,022,275 (1,053,506) 5,272,981 34,815

(307,550) 5,889,837 2,303,529 1,285,865 2,363,841 (1,426,307) 5,761,869 1,566,320

$ 277,825 $ 8,102,605 $ 2,421,215 $ 1,269,185 $ 2,398,723 $ 1,437,749 $ 5,679,052 $ 1,571,246


A3



SUBACCOUNTS

T. Rowe PriceInternational

Stock PortfolioAIM V.I. Premier

Equity Fund

Janus AspenLarge Cap

GrowthPortfolio –

InstitutionalShares

MFS EmergingGrowth Series

AmericanCentury VPValue Fund

ASSETSInvestment in the portfolios, at value . . . . . . . . . . . . . . $ 7,877,220 $ 2,149,067 $ 5,587,564 $ 3,843,585 $11,077,562

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,877,220 $ 2,149,067 $ 5,587,564 $ 3,843,585 $11,077,562

NET ASSETS, representing:Accumulation units . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,877,220 $ 2,149,067 $ 5,587,564 $ 3,843,585 $11,077,562

$ 7,877,220 $ 2,149,067 $ 5,587,564 $ 3,843,585 $11,077,562


Portfolio shares held . . . . . . . . . . . . . . . . . . . . . . . . . 514,515 96,284 267,860 200,919 1,350,922


Investment in portfolio shares, at cost . . . . . . . . . . . . . $ 6,027,583 $ 2,084,106 $ 5,293,626 $ 3,839,589 $ 9,875,194


SUBACCOUNTS

T. Rowe PriceInternational

Stock PortfolioAIM V.I. Premier

Equity Fund

Janus AspenLarge Cap

GrowthPortfolio –

InstitutionalShares

MFS EmergingGrowth Series

AmericanCentury VPValue Fund

INVESTMENT INCOMEDividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 115,590 $ 17,959 $ 18,728 $ 0 $ 91,475


and expense risk . . . . . . . . . . . . . . . . . . . . . . . . . . 30,656 14,105 32,010 16,486 61,183

NET EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,656 14,105 32,010 16,486 61,183

NET INVESTMENT INCOME (LOSS) . . . . . . . . . . . . . . . 84,934 3,854 (13,282) (16,486) 30,292


Capital gains distributions received . . . . . . . . . . . . . . . 25,128 0 0 0 1,058,397Realized gain (loss) on shares redeemed . . . . . . . . . . . 135,587 8,734 37,918 (258,722) 116,959

Net change in unrealized gain (loss) on investments . . . . 822,937 94,605 163,212 526,266 (725,343)

NET GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . 983,652 103,339 201,130 267,544 450,013

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . $ 1,068,586 $ 107,193 $ 187,848 $ 251,058 $ 480,305

A4



Franklin Small-Mid CapGrowth

Securities Fund

AmericanCentury VPIncome &

Growth Fund

Prudential SPT.Rowe Price

Large CapGrowth

Portfolio

Prudential SPDavis Value

Portfolio

DreyfusVariable

InvestmentMidCap Stock

Portfolio

DreyfusVariable

InvestmentDeveloping

LeadersPortfolio

Prudential SPSmall Cap

Value Portfolio

Goldman SachsCORE SmallCap Equity

Fund

$ 7,043,000 $ 1,322,438 $ 9,170,237 $34,152,990 $ 3,439,399 $ 4,376,703 $29,146,807 $ 2,417,376

$ 7,043,000 $ 1,322,438 $ 9,170,237 $34,152,990 $ 3,439,399 $ 4,376,703 $29,146,807 $ 2,417,376

$ 7,043,000 $ 1,322,438 $ 9,170,237 $34,152,990 $ 3,439,399 $ 4,376,703 $29,146,807 $ 2,417,376

$ 7,043,000 $ 1,322,438 $ 9,170,237 $34,152,990 $ 3,439,399 $ 4,376,703 $29,146,807 $ 2,417,376

8,854,866 1,232,238 9,205,742 26,836,137 2,546,552 6,876,311 19,661,573 1,559,034

345,923 176,090 1,189,395 3,197,845 179,603 99,561 2,042,523 173,537

$ 20.36 $ 7.51 $ 7.71 $ 10.68 $ 19.15 $ 43.96 $ 14.27 $ 13.93

$ 5,892,033 $ 1,125,184 $ 7,638,463 $29,605,636 $ 2,882,472 $ 3,603,951 $25,330,843 $ 2,134,067


Franklin Small-Mid CapGrowth

Securities Fund

AmericanCentury VPIncome &

Growth Fund

Prudential SPT.Rowe Price

Large CapGrowth

Portfolio

Prudential SPDavis Value

Portfolio

DreyfusVariable

InvestmentMidCap Stock

Portfolio

DreyfusVariable

InvestmentDeveloping

LeadersPortfolio


Value Portfolio

Goldman SachsCORE SmallCap Equity

Fund

$ 0 $ 68,906 $ 0 $ 253,048 $ 707 $ 0 $ 124,931 $ 5,145

27,949 5,747 20,665 79,643 5,823 7,752 67,786 4,308

27,949 5,747 20,665 79,643 5,823 7,752 67,786 4,308

(27,949) 63,159 (20,665) 173,405 (5,116) (7,752) 57,145 837

0 0 0 2,755,364 9,416 0 2,748,572 190,488546,233 363,795 190,584 514,633 30,246 84,288 524,336 50,402

(199,470) (310,769) 1,161,193 (674,265) 273,183 146,061 (2,098,925) (117,382)

346,763 53,026 1,351,777 2,595,732 312,845 230,349 1,173,983 123,508

$ 318,814 $ 116,185 $1,331,112 $ 2,769,137 $ 307,729 $ 222,597 $ 1,231,128 $ 124,345


A5



SUBACCOUNTS

AIM V.I. UtilitiesSeries

AIM V.I.Technology Fund


GrowthPortfolio

Janus AspenMid-Cap Growth

Portfolio –Service Shares

Janus AspenBalancedPortfolio –

Service Shares

ASSETSInvestment in the portfolios, at value . . . . . . . . . . . . . . $ 617,506 $ 545,592 $ 5,517,877 $ 1,364,253 $22,771,802

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 617,506 $ 545,592 $ 5,517,877 $ 1,364,253 $22,771,802

NET ASSETS, representing:

Accumulation units . . . . . . . . . . . . . . . . . . . . . . . . . . $ 617,506 $ 545,592 $ 5,517,877 $ 1,364,253 $22,771,802

$ 617,506 $ 545,592 $ 5,517,877 $ 1,364,253 $22,771,802

Units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 707,776 1,936,715 5,892,432 2,285,066 19,794,338

Portfolio shares held. . . . . . . . . . . . . . . . . . . . . . . . . . . 34,633 42,994 833,516 48,020 855,761

Portfolio net asset value per share . . . . . . . . . . . . . . . . . $ 17.83 $ 12.69 $ 6.62 $ 28.41 $ 26.61

Investment in portfolio shares, at cost . . . . . . . . . . . . . . . $ 583,568 $ 480,950 $ 5,040,088 $ 1,056,941 $20,001,688


SUBACCOUNTS

AIM V.I. UtilitiesSeries

AIM V.I.Technology Fund


GrowthPortfolio

Janus AspenMid-Cap Growth

Portfolio –Service Shares

Janus AspenBalancedPortfolio –

Service Shares

INVESTMENT INCOMEDividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,014 $ 0 $ 0 $ 0 $ 455,087


and expense risk . . . . . . . . . . . . . . . . . . . . . . . . . . 629 1,005 12,367 6,140 42,964

NET EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 629 1,005 12,367 6,140 42,964

NET INVESTMENT INCOME (LOSS) . . . . . . . . . . . . . . . 13,385 (1,005) (12,367) (6,140) 412,123


Capital gains distributions received . . . . . . . . . . . . . . . 0 0 0 0 0

Realized gain (loss) on shares redeemed . . . . . . . . . . . 1,510 29,400 39,628 658,492 77,385

Net change in unrealized gain (loss) on

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,408 (8,824) 121,345 (358,731) 1,080,265

NET GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . 33,918 20,576 160,973 299,761 1,157,650

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . $ 47,303 $ 19,571 $ 148,606 $ 293,621 $ 1,569,773

A6



Oppenheimer

Aggressive

Growth Fund/VA

Prudential SP

PIMCO Total

Return Portfolio

Prudential SP

PIMCO High

Yield Portfolio

Janus Aspen

Large Cap

Growth

Portfolio –

Service Shares

Prudential SP

Large Cap

Value Portfolio

Prudential SP

AIM Core

Equity Portfolio

Prudential SP

Strategic

Partners

Focused

Growth

Portfolio

Prudential SP Mid

Cap Growth

Portfolio

$ 1,348,055 $43,674,846 $ 8,696,757 $ 1,929,295 $10,689,052 $ 2,910,284 $ 2,986,227 $14,151,994

$ 1,348,055 $43,674,846 $ 8,696,757 $ 1,929,295 $10,689,052 $ 2,910,284 $ 2,986,227 $14,151,994

$ 1,348,055 $43,674,846 $ 8,696,757 $ 1,929,295 $10,689,052 $ 2,910,284 $ 2,986,227 $14,151,994

$ 1,348,055 $43,674,846 $ 8,696,757 $ 1,929,295 $10,689,052 $ 2,910,284 $ 2,986,227 $14,151,994

2,066,935 32,938,377 6,202,786 2,099,433 8,468,277 2,671,882 2,655,701 16,521,636

27,585 3,896,061 848,464 93,564 898,240 381,927 370,041 1,962,829

$ 48.87 $ 11.21 $ 10.25 $ 20.62 $ 11.90 $ 7.62 $ 8.07 $ 7.21$ 997,604 $44,129,121 $ 8,593,634 $ 1,693,371 $ 9,123,223 $ 2,556,451 $ 2,416,897 $11,744,967


Oppenheimer

Aggressive

Growth Fund/VA

Prudential SP

PIMCO Total

Return Portfolio

Prudential SP

PIMCO High

Yield Portfolio

Janus Aspen

Large Cap

Growth

Portfolio-

Service Shares

Prudential SP

Large Cap

Value Portfolio

Prudential SP

AIM Core

Equity Portfolio

Prudential SP

Strategic

Partners

Focused

Growth

Portfolio

Prudential SP Mid

Cap Growth

Portfolio

$ 0 $ 2,017,488 $ 503,032 $ 2,199 $ 66,018 $ 21,702 $ 0 $ 0

2,392 105,309 20,516 4,172 23,390 7,054 6,482 29,529

2,392 105,309 20,516 4,172 23,390 7,054 6,482 29,529

(2,392) 1,912,179 482,516 (1,973) 42,628 14,648 (6,482) (29,529)

0 711,958 92,983 0 197,294 0 0 0

21,650 17,101 44,961 25,747 270,973 34,979 25,681 217,127

137,730 (1,744,299) (317,766) 43,172 84,576 72,892 343,928 980,076

159,380 (1,015,240) (179,822) 68,919 552,843 107,871 369,609 1,197,203

$ 156,988 $ 896,939 $ 302,694 $ 66,946 $ 595,471 $ 122,519 $ 363,127 $ 1,167,674


A7



SUBACCOUNTS

SP PrudentialU.S. Emerging

Growth Portfolio

Prudential SPConservative

Asset AllocationPortfolio

Prudential SPBalanced Asset

AllocationPortfolio

Prudential SPGrowth Asset

AllocationPortfolio

Prudential SPAggressive

Growth AssetAllocationPortfolio

ASSETSInvestment in the portfolios, at value . . . . . . . . . . . . . . $16,696,935 $ 7,613,853 $30,116,140 $43,776,640 $14,089,292

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,696,935 $ 7,613,853 $30,116,140 $43,776,640 $14,089,292


Accumulation units . . . . . . . . . . . . . . . . . . . . . . . . . . $16,696,935 $ 7,613,853 $30,116,140 $43,776,640 $14,089,292

$16,696,935 $ 7,613,853 $30,116,140 $43,776,640 $14,089,292


Portfolio shares held . . . . . . . . . . . . . . . . . . . . . . . . . 2,121,593 674,987 2,757,888 4,279,241 1,483,083

Portfolio net asset value per share. . . . . . . . . . . . . . . . $ 7.87 $ 11.28 $ 10.92 $ 10.23 $ 9.50Investment in portfolio shares, at cost . . . . . . . . . . . . . $13,738,397 $ 6,904,414 $26,540,616 $37,813,187 $12,193,926


SUBACCOUNTS

SP PrudentialU.S. Emerging

Growth Portfolio

Prudential SPConservative

Asset AllocationPortfolio

Prudential SPBalanced Asset

AllocationPortfolio

Prudential SPGrowth Asset

AllocationPortfolio

Prudential SPAggressive

Growth AssetAllocationPortfolio

INVESTMENT INCOMEDividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15 $ 84,161 $ 209,768 $ 196,852 $ 15,586

EXPENSESCharges to contract owners for assuming

mortality risk and expense risk . . . . . . . . . . . . . . . 34,786 20,295 63,915 87,196 27,305

NET EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,786 20,295 63,915 87,196 27,305

NET INVESTMENT INCOME (LOSS) . . . . . . . . . . . . . . . (34,771) 63,866 145,853 109,656 (11,719)


Capital gains distributions received . . . . . . . . . . . . . . . 1,640,413 205,698 745,238 1,134,575 351,101

Realized gain (loss) on shares redeemed . . . . . . . . . . . 149,335 59,456 300,217 362,929 142,706

Net change in unrealized gain (loss) oninvestments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820,518 51,539 668,310 1,783,162 728,747

NET GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . 2,610,266 316,693 1,713,765 3,280,666 1,222,554

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . $ 2,575,495 $ 380,559 $ 1,859,618 $ 3,390,322 $ 1,210,835

A8



Janus AspenInternational

GrowthPortfolio –

Service Shares

Prudential SPWilliam BlairInternational

GrowthPortfolio

Prudential SPLSV

InternationalValue Portfolio

M FinancialTurner CoreGrowth Fund

M FinancialFrontier Capital

AppreciationFund

M FinancialBrandes

InternationalEquity Fund

M FinancialBusiness

OpportunityValue Fund

ProFund VPAsia 30 Fund

$ 5,615,741 $ 7,257,382 $13,283,627 $ 611,000 $ 557,663 $ 1,100,999 $ 279,223 $ 315

$ 5,615,741 $ 7,257,382 $13,283,627 $ 611,000 $ 557,663 $ 1,100,999 $ 279,223 $ 315

$ 5,615,741 $ 7,257,382 $13,283,627 $ 611,000 $ 557,663 $ 1,100,999 $ 279,223 $ 315

$ 5,615,741 $ 7,257,382 $13,283,627 $ 611,000 $ 557,663 $ 1,100,999 $ 279,223 $ 315

5,290,831 5,436,112 11,301,150 46,615 42,867 76,567 20,269 158

159,674 961,243 1,462,955 36,807 24,299 62,842 23,153 7

$ 35.17 $ 7.55 $ 9.08 $ 16.60 $ 22.95 $ 17.52 $ 12.06 $ 44.47$ 3,762,452 $ 5,774,350 $11,040,819 $ 531,241 $ 518,129 $ 1,022,088 $ 265,236 $ 299


Janus AspenInternational

GrowthPortfolio –

Service Shares

Prudential SPWilliam BlairInternational

GrowthPortfolio

Prudential SPLSV

InternationalValue Portfolio

M FinancialTurner CoreGrowth Fund

M FinancialFrontier Capital

AppreciationFund

M FinancialBrandes

InternationalEquity Fund

M FinancialBusiness

OpportunityValue Fund

ProFund VPAsia 30 Fund

$ 61,332 $ 30,212 $ 45,068 $ 2,432 $ 0 $ 14,716 $ 1,689 $ 61

11,537 16,496 29,758 0 0 0 0 13

11,537 16,496 29,758 0 0 0 0 13

49,795 13,716 15,310 2,432 0 14,716 1,689 48

0 223,428 942,415 0 42,321 56,675 22,098 0

775,362 99,293 334,611 3,084 3,885 4,887 4,076 501

827,262 619,684 228,626 61,091 14,334 28,424 (8,181) 16

1,602,624 942,405 1,505,652 64,175 60,540 89,986 17,993 517

$ 1,652,419 $ 956,121 $ 1,520,962 $ 66,607 $ 60,540 $ 104,702 $ 19,682 $ 565


A9



SUBACCOUNTS

ProFund VPBanks Fund

ProFund VPBasic Materials

FundProFund VPBear Fund

ProFund VPBiotechnology

Fund

ProFund VPUltraBull

Fund

ASSETSInvestment in the portfolios, at value . . . . . . . . . . . . . . $ 1 $637,063 $ 8,974 $ 17,570 $ 13

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 $637,063 $ 8,974 $ 17,570 $ 13


Accumulation units . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 $637,063 $ 8,974 $ 17,570 $ 13

$ 1 $637,063 $ 8,974 $ 17,570 $ 13

Units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 418,226 13,423 9,917 7

Portfolio shares held . . . . . . . . . . . . . . . . . . . . . . . . . 0* 18,439 318 809 1

Portfolio net asset value per share. . . . . . . . . . . . . . . . $ 30.26 $ 34.55 $ 28.22 $ 21.73 $ 20.65Investment in portfolio shares, at cost . . . . . . . . . . . . . $ 1 $634,879 $ 8,978 $ 17,827 $ 13


SUBACCOUNTS

ProFund VPBanks Fund

ProFund VPBasic Materials

FundProFund VPBear Fund

ProFund VPBiotechnology

Fund

ProFund VPUltraBull

Fund

INVESTMENT INCOMEDividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0 $ 0 $ 0 $ 0

EXPENSESCharges to contract owners for assuming

mortality risk and expense risk . . . . . . . . . . . . . . . 3 92 43 46 123

NET EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 92 43 46 123

NET INVESTMENT INCOME (LOSS) . . . . . . . . . . . . . . . (3) (92) (43) (46) (123)


Capital gains distributions received . . . . . . . . . . . . . . . 0 3 0 1,408 3

Realized gain (loss) on shares redeemed . . . . . . . . . . . (551) (1,094) 1,132 3,356 20,163

Net change in unrealized gain (loss) on

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 2,144 (4) (355) (491)

NET GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . (551) 1,053 1,128 4,409 19,675

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . $ (554) $ 961 $ 1,085 $ 4,363 $ 19,552

* Represents less than one share

A10



ProFund VPConsumer

Services Fund

ProFund VPConsumer

Goods FundProFund VP Oil

& Gas FundProFund VP

Europe 30 FundProFund VP

Financials FundProFund VP

Health Care FundProFund VP

Industrials FundProFund VP

Internet Fund

$ 6 $ 27 $ 4 $ 29,168 $669,249 $ 25,016 $ 1 $ 2,729

$ 6 $ 27 $ 4 $ 29,168 $669,249 $ 25,016 $ 1 $ 2,729

$ 6 $ 27 $ 4 $ 29,168 $669,249 $ 25,016 $ 1 $ 2,729

$ 6 $ 27 $ 4 $ 29,168 $669,249 $ 25,016 $ 1 $ 2,729

5 22 2 17,257 469,543 20,217 1 1,466

0* 1 0* 1,043 19,209 893 0* 47

$ 28.59 $ 29.75 $ 47.02 $ 27.96 $ 34.84 $ 28.01 $ 33.54 $ 58.35$ 6 $ 27 $ 4 $ 29,254 $672,899 $ 24,644 $ 1 $ 2,694


ProFund VPConsumer

Services Fund

ProFund VPConsumer

Goods FundProFund VP Oil

& Gas FundProFund VP

Europe 30 FundProFund VP

Financials FundProFund VP

Health Care FundProFund VP

Industrials FundProFund VP

Internet Fund

$ 0 $ 0 $ 0 $ 87 $ 332 $ 0 $ 0 $ 0

42 42 73 110 221 108 1 8

42 42 73 110 221 108 1 8

(42) (42) (73) (23) 111 (108) (1) (8)

0 0 395 6,316 0 0 0 0

5,852 5,518 11,122 (7,551) 6,747 3,112 (688) 462

0 0 0 (586) (3,897) (18) 0 (223)

5,852 5,518 11,517 (1,821) 2,850 3,094 (688) 239

$ 5,810 $ 5,476 $ 11,444 $ (1,844) $ 2,961 $ 2,986 $ (689) $ 231


A11



SUBACCOUNTS

ProFund VPJapan Fund

ProFund VP MidCap Growth

FundProFund VP Mid-Cap Value Fund

ProFund VPMoney Market

FundProFund VPOTC Fund

ASSETSInvestment in the portfolios, at value . . . . . . . . . . . . . . $ 65,814 $ 9,262 $ 19,993 $1,495,813 $ 71,102

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,814 $ 9,262 $ 19,993 $1,495,813 $ 71,102

NET ASSETS, representing:Accumulation units . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,814 $ 9,262 $ 19,993 $1,495,813 $ 71,102

$ 65,814 $ 9,262 $ 19,993 $1,495,813 $ 71,102

Units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,276 6,049 11,757 1,479,289 46,711

Portfolio shares held . . . . . . . . . . . . . . . . . . . . . . . . . 1,681 266 576 1,495,813 4,737


Investment in portfolio shares, at cost . . . . . . . . . . . . . $ 63,207 $ 9,333 $ 19,403 $1,495,813 $ 69,561


SUBACCOUNTS

ProFund VPJapan Fund

ProFund VP MidCap Growth

FundProFund VP Mid-Cap Value Fund

ProFund VPMoney Market

FundProFund VPOTC Fund

INVESTMENT INCOME

Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0 $ 0 $ 30,018 $ 0


and expense risk . . . . . . . . . . . . . . . . . . . . . . . . . . 40 41 79 4,111 55

NET EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 41 79 4,111 55

NET INVESTMENT INCOME (LOSS) . . . . . . . . . . . . . . . (40) (41) (79) 25,907 (55)


Capital gains distributions received . . . . . . . . . . . . . . . 0 289 1,832 0 567Realized gain (loss) on shares redeemed . . . . . . . . . . . 4,377 458 906 0 (13)

Net change in unrealized gain (loss) on investments . . . . 2,607 (1,833) (794) 0 1,067

NET GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . 6,984 (1,086) 1,944 0 1,621

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . $ 6,944 $ (1,127) $ 1,865 $ 25,907 $ 1,566


A12



ProFund VPPharmaceuticals

Fund

ProFund VPPrecious Metals

Fund

ProFund VPReal Estate

Fund

ProFund VPRising RatesOpportunity

Fund

ProFund VPSemiconductor

FundProFund VP

Short OTC Fund

ProFund VPShort Small-Cap

Fund

ProFund VPSmall-Cap

Fund

$ 56 $ 44,912 $ 30,679 $ 1,665 $ 1 $ 17,601 $223,392 $ 9

$ 56 $ 44,912 $ 30,679 $ 1,665 $ 1 $ 17,601 $223,392 $ 9

$ 56 $ 44,912 $ 30,679 $ 1,665 $ 1 $ 17,601 $223,392 $ 9

$ 56 $ 44,912 $ 30,679 $ 1,665 $ 1 $ 17,601 $223,392 $ 9

63 24,811 17,562 2,281 1 31,176 365,857 5

2 1,091 586 87 0* 948 13,441 0*

$ 22.56 $ 41.15 $ 52.36 $ 19.13 $ 22.18 $ 18.56 $ 16.62 $ 32.95

$ 53 $ 45,468 $ 31,676 $ 1,754 $ 1 $ 17,134 $222,935 $ 9


ProFund VPPharmaceuticals

Fund

ProFund VPPrecious Metals

Fund

ProFund VPReal Estate

Fund

ProFund VPRising RatesOpportunity

Fund

ProFund VPSemiconductor

FundProFund VP

Short OTC Fund

ProFund VPShort Small-Cap

Fund

ProFund VPSmall-Cap

Fund

$ 0 $ 0 $ 1,957 $ 0 $ 0 $ 0 $ 0 $ 0

11 52 129 48 6 2,365 23 27

11 52 129 48 6 2,365 23 27

(11) (52) 1,828 (48) (6) (2,365) (23) (27)

0 0 0 0 0 0 0 0205 6,837 (2,120) (5,581) 1,048 (120,409) 3,105 2,017

3 (556) (1,071) 748 0 218,177 457 (145)

208 6,281 (3,191) (4,833) 1,048 97,768 3,562 1,872

$ 197 $ 6,229 $ (1,363) $ (4,881) $ 1,042 $ 95,403 $ 3,539 $ 1,845


A13



SUBACCOUNTS

ProFund VPSmall

Cap-GrowthFund

ProFund VPSmall-Cap

ValueFund

ProFund VPTechnology

Fund

ProFund VPTelecommunications

Fund

ProFund VPU.S.

GovernmentPlusFund

ASSETSInvestment in the portfolios, at value . . . . . . . . . . . . . . $ 6,308 $ 1 $ 2,342 $ 56 $145,186

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,308 $ 1 $ 2,342 $ 56 $145,186


Accumulation units . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,308 $ 1 $ 2,342 $ 56 $145,186

$ 6,308 $ 1 $ 2,342 $ 56 $145,186

Units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,748 1 1,648 52 121,197

Portfolio shares held . . . . . . . . . . . . . . . . . . . . . . . . . 163 0* 157 4 4,433


Investment in portfolio shares, at cost . . . . . . . . . . . . . $ 6,417 $ 1 $ 2,426 $ 59 $145,451


SUBACCOUNTS

ProFund VPSmall

Cap-GrowthFund

ProFund VPSmall-Cap

ValueFund

ProFund VPTechnology

Fund

ProFund VPTelecommunications

Fund

ProFund VPU.S.

GovernmentPlusFund

INVESTMENT INCOMEDividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0 $ 9 $ 2,693 $ 412


and expense risk . . . . . . . . . . . . . . . . . . . . . . . . . . 25 19 2 30 45

NET EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 19 2 30 45

NET INVESTMENT INCOME (LOSS) . . . . . . . . . . . . . . . (25) (19) 7 2,663 367


Capital gains distributions received . . . . . . . . . . . . . . . 0 59 88 4,079 0

Realized gain (loss) on shares redeemed . . . . . . . . . . . (208) 598 506 (4,388) 7,308

Net change in unrealized gain (loss) on investments . . . . (709) (1,199) (84) 79 (401)

NET GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . (917) (542) 510 (230) 6,907

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . $ (942) $ (561) $ 517 $ 2,433 $ 7,274


A14



ProFund VPUltraMid-Cap

Fund

ProFund VPUltraOTC

Fund

ProFund VPUltraSmall-Cap

Fund

ProFund VPBull

Fund

ProFund VPUtilities

Fund

AST Cohen &SteersReal

EstatePortfolio

AST GlobalAllocationPorfolio

ASTDeAmLarge-

Cap ValuePortfolio

$ 2,609 $68,113 $ 9 $82,212 $ 308 $13,364 $ 2,888 $ 6,083

$ 2,609 $68,113 $ 9 $82,212 $ 308 $13,364 $ 2,888 $ 6,083

$ 2,609 $68,113 $ 9 $82,212 $ 308 $13,364 $ 2,888 $ 6,083

$ 2,609 $68,113 $ 9 $82,212 $ 308 $13,364 $ 2,888 $ 6,083

1,060 33,931 4 60,459 179 1,228 276 568

69 1,630 0* 2,908 10 752 230 487

$ 37.93 $ 41.79 $ 21.51 $ 28.27 $ 29.64 $ 17.78 $ 12.56 $ 12.50

$ 2,590 $68,130 $ 9 $82,047 $ 309 $13,349 $ 2,881 $ 6,113


ProFund VPUltraMid-Cap

Fund

ProFund VPUltraOTC

Fund

ProFund VPUltraSmall-Cap

Fund

ProFund VPBull

Fund

ProFund VPUtilities

Fund

AST Cohen &SteersReal

EstatePortfolio

AST GlobalAllocationPorfolio

ASTDeAmLarge-

Cap ValuePortfolio

$ 0 $ 0 $ 0 $ 27 $ 78 $ 0 $ 0 $ 0

118 62 111 126 69 1 0 0

118 62 111 126 69 1 0 0

(118) (62) (111) (99) 9 (1) 0 0

1,262 3,374 4 0 124 0 0 0

29,506 (6,158) 27,815 7,108 11,389 2 0 0

(771) (443) (434) (903) (2) 15 7 (30)

29,997 (3,227) 27,385 6,205 11,511 17 7 (30)

$29,879 $ (3,289) $27,274 $ 6,106 $11,520 $ 16 $ 7 $ (30)


A15



SUBACCOUNTS

ASTDeAm

Small-CapGrowthPorfolio

ASTDeAm

Small-CapValue

Porfolio

ASTFederatedAggressive

GrowthPortfolio

ASTSmallCap

ValuePortfolio

ASTGoldman

SachsMid-CapGrowth

Portfolio

ASSETSInvestment in the portfolios, at value . . . . . . . . . . . . . . $ 5,871 $ 842 $ 1,804 $27,170 $ 8,971

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,871 $ 842 $ 1,804 $27,170 $ 8,971


Accumulation units . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,871 $ 842 $ 1,804 $27,170 $ 8,971

$ 5,871 $ 842 $ 1,804 $27,170 $ 8,971

Units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 547 81 163 2,559 847

Portfolio shares held . . . . . . . . . . . . . . . . . . . . . . . . . 701 70 172 1,807 1,942Portfolio net asset value per share. . . . . . . . . . . . . . . . $ 8.38 $ 11.95 $ 10.46 $ 15.04 $ 4.62

Investment in portfolio shares, at cost . . . . . . . . . . . . . $ 5,926 $ 852 $ 1,791 $27,435 $ 9,059


SUBACCOUNTS

ASTDeAm

Small-CapGrowthPorfolio

ASTDeAm

Small-CapValue

Porfolio

ASTFederatedAggressive

GrowthPortfolio

ASTSmallCap

ValuePortfolio

ASTGoldman

SachsMid-CapGrowth

Portfolio

INVESTMENT INCOMEDividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0 $ 0 $ 0 $ 0


and expense risk . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 1 0

NET EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 1 0

NET INVESTMENT INCOME (LOSS) . . . . . . . . . . . . . . . 0 0 0 (1) 0

NET REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS

Capital gains distributions received . . . . . . . . . . . . . . . 0 0 0 0 0

Realized gain (loss) on shares redeemed . . . . . . . . . . . 0 0 0 0 (1)

Net change in unrealized gain (loss) on investments . . . . (55) (10) 13 (265) (88)

NET GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . (55) (10) 13 (265) (89)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . $ (55) $ (10) $ 13 $ (266) $ (89)

A16



ASTMarsicoCapitalGrowth

Portfolio

ASTMFS

GrowthPortfolio

ASTNeuberger &

BermanMid-CapGrowth

Portfolio

ASTPIMCOLimitedMaturity

BondPortfolio

AST T. RowePrice

NaturalResourcesPortfolio

AST MFSGlobalEquity

Portfolio

ASTJP Morgan

InternationalEquity

Portfolio

AST T. RowePrice

GlobalBond

Portfolio

$ 5,332 $ 2,559 $ 3,679 $ 915 $143,314 $ 1,407 $ 42,383 $ 16,630

$ 5,332 $ 2,559 $ 3,679 $ 915 $143,314 $ 1,407 $ 42,383 $ 16,630

$ 5,332 $ 2,559 $ 3,679 $ 915 $143,314 $ 1,407 $ 42,383 $ 16,630

$ 5,332 $ 2,559 $ 3,679 $ 915 $143,314 $ 1,407 $ 42,383 $ 16,630

496 242 336 91 12,966 134 3,997 1,672

279 298 228 82 5,202 108 2,109 1,487$ 19.08 $ 8.59 $ 16.15 $ 11.10 $ 27.55 $ 12.98 $ 20.10 $ 11.18

$ 5,368 $ 2,570 $ 3,706 $ 914 $141,497 $ 1,388 $ 41,726 $ 16,545


ASTMarsicoCapitalGrowth

Portfolio

ASTMFS

GrowthPortfolio

ASTNeuberger &

BermanMid-CapGrowth

Portfolio

ASTPIMCOLimitedMaturity

BondPortfolio

AST T. RowePrice

NaturalResourcesPortfolio

AST MFSGlobalEquity

Portfolio

ASTJP Morgan

InternationalEquity

Portfolio

AST T. RowePrice

GlobalBond

Portfolio

$ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0

0 0 0 0 10 0 3 1

0 0 0 0 10 0 3 1

0 0 0 0 (10) 0 (3) (1)

0 0 0 0 0 0 0 0

0 1 0 0 5 1 4 1

(36) (11) (27) 1 1,817 19 657 85

(36) (10) (27) 1 1,822 20 661 85

$ (36) $ (10) $ (27) $ 1 $ 1,812 $ 20 $ 658 $ 85


A17


STATEMENT OF CHANGES IN NET ASSETSFor the periods ended December 31, 2005 and 2004

SUBACCOUNTS

Prudential Money Market Portfolio Prudential Diversified Bond Portfolio Prudential Equity Portfolio

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . $ 3,295,966 $ 736,324 $ 4,471,826 $ 3,545,425 $ 427,846 $ 499,598Capital gains distributions received . . . . . . . . . . . . 0 0 667,019 0 0 0

Realized gain (loss) on shares redeemed. . . . . . . . . 0 0 123,445 88,203 1,078,836 (13,499)

Net change in unrealized gain (loss) on investments . 0 0 (2,687,657) 830,287 6,039,622 4,804,519

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . 3,295,966 736,324 2,574,633 4,463,915 7,546,304 5,290,618

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . 46,274,344 58,265,949 8,706,957 9,336,504 10,094,935 9,837,244Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,800,212) (195,392) (233,046) (216,939) (407,875) (217,410)

Policy loan repayments and interest . . . . . . . . . . . . 468,694 981,112 76,038 21,208 44,280 11,450

Surrenders, withdrawals and death benefits. . . . . . . (12,252,696) (4,601,978) (6,601,591) (2,749,124) (2,573,258) (830,259)

Net transfers between other subaccounts or fixedrate option . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,406,229) (28,167,755) 597,421 (487,068) 4,150,753 (2,244,252)

Withdrawal and other charges . . . . . . . . . . . . . . . . (9,946,209) (11,012,706) (4,691,219) (4,415,917) (5,119,456) (4,347,337)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 20,337,692 15,269,230 (2,145,440) 1,488,664 6,189,379 2,209,436

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . 23,633,658 16,005,554 429,193 5,952,579 13,735,683 7,500,054

NET ASSETSBeginning of period . . . . . . . . . . . . . . . . . . . . . . . 135,016,488 119,010,934 91,524,977 85,572,398 61,149,624 53,649,570

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $158,650,146 $135,016,488 $91,954,170 $91,524,977 $ 74,885,307 $61,149,624

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . 101,072,327 91,975,506 44,852,781 42,294,062 38,699,197 34,244,410

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,624,290 78,888,174 8,881,825 12,508,049 17,817,137 14,318,064

Units redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . (72,194,503) (69,791,353) (8,111,052) (9,949,330) (11,967,238) (9,863,277)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,502,114 101,072,327 45,623,554 44,852,781 44,549,096 38,699,197

A18



Prudential Flexible Managed Portfolio Prudential Conservative Balanced Portfolio Prudential High Yield Bond Portfolio Prudential Stock Index Portfolio

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

$ 44,072 $ 20,640 $ 1,118,901 $ 870,779 $ 585,375 $ 525,899 $ 2,212,768 $ 2,268,0560 0 618,199 360,082 0 0 4,925,036 3,136,915

20,324 446 231,637 (102,420) (29,143) 6,776 1,506,585 (231,518)

81,052 312,727 (335,495) 2,998,237 (278,407) 192,459 (541,784) 12,879,025

145,448 333,813 1,633,242 4,126,678 277,825 725,134 8,102,605 18,052,478

352,939 365,330 686,638 1,083,251 2,301,039 1,962,437 23,296,190 24,409,640(12,990) (3,882) (23,218) (124) (185,696) (76,543) (1,228,453) (854,140)

4,664 8,111 33,339 20,946 8,317 3,244 361,322 71,782

(43,664) (206,553) (11,630,588) (176,036) (488,676) (414,389) (6,950,865) (4,802,842)

165,823 270,199 1,055,092 (5,660,484) 229,627 1,020,613 (5,933,051) 1,184,952

(130,193) (125,231) (964,683) (1,100,509) (1,170,330) (1,047,260) (10,948,605) (9,533,250)

336,579 307,974 (10,843,420) (5,832,956) 694,281 1,448,102 (1,403,462) 10,476,142

482,027 641,787 (9,210,178) (1,706,278) 972,106 2,173,236 6,699,143 28,528,620

3,775,105 3,133,318 58,335,759 60,042,037 8,312,795 6,139,559 201,938,132 173,409,512

$ 4,257,132 $ 3,775,105 $ 49,125,581 $ 58,335,759 $ 9,284,901 $ 8,312,795 $208,637,275 $ 201,938,132

3,029,971 2,676,625 25,514,928 27,883,017 6,416,328 5,186,442 126,516,251 113,050,073

600,267 649,853 4,802,566 5,890,484 2,525,502 2,658,289 31,567,026 40,208,296

(284,886) (296,507) (8,136,978) (8,258,573) (2,064,843) (1,428,403) (29,903,874) (26,742,118)

3,345,352 3,029,971 22,180,516 25,514,928 6,876,987 6,416,328 128,179,403 126,516,251


A19



SUBACCOUNTS

Prudential Value Portfolio Prudential Natural Resources Portfolio Prudential Global Portfolio

01/01/2005 01/01/2004 01/01/2005 01/01/2004 01/01/2005 01/01/2004to to to to to to

12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . $ 117,686 $ 127,430 $ (16,680) $ 66,071 $ 34,882 $ 74,786

Capital gains distributions received . . . . . . . . . . . . 0 0 219,910 86,314 0 0Realized gain (loss) on shares redeemed. . . . . . . . . 914,704 45,473 234,469 224,099 341,566 (328,576)

Net change in unrealized gain (loss) on investments . 1,388,825 1,732,082 831,486 139,774 2,022,275 1,468,128

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS. . . . . . . . . . . . 2,421,215 1,904,985 1,269,185 516,258 2,398,723 1,214,338

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . 1,098,262 992,784 54,213 79,140 2,743,412 2,545,800

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,484) (14,037) (1) 0 (81,930) (71,361)Policy loan repayments and interest . . . . . . . . . . . . 13,482 133 8 0 59,193 12,469

Surrenders, withdrawals and death benefits. . . . . . . (2,978,473) (220,340) (257,754) 0 (1,131,611) (284,303)

Net transfers between other subaccounts or fixed

rate option . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,042 657,226 155,516 (372,011) 68,064 765,969Withdrawal and other charges . . . . . . . . . . . . . . . . (442,213) (362,078) (54,841) (51,368) (1,217,375) (1,049,754)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . (2,138,384) 1,053,688 (102,859) (344,239) 439,753 1,918,820

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . 282,831 2,958,673 1,166,326 172,019 2,838,476 3,133,158


End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,569,789 $14,286,958 $ 3,440,044 $ 2,273,718 $17,159,800 $14,321,324

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . 7,805,399 7,048,315 387,223 445,364 14,272,225 12,072,678

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,059,990 1,716,734 78,905 43,283 4,345,122 4,794,387

Units redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . (3,344,043) (959,650) (88,116) (101,424) (3,824,499) (2,594,840)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,521,346 7,805,399 378,012 387,223 14,792,848 14,272,225

A20



Prudential Government Income Prudential Small Capitalization Stock T. Rowe Price InternationalPortfolio Prudential Jennison Portfolio Portfolio Stock Portfolio

01/01/2005 01/01/2004 01/01/2005 01/01/2004 01/01/2005 01/01/2004 01/01/2005 01/01/2004to to to to to to to to

12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

$ 2,864,056 $ 2,403,031 $ (82,817) $ 56,924 $ 4,926 $ 1,199 $ 84,934 $ 38,741

0 1,189,521 0 0 1,394,371 76,967 25,128 0(372,801) (38,605) 488,888 73,779 137,134 132,730 135,587 71,663

(1,053,506) (1,678,769) 5,272,981 2,927,527 34,815 3,911,210 822,937 608,969

1,437,749 1,875,178 5,679,052 3,058,230 1,571,246 4,122,106 1,068,586 719,373

0 65,828 10,177,498 10,053,375 21,737 46,290 494,248 555,411

(1,275,325) 0 (433,802) (310,939) 0 0 (24,922) (29,733)33,955 0 101,427 34,324 0 0 17,913 11,397

(6,706,204) 0 (1,484,898) (1,173,952) 0 (66,845) (125,463) (213,717)

(433,459) (214,584) 594,117 1,417,482 418,962 (15) 428,013 90,601(339,546) (403,899) (4,780,366) (4,431,851) (228,058) (209,580) (221,499) (199,403)

(8,720,579) (552,655) 4,173,976 5,588,439 212,641 (230,150) 568,290 214,556

(7,282,830) 1,322,523 9,853,028 8,646,669 1,783,887 3,891,956 1,636,876 933,929

76,491,820 75,169,297 36,565,901 27,919,232 23,544,100 19,652,144 6,240,344 5,306,415

$69,208,990 $76,491,820 $ 46,418,929 $36,565,901 $25,327,987 $23,544,100 $ 7,877,220 $ 6,240,344

28,242,751 28,451,880 43,861,738 36,809,502 7,256,037 7,347,420 7,022,102 6,772,107

573,498 47,136 14,674,121 16,428,064 197,894 130,692 1,639,280 1,378,581

(3,740,256) (256,265) (10,152,144) (9,375,828) (133,048) (222,075) (1,037,551) (1,128,586)

25,075,993 28,242,751 48,383,715 43,861,738 7,320,883 7,256,037 7,623,831 7,022,102


A21



SUBACCOUNTS

AIM V.I. Premier Equity FundJanus Aspen Large Cap GrowthPortfolio – Institutional Shares MFS Emerging Growth Series

01/01/2005 01/01/2004 01/01/2005 01/01/2004 01/01/2005 01/01/2004to to to to to to

12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . $ 3,854 $ (4,006) $ (13,282) $ (22,930) $ (16,486) $ (16,595)

Capital gains distributions received . . . . . . . . . . . . 0 0 0 0 0 0

Realized gain (loss) on shares redeemed. . . . . . . . . 8,734 (33,977) 37,918 (28,421) (258,722) (105,452)Net change in unrealized gain (loss) on investment . . 94,605 136,360 163,212 276,399 526,266 627,837

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . 107,193 98,377 187,848 225,048 251,058 505,790

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . 234,758 441,456 644,839 822,333 373,107 572,413

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,235) (14,432) (16,790) (1,468) (17,664) (41,854)

Policy loan repayments and interest . . . . . . . . . . . . 567 134 33,070 20,869 740 388Surrenders, withdrawals and death benefits. . . . . . . (331,756) (102,752) (483,832) (167,736) (487,168) (190,752)

Net transfers between other subaccounts

or fixed rate option . . . . . . . . . . . . . . . . . . . . . 106,432 (171,057) (307,535) (194,102) (665,102) (93,951)

Withdrawal and other charges . . . . . . . . . . . . . . . . (84,296) (105,417) (275,122) (283,136) (119,457) (162,849)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . (79,530) 47,932 (405,370) 196,760 (915,544) 83,395

TOTAL INCREASE (DECREASE) IN NET ASSET . . . . 27,663 146,309 (217,522) 421,808 (664,486) 589,185


End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,149,067 $2,121,404 $ 5,587,564 $ 5,805,086 $ 3,843,585 $4,508,071

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . 3,075,106 3,026,408 8,094,772 7,778,703 6,854,795 6,795,669

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621,721 699,349 1,438,853 1,714,323 639,389 1,037,158

Units redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . (740,735) (650,651) (1,971,140) (1,398,254) (2,008,824) (978,032)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,956,092 3,075,106 7,562,485 8,094,772 5,485,360 6,854,795

A22



American Century VP Value FundFranklin Small-Mid Cap Growth

Securities FundAmerican Century VP Income &

Growth FundPrudential SP T.Rowe PriceLarge Cap Growth Portfolio


12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

$ 30,292 $ 32,554 $ (27,949) $ (28,564) $ 63,159 $ 37,488 $ (20,665) $ (18,015)

1,058,397 67,598 0 0 0 0 0 0

116,959 345,016 546,233 166,478 363,795 62,510 190,584 (23,051)(725,343) 712,088 (199,470) 753,106 (310,769) 253,110 1,161,193 529,924

480,305 1,157,256 318,814 891,020 116,185 353,108 1,331,112 488,858

700,782 604,881 400,952 709,742 95,774 156,018 2,481,060 2,493,945

(24,013) (8,233) (30,608) (42,262) 0 0 (102,740) (67,972)

852 35 980 559 0 0 37,218 8,145(456,800) (501,877) (2,450,188) (251,777) (1,238,367) 0 (1,885,662) (232,198)

1,119,270 (732,500) (190,404) 679,417 (759,345) 201,905 173,922 82,690

(200,941) (182,631) (200,630) (218,106) (57,272) (56,471) (1,123,625) (1,052,874)

1,139,150 (820,325) (2,469,898) 877,573 (1,959,210) 301,452 (419,827) 1,231,736

1,619,455 336,931 (2,151,084) 1,768,593 (1,843,025) 654,560 911,285 1,720,594

9,458,107 9,121,176 9,194,084 7,425,491 3,165,463 2,510,903 8,258,952 6,538,358

$11,077,562 $ 9,458,107 $ 7,043,000 $ 9,194,084 $ 1,322,438 $3,165,463 $ 9,170,237 $ 8,258,952

6,078,843 6,697,802 12,067,460 10,827,668 3,079,514 2,754,391 10,311,707 8,917,684

1,199,880 549,203 2,270,518 4,639,213 721,640 1,016,616 4,282,918 3,936,628

(444,343) (1,168,162) (5,483,112) (3,399,421) (2,568,916) (691,493) (5,388,883) (2,542,605)

6,834,380 6,078,843 8,854,866 12,067,460 1,232,238 3,079,514 9,205,742 10,311,707


A23



SUBACCOUNTS

Prudential SP Davis ValuePortfolio

Dreyfus Variable InvestmentMidCap Stock Portfolio

Dreyfus Variable InvestmentDeveloping Leaders Portfolio

01/01/2005 01/01/2004 01/01/2005 01/01/2004 01/01/2005 01/01/2004to to to to to to

12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . $ 173,405 $ 28,029 $ (5,116) $ 4,768 $ (7,752) $ 89

Capital gains distributions received . . . . . . . . . . . . 2,755,364 0 9,416 54,010 0 0

Realized gain (loss) on shares redeemed. . . . . . . . . 514,633 384,219 30,246 82,910 84,288 105,312Net change in unrealized gain (loss) on

investments . . . . . . . . . . . . . . . . . . . . . . . . . (674,265) 2,343,434 273,183 65,067 146,061 263,940

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . 2,769,137 2,755,682 307,729 206,755 222,597 369,341

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . 8,629,754 7,854,708 35,868 280,927 431,779 478,652

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . (363,407) (358,122) 0 0 0 0Policy loan repayments and interest . . . . . . . . . . . . 158,131 23,619 0 0 0 0

Surrenders, withdrawals and death benefits. . . . . . . (1,498,069) (1,442,542) (13,190) (5,353) (84,319) (18,191)


rate option . . . . . . . . . . . . . . . . . . . . . . . . . . 1,428,773 2,885,762 816,821 476,392 267,251 31,444Withdrawal and other charges . . . . . . . . . . . . . . . . (4,097,939) (3,735,268) (43,285) (28,972) (88,720) (78,968)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 4,257,243 5,228,157 796,214 722,994 525,991 412,937

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . 7,026,380 7,983,839 1,103,943 929,749 748,588 782,278


End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,152,990 $27,126,610 $3,439,399 $2,335,456 $ 4,376,703 $ 3,628,115

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . 23,360,351 18,726,405 1,883,994 1,295,499 6,019,470 5,247,137

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,743,214 10,744,917 985,841 1,414,830 2,000,005 1,882,746Units redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . (6,267,428) (6,110,971) (323,283) (826,335) (1,143,164) (1,110,413)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,836,137 23,360,351 2,546,552 1,883,994 6,876,311 6,019,470

A24



Prudential SP Small Cap ValuePortfolio

Goldman Sachs CORE Small CapEquity Fund AIM V.I. Utilities Series AIM V.I. Technology Fund


12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

$ 57,145 $ (19,000) $ 837 $ (22) $ 13,385 $ 71 $ (1,005) $ (1,140)

2,748,572 5,327 190,488 82,674 0 0 0 0

524,336 238,624 50,402 21,060 1,510 18 29,400 2,074

(2,098,925) 3,579,336 (117,382) 154,377 32,408 1,185 (8,824) 58,817

1,231,128 3,804,287 124,345 258,089 47,303 1,274 19,571 59,751

8,418,966 7,104,585 322,549 232,294 4,652 4,939 0 33,995

(382,481) (307,862) (6,324) (6,083) 0 0 0 0144,653 17,399 0 0 0 0 0 0

(1,323,294) (757,791) (98,784) 0 (385) 0 (1,819) (13,616)

1,189,455 2,173,337 121,084 168,667 558,443 2,595 (241,758) 304,994(4,048,905) (3,415,323) (122,894) (107,534) (4,013) (162) (6,568) (7,252)

3,998,394 4,814,345 215,631 287,344 558,697 7,372 (250,145) 318,121

5,229,522 8,618,632 339,976 545,433 606,000 8,646 (230,574) 377,872

23,917,285 15,298,653 2,077,400 1,531,967 11,506 2,860 776,166 398,294

$29,146,807 $23,917,285 $2,417,376 $2,077,400 $617,506 $11,506 $ 545,592 $ 776,166

16,697,840 12,811,700 1,418,263 1,214,180 15,378 4,714 2,810,465 5,303,394

7,972,358 7,920,865 322,559 305,975 726,591 10,911 981,902 2,441,437(5,008,625) (4,034,725) (181,788) (101,892) (34,193) (247) (1,855,652) (3,059,578)

19,661,573 16,697,840 1,559,034 1,418,263 707,776 15,378 1,936,715 4,685,253


A25



SUBACCOUNTS

Prudential SP Small Cap GrowthPortfolio

Janus Aspen Mid Cap GrowthPortfolio – Service Shares

Janus Aspen BalancedPortfolio – Service Shares

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . . . $ (12,367) $ (9,981) $ (6,140) $ (5,625) $ 412,123 $ 382,215

Capital gains distributions received . . . . . . . . . . . . . . . 0 0 0 0 0 0

Realized gain (loss) on shares redeemed . . . . . . . . . . . 39,628 40,073 658,492 83,677 77,385 84,196Net change in unrealized gain (loss) on investments . . . . 121,345 (37,924) (358,731) 462,252 1,080,265 828,602

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . 148,606 (7,832) 293,621 540,304 1,569,773 1,295,013

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . . . . 1,723,207 1,736,509 16,785 112,940 54,990 5,511,367

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70,436) (96,578) (525) (12,028) 0 0

Policy loan repayments and interest. . . . . . . . . . . . . . . 36,704 3,060 450 102 0 0Surrenders, withdrawals and death benefits . . . . . . . . . (170,676) (266,029) (2,112,882) 0 (16,574) (8,143)

Net transfers between other subaccounts or fixed rate

option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,330 528,281 (252,893) 966,428 430,396 59,129

Withdrawal and other charges. . . . . . . . . . . . . . . . . . . (808,911) (777,326) (60,644) (49,887) (405,919) (394,723)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1,055,218 1,127,917 (2,409,709) 1,017,555 62,893 5,167,630

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . . . . 1,203,824 1,120,085 (2,116,088) 1,557,859 1,632,666 6,462,643

NET ASSETSBeginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 4,314,053 3,193,968 3,480,341 1,922,482 21,139,136 14,676,493

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,517,877 $ 4,314,053 $ 1,364,253 $ 3,480,341 $22,771,802 $21,139,136

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,798,680 3,542,398 6,517,859 4,328,842 19,744,023 14,816,060

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,676,875 2,957,908 1,805,349 4,073,118 972,099 6,088,458

Units redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,583,123) (1,701,626) (6,038,142) (1,884,101) (921,784) (1,160,495)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,892,432 4,798,680 2,285,066 6,517,859 19,794,338 19,744,023

A26



Oppenheimer Aggressive GrowthFund/VA

Prudential SP PIMCO Total ReturnPortfolio

Prudential SP PIMCO High YieldPortfolio

Janus Aspen Large Cap GrowthPortfolio – Service Shares

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

$ (2,392) $ (1,834) $ 1,912,179 $ 612,716 $ 482,516 $ 426,382 $ (1,973) $ (3,288)

0 0 711,958 626,208 92,983 62,163 0 0

21,650 19,539 17,101 234,189 44,961 267,891 25,747 21,655137,730 144,785 (1,744,299) 347,512 (317,766) (143,289) 43,172 49,916

156,988 162,490 896,939 1,820,625 302,694 613,147 66,946 68,283

268,026 217,929 7,718,287 7,783,050 2,028,448 1,671,345 627,229 723,428

0 0 (279,402) (244,734) (101,617) (26,688) (28,354) (19,828)

0 0 44,517 20,301 40,993 1,137 4,158 2,151(46,061) (8,653) (5,740,990) (1,722,942) (265,999) (256,433) (98,781) (53,257)

3,240 80,830 3,886,075 1,859,796 1,237,465 (1,489,921) 72,276 141,992

(43,812) (35,600) (3,354,955) (3,090,074) (935,566) (743,309) (291,353) (335,132)

181,393 254,506 2,273,532 4,605,397 2,003,724 (843,869) 285,175 459,354

338,381 416,996 3,170,471 6,426,022 2,306,418 (230,722) 352,121 527,637

1,009,674 592,678 40,504,375 34,078,353 6,390,339 6,621,061 1,577,174 1,049,537

$ 1,348,055 $ 1,009,674 $43,674,846 $40,504,375 $ 8,696,757 $ 6,390,339 $ 1,929,295 $ 1,577,174

1,730,227 1,210,560 30,947,725 27,143,918 4,685,253 5,303,394 1,780,789 1,231,779

516,579 754,030 10,945,720 12,906,784 2,824,752 2,441,437 904,341 1,215,200

(179,871) (234,363) (8,955,068) (9,102,977) (1,307,219) (3,059,578) (585,697) (666,190)

2,066,935 1,730,227 32,938,377 30,947,725 6,202,786 4,685,253 2,099,433 1,780,789


A27



SUBACCOUNTS

Prudential SP Large Cap ValuePortfolio

Prudential SP AIM Core EquityPortfolio

Prudential SP Strategic PartnersFocused Growth Portfolio

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . $ 42,628 $ 26,562 $ 14,648 $ 2,971 $ (6,482) $ (4,266)

Capital gains distributions received . . . . . . . . . . . . 197,294 0 0 0 0 0

Realized gain (loss) on shares redeemed. . . . . . . . . 270,973 79,890 34,979 32,031 25,681 38,430Net change in unrealized gain (loss) on investments . 84,576 925,271 72,892 110,124 343,928 123,281

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . 595,471 1,031,723 122,519 145,126 363,127 157,445

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . 3,255,986 2,506,442 813,119 679,961 842,843 698,312

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . (91,598) (40,003) (25,482) (14,009) (16,706) (10,383)

Policy loan repayments and interest . . . . . . . . . . . . 19,432 2,612 2,334 1,090 732 9,347Surrenders, withdrawals and death benefits. . . . . . . (662,781) (281,344) (148,672) (152,007) (66,970) (558,119)


rate option . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,476,785 962,845 483,381 350,100 367,175 983,717

Withdrawal and other charges . . . . . . . . . . . . . . . . (1,541,178) (1,263,148) (381,293) (315,387) (352,153) (290,107)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2,456,646 1,887,404 743,387 549,748 774,921 832,767

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . 3,052,117 2,919,127 865,906 694,874 1,138,048 990,212

NET ASSETSBeginning of period . . . . . . . . . . . . . . . . . . . . . . . 7,636,935 4,717,808 2,044,378 1,349,504 1,848,179 857,967

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,689,052 $ 7,636,935 $2,910,284 $2,044,378 $2,986,227 $ 1,848,179

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . 6,476,373 4,701,667 1,960,344 1,406,463 1,917,342 988,084

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,332,807 3,511,592 1,309,596 1,104,372 1,250,731 2,006,824

Units redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . (2,340,903) (1,736,886) (598,058) (550,491) (512,372) (1,077,566)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,468,277 6,476,373 2,671,882 1,960,344 2,655,701 1,917,342

A28



Prudential SP Mid Cap GrowthPortfolio

SP Prudential U.S. Emerging GrowthPortfolio

Prudential SP ConservativeAsset Allocation Portfolio

Prudential SP Balanced AssetAllocation Portfolio

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

$ (29,529) $ (16,420) $ (34,771) $ (20,589) $ 63,866 $ 44,849 $ 145,853 $ 71,678

0 0 1,640,413 1,697 205,698 11,894 745,238 10,264

217,127 60,317 149,335 84,507 59,456 83,254 300,217 126,280

980,076 1,119,627 820,518 1,444,743 51,539 293,520 668,310 1,591,509

1,167,674 1,163,524 2,575,495 1,510,358 380,559 433,517 1,859,618 1,799,731

4,217,570 2,591,727 4,684,108 3,283,109 2,349,658 2,276,845 10,932,248 7,184,677

(273,857) (219,852) (237,359) (136,092) (54,148) (46,924) (404,628) (143,155)

106,981 11,568 81,354 9,039 3,079 2,659 82,865 61,403(588,860) (351,418) (516,632) (280,930) (259,828) (67,371) (641,787) (472,809)

3,849,871 902,849 3,070,825 1,190,667 762,463 189,561 3,517,442 3,977,222

(2,036,195) (1,197,622) (2,306,818) (1,586,931) (1,280,628) (1,091,293) (5,531,038) (3,697,101)

5,275,510 1,737,252 4,775,478 2,478,862 1,520,596 1,263,477 7,955,102 6,910,237

6,443,184 2,900,776 7,350,973 3,989,220 1,901,155 1,696,994 9,814,720 8,709,968

7,708,810 4,808,034 9,345,962 5,356,742 5,712,698 4,015,704 20,301,420 11,591,452

$14,151,994 $ 7,708,810 $16,696,935 $ 9,345,962 $ 7,613,853 $ 5,712,698 $30,116,140 $20,301,420

9,615,603 7,313,453 8,887,756 6,237,644 4,690,269 3,679,781 17,278,574 10,903,580

11,374,699 5,176,974 7,869,603 5,132,729 2,555,072 2,662,122 13,183,602 10,685,224

(4,468,666) (2,874,824) (3,337,808) (2,482,617) (1,455,825) (1,651,634) (6,461,409) (4,310,230)

16,521,636 9,615,603 13,419,551 8,887,756 5,789,516 4,690,269 24,000,767 17,278,574


A29



SUBACCOUNTS

Prudential SP Growth Asset Prudential SP Aggressive Growth Janus Aspen International GrowthAllocation Portfolio Asset Allocation Portfolio Portfolio – Service Shares

01/01/2005 01/01/2004 01/01/2005 01/01/2004 01/01/2005 01/01/2004to to to to to to

12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . $ 109,656 $ 20,817 $ (11,719) $ (11,348) $ 49,795 $ 32,266

Capital gains distributions received . . . . . . . . . . . . 1,134,575 0 351,101 0 0 0

Realized gain (loss) on shares redeemed. . . . . . . . . 362,929 190,820 142,706 91,886 775,362 67,240Net change in unrealized gain (loss)

on investments. . . . . . . . . . . . . . . . . . . . . . . . . 1,783,162 2,494,549 728,747 756,976 827,262 706,737

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . 3,390,322 2,706,186 1,210,835 837,514 1,652,419 806,243

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . 19,328,984 13,153,075 6,961,804 4,060,086 140,436 175,810

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . (586,364) (262,187) (210,694) (118,273) 0 0Policy loan repayments and interest . . . . . . . . . . . . 98,841 317,627 234,879 23,121 0 0

Surrenders, withdrawals and

death benefits . . . . . . . . . . . . . . . . . . . . . . . . . (825,291) (695,846) (194,460) (149,204) (2,312,700) (17,880)

Net transfers between othersubaccounts or fixed rate option. . . . . . . . . . . . . 4,473,354 5,794,931 1,474,269 2,383,442 963,902 845,267

Withdrawal and other charges . . . . . . . . . . . . . . . . (9,405,761) (6,088,357) (3,212,935) (1,871,493) (124,997) (90,023)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13,083,763 12,219,243 5,052,863 4,327,679 (1,333,359) 913,174

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . 16,474,085 14,925,429 6,263,698 5,165,193 319,060 1,719,417


End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $43,776,640 $27,302,555 $14,089,292 $ 7,825,594 $ 5,615,741 $ 5,296,681

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . 23,745,682 12,142,071 7,027,569 2,742,190 6,570,749 5,256,663

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,184,897 18,868,410 7,965,650 6,720,540 1,925,804 2,569,468

Units redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . (9,994,113) (7,264,799) (3,620,842) (2,435,161) (3,205,722) (1,255,382)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,936,466 23,745,682 11,372,377 7,027,569 5,290,831 6,570,749

A30



Prudential SP William Blair Prudential SP LSV International Value M Financial Turner Core Growth M Financial Frontier Capital AppreciationInternational Growth Portfolio Portfolio Fund Fund


12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

$ 13,716 $ (3,923) $ 15,310 $ 14,688 $ 2,432 $ 536 $ 0 $ 0

223,428 0 942,415 0 0 0 42,321 0

99,293 75,203 334,611 104,724 3,084 191 3,885 (363)

619,684 508,522 228,626 1,202,067 61,091 18,668 14,334 25,200

956,121 579,802 1,520,962 1,321,479 66,607 19,395 60,540 24,837

2,108,584 1,622,482 3,209,318 3,052,884 21,756 2,298 39,055 66,163

(81,781) (36,517) (265,644) (170,252) 0 0 0 053,571 4,081 134,342 11,806 0 0 0 0

(120,784) (154,176) (647,986) (551,817) (4,762) 0 (4,910) 0

856,958 1,162,461 874,619 916,407 342,967 240,053 163,230 293,937

(997,988) (705,518) (1,667,361) (1,554,124) (34,888) (42,426) (47,846) (37,343)

1,818,560 1,892,813 1,637,288 1,704,904 325,073 199,925 149,529 322,757

2,774,681 2,472,615 3,158,250 3,026,383 391,680 219,320 210,069 347,594

4,482,701 2,010,086 10,125,377 7,098,994 219,320 0 347,594 0

$ 7,257,382 $ 4,482,701 $13,283,627 $10,125,377 $611,000 $219,320 $557,663 $347,594

3,916,946 2,080,136 9,887,155 8,028,512 19,061 0 30,761 0

2,830,959 3,035,838 4,843,260 4,598,408 30,833 23,105 20,479 34,965

(1,311,793) (1,199,028) (3,429,265) (2,739,765) (3,279) (4,044) (8,373) (4,204)

5,436,112 3,916,946 11,301,150 9,887,155 46,615 19,061 42,867 30,761


A31



SUBACCOUNTS

M Financial BrandesInternational Equity Fund

M Financial BusinessOpportunity Value Fund ProFund VP Asia 30 Fund

01/01/2005 01/01/2004 01/01/2005 01/01/2004 01/01/2005 01/01/2004to to to to to to

12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . . . $ 14,716 $ 6,671 $ 1,689 $ 1,187 $ 48 $ (11)

Capital gains distributions received . . . . . . . . . . . . . . . 56,675 31,361 22,098 1,421 0 0

Realized gain (loss) on shares redeemed . . . . . . . . . . . 4,887 998 4,076 439 501 (1,045)Net change in unrealized gain (loss) on investments . . . . 28,424 50,487 (8,181) 22,168 16 (627)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . 104,702 89,517 19,682 25,215 565 (1,683)

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . . . . 63,946 128,535 51,612 98,693 113 (1)

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0 0

Policy loan repayments and interest. . . . . . . . . . . . . . . 0 0 0 0 0 0Surrenders, withdrawals and death benefits . . . . . . . . . (4,974) 0 (4,848) 0 0 (141)

Net transfers between other subaccounts or fixed rate

option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358,367 491,977 22,921 129,276 507 (8,533)

Withdrawal and other charges. . . . . . . . . . . . . . . . . . . (72,190) (58,881) (38,427) (24,901) (870) (222)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 345,149 561,631 31,258 203,068 (250) (8,897)

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . . . . 449,851 651,148 50,940 228,283 315 (10,580)

NET ASSETSBeginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 651,148 0 228,283 0 0 10,580

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,100,999 $651,148 $279,223 $228,283 $ 315 $ 0

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,060 0 17,865 0 0 6,272

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,341 55,136 5,756 20,233 104,007 22,266

Units redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,834) (5,076) (3,352) (2,368) (103,849) (28,538)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,567 50,060 20,269 17,865 158 0

A32



ProFund VP Banks Fund ProFund VP Basic Materials Fund ProFund VP Bear Fund ProFund VP Biotechnology Fund

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

$ (3) $ (1) $ (92) $ (4) $ (43) $ (474) $ (46) $ (2)

0 0 3 17 0 0 1,408 0

(551) (184) (1,094) (713) 1,132 16,057 3,356 (1,044)0 0 2,144 40 (4) 0 (355) 98

(554) (185) 961 (660) 1,085 15,583 4,363 (948)

0 (3) 112 (3) 0 (46) 8,507 (1)

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 00 0 0 0 (1) 0 0 0

555 188 637,459 1,592 9,700 (13,691) 205 8,015

0 0 (2,022) (380) (1,811) (1,861) (2,463) (109)

555 185 635,549 1,209 7,888 (15,598) 6,249 7,905

1 0 636,510 549 8,973 (15) 10,612 6,957

0 0 553 4 1 16 6,958 1

$ 1 $ 0 $ 637,063 $ 553 $ 8,974 $ 1 $ 17,570 $ 6,958

0 0 371 3 1 21 4,672 1

196,754 18,830 1,039,174 257,208 925,225 9,422,433 152,159 54,240

(196,753) (18,830) (621,319) (256,840) (911,803) (9,422,453) (146,914) (49,569)

1 0 418,226 371 13,423 1 9,917 4,672


A33



SUBACCOUNTS

ProFund VP UltraBull Fund ProFund VP Consumer Services Fund ProFund VP Consumer Goods Fund

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . $ (123) $ (275) $ (42) $ (2) $ (42) $ (8)Capital gains distributions received . . . . . . . . . . . . 3 7,701 0 0 0 0

Realized gain (loss) on shares redeemed. . . . . . . . . 20,163 (10,515) 5,852 (10) 5,518 (294)

Net change in unrealized gain (loss) on investments . (491) 490 0 0 0 0

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . 19,552 (2,599) 5,810 (12) 5,476 (302)

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . 0 (341) 0 (2) 60 13Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0 0

Policy loan repayments and interest . . . . . . . . . . . . 0 0 0 0 0 0

Surrenders, withdrawals and death benefits. . . . . . . (10,593) 0 (1) 0 0 0

Net transfers between other subaccounts or fixedrate option. . . . . . . . . . . . . . . . . . . . . . . . . . . . (183,103) 156,482 (5,408) 78 (5,070) 819

Withdrawal and other charges . . . . . . . . . . . . . . . . (1,361) (5,128) (395) (66) (439) (530)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . (195,057) 151,013 (5,804) 10 (5,449) 302

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . (175,505) 148,414 6 (2) 27 0

NET ASSETSBeginning of period . . . . . . . . . . . . . . . . . . . . . . . 175,518 27,104 0 2 0 0

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13 $ 175,518 $ 6 $ 0 $ 27 $ 0

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . 102,473 18,497 0 2 0 0

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,271,275 7,883,346 460,205 30,434 418,232 68,236Units redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . (4,373,741) (7,799,370) (460,200) (30,436) (418,210) (68,236)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 102,473 5 0 22 0

A34



ProFund VP Oil & Gas Fund ProFund VP Europe 30 Fund ProFund VP Financials Fund ProFund VP Health Care Fund

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

$ (73) $ (41) $ (23) $ (13) $ 111 $ (4) $ (108) $ (28)395 0 6,316 71 0 0 0 0

11,122 3,068 (7,551) 4,457 6,747 371 3,112 41

0 0 (586) (1,580) (3,897) 247 (18) (363)

11,444 3,027 (1,844) 2,935 2,961 614 2,986 (350)

0 1 1,738 (1) 22,499 0 14,104 2,9690 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

(1) 0 0 (96) 0 0 0 (121)

(8,767) (1,903) 26,276 (44,037) 630,096 18,218 (10,736) (1,346)

(2,673) (1,124) (6,633) (556) (4,846) (293) (2,579) (370)

(11,441) (3,026) 21,381 (44,690) 647,749 17,925 789 1,132

3 1 19,537 (41,755) 650,710 18,539 3,775 782

1 0 9,631 51,386 18,539 0 21,241 20,459

$ 4 $ 1 $ 29,168 $ 9,631 $ 669,249 $ 18,539 $ 25,016 $ 21,241

1 0 6,144 37,381 13,491 0 18,154 17,855

1,015,115 784,056 1,173,253 73,078 1,114,008 39,950 781,541 104,372(1,015,114) (784,055) (1,162,140) (104,315) (657,956) (26,459) (779,478) (104,073)

2 1 17,257 6,144 469,543 13,491 20,217 18,154


A35



SUBACCOUNTS

ProFund VP Industrials Fund ProFund VP Internet Fund ProFund VP Japan Fund

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . . . $ (1) $ (2) (8) $ (2) $ (40) $ (24)Capital gains distributions received . . . . . . . . . . . . . . . 0 0 0 0 0 689

Realized gain (loss) on shares redeemed . . . . . . . . . . . (688) (180) 462 (281) 4,377 (1,319)

Net change in unrealized gain (loss) on investments . . . . 0 0 (223) 258 2,607 0

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . (689) (182) 231 (25) 6,944 (654)

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . . . . 1 0 1 1 0 2,613Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0 0

Policy loan repayments and interest. . . . . . . . . . . . . . . 0 0 0 0 0 0

Surrenders, withdrawals and death benefits . . . . . . . . . 0 0 0 0 (80) (177)

Net transfers between other subaccounts or fixed rateoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 208 (6,882) 9,639 61,993 (1,651)

Withdrawal and other charges. . . . . . . . . . . . . . . . . . . 0 (26) (209) (27) (3,043) (131)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 690 182 (7,090) 9,613 58,870 654

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . . . . 1 0 (6,859) 9,588 65,814 0

NET ASSETSBeginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 9,588 0 0 0

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 $ 0 2,729 $ 9,588 $ 65,814 $ 0

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 5,520 0 0 0

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,623 28,855 114,563 11,656 220,235 47,371

Units redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (113,622) (28,855) (118,617) (6,136) (188,959) (47,371)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 1,466 5,520 31,276 0

A36



ProFund VP Mid-Cap Growth Fund ProFund VP Mid-Cap Value Fund ProFund VP Money Market Fund ProFund VP OTC Fund

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

01/01/2005to

12/31/2005

01/01/2004to

12/31/2004

$ (41) $ (45) $ (79) $ (51) $ 25,907 $ (2,743) $ (55) $ (120)289 563 1,832 673 0 0 567 553

458 (1,484) 906 2,309 0 0 (13) 17,660

(1,833) 1,752 (794) (842) 0 0 1,067 474

(1,127) 786 1,865 2,089 25,907 (2,743) 1,566 18,567

248 (1) 0 1,749 442,661 445,514 52,391 9960 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

(10,662) (1,232) (15,110) (1,700) (44) (218,639) 0 0

(7,198) 20,152 1,508 385 (125,306) (328,685) 0 (1,400)

(2,381) (1,466) (5,288) (1,835) (125,164) (81,493) 0 (1,019)

(19,993) 17,453 (18,890) (1,401) 192,147 (183,303) 52,391 (1,423)

(21,120) 18,239 (17,025) 688 218,054 (186,046) 53,957 17,144

30,382 12,143 37,018 36,330 1,277,759 1,463,805 17,145 1

$ 9,262 $ 30,382 $ 19,993 $ 37,018 $ 1,495,813 $ 1,277,759 $ 71,102 $ 17,145

22,015 9,750 23,637 26,832 1,282,994 1,466,445 11,256 1

329,402 85,979 357,569 49,386 27,673,571 33,034,101 490,051 667,666

(345,368) (73,714) (369,449) (52,581) (27,477,276) (33,217,552) (454,596) (656,411)

6,049 22,015 11,757 23,637 1,479,289 1,282,994 46,711 11,256


A37



SUBACCOUNTS

ProFund VP Pharmaceuticals Fund ProFund VP Precious Metals Fund ProFund VP Real Estate Fund

01/01/2005 01/01/2004 01/01/2005 01/01/2004 01/01/2005 01/01/2004to to to to to to

12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . $ (11) $ (1) $ (52) $ (44) $ 1,828 $ 1,674Capital gains distributions received . . . . . . . . . . . . 0 0 0 0 0 214

Realized gain (loss) on shares redeemed. . . . . . . . . 205 (541) 6,837 (22,560) (2,120) 3,912

Net change in unrealized gain (loss) on investments . 3 0 (556) 103 (1,071) (125)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . 197 (542) 6,229 (22,501) (1,363) 5,675

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . 111 1 0 0 11,610 2,740Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0 0


Surrenders, withdrawals and death benefits. . . . . . . 0 0 (28,416) 0 0 (68)

Net transfers between other subaccounts or fixedrate option. . . . . . . . . . . . . . . . . . . . . . . . . . . . (102) 561 69,580 (1,442) 6,038 (115,709)

Withdrawal and other charges . . . . . . . . . . . . . . . . (150) (20) (2,481) (650) (4,509) (1,066)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . (141) 542 38,683 (2,092) 13,139 (114,103)

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . 56 0 44,912 (24,593) 11,776 (108,428)

NET ASSETSBeginning of period . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 24,593 18,903 127,331

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56 $ 0 $ 44,912 $ 0 $ 30,679 $ 18,903

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 15,380 11,522 98,485

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384,955 42,388 670,435 1,330,845 1,657,044 2,830,329

Units redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . (384,892) (42,388) (645,624) (1,346,225) (1,651,004) (2,917,292)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 0 24,811 0 17,562 11,522

A38



ProFund VP Rising Fund Rates Opportunity ProFund VP Semiconductor Fund ProFund VP Short OTC Fund ProFund VP Short Small-Cap Fund


12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

$ (48) $ (957) $ (6) $ (6) $ (2,365) $ (1,414) $ (23) $ (122)0 0 0 0 0 0 0 0

(5,581) 104,589 1,048 232 (120,409) (83,128) 3,105 16,208

748 (922) 0 (533) 218,177 (210,202) 457 0

(4,881) 102,710 1,042 (307) 95,403 (294,744) 3,539 16,086

17 5,148 2 0 0 (468) 0 90 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

(9,215) (385) 0 0 (50,784) (11,482) (1,069) 0

(3,433) (92,867) (928) (24,345) (1,144,950) 149,791 160,046 46,002

(2,754) (6,165) (115) (177) (18,514) (4,353) (189) (1,033)

(15,385) (94,269) (1,041) (24,522) (1,214,248) 133,488 158,788 44,978

(20,266) 8,441 1 (24,829) (1,118,845) (161,256) 162,327 61,064

21,931 13,490 0 24,829 1,136,446 1,297,702 61,065 1

$ 1,665 $ 21,931 $ 1 $ 0 $ 17,601 $ 1,136,446 $ 223,392 $ 61,065

27,603 15,090 0 15,419 2,024,127 2,049,661 96,846 1

673,382 11,911,434 29,811 37,994 1,088,651 9,486,823 1,140,692 7,900,503

(698,704) (11,898,921) (29,810) (53,413) (3,081,602) (9,512,357) (871,681) (7,803,658)

2,281 27,603 1 0 31,176 2,024,127 365,857 96,846


A39



SUBACCOUNTS

ProFund VP Small-Cap Fund ProFund VP Small Cap-Growth Fund ProFund VP Small-Cap Value Fund

01/01/2005 01/01/2004 01/01/2005 01/01/2004 01/01/2005 01/01/2004to to to to to to

12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . $ (27) $ (11) $ (25) $ (42) $ (19) $ (42)

Capital gains distributions received . . . . . . . . . . . . 0 131 0 701 59 426

Realized gain (loss) on shares redeemed. . . . . . . . . 2,017 (36) (208) (677) 598 (167)

Net change in unrealized gain (loss) on investments . (145) 145 (709) 524 (1,199) 549

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . 1,845 229 (942) 506 (561) 766

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . 9 (5) 572 1,865 1,259 1,071

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0 0


Surrenders, withdrawals and death benefits. . . . . . . 0 (68) (8,527) (983) (11,628) (1,419)Net transfers between other subaccounts or fixed

rate option. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,470 5,480 (6,134) 13,889 (1,847) 1,600

Withdrawal and other charges . . . . . . . . . . . . . . . . (9,444) (507) (2,001) (1,163) (658) (1,203)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . (6,965) 4,900 (16,090) 13,608 (12,874) 49

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . (5,120) 5,129 (17,032) 14,114 (13,435) 815

NET ASSETSBeginning of period . . . . . . . . . . . . . . . . . . . . . . . 5,129 0 23,340 9,226 13,436 12,621

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 $ 5,129 $ 6,308 $ 23,340 $ 1 $ 13,436

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . 3,132 0 14,878 7,028 8,393 9,447

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,426 42,260 81,102 75,173 83,300 30,582

Units redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . (114,553) (39,128) (92,232) (67,323) (91,692) (31,636)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3,132 3,748 14,878 1 8,393

A40



ProFund VP Technology Fund ProFund VP Telecommunications Fund ProFund VP U.S. Government Plus Fund ProFund VP UltraMid-Cap Fund


12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

$ 7 $ (9) $ 2,663 $ 80 $ 367 $ 425 $ (118) $ (182)

88 0 4,079 299 0 0 1,262 3,766

506 (1,609) (4,388) (322) 7,308 (9,709) 29,506 (7,518)

(84) (176) 79 (82) (401) 8,283 (771) 286

517 (1,794) 2,433 (25) 7,274 (1,001) 29,879 (3,648)

113 1 113 0 511 5,623 0 (627)

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

0 (52) 0 0 0 0 0 0

1,818 (10,488) (12,287) 10,272 27,029 26,494 (48,397) 18,065

(106) (88) (179) (271) (2,288) (5,451) (1,626) (2,293)

1,825 (10,627) (12,353) 10,001 25,252 26,666 (50,023) 15,145

2,342 (12,421) (9,920) 9,976 32,526 25,665 (20,144) 11,497

0 12,421 9,976 0 112,660 86,995 22,753 11,256

$ 2,342 $ 0 $ 56 $ 9,976 $ 145,186 $ 112,660 $ 2,609 $ 22,753

0 8,766 8,591 0 102,264 85,207 10,872 6,851

147,131 47,928 346,143 60,023 577,716 1,304,148 1,896,256 4,929,417

(145,483) (56,694) (354,682) (51,432) (558,783) (1,287,091) (1,906,068) (4,925,396)

1,648 0 52 8,591 121,197 102,264 1,060 10,872


A41



SUBACCOUNTS

ProFund VP UltraOTC FundProFund VP Ultra Small-

Cap Fund ProFund VP Bull Fund

01/01/2005 01/01/2004 01/01/2005 01/01/2004 01/01/2005 01/01/2004to to to to to to

12/31/2005 12/31/2004 12/31/2005 12/31/2004 12/31/2005 12/31/2004

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . . . $ (62) $ (295) $ (111) $ (234) $ (99) $ (147)Capital gains distributions received . . . . . . . . . . . . . . . 3,374 4,950 4 12,426 0 612

Realized gain (loss) on shares redeemed . . . . . . . . . . . (6,158) (108,896) 27,815 (32,243) 7,108 4,597

Net change in unrealized gain (loss) on investments . . . . (443) 226 (434) (6,163) (903) 598

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . . . . . (3,289) (104,015) 27,274 (26,214) 6,106 5,660

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . . . . 0 (1,417) 0 (858) 670 49Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0 0

Policy loan repayments and interest. . . . . . . . . . . . . . . 0 0 0 0 0 0

Surrenders, withdrawals and death benefits . . . . . . . . . (24,383) 0 (5,835) 0 (10,387) (1,260)

Net transfers between other subaccounts or fixed rateoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,892) 222,282 (44,339) (66,123) 67,010 16,747

Withdrawal and other charges. . . . . . . . . . . . . . . . . . . (180) (1,337) (219) (2,451) (12,452) (2,414)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . (102,455) 219,528 (50,393) (69,432) 44,841 13,122

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . . . . (105,744) 115,513 (23,119) (95,646) 50,947 18,782

NET ASSETSBeginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 173,857 58,344 23,128 118,774 31,265 12,483

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,113 $ 173,857 $ 9 $ 23,128 $ 82,212 $ 31,265

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,146 31,760 9,010 60,497 23,562 10,212

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,159,414 6,687,341 1,990,129 5,023,331 1,110,471 738,028

Units redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,208,629) (6,635,955) (1,999,135) (5,074,818) (1,073,574) (724,678)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,931 83,146 4 9,010 60,459 23,562

** Date subaccounts became available for investment

A42



ProFund VP UtilitiesFund

AST Cohen & SteersReal Estate Portfolio

AST GlobalAllocation Portfolio

AST DeAm Large-Cap Value Portfolio

AST DeAm Small-Cap Growth Portfolio

AST DeAm Small-Cap Value Portfolio

AST FederatedAggressive Growth

Portfolio

01/01/2005 01/01/2004 10/17/2005 ** 10/17/2005 ** 10/17/2005 ** 10/17/2005 ** 10/17/2005 ** 10/17/2005 **to to to to to to to to

12/31/2005 12/31/2004 12/31/2005 12/31/2005 12/31/2005 12/31/2005 12/31/2005 12/31/2005

$ 9 $ 407 $ (1) $ 0 $ 0 $ 0 $ 0 $ 0124 976 0 0 0 0 0 0

11,389 3,063 2 0 0 0 0 0

(2) (220) 15 7 (30) (55) (10) 13

11,520 4,226 16 7 (30) (55) (10) 13

113 996 194 187 615 19 116 890 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

0 (68) 0 0 0 0 0 0

(10,198) (14,738) 13,382 2,792 5,725 5,947 882 1,770

(1,142) (669) (228) (98) (227) (40) (146) (68)

(11,227) (14,479) 13,348 2,881 6,113 5,926 852 1,791

293 (10,253) 13,364 2,888 6,083 5,871 842 1,804

15 10,268 0 0 0 0 0 0

$ 308 $ 15 $ 13,364 $ 2,888 $ 6,083 $ 5,871 $ 842 $ 1,804

10 8,146 0 0 0 0 0 0

1,634,040 989,209 1,252 285 589 550 95 169

(1,633,871) (997,345) (24) (9) (21) (3) (14) (6)

179 10 1,228 276 568 547 81 163


A43



SUBACCOUNTS

AST Goldman Sachs AST Neuberger &AST Small Cap Mid-Cap Growth AST Marsico Capital AST MFS Growth Berman Mid-CapValue Portfolio Portfolio Growth Portfolio Portfolio Growth Portfolio

10/17/2005** 10/17/2005** 10/17/2005** 10/17/2005** 10/17/2005**to to to to to

12/31/2005 12/31/2005 12/31/2005 12/31/2005 12/31/2005

OPERATIONSNet investment income (loss) . . . . . . . . . . . . . . . . . $ (1) $ 0 $ 0 $ 0 $ 0Capital gains distributions received . . . . . . . . . . . . 0 0 0 0 0

Realized gain (loss) on shares redeemed. . . . . . . . . 0 (1) 0 1 0

Net change in unrealized gain (loss) on investments . (265) (88) (36) (11) (27)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM OPERATIONS . . . . . . . . . . . (266) (89) (36) (10) (27)

CONTRACT OWNER TRANSACTIONSContract owner net payments . . . . . . . . . . . . . . . . 1,030 2,107 264 522 324Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0

Policy loan repayments and interest . . . . . . . . . . . . 0 0 0 0 0

Surrenders, withdrawals and death benefits. . . . . . . 0 0 0 0 0

Net transfers between other subaccounts or fixedrate option . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,695 7,232 5,226 2,262 3,500

Withdrawal and other charges . . . . . . . . . . . . . . . . (289) (279) (122) (215) (118)

NET INCREASE (DECREASE) IN NET ASSETSRESULTING FROM CONTRACT OWNERTRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 27,436 9,060 5,368 2,569 3,706

TOTAL INCREASE (DECREASE) IN NET ASSETS . . . 27,170 8,971 5,332 2,559 3,679

NET ASSETSBeginning of period . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,170 $8,971 $5,332 $2,559 $3,679

Beginning units . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0

Units issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,586 874 508 262 347

Units redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . (27) (27) (12) (20) (11)

Ending units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,559 847 496 242 336

** Date subaccounts became available for investment

A44



AST PIMCO Limited AST T. Rowe Price AST JP MorganMaturity Bond Natural Resources AST MFS Global Equity International Equity AST T. Rowe Price

Portfolio Portfolio Portfolio Portfolio Global Bond Portfolio

10/17/2005** 10/17/2005** 10/17/2005** 10/17/2005** 10/17/2005**to to to to to

12/31/2005 12/31/2005 12/31/2005 12/31/2005 12/31/2005

$ 0 $ (10) $ 0 $ (3) $ (1)0 0 0 0 0

0 5 1 4 1

1 1,817 19 657 85

1 1,812 20 658 85

116 14,802 52 2,462 1,0270 0 0 0 0

0 0 0 0 0

0 0 0 0 0

826 129,499 1,456 40,080 15,994

(28) (2,799) (121) (817) (476)

914 141,502 1,387 41,725 16,545

915 143,314 1,407 42,383 16,630

0 0 0 0 0

$ 915 $143,314 $1,407 $42,383 $16,630

0 0 0 0 0

94 13,221 145 4,075 1,720

(3) (255) (11) (78) (48)

91 12,966 134 3,997 1,672

NOTES TO FINANCIAL STATEMENTS OFPRUCO LIFE VARIABLE UNIVERSAL ACCOUNT

December 31, 2005

A45

Note 1: General

The Pruco Life Variable Universal Account (the ‘‘Account’’) was established on April 17, 1989 under Arizonalaw as a separate investment account of Pruco Life Insurance Company (‘‘Pruco Life’’) which is a wholly-owned subsidiary of The Prudential Insurance Company of America (‘‘Prudential’’), a wholly-ownedsubsidiary of Prudential Financial, Inc. (‘‘PFI’’). Under applicable insurance law, the assets and liabilities ofthe Account are clearly identified and distinguished from Prudential’s other assets and liabilities. Theportion of the Account’s assets applicable to the variable life contracts is not chargeable with liabilitiesarising out of any other business Prudential may conduct. Proceeds from purchases of Pruselect I,Pruselect II, Pruselect III, Survivorship Variable Universal Life (‘‘SVUL’’), PruLife Custom Premier (‘‘VULII’’),PruLife Advisor Select (‘‘PROSEL’’), MPremier VUL (‘‘MPVUL’’) and PruLife Custom Premier II (‘‘ENVUL’’)contracts are invested in the Account

The Account is registered under the Investment Company Act of 1940, as amended, as a unit investmenttrust. The Account is a funding vehicle for individual variable life insurance contracts. There are onehundred and four subaccounts within the Account. Each contract offers the option to invest in varioussubaccounts, each of which invests in either a corresponding portfolio of The Prudential Series Fund, Inc.,American Skandia Trust (collectively, the ‘‘Series Funds’’) or one of the non-Prudential administered funds(collectively, the ‘‘portfolios’’). Investment options vary by contract. Options available which invest in acorresponding portfolio of the Series Funds are: Prudential Money Market Portfolio, Prudential DiversifiedBond Portfolio, Prudential Equity Portfolio, Prudential Flexible Managed Portfolio, Prudential ConservativeBalanced Portfolio, Prudential High Yield Bond Portfolio, Prudential Stock Index Portfolio, Prudential ValuePortfolio, Prudential Natural Resources Portfolio, Prudential Global Portfolio, Prudential Government IncomePortfolio, Prudential Jennison Portfolio, Prudential Small Capitalization Stock Portfolio, Prudential SPT.Rowe Price Large Cap Growth Portfolio, Prudential SP Davis Value Portfolio, Prudential SP Small CapValue Portfolio, Prudential SP Small Cap Growth Portfolio, Prudential SP PIMCO Total Return Portfolio,Prudential SP PIMCO High Yield Portfolio, Prudential SP Large Cap Value Portfolio, Prudential SP AIM CoreEquity Portfolio, Prudential SP Strategic Partners Focused Growth Portfolio, Prudential SP Mid Cap GrowthPortfolio, SP Prudential U.S. Emerging Growth Portfolio, Prudential SP Conservative Asset AllocationPortfolio, Prudential SP Balanced Asset Allocation Portfolio, Prudential SP Growth Asset AllocationPortfolio, Prudential SP Aggressive Growth Asset Allocation Portfolio, Prudential SP William BlairInternational Growth Portfolio, Prudential SP LSV International Value Portfolio, AST Cohen & Steers RealEstate Portfolio, AST Global Allocation Portfolio, AST DeAm Large-Cap Value Portfolio, AST DeAm Small-Cap Growth Portfolio, AST DeAm Small-Cap Value Portfolio, AST Federated Aggressive Growth Portfolio,AST Small Cap Value Portfolio, AST Goldman Sachs Mid-Cap Growth Portfolio, AST Marsico CapitalGrowth, AST MFS Growth Portfolio, AST Neuberger & Berman Mid-Cap Growth Portfolio, AST PIMCOLimited Maturity Bond Portfolio, AST T. Rowe Price Natural Resources Portfolio, AST MFS Global EquityPortfolio, AST JP Morgan International Equity Portfolio and AST T. Rowe Price Global Bond Portfolio.Options available which invest in a corresponding portfolio of the non-Prudential administered funds are:T. Rowe Price International Stock Portfolio, AIM V.I. Premier Equity Fund, Janus Aspen Large Cap GrowthPortfolio — Institutional Shares, MFS Emerging Growth Series, American Century VP Value Fund, FranklinSmall-Mid Cap Growth Securities Fund, American Century VP Income & Growth Fund, Dreyfus VariableInvestment MidCap Stock Portfolio, Dreyfus Variable Investment Developing Leaders Portfolio, GoldmanSachs CORE Small Cap Equity Fund, AIM V.I. Utilities Series, AIM V.I. Technology Fund, Janus Aspen MidCap Growth Portfolio — Service Shares, Janus Aspen Balanced Portfolio — Service Shares, OppenheimerAggressive Growth Fund/VA, Janus Aspen Large Cap Growth Portfolio — Service Shares, Janus AspenInternational Growth Portfolio — Service Shares, M Financial Turner Core Growth Fund, M FinancialFrontier Capital Appreciation Fund, M Financial Brandes International Equity Fund, M Financial BusinessOpportunity Value Fund, ProFund VP Asia 30 Fund, ProFund VP Banks Fund, ProFund VP Basic Materials

A46

Note 1: General (continued)

Fund, ProFund VP Bear Fund, ProFund VP Biotechnology Fund, ProFund VP UltraBull Fund, ProFund VPConsumer Services Fund, ProFund VP Consumer Goods Fund, ProFund VP Oil & Gas Fund, ProFund VPEurope 30 Fund, ProFund VP Financials Fund, ProFund VP Health Care Fund, ProFund VP Industrials Fund,ProFund VP Internet Fund, ProFund VP Japan Fund, ProFund VP Mid-Cap Growth Fund, ProFund VP Mid-Cap Value Fund, ProFund VP Money Market Fund, ProFund VP OTC Fund, ProFund VP PharmaceuticalsFund, ProFund VP Precious Metals Fund, ProFund VP Real Estate Fund, ProFund VP Rising RatesOpportunity Fund, ProFund VP Semiconductor Fund, ProFund VP Short OTC Fund, ProFund VP ShortSmall-Cap Fund, ProFund VP Small-Cap Fund, ProFund VP Small-Cap Growth Fund, ProFund VP Small-Cap Value Fund, ProFund VP Technology Fund, ProFund VP Telecommunications Fund, ProFund VP U.S.Government Plus Fund, ProFund VP UltraMid-Cap Fund, ProFund VP UltraOTC Fund, ProFund VPUltraSmall-Cap Fund, ProFund VP Bull Fund and ProFund VP Utilities Fund.

The Series Funds are diversified open-ended management investment companies, and are managed byaffiliates of Prudential.

The Zero Coupon Bond 2005 Portfolio was liquidated on November 15, 2005 and is no longer available tocontract owners.

On April 29, 2005, the following funds were merged into an existing fund. The transfer from the oldsubaccount to the new subaccount is reflected in the Statement of Changes in the year 2005 as a transferin.

Retired Portfolios Existing Portfolios Assets Moved

Prudential SP Technology Portfolio SP Prudential U.S Emerging Growth Portfolio $2,193,320Prudential SP MFS Capital Opportunities Portfolio Prudential Equity Portfolio $2,762,341

Prudential SP AIM Aggressive Growth Portfolio Prudential SP Mid Cap Growth Portfolio $3,530,985

Note 2: Significant Accounting Policies

The accompanying financial statements are prepared in conformity with accounting principles generallyaccepted in the United States of America (‘‘GAAP’’). The preparation of the financial statements inconformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts and disclosures. Actual results could differ from those estimates.

Investments — The investments in shares of the portfolios are stated at the net asset values of therespective portfolios, whose investment securities are stated at value.

Security Transactions — Realized gains and losses on security transactions are determined based upon anaverage cost. Purchase and sale transactions are recorded as of the trade date of the security beingpurchased or sold.

Distributions Received — Dividend and capital gain distributions received are reinvested in additionalshares of the portfolios and are recorded on the ex distribution date.

Note 3: Taxes

Pruco Life is taxed as a ‘‘life insurance company’’ as defined by the Internal Revenue Code. The results ofoperations of the Account form a part of PFI’s consolidated federal tax return. Under current federal law, nofederal income taxes are payable by the Account. As such, no provision for tax liability has been recordedin these financial statements. Pruco Life Management will review periodically the status of the policy in theevent of changes in the tax law. A charge may be made in future years for any federal income taxes thatwould be attributable to the contracts.

A47

Note 4: Purchases and Sales of Investments

The aggregate costs of purchases and proceeds from sales, excluding distributions received and invested,of investments in the portfolios for the year ended December 31, 2005 were as follows:

Purchases Sales

Prudential Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $72,594,432 $(52,847,085)Prudential Diversified Bond Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,130,124 $(16,727,463)

Prudential Equity Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,381,288 $(12,458,175)

Prudential Flexible Managed Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 793,100 $ (485,444)

Prudential Conservative Balanced Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,785,139 $(19,947,649)Prudential High Yield Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,572,055 $ (1,902,335)

Prudential Stock Index Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,290,733 $(33,568,542)

Prudential Value Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,262,693 $ (5,473,245)

Prudential Natural Resources Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 510,023 $ (629,665)Prudential Global Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,497,754 $ (3,110,620)

Prudential Government Income Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 321,163 $ (9,474,413)

Prudential Jennison Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,487,253 $ (4,439,216)Prudential Small Capitalization Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 589,032 $ (519,956)

T. Rowe Price International Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,444,050 $ (906,416)

AIM V.I. Premier Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 654,147 $ (747,782)

Janus Aspen Large Cap Growth Portfolio – Institutional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,027,465 $ (1,464,844)MFS Emerging Growth Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 512,436 $ (1,444,466)

American Century VP Value Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,566,312 $ (1,488,345)

Franklin Small-Mid Cap Growth Securities Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,583,251 $ (4,081,099)

American Century VP Income & Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 737,236 $ (2,702,194)Prudential SP T. Rowe Price Large Cap Growth Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,970,817 $ (3,411,308)

Prudential SP Davis Value Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,187,704 $ (4,010,104)

Dreyfus Variable Investment MidCap Stock Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,184,939 $ (394,549)Dreyfus Variable Investment Developing Leaders Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,160,500 $ (642,261)

Prudential SP Small Cap Value Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,157,013 $ (3,226,406)

Goldman Sachs CORE Small Cap Equity Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 477,217 $ (265,893)

AIM V.I. Utilities Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 586,191 $ (28,124)AIM V.I. Technology Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 243,190 $ (494,341)

Prudential SP Small Cap Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,719,395 $ (676,544)

Janus Aspen Mid Cap Growth Portfolio — Service Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 986,694 $ (3,402,542)

Janus Aspen Balanced Portfolio — Service Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,024,938 $ (1,005,009)Oppenheimer Aggressive Growth Fund/VA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 289,464 $ (110,462)

Prudential SP PIMCO Total Return Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,417,749 $ (9,249,527)

Prudential SP PIMCO High Yield Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,995,498 $ (1,012,289)

Janus Aspen Large Cap Growth Portfolio — Service Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 529,627 $ (248,623)Prudential SP Large Cap Value Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,101,260 $ (1,668,003)

Prudential SP AIM Core Equity Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,066,321 $ (329,986)

Prudential SP Strategic Partners Focused Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 999,707 $ (231,268)Prudential SP Mid Cap Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,934,682 $ (1,688,702)

SP Prudential U.S. Emerging Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,130,989 $ (1,390,298)

Prudential SP Conservative Asset Allocation Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,288,426 $ (788,124)

Prudential SP Balanced Asset Allocation Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,978,480 $ (3,087,292)Prudential SP Growth Asset Allocation Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,413,555 $ (3,416,989)

Prudential SP Aggressive Growth Asset Allocation Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,761,849 $ (1,736,291)

Janus Aspen International Growth Portfolio — Service Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,631,265 $ (2,976,161)

Prudential SP William Blair International Growth Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,513,431 $ (711,366)Prudential SP LSV International Value Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,861,101 $ (2,253,571)

M Financial Turner Core Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 358,811 $ (33,738)

M Financial Frontier Capital Appreciation Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 241,484 $ (91,955)M Financial Brandes International Equity Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 416,633 $ (71,484)

M Financial Business Opportunity Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,951 $ (46,692)

ProFund VP Asia 30 Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 194,936 $ (195,200)

ProFund VP Banks Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 255,444 $ (254,892)ProFund VP Basic Materials Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,524,601 $ (889,144)

ProFund VP Bear Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 621,097 $ (613,252)

ProFund VP Biotechnology Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 251,798 $ (245,595)

A48

Note 4: Purchases and Sales of Investments (continued)

Purchases Sales

ProFund VP UltraBull Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,792,829 $ (6,988,008)

ProFund VP Consumer Services Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 554,015 $ (559,861)

ProFund VP Consumer Goods Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 514,912 $ (520,404)ProFund VP Oil & Gas Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,051,024 $ (2,062,538)

ProFund VP Europe 30 Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,908,635 $ (1,887,363)

ProFund VP Financials Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,557,050 $ (909,523)

ProFund VP Health Care Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 943,762 $ (943,080)ProFund VP Industrials Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 151,731 $ (151,042)

ProFund VP Internet Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 173,174 $ (180,271)

ProFund VP Japan Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 385,660 $ (326,830)

ProFund VP Mid-Cap Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 470,720 $ (490,754)ProFund VP Mid-Cap Value Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 510,516 $ (529,485)

ProFund VP Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,971,842 $(25,783,805)

ProFund VP OTC Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 717,467 $ (665,131)ProFund VP Pharmaceuticals Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 331,578 $ (331,729)

ProFund VP Precious Metals Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 969,311 $ (930,680)

ProFund VP Real Estate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,684,631 $ (2,671,621)

ProFund VP Rising Rates Opportunity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 493,834 $ (509,268)ProFund VP Semiconductor Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,133 $ (37,179)

ProFund VP Short OTC Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 633,400 $ (1,850,013)

ProFund VP Short Small-Cap Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 726,432 $ (567,667)

ProFund VP Small-Cap Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 178,393 $ (185,385)ProFund VP Small Cap-Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 131,282 $ (147,397)

ProFund VP Small-Cap Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,099 $ (148,991)

ProFund VP Technology Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 197,477 $ (195,654)ProFund VP Telecommunications Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 381,413 $ (393,796)

ProFund VP U.S. Government Plus Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 698,281 $ (673,074)

ProFund VP UltraMid-Cap Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,159,782 $ (4,209,924)

ProFund VP UltraOTC Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,530,488 $ (3,633,005)ProFund VP UltraSmall-Cap Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,622,263 $ (4,672,766)

ProFund VP Bull Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,464,708 $ (1,419,994)

ProFund VP Utilities Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,714,532 $ (2,725,827)

AST Cohen & Steers Real Estate Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,472 $ (124)AST Global Allocation Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,963 $ (82)

AST DeAm Large-Cap Value Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,151 $ (39)

AST DeAm Small-Cap Growth Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,953 $ (28)AST DeAm Small-Cap Value Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 920 $ (67)

AST Federated Aggressive Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,812 $ (21)

AST Small Cap Value Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,499 $ (64)

AST Goldman Sachs Mid-Cap Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,227 $ (168)AST Marsico Capital Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,403 $ (34)

AST MFS Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,686 $ (116)

AST Neuberger & Berman Mid-Cap Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,726 $ (19)

AST PIMCO Limited Maturity Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 931 $ (17)AST T. Rowe Price Natural Resources Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 141,715 $ (223)

AST MFS Global Equity Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,460 $ (73)

AST JP Morgan International Equity Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,998 $ (276)

AST T. Rowe Price Global Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,707 $ (163)

A49

Note 5: Related Party Transactions

Prudential and its affiliates perform various services on behalf of the Series Funds in which the Accountinvests and may receive fees for the services performed. These services include, among other things,shareholder communications, preparation, postage, fund transfer agency and various other record keepingand customer service functions.

The Series Funds have management agreements with Prudential Investment LLC (‘‘PI’’) and AmericanSkandia Investment Services, Inc, indirect, wholly-owned subsidiaries of Prudential (together the‘‘Investment Managers’’). Pursuant to these agreements, the Investment Managers have responsibility for allinvestment advisory services and supervise the subadvisors’ performance of such services. The InvestmentManagers entered into subadvisory agreements with several subadvisors, including Prudential InvestmentManagement, Inc. and Jennison Associates LLC, which are indirect, wholly-owned subsidiaries ofPrudential.

The Prudential Series Fund has a distribution agreement with Prudential Investment Management ServicesLLC (‘‘PIMS’’), an indirect, wholly-owned subsidiary of Prudential, which acts as the distributor of the ClassI and Class II shares of the Series Fund.

The Investment Managers have agreed to reimburse certain portfolios of the Series Funds the portion of themanagement fee for that Portfolio equal to the amount that the aggregate annual ordinary operatingexpenses (excluding interest, taxes, and brokerage commissions) exceeds various agreed uponpercentages of the portfolio’s average daily net assets.

A50

Note 6: Financial Highlights

Pruco Life sells a number of variable life products that are funded by the Account. These products haveunique combinations of features and fees that are charged against the contract owner’s account balance.Differences in the fee structures result in a variety of unit values, expense ratios and total returns.

The following table was developed by determining which products offered by Pruco Life and funded by theAccount have the lowest and highest expense ratio. Only product designs within each subaccount that hadunits outstanding throughout the respective periods were considered when determining the lowest andhighest expense ratio. The summary may not reflect the minimum and maximum contract charges offeredby Pruco Life as contract owners may not have selected all available and applicable contract options.

At year ended For year ended

Units(000s)

Unit ValueLowest — Highest

NetAssets(000s)

InvestmentIncomeRatios

Expense Ratioss

Lowest — HighestTotal Returnsss

Lowest — Highest

Prudential Money Market Portfolio

December 31, 2005 . . . 112,502 $1.03506 to $10.39889 $158,650 2.88% 0.00% to 0.90% 1.99% to 2.90%December 31, 2004 . . . 101,072 $1.05537 to $10.10571 $135,016 1.04% 0.10% to 0.90% 0.12% to 1.02%December 31, 2003 . . . 91,976 $1.04751 to $ 1.77000 $119,011 0.83% 0.20% to 0.90% -0.05% to 0.65%December 31, 2002 . . . 80,788 $1.04174 to $ 1.76576 $106,053 1.51% 0.20% to 0.90% 0.63% to 1.31%December 31, 2001 . . . 83,554 $1.02864 to $ 1.74968 $122,588 3.67% 0.20% to 0.90% 3.17% to 3.48%

Prudential Diversified Bond Portfolio

December 31, 2005 . . . 45,624 $1.10424 to $10.94617 $ 91,954 5.29% 0.00% to 0.90% 2.37% to 3.28%December 31, 2004 . . . 44,853 $1.24831 to $10.59867 $ 91,525 4.45% 0.10% to 0.90% 4.66% to 5.59%December 31, 2003 . . . 42,294 $1.18525 to $ 2.68559 $ 85,572 3.96% 0.20% to 0.90% 6.52% to 7.26%December 31, 2002 . . . 44,142 $1.10563 to $ 2.51353 $ 88,618 11.45% 0.20% to 0.90% 6.11% to 6.82%December 31, 2001 . . . 44,268 $1.03535 to $ 2.36167 $ 86,640 6.33% 0.20% to 0.90% 6.02% to 6.34%

Prudential Equity Portfolio

December 31, 2005 . . . 44,549 $1.13004 to $12.67894 $ 74,885 1.04% 0.00% to 0.90% 10.48% to 11.47%December 31, 2004 . . . 38,699 $1.02288 to $11.37408 $ 61,150 1.30% 0.10% to 0.90% 8.95% to 9.93%December 31, 2003 . . . 34,244 $0.93887 to $ 3.55677 $ 53,650 1.04% 0.20% to 0.90% 30.48% to 31.39%December 31, 2002 . . . 28,392 $0.71954 to $ 2.71798 $ 40,044 0.90% 0.20% to 0.90% -23.04% to -22.50%December 31, 2001 . . . 20,841 $0.93072 to $ 3.52084 $ 45,664 0.85% 0.20% to 0.90% -11.97% to -11.71%

Prudential Flexible Managed Portfolio

December 31, 2005 . . . 3,345 $1.11430 to $ 3.27131 $ 4,257 1.82% 0.20% to 0.90% 3.23% to 3.95%December 31, 2004 . . . 3,030 $1.07944 to $ 3.15950 $ 3,775 1.36% 0.20% to 0.90% 9.75% to 10.52%December 31, 2003 . . . 2,677 $0.98351 to $ 2.87015 $ 3,133 2.17% 0.20% to 0.90% 22.65% to 23.50%December 31, 2002 . . . 2,993 $0.80187 to $ 2.33302 $ 3,300 2.43% 0.20% to 0.90% -13.52% to -12.91%December 31, 2001 . . . 3,278 $0.92720 to $ 2.68967 $ 5,917 3.47% 0.20% to 0.90% -6.52% to -6.24%

Prudential Conservative Balanced Portfolio


Prudential High Yield Bond Portfolio

December 31, 2005 . . . 6,877 $1.16361 to $11.51387 $ 9,285 6.96% 0.00% to 0.90% 2.51% to 3.41%December 31, 2004 . . . 6,416 $1.25182 to $11.13367 $ 8,313 7.51% 0.10% to 0.90% 9.31% to 10.29%December 31, 2003 . . . 5,186 $1.14520 to $ 2.56656 $ 6,140 8.51% 0.20% to 0.90% 23.90% to 24.78%December 31, 2002 . . . 4,453 $0.92426 to $ 2.06489 $ 4,522 16.56% 0.20% to 0.90% 0.60% to 1.28%December 31, 2001 . . . 5,237 $0.92692 to $ 2.04629 $ 6,111 12.82% 0.20% to 0.90% -1.30% to -1.03%

Prudential Stock Index Portfolio

December 31, 2005 . . . 128,179 $0.89500 to $11.95707 $208,637 1.54% 0.00% to 0.90% 3.60% to 4.54%December 31, 2004 . . . 126,516 $0.86390 to $11.43827 $201,938 1.68% 0.10% to 0.90% 9.47% to 10.45%December 31, 2003 . . . 113,050 $0.78920 to $ 3.79474 $173,410 1.57% 0.20% to 0.90% 27.05% to 27.93%December 31, 2002 . . . 83,777 $0.62117 to $ 2.97814 $115,171 1.24% 0.20% to 0.90% -22.90% to -22.35%December 31, 2001 . . . 71,447 $0.80562 to $ 3.85057 $149,646 0.93% 0.20% to 0.90% -12.83% to -12.57%

Prudential Value Portfolio


A51

Note 6: Financial Highlights (continued)


Units(000s)


NetAssets(000s)


Expense Ratioss


Lowest — Highest

Prudential Natural Resources Portfolio

December 31, 2005 . . . 378 $9.10035 to $ 9.10035 $ 3,440 0.00% 0.60% to 0.60% 54.98% to 54.98%December 31, 2004 . . . 387 $5.87186 to $ 5.87186 $ 2,274 3.50% 0.60% to 0.60% 24.43% to 24.43%December 31, 2003 . . . 445 $4.71906 to $ 4.71906 $ 2,102 4.42% 0.60% to 0.60% 38.17% to 38.17%December 31, 2002 . . . 507 $3.41538 to $ 3.41538 $ 1,733 0.56% 0.60% to 0.60% 18.21% to 18.21%December 31, 2001 . . . 501 $2.88936 to $ 2.88936 $ 1,447 2.44% 0.60% to 0.60% -10.62% to -10.62%

Prudential Global Portfolio

December 31, 2005 . . . 14,793 $0.83720 to $13.26217 $17,160 0.57% 0.00% to 0.90% 15.03% to 16.06%December 31, 2004 . . . 14,272 $0.72784 to $11.42679 $14,321 0.95% 0.10% to 0.90% 8.61% to 9.59%December 31, 2003 . . . 12,073 $0.67013 to $ 1.72057 $11,188 0.34% 0.20% to 0.90% 32.87% to 33.79%December 31, 2002 . . . 9,646 $0.50434 to $ 1.29103 $ 7,074 0.91% 0.20% to 0.90% -25.80% to -25.29%December 31, 2001 . . . 10,694 $0.67974 to $ 1.73500 $12,406 0.33% 0.20% to 0.90% -18.34% to -18.10%

Prudential Government Income Portfolio

December 31, 2005 . . . 25,076 $2.75997 to $ 2.75997 $69,209 4.55% 0.60% to 0.60% 1.91% to 1.91%December 31, 2004 . . . 28,243 $2.70837 to $ 2.70837 $76,492 3.78% 0.60% to 0.60% 2.51% to 2.51%December 31, 2003 . . . 28,452 $2.64198 to $ 2.64198 $75,169 3.81% 0.60% to 0.60% 1.85% to 1.85%December 31, 2002 . . . 24,712 $2.59395 to $ 2.59395 $64,100 8.72% 0.60% to 0.60% 11.38% to 11.38%December 31, 2001 . . . 2,282 $2.32900 to $ 2.32900 $ 5,315 6.13% 0.60% to 0.60% 7.41% to 7.41%

Prudential Jennison Portfolio

December 31, 2005 . . . 48,384 $0.70598 to $12.97872 $46,419 0.11% 0.00% to 0.90% 13.53% to 14.55%December 31, 2004 . . . 43,862 $0.62184 to $11.32981 $36,566 0.51% 0.10% to 0.90% 8.67% to 9.63%December 31, 2003 . . . 36,810 $0.57225 to $ 2.13262 $27,919 0.30% 0.20% to 0.90% 29.09% to 30.02%December 31, 2002 . . . 28,668 $0.44328 to $ 1.64713 $16,808 0.30% 0.20% to 0.90% -31.57% to -31.07%December 31, 2001 . . . 15,056 $0.64774 to $ 2.39981 $13,244 0.17% 0.20% to 0.90% -18.97% to -18.74%

Prudential Small Capitalization Stock Portfolio

December 31, 2005 . . . 7,321 $3.45969 to $ 3.45969 $25,328 0.62% 0.60% to 0.60% 6.62% to 6.62%December 31, 2004 . . . 7,256 $3.24476 to $ 3.24476 $23,544 0.60% 0.60% to 0.60% 21.31% to 21.31%December 31, 2003 . . . 7,347 $2.67470 to $ 2.67470 $19,652 0.49% 0.60% to 0.60% 37.44% to 37.44%December 31, 2002 . . . 7,273 $1.94604 to $ 1.94604 $14,154 0.91% 0.60% to 0.60% -15.43% to -15.43%December 31, 2001 . . . 7,184 $2.30107 to $ 2.30107 $16,531 0.50% 0.60% to 0.60% 4.92% to 4.92%

T. Rowe Price International Stock Portfolio


AIM V.I. Premier Equity Fund


Janus Aspen Large Cap Growth Portfolio — Institutional Shares


MFS Emerging Growth Series


A52

Note 6: Financial Highlights (continued)At year ended For year ended

Units(000s)


NetAssets(000s)


Expense Ratioss


Lowest — Highest

American Century VP Value Fund

December 31, 2005 . . . 6,834 $1.53595 to $ 1.75405 $11,078 0.86% 0.20% to 0.90% 4.11% to 4.83%December 31, 2004 . . . 6,079 $1.47095 to $ 1.68484 $ 9,458 0.96% 0.20% to 0.90% 13.31% to 14.10%

December 31, 2003 . . . 6,698 $1.29419 to $ 1.48693 $ 9,121 0.99% 0.20% to 0.90% 27.81% to 28.71%

December 31, 2002 . . . 4,492 $1.00958 to $ 1.16337 $ 4,863 0.78% 0.20% to 0.90% -13.40% to -12.80%

December 31, 2001 . . . 1,677 $1.16236 to $ 1.34339 $ 2,224 0.65% 0.20% to 0.90% 11.83% to 12.16%Franklin Small-Mid Cap Growth Securities Fund

December 31, 2005 . . . 8,855 $0.78887 to $ 0.79733 $ 7,043 0.00% 0.20% to 0.90% 3.86% to 4.58%

December 31, 2004 . . . 12,067 $0.75958 to $ 0.76243 $ 9,194 0.00% 0.20% to 0.90% 10.47% to 11.25%December 31, 2003 . . . 10,828 $0.68532 to $ 0.68757 $ 7,425 0.00% 0.20% to 0.90% 36.00% to 36.97%

December 31, 2002 . . . 8,291 $0.50033 to $ 0.50555 $ 4,159 0.24% 0.20% to 0.90% -29.32% to -28.82%

December 31, 2001 . . . 4,633 $0.70289 to $ 0.71530 $ 3,276 0.43% 0.20% to 0.90% -16.00% to -16.00%American Century VP Income & Growth Fund

December 31, 2005 . . . 1,232 $1.07320 to $ 1.07320 $ 1,322 2.40% 0.20% to 0.20% 4.41% to 4.41%


December 31, 2002 . . . 2,933 $0.70615 to $ 0.70615 $ 2,071 0.97% 0.20% to 0.20% -19.51% to -19.51%

December 31, 2001 . . . 273 $0.87732 to $ 0.87732 $ 240 0.57% 0.20% to 0.20% -4.81% to -4.81%

Prudential SP T.Rowe Price Large Cap Growth Portfolio

December 31, 2005 . . . 9,206 $0.81223 to $12.72743 $ 9,170 0.00% 0.00% to 0.90% 15.46% to 16.49%

December 31, 2004 . . . 10,312 $0.69854 to $10.92574 $ 8,259 0.00% 0.10% to 0.90% 5.16% to 6.10%December 31, 2003 . . . 8,918 $0.65971 to $ 0.80974 $ 6,538 0.00% 0.20% to 0.90% 22.76% to 23.68%

December 31, 2002 . . . 6,955 $0.53338 to $ 0.65960 $ 4,038 0.00% 0.20% to 0.90% -31.81% to -31.33%

December 31, 2001 . . . 4,118 $0.77671 to $ 0.96725 $ 3,351 0.04% 0.20% to 0.90% -8.20% to -8.20%

Prudential SP Davis Value Portfolio

December 31, 2005 . . . 26,836 $1.22267 to $12.73961 $34,153 0.85% 0.00% to 0.90% 8.54% to 9.52%

December 31, 2004 . . . 23,360 $1.14376 to $11.63249 $27,127 0.40% 0.10% to 0.90% 11.51% to 12.53%

December 31, 2003 . . . 18,726 $1.01900 to $ 1.03934 $19,143 0.48% 0.20% to 0.90% 28.25% to 29.16%December 31, 2002 . . . 12,835 $0.78949 to $ 0.81040 $10,165 0.01% 0.20% to 0.90% -16.44% to -15.87%

December 31, 2001 . . . 4,112 $0.93883 to $ 0.96984 $ 3,866 0.62% 0.20% to 0.90% -6.12% to -6.12%

Dreyfus Variable Investment MidCap Stock Portfolio

December 31, 2005 . . . 2,547 $1.35061 to $ 1.35061 $ 3,439 0.02% 0.20% to 0.20% 8.95% to 8.95%

December 31, 2004 . . . 1,884 $1.23963 to $ 1.23963 $ 2,335 0.46% 0.20% to 0.20% 14.24% to 14.24%

December 31, 2003 . . . 1,295 $1.08507 to $ 1.08507 $ 1,406 0.34% 0.20% to 0.20% 31.45% to 31.45%December 31, 2002 . . . 766 $0.82545 to $ 0.82545 $ 633 0.25% 0.20% to 0.20% -12.67% to -12.67%

December 31, 2001 . . . 700 $0.94518 to $ 0.94518 $ 662 0.64% 0.20% to 0.20% -1.79% to -1.79%

Dreyfus Variable Investment Developing Leaders Portfolio

December 31, 2005 . . . 6,876 $0.63649 to $ 0.63649 $ 4,377 0.00% 0.20% to 0.20% 5.60% to 5.60%


December 31, 2002 . . . 3,468 $0.41265 to $ 0.41265 $ 1,431 0.04% 0.20% to 0.20% -19.29% to -19.29%

December 31, 2001 . . . 2,081 $0.51129 to $ 0.51129 $ 1,064 0.82% 0.20% to 0.20% -1.53% to -1.53%

Prudential SP Small Cap Value Portfolio

December 31, 2005 . . . 19,662 $1.29067 to $12.55835 $29,147 0.49% 0.00% to 0.90% 3.68% to 4.61%

December 31, 2004 . . . 16,698 $1.29903 to $ 1.59242 $23,917 0.17% 0.10% to 0.90% 19.61% to 20.44%December 31, 2003 . . . 12,812 $1.08604 to $ 1.32220 $15,299 0.03% 0.20% to 0.90% 31.92% to 32.85%

December 31, 2002 . . . 8,622 $0.82323 to $ 0.99523 $ 7,769 0.66% 0.20% to 0.90% -15.14% to -14.55%

December 31, 2001 . . . 2,201 $0.97015 to $ 1.16476 $ 2,311 1.11% 0.20% to 0.90% 3.84% to 3.84%

Goldman Sachs CORE Small Cap Equity Fund

December 31, 2005 . . . 1,559 $1.55056 to $ 1.55056 $ 2,417 0.24% 0.20% to 0.20% 5.86% to 5.86%

December 31, 2004 . . . 1,418 $1.46475 to $ 1.46475 $ 2,077 0.20% 0.20% to 0.20% 16.09% to 16.09%

December 31, 2003 . . . 1,214 $1.26173 to $ 1.26173 $ 1,532 0.27% 0.20% to 0.20% 45.72% to 45.72%December 31, 2002 . . . 1,097 $0.86584 to $ 0.86584 $ 950 0.34% 0.20% to 0.20% -15.13% to -15.13%

December 31, 2001 . . . 801 $1.02020 to $ 1.02020 $ 817 0.80% 0.20% to 0.20% -0.64% to -0.64%

A53



Units(000s)


NetAssets(000s)


Expense Ratioss


Lowest — Highest

AIM V.I. Utilities Series

December 31, 2005 . . . 708 $0.87246 to $ 0.87246 $ 618 4.38% 0.20% to 0.20% 16.61% to 16.61%December 31, 2004 . . . 15 $0.74819 to $ 0.74819 $ 12 1.72% 0.20% to 0.20% 23.32% to 23.32%

December 31, 2003 . . . 5 $0.60669 to $ 0.60669 $ 3 1.26% 0.20% to 0.20% 17.23% to 17.23%

December 31, 2002 . . . 6 $0.51751 to $ 0.51751 $ 3 0.40% 0.20% to 0.20% -20.49% to -20.49%

December 31, 2001 . . . 5 $0.65084 to $ 0.65084 $ 3 0.00% 0.20% to 0.20% -19.16% to -19.16%

AIM V.I. Technology Fund

December 31, 2005 . . . 1,937 $0.28171 to $ 0.28171 $ 546 0.00% 0.20% to 0.20% 2.01% to 2.01%

December 31, 2004 . . . 2,810 $0.27617 to $ 0.27617 $ 776 0.00% 0.20% to 0.20% 4.43% to 4.43%

December 31, 2003 . . . 1,506 $0.26445 to $ 0.26445 $ 398 0.00% 0.20% to 0.20% 45.01% to 45.01%

December 31, 2002 . . . 1,433 $0.18237 to $ 0.18237 $ 261 0.00% 0.20% to 0.20% -46.93% to -46.93%December 31, 2001 . . . 987 $0.34362 to $ 0.34362 $ 339 0.00% 0.20% to 0.20% -20.24% to -20.24%

Prudential SP Small Cap Growth Portfolio

December 31, 2005 . . . 5,892 $0.66950 to $10.31158 $ 5,518 0.00% 0.00% to 0.90% 1.56% to 2.48%

December 31, 2004 . . . 4,799 $0.65467 to $10.06229 $ 4,314 0.00% 0.10% to 0.90% -1.80% to -0.92%

December 31, 2003 . . . 3,542 $0.66197 to $ 0.91323 $ 3,194 0.00% 0.20% to 0.90% 33.51% to 34.44%December 31, 2002 . . . 2,261 $0.49239 to $ 0.67960 $ 1,513 0.00% 0.20% to 0.90% -30.89% to -6.11%

December 31, 2001 . . . 738 $0.70738 to $ 0.97681 $ 703 0.00% 0.20% to 0.90% -1.90% to -1.90%

Janus Aspen Mid Cap Growth Portfolio — Service Shares


December 31, 2003 . . . 4,329 $0.44411 to $ 0.44411 $ 1,922 0.00% 0.20% to 0.20% 34.49% to 34.49%

December 31, 2002 . . . 3,847 $0.33021 to $ 0.33021 $ 1,270 0.00% 0.20% to 0.20% -28.25% to -11.89%

December 31, 2001 . . . 4,274 $0.46024 to $ 0.46024 $ 1,967 0.00% 0.20% to 0.20% -17.80% to -17.80%

Janus Aspen Balanced Portfolio — Service Shares

December 31, 2005 . . . 19,794 $1.15042 to $ 1.15042 $22,772 2.11% 0.20% to 0.20% 7.45% to 7.45%

December 31, 2004 . . . 19,744 $1.07066 to $ 1.07066 $21,139 2.72% 0.20% to 0.20% 8.08% to 8.08%

December 31, 2003 . . . 14,816 $0.99058 to $ 0.99058 $14,676 1.96% 0.20% to 0.20% 13.49% to 13.49%

December 31, 2002 . . . 9,467 $0.87282 to $ 0.87282 $ 8,263 2.71% 0.20% to 0.20% -17.47% to -6.85%December 31, 2001 . . . 1,267 $0.93705 to $ 0.93705 $ 1,187 3.22% 0.20% to 0.20% -1.48% to -1.48%

Oppenheimer Aggressive Growth Fund/VA

December 31, 2005 . . . 2,067 $0.65220 to $ 0.65220 $ 1,348 0.00% 0.20% to 0.20% 11.76% to 11.76%

December 31, 2004 . . . 1,730 $0.58355 to $ 0.58355 $ 1,010 0.00% 0.20% to 0.20% 19.19% to 19.19%

December 31, 2003 . . . 1,211 $0.48959 to $ 0.48959 $ 593 0.00% 0.20% to 0.20% 25.18% to 25.18%December 31, 2002 . . . 132 $0.39111 to $ 0.39111 $ 52 0.54% 0.20% to 0.20% -28.19% to -22.36%

December 31, 2001 . . . 66 $0.54468 to $ 0.54468 $ 36 0.92% 0.20% to 0.20% -5.98% to -5.98%

Prudential SP PIMCO Total Return Portfolio

December 31, 2005 . . . 32,938 $1.08232 to $10.79983 $43,675 4.68% 0.00% to 0.90% 1.48% to 2.39%December 31, 2004 . . . 30,948 $1.21784 to $10.54770 $40,504 1.95% 0.10% to 0.90% 4.33% to 5.28%

December 31, 2003 . . . 27,144 $1.16728 to $ 1.29466 $34,078 2.46% 0.20% to 0.90% 4.91% to 5.65%

December 31, 2002 . . . 20,532 $1.11264 to $ 1.22547 $24,524 3.13% 0.20% to 0.90% 8.40% to 9.15%

December 31, 2001 . . . 6,059 $1.02645 to $ 1.12277 $ 6,768 4.02% 0.20% to 0.90% 5.25% to 5.25%

Prudential SP PIMCO High Yield Portfolio

December 31, 2005 . . . 6,203 $1.16538 to $11.47762 $ 8,697 6.64% 0.00% to 0.90% 3.12% to 4.03%

December 31, 2004 . . . 4,685 $1.32262 to $11.03289 $ 6,390 6.61% 0.10% to 0.90% 8.36% to 9.32%

December 31, 2003 . . . 5,303 $1.22063 to $ 1.29355 $ 6,621 6.63% 0.20% to 0.90% 21.32% to 22.16%

December 31, 2002 . . . 3,685 $1.00616 to $ 1.05893 $ 3,768 10.92% 0.20% to 0.90% -0.74% to -0.09%December 31, 2001 . . . 413 $1.01365 to $ 1.05986 $ 420 5.34% 0.20% to 0.90% 3.35% to 3.35%

A54



Units(000s)


NetAssets(000s)


Expense Ratioss


Lowest — Highest

Janus Aspen Large Cap Growth Portfolio — Service Shares (became available August 6, 2001)


December 31, 2003 . . . 1,232 $0.85205 to $ 0.85205 $ 1,050 0.00% 0.25% to 0.25% 31.16% to 31.16%

December 31, 2002 . . . 565 $0.64963 to $ 0.64963 $ 367 0.00% 0.25% to 0.25% -26.90% to -26.90%

December 31, 2001 . . . 42 $0.88873 to $ 0.88873 $ 37 0.00% 0.25% to 0.25% -10.24% to -10.24%

Prudential SP Large Cap Value Portfolio (became available August 6, 2001)

December 31, 2005 . . . 8,468 $1.21922 to $12.42748 $10,689 0.74% 0.00% to 0.90% 5.70% to 6.64%

December 31, 2004 . . . 6,476 $1.15350 to $ 1.25106 $ 7,637 0.73% 0.10% to 0.90% 16.70% to 17.51%

December 31, 2003 . . . 4,702 $0.98843 to $ 1.06462 $ 4,718 0.00% 0.20% to 0.90% 25.64% to 26.51%

December 31, 2002 . . . 2,978 $0.78673 to $ 0.84151 $ 2,363 1.71% 0.25% to 0.90% -17.12% to -16.58%December 31, 2001 . . . 343 $0.94919 to $ 0.95177 $ 327 0.53% 0.25% to 0.90% -4.31% to -4.05%

Prudential SP AIM Core Equity Portfolio (became available August 6, 2001)

December 31, 2005 . . . 2,672 $1.05693 to $ 1.13227 $ 2,910 0.89% 0.10% to 0.90% 3.71% to 4.52%

December 31, 2004 . . . 1,960 $1.01915 to $11.24299 $ 2,044 0.45% 0.10% to 0.90% 7.83% to 8.79%

December 31, 2003 . . . 1,406 $0.94517 to $ 0.95989 $ 1,350 0.30% 0.25% to 0.90% 22.59% to 23.38%December 31, 2002 . . . 785 $0.77097 to $ 0.77800 $ 611 0.00% 0.25% to 0.90% -15.97% to -15.42%

December 31, 2001 . . . 77 $0.91746 to $ 0.91988 $ 71 0.00% 0.25% to 0.90% -7.07% to -6.82%

Prudential SP Strategic Partners Focused Growth Portfolio (became available August 6, 2001)

December 31, 2005 . . . 2,656 $1.07038 to $13.19148 $ 2,986 0.00% 0.00% to 0.90% 14.12% to 15.14%December 31, 2004 . . . 1,917 $0.93791 to $11.45666 $ 1,848 0.00% 0.10% to 0.90% 9.62% to 10.58%

December 31, 2003 . . . 988 $0.85560 to $ 0.86896 $ 858 0.00% 0.25% to 0.90% 24.72% to 25.52%

December 31, 2002 . . . 436 $0.68600 to $ 0.69228 $ 302 0.00% 0.25% to 0.90% -25.93% to -25.44%

December 31, 2001 . . . 38 $0.92620 to $ 0.92854 $ 35 0.00% 0.25% to 0.90% -6.34% to -6.11%

Prudential SP Mid Cap Growth Portfolio (became available March 5, 2001)

December 31, 2005 . . . 16,522 $0.82065 to $12.99106 $14,152 0.00% 0.00% to 0.90% 4.33% to 5.26%

December 31, 2004 . . . 9,616 $0.78166 to $12.34238 $ 7,709 0.00% 0.10% to 0.90% 18.48% to 19.55%

December 31, 2003 . . . 7,313 $0.65537 to $ 0.96166 $ 4,808 0.00% 0.20% to 0.90% 38.86% to 39.86%

December 31, 2002 . . . 4,231 $0.46893 to $ 0.68758 $ 1,986 0.00% 0.25% to 0.90% -46.80% to -46.46%December 31, 2001 . . . 1,183 $0.87586 to $ 0.94666 $ 1,036 0.00% 0.25% to 0.90% -12.01% to -12.01%

SP Prudential U.S. Emerging Growth Portfolio (became available March 5, 2001)

December 31, 2005 . . . 13,420 $1.21970 to $14.58109 $16,697 0.00% 0.00% to 0.90% 16.72% to 17.77%

December 31, 2004 . . . 8,888 $1.03828 to $12.38071 $ 9,346 0.00% 0.10% to 0.90% 20.31% to 21.39%

December 31, 2003 . . . 6,238 $0.85748 to $ 0.87838 $ 5,357 0.00% 0.25% to 0.90% 40.82% to 41.72%December 31, 2002 . . . 3,672 $0.60504 to $ 0.62375 $ 2,224 0.00% 0.25% to 0.90% -32.68% to -32.24%

December 31, 2001 . . . 1,094 $0.89289 to $ 0.92649 $ 978 0.00% 0.25% to 0.90% -11.06% to -11.06%

Prudential SP Conservative Asset Allocation Portfolio (became available August 6, 2001)

December 31, 2005 . . . 5,790 $1.16989 to $11.67693 $ 7,614 1.29% 0.00% to 0.90% 4.97% to 5.91%December 31, 2004 . . . 4,690 $1.16226 to $11.02585 $ 5,713 1.29% 0.10% to 0.90% 7.92% to 8.89%

December 31, 2003 . . . 3,680 $1.07699 to $ 1.10200 $ 4,016 1.29% 0.20% to 0.90% 15.45% to 16.25%

December 31, 2002 . . . 1,492 $0.93287 to $ 0.94792 $ 1,401 0.17% 0.20% to 0.90% -6.71% to -6.11%

December 31, 2001 . . . 194 $0.99998 to $ 1.00256 $ 195 3.26% 0.25% to 0.90% 0.41% to 0.66%

Prudential SP Balanced Asset Allocation Portfolio (became available August 6, 2001)

December 31, 2005 . . . 24,001 $1.21353 to $12.19356 $30,116 0.88% 0.00% to 0.90% 6.64% to 7.60%

December 31, 2004 . . . 17,279 $1.15290 to $11.33193 $20,301 0.75% 0.10% to 0.90% 10.09% to 11.09%

December 31, 2003 . . . 10,904 $1.04724 to $ 1.10143 $11,591 0.84% 0.20% to 0.90% 21.78% to 22.62%

December 31, 2002 . . . 4,292 $0.85996 to $ 0.89823 $ 3,726 0.00% 0.20% to 0.90% -12.46% to -11.89%December 31, 2001 . . . 410 $0.98238 to $ 0.98498 $ 403 4.12% 0.25% to 0.90% -1.23% to -0.97%

A55



Units(000s)


NetAssets(000s)


Expense Ratioss


Lowest — Highest

Prudential SP Growth Asset Allocation Portfolio (became available August 6, 2001)

December 31, 2005 . . . 34,936 $ 1.21764 to $12.68422 $43,777 0.57% 0.00% to 0.90% 8.27% to 9.24%December 31, 2004 . . . 23,746 $ 1.12461 to $11.61172 $27,303 0.37% 0.10% to 0.90% 12.04% to 13.05%

December 31, 2003 . . . 12,142 $ 1.00377 to $ 1.08904 $12,377 0.48% 0.20% to 0.90% 27.14% to 28.02%

December 31, 2002 . . . 4,939 $ 0.78950 to $ 0.85069 $ 3,933 0.00% 0.20% to 0.90% -18.00% to -17.47%

December 31, 2001 . . . 223 $ 0.96279 to $ 0.96529 $ 215 1.49% 0.25% to 0.90% -3.04% to -2.79%

Prudential SP Aggressive Growth Asset Allocation Portfolio (became available August 6, 2001)

December 31, 2005 . . . 11,372 $ 1.18874 to $ 1.34325 $14,089 0.15% 0.10% to 0.90% 9.49% to 10.37%

December 31, 2004 . . . 7,028 $ 1.08568 to $11.83854 $ 7,826 0.05% 0.10% to 0.90% 13.73% to 14.76%

December 31, 2003 . . . 2,742 $ 0.95462 to $ 1.06372 $ 2,660 0.03% 0.20% to 0.90% 31.58% to 32.51%

December 31, 2002 . . . 1,113 $ 0.72551 to $ 0.80276 $ 815 0.00% 0.25% to 0.90% -22.86% to -22.36%December 31, 2001 . . . 85 $ 0.94047 to $ 0.94300 $ 80 0.16% 0.25% to 0.90% -5.13% to -4.87%

Janus Aspen International Growth Portfolio — Service Shares

December 31, 2005 . . . 5,291 $ 1.06141 to $ 1.06141 $ 5,616 1.06% 0.20% to 0.20% 31.67% to 31.67%

December 31, 2004 . . . 6,571 $ 0.80610 to $ 0.80610 $ 5,297 0.92% 0.20% to 0.20% 18.45% to 18.45%

December 31, 2003 . . . 5,257 $ 0.68052 to $ 0.68052 $ 3,577 1.01% 0.20% to 0.20% 34.26% to 34.26%December 31, 2002 . . . 5,056 $ 0.50685 to $ 0.50685 $ 2,563 0.77% 0.20% to 0.20% -25.91% to -25.91%

December 31, 2001 . . . 2,100 $ 0.68406 to $ 0.68406 $ 1,437 0.79% 0.20% to 0.20% -9.43% to -9.43%

Prudential SP William Blair International Growth Portfolio (became available August 6, 2001)

December 31, 2005 . . . 5,436 $ 1.26952 to $14.16477 $ 7,257 0.55% 0.00% to 0.90% 15.34% to 16.39%December 31, 2004 . . . 3,917 $ 1.10066 to $12.17058 $ 4,483 0.17% 0.10% to 0.90% 15.51% to 16.54%

December 31, 2003 . . . 2,080 $ 0.95286 to $ 0.96758 $ 2,010 0.00% 0.25% to 0.90% 38.33% to 39.23%

December 31, 2002 . . . 890 $ 0.68881 to $ 0.69495 $ 618 0.00% 0.25% to 0.90% -23.26% to -22.77%

December 31, 2001 . . . 86 $ 0.89755 to $ 0.89989 $ 77 0.00% 0.25% to 0.90% -9.34% to -9.11%Prudential SP LSV International Value Portfolio (became available March 5, 2001)

December 31, 2005 . . . 11,301 $ 1.15143 to $ 1.37811 $13,284 0.40% 0.10% to 0.90% 12.75% to 13.67%

December 31, 2004 . . . 9,887 $ 1.01469 to $12.10092 $10,125 0.45% 0.10% to 0.90% 14.77% to 15.80%December 31, 2003 . . . 8,029 $ 0.87846 to $ 1.05026 $ 7,099 0.76% 0.25% to 0.90% 26.23% to 27.14%

December 31, 2002 . . . 5,177 $ 0.69143 to $ 0.82608 $ 3,584 0.00% 0.25% to 0.90% -17.91% to -17.38%

December 31, 2001 . . . 1,952 $ 0.83687 to $ 0.91304 $ 1,634 0.32% 0.25% to 0.90% -16.41% to -16.41%M Financial Turner Core Growth Fund (became available December 15, 2003)

December 31, 2005 . . . 47 $13.10724 to $13.10724 $ 611 0.59% 0.00% to 0.00% 13.92% to 13.92%

December 31, 2004 . . . 19 $11.50611 to $11.50611 $ 219 0.51% 0.00% to 0.00% 11.19% to 11.19%

M Financial Frontier Capital Appreciation Fund (became available December 15, 2003)

December 31, 2005 . . . 43 $13.00911 to $13.00911 $ 558 0.00% 0.00% to 0.00% 15.13% to 15.13%

December 31, 2004 . . . 31 $11.29972 to $11.29972 $ 348 0.00% 0.00% to 0.00% 9.33% to 9.33%

M Financial Brandes International Equity Fund (became available December 15, 2003)

December 31, 2005 . . . 77 $14.37951 to $14.37951 $ 1,101 1.75% 0.00% to 0.00% 10.55% to 10.55%

December 31, 2004 . . . 50 $13.00731 to $13.00731 $ 651 2.55% 0.00% to 0.00% 24.00% to 24.00%

M Financial Business Opportunity Value Fund (became available December 15, 2003)

December 31, 2005 . . . 20 $13.77563 to $13.77563 $ 279 0.67% 0.00% to 0.00% 7.81% to 7.81%

December 31, 2004 . . . 18 $12.77809 to $12.77809 $ 228 1.24% 0.00% to 0.00% 22.60% to 22.60%

ProFund VP Asia 30 Fund (became available November 4, 2002)

December 31, 2005 . . . 0 $ 1.99507 to $ 1.99507 $ 0 1.20% 0.25% to 0.25% 19.21% to 19.21%

December 31, 2004 . . . 0 $ 1.67351 to $ 1.67351 $ 0 0.00% 0.25% to 0.25% -0.79% to -0.79%December 31, 2003 . . . 6 $ 1.68678 to $ 1.68678 $ 11 0.10% 0.25% to 0.25% 64.51% to 64.51%

ProFund VP Banks Fund (became available May 1, 2003)

December 31, 2005 . . . 0 $ 1.36608 to $ 1.36608 $ 0 0.00% 0.25% to 0.25% -0.39% to -0.39%

December 31, 2004 . . . 0 $ 1.37148 to $ 1.37148 $ 0 0.00% 0.25% to 0.25% 11.49% to 11.49%

December 31, 2003 . . . 0 $ 1.23017 to $ 1.23017 $ 0 0.00% 0.25% to 0.25% 22.79% to 22.79%

A56



Units(000s)


NetAssets(000s)


Expense Ratioss


Lowest — Highest

ProFund VP Basic Materials Fund (became available November 4, 2002)

December 31, 2005 . . . 418 $1.52325 to $1.52325 $637 0.00% 0.25% to 0.25% 2.18% to 2.18%December 31, 2004 . . . 0 $1.49070 to $1.49070 $ 1 0.06% 0.25% to 0.25% 9.94% to 9.94%

December 31, 2003 . . . 0 $1.35588 to $1.35588 $ 0 0.00% 0.25% to 0.25% 31.26% to 31.26%

ProFund VP Bear Fund (became available November 4, 2002)

December 31, 2005 . . . 13 $0.66855 to $0.66855 $ 9 0.00% 0.25% to 0.25% -1.61% to -1.61%

December 31, 2004 . . . 0 $0.67949 to $0.67949 $ 0 0.00% 0.25% to 0.25% -10.50% to -10.50%December 31, 2003 . . . 0 $0.75922 to $0.75922 $ 0 0.00% 0.25% to 0.25% -24.78% to -24.78%

ProFund VP Biotechnology Fund (became available November 4, 2002)

December 31, 2005 . . . 10 $1.77162 to $1.77162 $ 18 0.00% 0.25% to 0.25% 18.95% to 18.95%

December 31, 2004 . . . 5 $1.48943 to $1.48943 $ 7 0.00% 0.25% to 0.25% 9.45% to 9.45%

December 31, 2003 . . . 0 $1.36083 to $1.36083 $ 0 0.00% 0.25% to 0.25% 39.43% to 39.43%

ProFund VP UltraBull Fund (became available November 4, 2002)

December 31, 2005 . . . 0 $1.75321 to $1.75321 $ 0 0.00% 0.25% to 0.25% 2.36% to 2.36%

December 31, 2004 . . . 102 $1.71282 to $1.71282 $176 0.00% 0.25% to 0.25% 16.89% to 16.89%

December 31, 2003 . . . 18 $1.46531 to $1.46531 $ 27 0.00% 0.25% to 0.25% 52.55% to 52.55%

ProFund VP Consumer Services Fund (became available November 4, 2002)

December 31, 2005 . . . 0 $1.21116 to $1.21116 $ 0 0.00% 0.25% to 0.25% -4.91% to -4.91%

December 31, 2004 . . . 0 $1.27367 to $1.27367 $ 0 0.00% 0.25% to 0.25% 7.34% to 7.34%December 31, 2003 . . . 0 $1.18656 to $1.18656 $ 0 0.00% 0.25% to 0.25% 26.48% to 26.48%

ProFund VP Consumer Goods Fund (became available November 4, 2002)

December 31, 2005 . . . 0 $1.24179 to $1.24179 $ 0 0.00% 0.25% to 0.25% -0.61% to -0.61%

December 31, 2004 . . . 0 $1.24945 to $1.24945 $ 0 0.00% 0.25% to 0.25% 8.98% to 8.98%

ProFund VP Oil & Gas Fund (became available November 4, 2002)


December 31, 2003 . . . 0 $1.23023 to $1.23023 $ 0 0.00% 0.25% to 0.25% 21.96% to 21.96%

ProFund VP Europe 30 Fund (became available November 4, 2002)

December 31, 2005 . . . 17 $1.69022 to $1.69022 $ 29 0.19% 0.25% to 0.25% 7.82% to 7.82%


ProFund VP Financials Fund (became available November 4, 2002)

December 31, 2005 . . . 470 $1.42532 to $1.42532 $669 0.37% 0.25% to 0.25% 3.72% to 3.72%

December 31, 2004 . . . 13 $1.37415 to $1.37415 $ 19 0.00% 0.25% to 0.25% 10.07% to 10.07%

December 31, 2003 . . . 0 $1.24846 to $1.24846 $ 0 0.00% 0.25% to 0.25% 28.67% to 28.67%

ProFund VP Health Care Fund (became available November 4, 2002)

December 31, 2005 . . . 20 $1.23740 to $1.23740 $ 25 0.00% 0.25% to 0.25% 5.76% to 5.76%


ProFund VP Industrials Fund (became available May 1, 2003)


ProFund VP Internet Fund (became available May 1, 2003)


December 31, 2003 . . . 0 $1.43607 to $1.43607 $ 0 0.00% 0.25% to 0.25% 42.24% to 42.24%

ProFund VP Japan Fund (became available May 1, 2003)


December 31, 2003 . . . 0 $1.38685 to $1.38685 $ 0 0.00% 0.25% to 0.25% 37.79% to 37.79%

A57



Units(000s)


NetAssets(000s)


Expense Ratioss


Lowest — Highest

ProFund VP Mid-Cap Growth Fund (became available November 4, 2002)

December 31, 2005 . . . 6 $1.53111 to $1.53111 $ 9 0.00% 0.25% to 0.25% 10.94% to 10.94%

December 31, 2004 . . . 22 $1.38008 to $1.38008 $ 30 0.00% 0.25% to 0.25% 10.81% to 10.81%

December 31, 2003 . . . 10 $1.24547 to $1.24547 $ 12 0.00% 0.25% to 0.25% 27.59% to 27.59%ProFund VP Mid-Cap Value Fund (became available November 4, 2002)

December 31, 2005 . . . 12 $1.70050 to $1.70050 $ 20 0.00% 0.25% to 0.25% 8.58% to 8.58%


ProFund VP Money Market Fund (became available November 4, 2002)

December 31, 2005 . . . 1,479 $1.01117 to $1.01117 $1,496 1.80% 0.25% to 0.25% 1.53% to 1.53%December 31, 2004 . . . 1,283 $0.99592 to $0.99592 $1,278 0.06% 0.25% to 0.25% -0.23% to -0.23%

December 31, 2003 . . . 1,466 $ 9820 to $0.99820 $1,464 0.05% 0.25% to 0.25% -0.18% to -0.18%

ProFund VP OTC Fund (became available November 4, 2002)

December 31, 2005 . . . 47 $1.52217 to $1.52217 $ 71 0.00% 0.25% to 0.25% -0.07% to -0.07%

December 31, 2004 . . . 11 $1.52323 to $1.52323 $ 17 0.00% 0.25% to 0.25% 8.26% to 8.26%

December 31, 2003 . . . 0 $1.40705 to $1.40705 $ 0 0.00% 0.25% to 0.25% 46.39% to 46.39%

ProFund VP Pharmaceuticals Fund (became available May 1, 2003)

December 31, 2005 . . . 0 $0.89532 to $0.89532 $ 0 0.00% 0.25% to 0.25% -4.04% to -4.04%

December 31, 2004 . . . 0 $0.93304 to $0.93304 $ 0 0.00% 0.25% to 0.25% -9.45% to -9.45%

December 31, 2003 . . . 0 $1.03038 to $1.03038 $ 0 0.00% 0.25% to 0.25% 2.61% to 2.61%

ProFund VP Precious Metals Fund (became available November 4, 2002)

December 31, 2005 . . . 25 $1.81017 to $1.81017 $ 45 0.00% 0.25% to 0.25% 25.98% to 25.98%

December 31, 2004 . . . 0 $1.43683 to $1.43683 $ 0 0.00% 0.25% to 0.25% -10.14 to -10.14%

December 31, 2003 . . . 15 $1.59900 to $1.59900 $ 25 0.00% 0.25% to 0.25% 38.88% to 38.88%

ProFund VP Real Estate Fund (became available November 4, 2002)

December 31, 2005 . . . 18 $1.74689 to $1.74689 $ 31 3.74% 0.25% to 0.25% 6.49% to 6.49%

December 31, 2004 . . . 12 $1.64049 to $1.64049 $ 19 3.22% 0.25% to 0.25% 26.88% to 26.88%

December 31, 2003 . . . 98 $1.29290 to $1.29290 $ 127 6.13% 0.25% to 0.25% 30.36% to 30.36%ProFund VP Rising Rates Opportunity Fund (became available November 4, 2002)

December 31, 2005 . . . 2 $0.72996 to $0.72996 $ 2 0.00% 0.25% to 0.25% -8.12% to -8.12%December 31, 2004 . . . 28 $0.79451 to $0.79451 $ 22 0.00% 0.25% to 0.25% -11.13 to -11.13%

December 31, 2003 . . . 15 $0.89397 to $0.89397 $ 13 0.00% 0.25% to 0.25% -4.35% to -4.35%

ProFund VP Semiconductor Fund (became available May 1, 2003)

December 31, 2005 . . . 0 $1.33091 to $1.33091 $ 0 0.00% 0.25% to 0.25% 8.38% to 8.38%December 31, 2004 . . . 0 $1.22805 to $1.22805 $ 0 0.00% 0.25% to 0.25% -23.74 to -23.74%

December 31, 2003 . . . 15 $1.61029 to $1.61029 $ 25 0.00% 0.25% to 0.25% 60.06% to 60.06%

ProFund VP Short OTC Fund (became available November 4, 2002)

December 31, 2005 . . . 31 $0.56456 to $0.56456 $ 18 0.00% 0.25% to 0.25% 0.55% to 0.55%

December 31, 2004 . . . 2,024 $0.56145 to $0.56145 $1,136 0.00% 0.25% to 0.25% -11.32 to -11.32%

December 31, 2003 . . . 2,050 $0.63313 to $0.63313 $1,298 0.00% 0.25% to 0.25% -37.46 to -37.46%

ProFund VP Short Small-Cap Fund (became available May 1, 2003)

December 31, 2005 . . . 366 $0.61060 to $0.61060 $ 223 0.00% 0.25% to 0.25% -3.16% to -3.16%

December 31, 2004 . . . 97 $0.63054 to $0.63054 $ 61 0.00% 0.25% to 0.25% -9.25% to -9.25%December 31, 2003 . . . 0 $0.69480 to $0.69480 $ 0 0.00% 0.25% to 0.25% -30.52to -30.52%

ProFund VP Small-Cap Fund (became available November 4, 2002)


December 31, 2003 . . . 0 $1.40625 to $1.40625 $ 0 0.00% 0.25% to 0.25% 42.39% to 42.39%

A58



Units(000s)


NetAssets(000s)


Expense Ratioss


Lowest — Highest

ProFund VP Small Cap-Growth Fund (became available November 4, 2002)

December 31, 2005 . . . 4 $ 1.68288 to $ 1.68288 $ 6 0.00% 0.25% to 0.25% 7.27% to 7.27%

December 31, 2004 . . . 15 $ 1.56876 to $ 1.56876 $ 23 0.00% 0.25% to 0.25% 19.50% to 19.50%

December 31, 2003 . . . 7 $ 1.31276 to $ 1.31276 $ 9 0.00% 0.25% to 0.25% 33.98% to 33.98%

ProFund VP Small-Cap Value Fund (became available November 4, 2002)

December 31, 2005 . . . 0 $ 1.66051 to $ 1.66051 $ 0 0.00% 0.25% to 0.25% 3.73% to 3.73%

December 31, 2004 . . . 8 $ 1.60083 to $ 1.60083 $ 13 0.00% 0.25% to 0.25% 19.82% to 19.82%

December 31, 2003 . . . 9 $ 1.33602 to $ 1.33602 $ 13 0.00% 0.25% to 0.25% 34.34% to 34.34%ProFund VP Technology Fund (became available November 4, 2002)

December 31, 2005 . . . 2 $ 1.42092 to $ 1.42092 $ 2 0.78% 0.25% to 0.25% 0.97% to 0.97%


ProFund VP Telecommunications Fund (became available November 4, 2002)


December 31, 2003 . . . 0 $ 1.00733 to $ 1.00733 $ 0 0.00% 0.25% to 0.25% 2.20% to 2.20%

ProFund VP U.S. Government Plus Fund (became available November 4, 2002)

December 31, 2005 . . . 121 $ 1.19793 to $ 1.19793 $145 2.23% 0.25% to 0.25% 8.74% to 8.74%

December 31, 2004 . . . 102 $ 1.10166 to $ 1.10166 $113 0.92% 0.25% to 0.25% 7.90% to 7.90%

December 31, 2003 . . . 85 $ 1.02099 to $ 1.02099 $ 87 3.45% 0.25% to 0.25% -2.77% to -2.77%

ProFund VP UltraMid-Cap Fund (became available November 4, 2002)

December 31, 2005 . . . 1 $ 2.46119 to $ 2.46119 $ 3 0.00% 0.25% to 0.25% 17.60% to 17.60%

December 31, 2004 . . . 11 $ 2.09283 to $ 2.09283 $ 23 0.00% 0.25% to 0.25% 27.38% to 27.38%

December 31, 2003 . . . 7 $ 1.64294 to $ 1.64294 $ 11 0.00% 0.25% to 0.25% 69.67% to 69.67%ProFund VP UltraOTC Fund (became available November 4, 2002)

December 31, 2005 . . . 34 $ 2.00741 to $ 2.00741 $ 68 0.00% 0.25% to 0.25% -4.00% to -4.00%

December 31, 2004 . . . 83 $ 2.09098 to $ 2.09098 $174 0.00% 0.25% to 0.25% 13.82% to 13.82%December 31, 2003 . . . 32 $ 1.83704 to $ 1.83704 $ 58 0.00% 0.25% to 0.25% 102.16% to 102.16%

ProFund VP UltraSmall-Cap Fund (became available November 4, 2002)


December 31, 2003 . . . 60 $ 1.96331 to $ 1.96331 $119 0.00% 0.25% to 0.25% 98.96% to 98.96%

ProFund VP Bull Fund (became available November 4, 2002)

December 31, 2005 . . . 60 $ 1.35979 to $ 1.35979 $ 82 0.05% 0.25% to 0.25% 2.47% to 2.47%

December 31, 2004 . . . 24 $ 1.32695 to $ 1.32695 $ 31 0.00% 0.25% to 0.25% 8.56% to 8.56%

December 31, 2003 . . . 10 $ 1.22237 to $ 1.22237 $ 12 0.00% 0.25% to 0.25% 25.27% to 25.27%

ProFund VP Utilities Fund (became available November 4, 2002)

December 31, 2005 . . . 0 $ 1.71689 to $ 1.71689 $ 0 0.26% 0.25% to 0.25% 12.78% to 12.78%

December 31, 2004 . . . 0 $ 1.52237 to $ 1.52237 $ 0 2.07% 0.25% to 0.25% 20.77% to 20.77%

December 31, 2003 . . . 8 $ 1.26052 to $ 1.26052 $ 10 8.04% 0.25% to 0.25% 21.07% to 21.07%

AST Cohen & Steers Real Estate Portfolio (became available October 17, 2005)

December 31, 2005 . . . 1 $10.88564 to $10.88564 $ 13 0.00% 0.10% to 0.10% 8.19% to 8.19%

AST Global Allocation Porfolio (became available October 17, 2005)

December 31, 2005 . . . 0 $10.48192 to $10.48192 $ 3 0.00% 0.10% to 0.10% 4.73% to 4.73%

AST DeAm Large-Cap Value Porfolio (became available October 17, 2005)

December 31, 2005 . . . 1 $10.71815 to $10.71815 $ 6 0.00% 0.10% to 0.10% 6.54% to 6.54%

AST DeAm Small-Cap Growth Porfolio (became available October 17, 2005)

December 31, 2005 . . . 1 $10.74134 to $10.74134 $ 6 0.00% 0.10% to 0.10% 7.00% to 7.00%

A59



Units(000s)


NetAssets(000s)


Expense Ratioss


Lowest — Highest

AST DeAm Small-Cap Value Porfolio (became available October 17, 2005)

December 31, 2005 . . . 0 $10.40721 to $10.40721 $ 1 0.00% 0.10% to 0.10% 4.07% to 4.07%

AST Federated Aggressive Growth Portfolio (became available October 17, 2005)

December 31, 2005 . . . 0 $11.05474 to $11.05474 $ 2 0.00% 0.10% to 0.10% 10.55% to 10.55%

AST Small Cap Value Portfolio (became available October 17, 2005)

December 31, 2005 . . . 3 $10.61923 to $10.61923 $ 27 0.00% 0.10% to 0.10% 6.27% to 6.27%

AST Goldman Sachs Mid-Cap Growth Portfolio (became available October 17, 2005)

December 31, 2005 . . . 1 $10.59405 to $10.59405 $ 9 0.00% 0.10% to 0.10% 5.46% to 5.46%

AST Marsico Capital Growth Portfolio (became available October 17, 2005)

December 31, 2005 . . . 0 $10.74095 to $10.74095 $ 5 0.00% 0.10% to 0.10% 7.17% to 7.17%

AST MFS Growth Portfolio (became available October 17, 2005)

December 31, 2005 . . . 0 $10.58963 to $10.58963 $ 3 0.00% 0.10% to 0.10% 5.51% to 5.51%

AST Neuberger & Berman Mid-Cap Growth Portfolio (became available October 17, 2005)

December 31, 2005 . . . 0 $10.93943 to $10.93943 $ 4 0.00% 0.10% to 0.10% 8.59% to 8.59%

AST PIMCO Limited Maturity Bond Portfolio (became available October 17, 2005)

December 31, 2005 . . . 0 $10.07052 to $10.07052 $ 1 0.00% 0.10% to 0.10% 0.71% to 0.71%

AST T. Rowe Price Natural Resources Portfolio (became available October 17, 2005)

December 31, 2005 . . . 13 $11.05306 to $11.05306 $143 0.00% 0.10% to 0.10% 9.35% to 9.35%

AST MFS Global Equity Portfolio (became available October 17, 2005)

December 31, 2005 . . . 0 $10.50746 to $10.50746 $ 1 0.00% 0.10% to 0.10% 5.50% to 5.50%

AST JP Morgan International Equity Portfolio (became available October 17, 2005)

December 31, 2005 . . . 4 $10.60464 to $10.60464 $ 42 0.00% 0.10% to 0.10% 7.06% to 7.06%

AST T. Rowe Price Global Bond Portfolio (became available October 17, 2005)

December 31, 2005 . . . 2 $ 9.94454 to $ 9.94454 $ 17 0.00% 0.10% to 0.10% -0.29% to -0.29%

* These amounts represent the dividends, excluding distributions of capital gains, received by thesubaccount from the underlying mutual fund, net of management fees assessed by the fundmanager, divided by the average net assets. This ratio excludes those expenses, such asmortality and expense charges, that result in direct reductions in the unit values. The recognitionof investment income by the subaccount is affected by the timing of the declaration of dividendsby the underlying fund in which the subaccounts invest.

** These ratios represent the annualized contract expenses of the separate account, consistingprimarily of mortality and expense charges, for each period indicated. The ratios include onlythose expenses that result in a direct reduction to unit values. Charges made directly to contractowner accounts through the redemption of units and expenses of the underlying fund areexcluded.

*** These amounts represent the total return for the periods indicated, including changes in thevalue of the underlying fund, and reflect deductions for all items included in the expense ratio.The total return does not include any expenses assessed through the redemption of units;inclusion of these expenses in the calculation would result in a reduction in the total returnpresented. Investment options with a date notation indicate the effective date of that investmentoption in the Account, the total return is calculated for each of the five years in the period endedDecember 31, 2005 or from the effective date of the subaccount through the end of thereporting period. Product designs within a subaccount with an effective date during a periodwere excluded from the range of total return for that period.

A60


Charges and Expenses

A. Mortality Risk and Expense Risk Charges

The mortality risk and expense risk charges, at an effective annual rate of up to 0.90% for Pruselect I,Pruselect II and SVUL contracts, 0.50% for Pruselect III contracts, 0.45% for VULII contracts, 0.25% forPROSEL contracts and 0.10% for ENVUL contracts are applied daily against the net assets held in eachsubaccount. No mortality risk and expense risk charges are applied to the MPVUL contracts. Mortality riskis that contract owners may not live as long as estimated and expense risk is that the cost of issuing andadministering the policies may exceed related charges by Pruco Life. Pruco Life intends to charge only0.60% on Pruselect I and Pruselect II contracts, but reserves the right to make the full 0.90% charge.Pruco Life intends to charge only 0.20% on Pruselect III contracts, but reserves the right to make the full0.50% charge. For VULII contracts Pruco Life intends to charge only 0.25%, but reserves the right tocharge 0.45%. The mortality risk and expense risk charges are assessed through reduction in unit values.

B. Partial Withdrawal Charge

A charge is imposed by Pruco Life on partial withdrawals of the cash surrender value. A charge equal tothe lesser of $15 or 2% will be made in connection with each partial withdrawal of the cash surrender valueof Pruselect I and Pruselect II contracts and a charge equal to the lesser of $25 or 2% will be made inconnection with each partial withdrawal of the cash surrender value of Pruselect III, SVUL, VULII, PROSEL,MPVUL and ENVUL contracts. The range for withdrawal charges is 0% — 2%. This charge is assessedthrough the redemption of units.

C. Expense Reimbursement

The Account is reimbursed by Pruco Life for expenses in excess of 0.40% of the Pruselect I and PruselectII products’ average daily net assets incurred by the Zero Coupon Bond 2005 Portfolio of the Series Fund.This reimbursement is applied through an increase in unit values.

D. Deferred Sales Charge

A deferred sales charge is imposed upon surrenders of certain SVUL contracts, not to exceed 0.8% of thebasic insurance amount, to compensate Pruco Life for sales and other marketing expenses. The amount ofany sales charge will depend on the number of years that have elapsed since the contract was issued. Nosales charge will be imposed after the tenth year of the contract. No sales charge will be imposed on deathbenefits. The deferred sales charge is assessed through the redemption of units.

E. Cost of Insurance and Other Related Charges

Contract owner contributions are subject to certain deductions prior to being invested in the Account. Thedeductions are for (1) transaction costs which are deducted from each premium payment to cover premiumcollection and processing costs; (2) state premium taxes; and (3) sales charges on Pruselect I, Pruselect II,Pruselect III, SVUL, VULII, PROSEL, MPVUL and ENVUL contracts which are deducted in order tocompensate Pruco Life for the cost of selling the contract. For Pruselect I and Pruselect II contracts, thesales charges are not to exceed 7% and 8%, respectively, of the premium remaining after the charge fortaxes attributable to premiums and a $2 administrative charge have been deducted. The sales charges arenot to exceed 15% of premiums received each year up to the Target Premium and up to 2% on anyexcess for Pruselect III contracts, 12% of premiums paid in the first five contract years for SVUL contracts,6% of premiums paid for VULII contracts, 6% of premium payments for PROSEL and ENVUL contracts and12% of premium payments for MPVUL contracts. Contracts are also subject to monthly charges for thecosts of administering the contract. These charges are assessed through the redemption of units.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

A61

To the Contract Owners ofPruco Life Variable Universal Accountand the Board of Directors ofPruco Life Insurance Company

In our opinion, the accompanying statements of net assets and the related statements of operations and of changes innet assets present fairly, in all material respects, the financial position of the subaccounts listed in Note 1 of Pruco LifeVariable Universal Account at December 31, 2005, and the results of each of their operations and the changes in eachof their net assets for each of the periods presented, in conformity with accounting principles generally accepted inthe United States of America. These financial statements are the responsibility of the management of the Pruco LifeInsurance Company; our responsibility is to express an opinion on these financial statements based on our audits. Weconducted our audits of these financial statements in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management, and evaluating the overall financialstatement presentation. We believe that our audits, which included confirmation of fund shares owned at December 31,2005 with the transfer agents of the investee mutual funds, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLPNew York, New YorkApril 12, 2006

B - 1

Pruco Life Insurance Company

Consolidated Statements of Financial PositionAs of December 31, 2005 and December 31, 2004 (in thousands, except share amounts)

2005 2004

ASSETSFixed maturities available for sale,

at fair value (amortized cost, 2005 - $6,142,093 ; 2004 - $6,114,020) $ 6,189,040 $ 6,339,103Policy loans 879,156 856,755Short-term investments 113,144 122,061Commercial loans 269,161 2,285Other long-term investments 34,993 25,973

Total investments 7,485,494 7,346,177Cash and cash equivalents 158,010 743,533Deferred policy acquisition costs 1,663,003 1,429,027Accrued investment income 98,110 101,432Reinsurance recoverables 932,826 765,045Receivables from parent and affiliates 79,188 50,339Deferred sales inducements 139,012 110,460Other assets 24,498 14,408Separate account assets 19,094,129 17,326,555TOTAL ASSETS $ 29,674,270 $ 27,886,976

LIABILITIES AND STOCKHOLDER’S EQUITYLIABILITIESPolicyholders’ account balances $ 5,793,743 $ 6,208,110Future policy benefits and other policyholder liabilities 1,446,717 1,240,650Cash collateral for loaned securities 389,794 410,718Securities sold under agreement to repurchase 36,439 45,254Income taxes payable 432,161 433,966Short term debt to affiliates 105,596 -Payable to parents and affiliates 22,445 3,739Other liabilities 287,035 327,227Separate account liabilities 19,094,129 17,326,555Total liabilities $ 27,608,059 $ 25,996,219

COMMITMENT AND CONTINGENT LIABILITIES (See Note 12)

STOCKHOLDER’S EQUITYCommon stock, ($10 par value;

1,000,000 shares, authorized;250,000 shares, issued and outstanding) 2,500 2,500

Additional paid-in capital 454,670 455,377Deferred compensation - (1,173)Retained earnings 1,590,441 1,359,526Accumulated other comprehensive income 18,600 74,527Total stockholder’s equity 2,066,211 1,890,757TOTAL LIABILITIES AND

STOCKHOLDER’S EQUITY $ 29,674,270 $ 27,886,976

See Notes to Consolidated Financial Statements

B - 2


Consolidated Statements of Operations and Comprehensive IncomeYears Ended December 31, 2005, 2004 and 2003 (in thousands)

2005 2004 2003

REVENUES

Premiums $ 38,029 $ 73,059 $ 118,449Policy charges and fee income 564,130 611,712 544,610Net investment income 404,045 373,552 344,628Realized investment (losses)/gains, net (147) 5,011 (2,770)Asset management fees 17,105 15,747 13,218Other income 12,125 10,514 9,595

Total revenues 1,035,287 1,089,595 1,027,730

BENEFITS AND EXPENSES

Policyholders’ benefits 98,899 234,841 282,875Interest credited to policyholders’ accountbalances 234,881 250,675 227,992General, administrative and other expenses 449,291 458,590 397,881

Total benefits and expenses 783,071 944,106 908,748

Income from operations before income taxesand cumulative effect of accounting change

252,216 145,489 118,982

Income taxes:Current (30,108) 59,682 (69,617)Deferred 51,409 (36,804) 103,666

Total income tax expense 21,301 22,878 34,049

Income from Operations BeforeCumulative Effect of Accounting Change 230,915 122,611 84,933

Cumulative effect of accounting change, netof taxes - (9,150) -

NET INCOME 230,915 113,461 84,933

Change in net unrealized investment gains,net of taxes

(55,927) (41,944) 8,379

Cumulative effect of accounting change, netof taxes - 4,030 -

Accumulated other comprehensive income(loss), net of taxes (55,927) (37,914) 8,379

COMPREHENSIVE INCOME $174,988 $ 75,547 $ 93,312


B - 3


Consolidated Statements of Stockholder’s EquityPeriods Ended December 31, 2005, 2004 and 2003 (in thousands)

CommonStock

AdditionalPaid-in-Capital

DeferredCompensation

RetainedEarnings

AccumulatedOther

ComprehensiveIncome (Loss)

TotalStockholder’s

Equity

Balance, January 1, 2003 $ 2,500 $ 466,748 - $ 1,161,136 $ 91,751 $ 1,722,135

Net income - - - 84,933 - 84,933

Adjustments to policy credits issued toeligible policyholders - - - (4) - (4)

Purchase of fixed maturities from anaffiliate, net of taxes - (7,557) - - 7,557 -

Stock-based compensation programs- 463 (850) - - (387)

Change in net unrealized investmentgains, net of taxes - - - - 8,379 8,379Balance, December 31, 2003 2,500 459,654 (850) 1,246,065 107,687 1,815,056

Net income - - - 113,461 - 113,461

Stock-based compensation programs - 477 (323) - - 154

Purchase of fixed maturities from anaffiliate, net of taxes - (4,754) - - 4,754 -

Cumulative effect of accountingchange, net of taxes - - - - 4,030 4,030

Change in net unrealized investmentgains, net of taxes - - - - (41,944) (41,944)

Balance, December 31, 2004 2,500 455,377 (1,173) 1,359,526 74,527 1,890,757

Net income - - - 230,915 - 230,915

Stock-based compensation programs- (941) 1,173 - - 232

Contributed Capital - 234 - - - 234

Purchase of fixed maturities from anaffiliate, net of taxes - - - - - -

Change in net unrealized investmentgains, net of taxes - - - - (55,927) (55,927)Balance, December 31, 2005 $ 2,500 $ 454,670 $ 0 $1,590,441 $ 18,600 $ 2,066,211


B - 4


Consolidated Statements of Cash FlowsYear Ended December 31, 2005, 2004 and 2003 (in thousands)

2005 2004 2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income $ 230,915 $ 113,461 $ 84,933Adjustments to reconcile net income to net cash from

(used in) operating activities:Policy charges and fee income (125,077) (109,931) (83,183)Interest credited to policyholders’ account balances 234,881 250,675 227,992Realized investment losses (gains), net 147 (5,011) 2,770Amortization and other non-cash items 33,063 (52,253) 34,436Cumulative effect of accounting change, net of taxes - 9,150 -Change in:

Future policy benefits and other insurance liabilities 206,067 219,305 137,212Reinsurance recoverable (167,781) (247,635) (116,739)Accrued investment income 3,322 1,638 (10,665)Receivables from Parent and affiliates (28,849) 2,799 461Payable to Parent and affiliates 18,706 3,034 273Deferred policy acquisition costs (130,540) (34,829) (241,712)Income taxes payable 27,720 123,407 81,529Deferred sales inducements (28,552) (36,136) (47,100)Other, net 36,805 21,575 (29,262)

Cash Flows From Operating Activities 310,827 259,249 40,945

CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from the sale/maturity/prepayment of:

Fixed maturities available for sale 4,625,000 2,295,883 2,503,029Policy loans 98,656 107,906 134,360Commercial loans 1,805 249 8,398

Payments for the purchase of:Fixed maturities available for sale (4,842,469) (2,128,650) (3,338,048)Policy loans (83,116) (78,515) (65,773)Commercial loans (270,950) (2,286) -

Other long-term investments, net (5,116) 38,800 (11,271)Short-term investments, net (12,953) 63,476 61,196

Cash Flows (Used In) From Investing Activities (489,143) 296,863 (708,109)

CASH FLOWS FROM FINANCING ACTIVITIES:

Policyholders’ account deposits 2,233,293 2,107,194 2,223,777Policyholders’ account withdrawals (2,768,247) (2,095,228) (1,637,409)Proceeds from short-term debt issued 783,341 - -Repayments of short-term debt (677,745) - -Cash collateral for loaned securities, net (20,924) (20,853) 206,053Securities sold under agreement to repurchase, net (8,815) (51,848) (303,405)Paid in capital transaction associated with the purchase offixed maturities from an affiliate - (4,754) (7,557)Contributed capital 234 - -Net change in financing arrangements (maturities 90 days orless) 51,656 (654) 3,087

Cash Flows (Used In) From Financing Activities (407,207) (66,143) 484,546

Net (decrease) increase in cash and cash equivalents (585,523) 489,969 (182,618)Cash and cash equivalents, beginning of year 743,533 253,564 436,182

CASH AND CASH EQUIVALENTS, END OF PERIOD $ 158,010 $ 743,533 $ 253,564

SUPPLEMENTAL CASH FLOW INFORMATIONIncome taxes received $ (6,418) $ (103,090) $ (51,515)


B - 5

Pruco Life Insurance CompanyNotes to Consolidated Financial Statements

1. BUSINESS

Pruco Life Insurance Company or “the Company,” is a stock life insurance company, organized in 1971 under the laws of the state ofArizona. Pruco Life Insurance Company is licensed to sell interest sensitive individual life insurance, variable life insurance, term lifeinsurance, variable and fixed annuities, and a non-participating guaranteed interest contract or, “GIC,” called Prudential CreditEnhanced GIC or, “PACE,” in the District of Columbia, Guam and in all states except New York. Pruco Life Insurance Company alsohad marketed individual life insurance through its branch office in Taiwan. The branch office was transferred to an affiliated Companyon January 31, 2001, as described in Note 13.

Pruco Life Insurance Company has three subsidiaries, which include one wholly owned life insurance subsidiary, Pruco Life InsuranceCompany of New Jersey or, “PLNJ,” and two subsidiaries formed in 2003 for the purpose of acquiring and investing in municipal fixedmaturities from an affiliated company (see Note 13 to the Consolidated Financial Statements). Pruco Life Insurance Company andits subsidiaries are referred to as “the Company” and all financial information is shown on a consolidated basis throughout thisdocument.

PLNJ is a stock life insurance company organized in 1982 under the laws of the state of New Jersey. It is licensed to sell individual lifeinsurance, variable life insurance, term life insurance, fixed and variable annuities only in the states of New Jersey and New York.

The Company is a wholly owned subsidiary of The Prudential Insurance Company of America (“Prudential Insurance”), an insurancecompany founded in 1875 under the laws of the state of New Jersey. On December 18, 2001 or, “the date of demutualization,”Prudential Insurance converted from a mutual life insurance company to a stock life insurance company and became an indirect whollyowned subsidiary of Prudential Financial, Inc. or “Prudential Financial.”

Prudential Insurance intends to make additional capital contributions to the Company, as needed, to enable it to comply with its reserverequirements and fund expenses in connection with its business. Generally, Prudential Insurance is under no obligation to make suchcontributions and its assets do not back the benefits payable under the Company’s policyholder contracts.

The Company is engaged in a business that is highly competitive because of the large number of stock and mutual life insurancecompanies and other entities engaged in marketing insurance products, and individual and group annuities.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of PresentationThe consolidated financial statements include the accounts of Pruco Life Insurance Company and its subsidiaries. The consolidatedfinancial statements have been prepared in accordance with accounting principles generally accepted in the United States of America,“GAAP.” The Company has extensive transactions and relationships with Prudential Insurance and other affiliates, as more fullydescribed in Note 13. Due to these relationships, it is possible that the terms of these transactions are not the same as those that wouldresult from transactions among wholly unrelated parties.

Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as the date of the financialstatements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from thoseestimates.

The most significant estimates include those used in determining deferred policy acquisition costs, investments, future policy benefits,provision for income taxes, reserves of contingent liabilities and reserves for losses in connection with unresolved legal matters.

Share-Based CompensationIn December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123(R),“Share-Based Payment,” that replaces FASB Statement No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 123(R)requires all entities to apply the fair value based measurement method in accounting for share-based payment transactions withemployees, except for equity instruments held by employee share ownership plans. Under this method, compensation costs of awardsto employees, such as stock options, are measured at fair value and expensed over the period during which an employee is required toprovide service in exchange for the award (the vesting period). The Company had previously adopted the fair value recognitionprovision of the original SFAS No. 123, prospectively for all new stock options issued to employees on or after January 1, 2003. TheCompany will adopt SFAS No. 123(R) on January 1, 2006. By that date, there will be no unvested stock options issued prior toJanuary 1, 2003.

B - 6


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

InvestmentsFixed maturities classified as “available for sale” are carried at fair value. The amortized cost of fixed maturities is written down to fairvalue if a decline in value is considered to be other than temporary. See the discussion below on realized investment gains and lossesfor a description of the accounting for impairment adjustments. Unrealized gains and losses on fixed maturities “available for sale”,including the effect on deferred policy acquisition costs and policyholders’ account balances that would result from the realization ofunrealized gains and losses are included in “Accumulated other comprehensive income (loss).”

Policy loans are carried at unpaid principal balances.

Securities repurchase and resale agreements and securities borrowed and loaned transactions are used to earn spread income, to borrowfunds, or to facilitate trading activity. Securities repurchase and resale agreements are generally short-term in nature, and therefore, thecarrying amounts of these instruments approximate fair value. Securities repurchase and resale agreements are collateralized principallyby U.S. government and government agency securities. Securities borrowed or loaned are collateralized principally by cash or U.S.government securities. For securities repurchase agreements and securities loaned transactions used to earn spread income, the cashreceived is typically invested in cash equivalents, short-term investments or fixed maturities.

Securities repurchase and resale agreements that satisfy certain criteria are treated as collateralized financing arrangements. Theseagreements are carried at the amounts at which the securities will be subsequently resold or reacquired, as specified in the respectiveagreements. For securities purchased under agreements to resell, the Company’s policy is to take possession or control of the securitiesand to value the securities daily. Securities to be resold are the same, or substantially the same, as the securities received. For securitiessold under agreements to repurchase, the market value of the securities to be repurchased is monitored, and additional collateral isobtained where appropriate, to protect against credit exposure. Securities to be repurchased are the same, or substantially the same asthose sold. Income and expenses related to these transactions executed within the insurance subsidiary used to earn spread income arereported as “Net investment income,” however, for transactions used to borrow funds, the associated borrowing cost is reported asinterest expense (included in “General and administrative expenses”).

Securities loaned transactions are treated as financing arrangements and are recorded at the amount of cash received. The Companyobtains collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively. TheCompany monitors the market value of the securities loaned on a daily basis with additional collateral obtained as necessary.Substantially all of the Company’s securities loaned transactions are with large brokerage firms. Income and expenses associated withsecurities loaned transactions used to earn spread income are generally reported as “Net investment income;” however, for securitiesloaned transactions used for funding purposes the associated rebate is reported as interest expense (included in “General andadministrative expenses”).

Short-term investments consist of highly liquid debt instruments with a maturity of greater than three months and less than twelvemonths when purchased. These investments are carried at amortized cost, which because of their short-term nature approximates fairvalue.

Other long-term investments consist of the Company’s investments in joint ventures and limited partnerships other than operating jointventures in which the Company does not exercise control, as well as investments in the Company’s own separate accounts, which arecarried at fair value, and investment real estate. Joint venture and partnership interests are generally accounted for using the equitymethod of accounting, except in instances in which the Company’s interest is so minor that it exercises virtually no influence overoperating and financial policies. In such instances, the Company applies the cost method of accounting. The Company’s share of netincome from investments in joint ventures and partnerships is generally included in “Net investment income.”

B - 7


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Realized investment gains (losses), net are computed using the specific identification method. Adjustments to the cost of fixedmaturities and equity securities for temporary impairments are included in “Realized investment losses, net.” In evaluating whether adecline in value is other than temporary, the Company considers several factors including, but not limited to the following: (1) theextent (generally if greater than 20%) and the duration (generally if greater than six months); (2) the reasons for the decline in value(credit event, interest related or market fluctuation); (3) the Company’s ability and intent to hold the investments for a period of time toallow for a recovery of value; and (4) the financial condition of and near-term prospects of the issuer. Realized investment gains(losses) are generated from numerous sources, including the sale of fixed maturity securities, equity securities, real estate investments,investments in joint ventures and limited partnerships and other types of investments, as well as adjustments to the cost of investmentsfor other than temporary impairments. “Realized investment gains (losses), net.” also include prepayment premiums received on privatefixed maturity securities, recoveries of principal on previously impaired securities, provisions for losses on commercial loans, fair valuechanges on embedded derivatives and derivatives that do not qualify for hedge accounting treatment.

There are a number of significant risks and uncertainties inherent in the process of monitoring impairments and determining if animpairment is other than temporary. These risks and uncertainties include, but are not limited to: (1) the risk that our assessment of anissuer’s ability to meet its obligations could change, (2) the risk that the economic outlook could be worse than expected or have moreof an impact on the issuer than anticipated, (3) the risk that we are making decisions based on fraudulent or misstated information in thefinancial statements provided by issuers and (4) the risk that new information obtained by us or changes in other facts andcircumstances, including those not related to the issuer, could lead us to change our intent to hold the security to maturity or until itrecovers in value. Any of these situations could result in a change in our impairment determination, and hence a charge to earnings in afuture period.

Cash and cash equivalentsCash and cash equivalents include cash on hand, amounts due from banks, money market instruments, and other debt issues withmaturities of three months or less when purchased.

Deferred policy acquisition costsThe Company is charged distribution expenses from Prudential Insurance’s agency network for both its domestic life and annuityproducts through a transfer pricing agreement, which is intended to reflect a market based pricing arrangement. These acquisition costsinclude commissions and variable field office expenses. The Company is also allocated costs of policy issuance and underwriting fromPrudential Insurance’s general and administrative expense allocation system. The Company also is charged commissions from thirdparties, which are primarily capitalized as deferred policy acquisition costs (“DAC”).

The costs that vary with and that are related primarily to the production of new insurance and annuity business are deferred to theextent such costs are deemed recoverable from future profits. For annuity products, the entire transfer pricing fee is deemed to berelated to the production of new annuity business and is deferred. For life products, there is a look-through into the expenses incurredby the Prudential agency network and expenses that are considered to be related to the production of new insurance business aredeferred. The cost of policy issuance and underwriting are also considered to be related primarily to the production of new insuranceand annuity business and are fully deferred.

DAC is subject to recoverability testing at the end of each accounting period. DAC, for applicable products, are adjusted for the impactof unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or chargesincluded in “Accumulated other comprehensive income (loss).”

Policy acquisition costs related to interest-sensitive and variable life products and certain investment-type products are deferredand amortized over the expected life of the contracts (periods ranging from 25 to 30 years) in proportion to estimated gross profitsarising principally from investment results, mortality and expense margins, and surrender charges based on historical and anticipatedfuture experience, which is updated periodically. The effect of changes to estimated gross profits on unamortized deferred acquisitioncosts is reflected in “General administrative and other expenses” in the period such estimated gross profits are revised.

DAC related to non-participating term insurance are amortized over the expected life of the contracts in proportion to premium income.For guaranteed investment contracts, acquisition costs are expensed as incurred.

The Company and Prudential Insurance have offered programs under which policyholders, for a selected product or group of products,can exchange an existing policy or contract issued by the Company or Prudential Insurance for another form of policy

B - 8



or contract. These transactions are known as internal replacements. If the terms of the new policies are not substantially similar tothose of the former policy, the unamortized DAC on the surrendered policies is immediately charged to expense. If the new policieshave terms that are substantially similar to those of the earlier policies, the DAC is retained with respect to the new policies andamortized over the life of the new policies.

Reinsurance recoverables and payablesReinsurance recoverables and payables include receivables and corresponding payables associated with reinsurance arrangements withaffiliates. See Note 13 to the Consolidated Financial Statements for additional information about these arrangements.

Separate account assets and liabilitiesSeparate account assets and liabilities are reported at fair value and represent segregated funds which are invested for certainpolicyholders, pension funds and other customers. The assets consist of equity securities, fixed maturities, real estate relatedinvestments, real estate mortgage loans and short-term investments. The assets of each account are legally segregated and are generallynot subject to claims that arise out of any other business of the Company. Investment risks associated with market value changes areborne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. See Note12 to the Consolidated Financial Statements for additional information regarding separate account arrangements with contractualguarantees. The investment income and gains or losses for separate accounts generally accrue to the policyholders and are not includedin the Consolidated Statements of Operations. Mortality, policy administration and surrender charges assessed against the accounts areincluded in “Policy charges and fee income.” Asset management fees charged to the accounts are included in “Asset management fees.”

Deferred sales inducementsThe Company provides sales inducements to contractholders, which primarily include an up-front bonus added to the contractholder’sinitial deposit for certain annuity contracts. They are amortized using the same methodology and assumptions used to amortize deferredpolicy acquisition costs. The amortization expense is included as a component of interest credited to policyholders’ account balances.As of December 31, 2005 and 2004, deferred sales inducement costs included in other assets were $139 million and $110 million,respectively.

Other assets, and other liabilitiesOther assets consist primarily of deferred sales inducements costs, premiums due, certain restricted assets, and receivables resultingfrom sales of securities that had not yet settled at the balance sheet date. Other liabilities consist primarily of accrued expenses,technical overdrafts, and payables resulting from purchases of securities that had not yet been settled at the balance sheet date.

Policyholders’ Account BalancesThe Company’s liability for policyholders’ account balances represents the contract value that has accrued to the benefit of thepolicyholder as of the balance sheet date. This liability is generally equal to the accumulated account deposits plus interest credited lesspolicyholders’ withdrawals and other charges assessed against the account balance. These policyholders’ account balances also includeprovision for benefits under non-life contingent payout annuities.

Future Policy BenefitsThe Company’s liability for future policy benefits is primarily comprised of the present value of estimated future payments to or onbehalf of policyholders, where the timing and amount of payment depends on policyholder mortality, less the present value of futurenet premiums. For life insurance, expected mortality is generally based on the Company’s historical experience or standard industrytables. Interest rate assumptions are based on factors such as market conditions and expected investment returns. Although mortalityand interest rate assumptions are “locked-in” upon the issuance of new insurance or annuity business with fixed and guaranteed terms,significant changes in experience or assumptions may require us to provide for expected future losses on a product by establishingpremium deficiency reserves. The Company’s liability for future policy benefits is also inclusive of liabilities for guarantee benefitsrelated to certain non-traditional long duration life and annuity contracts, which are discussed more fully in Note 8. Premiumdeficiency reserves, if required, are determined based on assumptions at the time the premium deficiency reserve is established and donot include a provision for the risk of adverse deviation.

Unpaid ClaimsUnpaid claims include estimates of claims that the Company believes have been incurred, but have not yet been reported (“IBNR”) asof the balance sheet date and is an estimate of the amount of loss will ultimately incur on reported claims. Consistent with industryaccounting practice, we do not establish loss reserves until a loss has occurred. These IBNR estimates,

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and estimates of the amounts of loss we will ultimately incur on reported claims, which are based in part on our historical experience,are regularly adjusted to reflect actual claims experience. When actual experience differs from our previous estimate, the resultingdifference will be included in our reported results for the period of the change in estimate in the “Policyholders’ benefits” caption inour statements of operations. On an ongoing basis, trends in actual experience are a significant factor in the determination of claimreserve levels.

Contingent LiabilitiesAmounts related to contingent liabilities are accrued if it is probable that a liability has been incurred and an amount is reasonablyestimable. Management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution ofthe matter that are reasonably estimable and, if so, they are included in the accrual.

Insurance Revenue and Expense RecognitionPremiums from life insurance policies are recognized when due. Benefits are recorded as an expense when they are incurred. A liabilityfor future policy benefits is recorded when premiums are recognized using the net level premium method.

Amounts received as payment for deferred annuities and guaranteed investment contracts are reported as deposits to “Policyholders’account balances”. Revenues from these contracts reflected as “Policy charges and fee income” consist primarily of fees assessedduring the period against the policyholders’ account balances for mortality charges, policy administration charges and surrendercharges. Fees assessed that represent compensation to the Company for services to be provided in future periods and certain other feesare deferred and amortized into revenue over the life of the related contracts. Benefits and expenses for these products include claims inexcess of related account balances, expenses of contract administration, interest credited to policyholders’ account balances andamortization of DAC.

Premiums, benefits and expenses are stated net of reinsurance ceded to other companies, except for amounts associated with certainmodified coinsurance contracts which are reflected in the Company’s financial statements based on the application of the depositmethod of accounting. Estimated reinsurance recoverables and the cost of reinsurance are recognized over the life of the reinsuredpolicies using assumptions consistent with those used to account for the underlying policies.

Asset management feesBeginning on February 1, 2002, the Company received asset management fee income from policyholders’ account balances invested inThe Prudential Series Funds or, “PSF,” which are a portfolio of mutual fund investments related to the Company’s separate accountproducts (see Note 13 to the Consolidated Financial Statements). In addition, the Company receives fees from policyholders’account balances invested in funds managed by companies other than Prudential Insurance. Asset management fees are recognized asincome when earned.

Derivative Financial InstrumentsDerivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, or the valueof securities or commodities. Derivative financial instruments used by the Company may be exchange-traded or contracted in the over-the-counter market. Derivative positions are carried at fair value, generally by obtaining quoted market prices or through the use ofpricing models. Values can be affected by changes in interest rates, foreign exchange rates, credit spreads, market volatility, expectedreturns and liquidity. Values can also be affected by changes in estimates and assumptions including those related to counterpartybehavior used in pricing models.

Derivatives are used to manage the characteristics of the Company’s asset/liability mix, manage the interest rate and currencycharacteristics of assets or liabilities. Additionally, derivatives may be used to seek to reduce exposure to interest rate and foreigncurrency risks associated with assets held or expected to be purchased or sold, and liabilities incurred or expected to be incurred.

Derivatives are recorded as assets, within “Other long-term investments,” or as liabilities, within “Other liabilities,” in the ConsolidatedBalance Sheets, except for embedded derivatives, which are recorded in the consolidated balance sheet with the associated hostcontract. As discussed in detail below and in Note 11, all realized and unrealized changes in fair value of derivatives, with theexception of the effective portion of cash flow hedges, are recorded in current earnings. Cash flows from these derivatives are reportedin investing activities section in the Consolidated Statements of Cash Flows.

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The Company designates derivatives as either (1) a hedge of the fair value of a recognized asset or liability or unrecognized firmcommitment (“fair value” hedge), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to arecognized asset or liability (“cash flow” hedge), (3) a foreign currency fair value or cash flow hedge (“foreign currency” hedge), (4) ahedge of a net investment in a foreign operation, or (5) a derivative entered into as an economic hedge that does not qualify for hedgeaccounting. As of December 31, 2005, derivatives qualifying for hedge accounting were not material.

If a derivative does not qualify for hedge accounting, all changes in its fair value, including net receipts and payments, are included in“Realized investment gains (losses), net” without considering changes in the fair value of the economically associated assets orliabilities.

The Company is a party to financial instruments that may contain derivative instruments that are “embedded” in the financial instruments.At inception, the Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to theeconomic characteristics of the remaining component of the financial instrument (i.e., the host contract) and whether a separate instrumentwith the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that (1) theembedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the hostcontract, and (2) a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separatedfrom the host contract, carried at fair value, and changes in its fair value are included in “Realized investment gains (losses), net.”

Income TaxesThe Company and its subsidiaries are members of the consolidated federal income tax return of Prudential Financial and file separatecompany state and local tax returns. Pursuant to the tax allocation arrangement with Prudential Financial, total federal income tax expenseis determined on a separate company basis. Members with losses record tax benefits to the extent such losses are recognized in theconsolidated federal tax provision.

Deferred income taxes are recognized, based on enacted rates, when assets and liabilities have different values for financial statement andtax reporting purposes. A valuation allowance is recorded to reduce a deferred tax asset to the amount expected to be realized.

New Accounting PronouncementsIn September 2005, the Accounting Standards Executive Committee (“AcSEC”) of the American Institute of Certified PublicAccountants (“AICPA”) issued Statement of Position (“SOP”) 05-1, “Accounting by Insurance Enterprises for Deferred AcquisitionCosts in Connection With Modifications or Exchanges of Insurance Contracts.” SOP 05-1 provides guidance on accounting byinsurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than thosespecifically described in SFAS No. 97. The SOP defines an internal replacement as a modification in product benefits, features, rights,or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or bythe election of a feature or coverage within a contract. This SOP is effective for internal replacements occurring in fiscal yearsbeginning after December 15, 2006. The Company will adopt SOP 05-1 on January 1, 2007. The Company is currently assessing theimpact of SOP 05-1 on the Company’s consolidated financial position and results of operations.

In November 2005, the FASB issued FASB Staff Position (“FSP”) FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments.” This FSP provides impairment models for determining whether torecord impairment losses associated with investments in certain equity and debt securities, primarily by referencing existing accountingguidance. It also requires income to be accrued on a level-yield basis following an impairment of debt securities, where reasonableestimates of the timing and amount of future cash flows can be made. The Company’s current policy is generally to record income onlyas cash is received following an impairment of a debt security. The Company will adopt this guidance on January 1, 2006, for otherthan temporary impairments recorded subsequent to December 31, 2005.

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In December 2003, the FASB issued FIN No. 46(R), “Consolidation of Variable Interest Entities,” which revised the original FIN No.46 guidance issued in January 2003. FIN No. 46(R) addresses whether certain types of entities, referred to as variable interest entities(“VIEs”), should be consolidated in a company’s financial statements. A VIE is an entity that either (1) has equity investors that lackcertain essential characteristics of a controlling financial interest (including the ability to control the entity, the obligation to absorb theentity’s expected losses and the right to receive the entity’s expected residual returns) or (2) lacks sufficient equity to finance its ownactivities without financial support provided by other entities, which in turn would be expected to absorb at least some of the expectedlosses of the VIE. An entity should consolidate a VIE if, as the primary beneficiary, it stands to absorb a majority of the VIE’s expectedlosses or to receive a majority of the VIE’s expected residual returns. On December 31, 2003, the Company adopted FIN No. 46(R) forall special purpose entities (“SPEs”) and for relationships with all VIEs that began on or after February 1, 2003. On March 31, 2004,the Company implemented FIN No. 46(R) for relationships with potential VIEs that are not SPEs. The transition to FIN No. 46(R) didnot have a material effect on the Company’s consolidated financial position or results of operations.

In July 2003, the Accounting Standards Executive Committee (“AcSEC”) of the American Institute of Certified Public Accountants(“AICPA”) issued Statement of Position (“SOP”) 03-1, “Accounting and Reporting by Insurance Enterprises for Certain NontraditionalLong-Duration Contracts and for Separate Accounts.” AcSEC issued this SOP to address the need for interpretive guidance in threeareas: separate account presentation and valuation; the classification and valuation of certain long-duration contract liabilities; and the accounting recognition given sales inducements (bonus interest, bonus credits and persistencybonuses).

The effect of adopting SOP 03-1 was a charge of $9 million, net of $5 million of taxes, which was reported as a “Cumulative effect ofaccounting change, net of taxes” in the results of operations for the year ended December 31, 2004. This charge reflects the net impactof converting certain individual market value adjusted annuity contracts from separate account accounting treatment to general accountaccounting treatment, including carrying the related liabilities at accreted value, and the effect of establishing reserves for guaranteedminimum death benefit provisions of the Company’s variable annuity and variable life contracts. The Company also recognized acumulative effect of accounting change related to unrealized investment gains within “Accumulated other comprehensive income, netof taxes” of $4 million, net of $3 million of taxes, for the year ended December 31, 2004. Upon adoption of SOP 03-1, approximately$400 million in “Separate account assets” were reclassified resulting in an increase in “Fixed maturities, available for sale”, as well aschanges in other non-separate account assets. Similarly, upon adoption, approximately $400 million in “separate account liabilities”were reclassified resulting in increases in “Policyholders’ account balances” as well as changes in other non-separate account liabilities.

In June 2004, the FASB issued FSP No. 97-1, “Situations in Which Paragraphs 17(b) and 20 of FASB Statement No. 97, Accountingand Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale ofInvestments, Permit or Require Accrual of an Unearned Revenue Liability.” FSP 97-1 clarifies the accounting for unearned revenueliabilities of certain universal-life type contracts under SOP 03-1. The Company’s adoption of FSP 97-1 on July 1, 2004 did not changeits accounting for unearned revenue liabilities and, therefore, had no impact on the Company’s consolidated financial position or resultsof operations. In September 2004, the AICPA SOP 03-1 Implementation Task Force issued a Technical Practice Aid (“TPA”) to clarifycertain aspects of SOP 03-1. The implementation of this TPA during the third quarter of 2004 had no impact on the Company’sconsolidated financial position or results of operations.

In April 2003, the FASB issued Statement No. 133 Implementation Issue No. B36, “Embedded Derivatives: Modified CoinsuranceArrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to theCreditworthiness of the Obligor Under Those Instruments.” Implementation Issue No. B36 indicates that a modified coinsurancearrangement (“modco”), in which funds are withheld by the ceding insurer and a return on those withheld funds is paid based on theceding company’s return on certain of its investments, generally contains an embedded derivative

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feature that is not clearly and closely related to the host contract and should be bifurcated in accordance with the provisions of SFASNo. 133, “Accounting for Derivative Instruments and Hedging Activities.” Effective October 1, 2003, the Company adopted theguidance prospectively for existing contracts and all future transactions. As permitted by SFAS No. 133, all contracts entered into priorto January 1, 1999, were grandfathered and are exempt from the provisions of SFAS No. 133 that relate to embedded derivatives. Theapplication of Implementation Issue No. B36 in 2003 had no impact on the consolidated financial position or results of operations ofthe Company.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilitiesand Equity.” SFAS No. 150 generally applies to instruments that are mandatorily redeemable, that represent obligations that will besettled with a variable number of company shares, or that represent an obligation to purchase a fixed number of company shares. Forinstruments within its scope, the statement requires classification as a liability with initial measurement at fair value. Subsequentmeasurement depends upon the certainty of the terms of the settlement (such as amount and timing) and whether the obligation will besettled by a transfer of assets or by issuance of a fixed or variable number of equity shares. The Company’s adoption of SFAS No. 150,as of July 1, 2003, did not have a material effect on the Company’s consolidated financial position or results of operations.

ReclassificationsCertain amounts in the prior years have been reclassified to conform to the current year presentation.

3. INVESTMENTSFixed Maturities:

The following tables provide additional information relating to fixed maturities as of December 31:

2005

AmortizedCost

GrossUnrealized

Gains

GrossUnrealized

Losses Fair Value(in thousands)

Fixed maturities available for saleBonds and Preferred Stock:

U.S. Treasury securities and obligations ofU.S. government corporations and agencies $ 95,239 $ 295 $ 133 $ 95,401

States, municipalities and political subdivisions 108,908 5,233 139 114,002

Foreign government bonds 65,034 5,556 12 70,578

Mortgage-backed securities 550,823 283 9,258 541,848

Asset-Backed Securities 777,236 4,139 6,403 774,972

Public utilities 709,479 17,906 5,744 721,641

All other corporate bonds 3,835,374 74,574 39,350 3,870,598

Total fixed maturities, available for sale $ 6,142,093 $ 107,986 $ 61,039 $ 6,189,040

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3. INVESTMENTS (continued)

2004

AmortizedCost

GrossUnrealized

Gains

GrossUnrealized

Losses Fair Value(in thousands)

Fixed maturities available for saleBonds and Preferred Stock:

U.S. Treasury securities and obligations ofU.S. government corporations and agencies $ 87,013 $ 778 $ 109 $ 87,682

States, municipalities and political subdivisions 173,129 8,627 191 181,565

Foreign government bonds 30,005 3,982 9 33,978

Mortgage-backed securities 333,720 1,685 440 334,965

Asset-Backed Securities 500,231 11,592 1,345 510,478Public utilities 848,762 40,036 1,710 887,088

All other corporate bonds 4,141,160 169,902 7,715 4,303,347

Total fixed maturities, available for sale $ 6,114,020 $ 236,602 $ 11,519 $ 6,339,103

The amortized cost and estimated fair value of fixed maturities, by contractual maturities at December 31, 2005 is shown below:

Available for saleAmortized

CostFairValue

(in thousands)

Due in one year or less $ 764,757 $ 767,081

Due after one year through five years 1,792,149 1,812,840

Due after five years through ten years 2,090,265 2,102,630

Due after ten years 944,099 964,641

Mortgage-backed securities 550,823 541,848

Total $ 6,142,093 $ 6,189,040

Actual maturities may differ from contractual maturities because issuers have the right to call or prepay obligations.

Proceeds from the sale of fixed maturities available for sale during 2005, 2004, and 2003, were $4,634 million, $1,500 million, and$1,957 million, respectively. Proceeds from the maturity of fixed maturities available for sale during 2005, 2004, and 2003, were $0million, $794 million, and $550 million, respectively. Gross gains of $26 million, $27 million, and $21 million and gross losses of $26million, $17 million, and $7 million were realized on those sales during 2005, 2004, and 2003, respectively.

Writedowns for impairments, which were deemed to be other than temporary for fixed maturities were $1 million, $1 million, and $12million for the years, ended December 31, 2005, 2004 and 2003, respectively.

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Other Long-Term InvestmentsThe following table provides information relating to other long-term investments as of December 31:

2005 2004(in thousands)

Joint ventures and limited partnerships $ 4,390 $ 185Company’s investment in Separate accounts 33,710 29,993Derivatives (3,876) (4,683)Equity securities 769 478Total other long- term investments $ 34,993 $ 25,973

The Company’s share of net income from the joint ventures was $(0.7) million, $1 million, and $2 million for the years endedDecember 31, 2005, 2004, and 2003, respectively, and is reported in “Net investment income.”

Investment Income and Investment Gains and Losses

Net investment income arose from the following sources for the years ended December 31:

2005 2004 2003(in thousands)

Fixed maturities, available for sale $ 354,943 $ 327,899 $ 295,357Policy loans 47,368 46,935 46,750Commercial Loans 6,391 19 878Short-term investments and cash equivalents 15,898 7,685 7,357Other 6,367 3,962 6,943Gross investment income 430,967 386,500 357,285

Less: investment expenses (26,922) (12,948) (12,657)Net investment income $ 404,045 $ 373,552 $ 344,628

Realized investment (losses)/ gains, net including charges for other than temporary reductions in value, for the years ended December31, were from the following sources:

2005 2004 2003(in thousands)

Fixed maturities, available for sale $ (1,722) $ 9,034 $ 1,567Derivatives 3,694 (5,801) (6,629)Other (2,119) 1,778 2,292

Realized investment gains (losses), net $ (147) $ 5,011 $ (2,770)

Net Unrealized Investment Gains (Losses)

Net unrealized investment gains (losses) on securities available for sale are included in the Consolidated Statements of FinancialPosition as a component of “Accumulated other comprehensive income (loss), net of tax.” Changes in these amounts includereclassification adjustments to exclude from “Accumulated other comprehensive income (loss),net of tax” those items that are includedas part of “Net income” for a period that also had been part of “Accumulated other comprehensive income (loss), net of tax” in earlierperiods. The amounts for the years ended December 31, net of taxes, are as follows:

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Net UnrealizedGains (Losses)on Investments

DeferredPolicy

AcquisitionCosts

Policyholders’Account

Balances

DeferredIncome Tax(Liability)

Benefit

AccumulatedOther

ComprehensiveIncome (Loss)Related to Net

UnrealizedInvestment

Gains (Losses)(in thousands)

Balance, December 31, 2002 236,513 (107,366) 14,215 (51,611) 91,751Net investment gains (losses) on investmentsarising during the period 25,794 - - (9,330) 16,464

Purchase of fixed maturities from an affiliate(see Note 13)

11,659 - - (4,102) 7,557

Reclassification adjustment for gains (losses)included in net income (2,177) - - 784 (1,393)

Impact of net unrealized investment gains(losses) on deferred policy acquisition costs - (13,999) - 5,040 (8,959)

Impact of net unrealized investment gains(losses) on policyholders’ account balances - - 3,543 (1,276) 2,267

Balance, December 31, 2003 271,789 (121,365) 17,758 (60,495) 107,687

Net investment gains (losses) on investmentsarising during the period (72,565) - - 26,651 (45,914)

Purchase of fixed maturities from an affiliate(see Note 13) 7,314 - - (2,560) 4,754

Cumulative effect of change in accountingprinciple 27,505 (21,208) - (2,267) 4,030

Reclassification adjustment for gains (losses)included in net income (8,888) - - 3,111 (5,777)

Impact of net unrealized investment gains(losses) on deferred policy acquisition costs - 11,592 - (4,057) 7,535

Impact of net unrealized investment gains(losses) on policyholders’ account balances - - 3,130 (918) 2,212

Balance, December 31, 2004 $ 225,155 $ (130,981) $ 20,888 $ (40,535) $ 74,527

Net investment gains (losses) on investmentsarising during the period (179,640) - - 62,491 (117,149)

Reclassification adjustment for gains (losses)included in net income 1,534 - - (537) 997

Impact of net unrealized investment gains(losses) on deferred policy acquisition costs - 103,437 - (36,203) 67,234

Impact of net unrealized investment gains(losses) on policyholders’ account balances - - (10,783) 3,774 (7,009)

Balance, December 31, 2005 $ 47,049 $ (27,544) $ 10,105 $ (11,010) $ 18,600

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The table below presents net unrealized gains on investments by asset class at December 31,

2005 2004 2003(in thousands)

Fixed maturities $ 46,948 $ 225,083 $ 271,772Other long-term investments 101 72 17Unrealized gains on investments $ 47,049 $ 225,155 $ 271,789

Included in other long-term investments are equity securities.

Duration of Gross Unrealized Loss Positions for Fixed Maturities

The following table shows the fair value and gross unrealized losses aggregated by investment category and length of time thatindividual fixed maturity securities have been in a continuous unrealized loss position, as of December 31, 2005 and 2004 respectively:

Less than twelvemonths

Twelve monthsor more Total

FairValue

UnrealizedLosses

FairValue

UnrealizedLosses

FairValue

UnrealizedLosses

(in thousands)Fixed maturities: 2005

U.S. Treasury securities and obligations ofU.S. government corporations and agencies $ 69,355 $ 148 $ 3,882 $ 124 $ 73,237 $ 272Foreign government bonds 786 7 174 5 960 12Corporate securities 2,272,623 41,195 331,991 10,302 2,604,614 51,497Mortgage-backed securities 494,304 8,650 22,912 608 517,216 9,258Total $2,837,068 $ 50,000 $358,959 $ 11,039 $3,196,027 $ 61,039

Fixed maturities: 2004

U.S. Treasury securities and obligations ofU.S. government corporations and agencies $104,487 $ 300 $ - $ - $ 104,487 $ 300Foreign government bonds 2,656 9 - - 2,656 9Corporate securities 1,113,346 8,943 50,766 1,827 1,164,112 10,770Mortgage-backed securities 80,097 438 41 2 80,138 440Total

$1,300,586 $ 9,690 $50,807 $ 1,829 $1,351,393 $ 11,519

As of December 31, 2005, gross unrealized losses on fixed maturities totaled $61 million comprising 557 issuers. Of this amount, therewas $50 million in the less than twelve months category comprising 444 issuers and $11 million in the greater than twelve months categorycomprising 113 issuers. There were 5 individual issuers with gross unrealized losses greater than $1.1 million. $48 million of grossunrealized losses of less than twelve months is comprised of investment grade securities. Approximately half of gross unrealized losses oftwelve months or more were concentrated in the finance and manufacturing sectors. Based on a review of the above information inconjunction with other factors as outlined in our policy surrounding other than temporary impairments (see Note 2 to the ConsolidatedFinancial Statements), we have concluded that an adjustment for other than temporary impairments is not warranted at December 31,2005.

Included in other long-term investments are equity securities, which have been in a loss position for less than 12 months with a fairvalue of $39 thousand and a gross unrealized loss of $93 thousand.

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Securities Pledged, Restricted Assets and Special Deposits

The Company pledges investment securities it owns to unaffiliated parties through certain transactions including securities lending,securities sold under agreements to repurchase, and futures contracts. At December 31, 2005 and 2004, the carrying value of fixedmaturities available for sale pledged to third parties as reported in the Consolidated Statements of Financial Position were $393 millionand $437 million, respectively.

Fixed maturities of $4 million at December 31, 2005 and 2004 were on deposit with governmental authorities or trustees as required bycertain insurance laws.

4. DEFERRED POLICY ACQUISITION COSTS

The balances of and changes in deferred policy acquisition costs as of and for the years ended December 31, are as follows:

2005 2004 2003(in thousands)

Balance, beginning of year $ 1,429,027 $ 1,380,710 $ 1,152,997Capitalization of commissions, sales and issue expenses 340,260 221,237 371,650Amortization (209,721) (186,408) (129,938)Change in unrealized investment gains 103,437 11,592 (13,999)Impact of adoption of SOP 03-1 - 1,896 -Balance, end of year $ 1,663,003 $ 1,429,027 $ 1,380,710

Deferred acquisition costs in 2004 and 2005 include reductions in capitalization and amortization related to the reinsurance expenseallowances resulting from the coinsurance treaty with Prudential Reinsurance Captive Company or “PARCC,” discussed in Note 13below. Ceded capitalization and amortization relating to this treaty included in the above table amounted to $69 million and $17million, respectively, in 2004 and 2005.

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5. POLICYHOLDERS’ LIABILITIES

Future policy benefits at December 31, are as follows:


Life insurance – domestic $ 825,341 $ 673,532Life insurance – Taiwan 519,189 467,332Individual and group annuities 47,103 46,190Other contract liabilities 55,084 53,596Total future policy benefits $ 1,446,717 $ 1,240,650

Life insurance liabilities include reserves for death benefits and other policy benefits. Annuity liabilities include reserves for annuitiesthat are in payout status.

Future policy benefits for domestic and Taiwan individual non-participating traditional life insurance policies are equal to the aggregateof (1) the present value of future benefit payments and related expenses, less the present value of future net premiums, and (2) anypremium deficiency reserves. Assumptions as to mortality and persistency are based on the Company’s experience, and in certaininstances, industry experience, when the basis of the reserve is established. Interest rates range from 2.50% to 8.25% for domesticinsurance and 6.18% to 7.43% for Taiwan reserves.

Future policy benefits for individual and group annuities are equal to the aggregate of 1) the present value of expected future paymentson the basis of actuarial assumptions established at issue, and 2) any premium deficiency reserves. Assumptions as to mortality arebased on the Company’s experience when the basis of the reserve is established. The interest rates used in the determination of theindividual and group annuities reserves range from 5.25% to 14.75%, with approximately 29% of the reserves based on an interest ratein excess of 8%. The interest rate used in the determination of group annuities reserves is 14.75%.

Future policy benefits for other contract liabilities are generally equal to the present value of expected future payments based on theCompany’s experience (except for certain group insurance coverages for which future policy benefits are equal to gross unearnedpremium reserves). The interest rates used in the determination of the present values range from 5.85% to 6.30%.

Policyholders’ account balances at December 31, are as follows:


Interest-sensitive life contracts $ 2,720,876 $ 2,508,606Individual annuities 2,080,547 2,265,097Guaranteed investment contracts andguaranteed interest accounts 740,003 1,263,082Dividend accumulations and other 252,317 171,325Total policyholders’ account balances $5,793,743 $ 6,208,110

Policyholders’ account balances represent an accumulation of account deposits plus credited interest less withdrawals, expenses andmortality charges, if applicable. Interest crediting rates range from 3% to 5.25% for interest-sensitive life contracts. Interest creditingrates for individual annuities range from 1.50% to 13.00%, with less than 1% of policyholders’ account balances with interest creditingrates in excess of 8%. Interest crediting rates for guaranteed investment contracts and guaranteed interest accounts range from 3% to8.03%, with less than 1% of policyholders’ account balances with interest crediting rates in excess of 8%. Interest crediting rates rangefrom 1% to 5% for dividend accumulations and other.

6. REINSURANCEThe Company participates in reinsurance, with Prudential Insurance, Prudential of Taiwan, PARCC and other companies, in order toprovide greater diversification of business, provide additional capacity for future growth and limit the maximum net loss potentialarising from large risks. Life reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term andcoinsurance. Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent aliability of the Company in the event the reinsurers were unable to meet their obligations to the Company under the terms of thereinsurance agreements. The likelihood of a material reinsurance liability reassumed by the Company is considered to be remote.Effective July 1, 2005, the Company entered into a new coinsurance agreement with

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6. REINSURANCE (continued)

Pruco Re, Ltd. providing for the 100% reinsurance of its Lifetime Five benefit feature sold on new business after May 5, 2005 as wellas for riders issued from March 15, 2005 forward on business in-force before March 15, 2005.

Reinsurance premiums, commissions, expense reimbursements, benefits and reserves related to reinsured long-duration contracts areaccounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for theunderlying contracts. Amounts recoverable from reinsurers, for both long and short duration reinsurance arrangements, are estimated ina manner consistent with the claim liabilities and policy benefits associated with the reinsured policies. The affiliated reinsuranceagreements, including the Company’s reinsurance of all its Taiwan business as of February 1, 2001, are described further in Note 13 ofthe Consolidated Financial Statements.

Reinsurance amounts included in the Consolidated Statements of Operations and Comprehensive Income for the year ended December31, are as follows:

2005 2004 2003(in thousands)

Direct premiums and policy charges and fee income $ 1,158,865 $ 992,637 $ 829,430Reinsurance ceded (556,706) (307,866) (166,371)

Premiums and policy charges and fee income 602,159 $ 684,771 $ 663,059

Policyholders’ benefits ceded $ 294,674 $ 129,125 $ 99,229

Reinsurance premiums ceded for interest-sensitive life products is accounted for as a reduction of policy charges and fee income.Reinsurance ceded for term insurance products is accounted for as a reduction of premiums.

Reinsurance recoverables, included in the Company’s Consolidated Statements of Financial Position at December 31, were as follows:2005 2004

(in thousands)

Domestic life insurance – affiliated $ 405,357 $ 272,999Domestic life insurance - unaffiliated (2,436) 13,166Other reinsurance – affiliated 10,716 11,548Taiwan life insurance-affiliated 519,189 467,332

$ 932,826 $ 765,045

During 2004, the Company entered into reinsurance contracts with affiliates covering the entire domestic life in force. As a result, allrelated reinsurance contracts are with affiliates as of December 31, 2004. These contracts are described further in Note 13, below.

The gross and net amounts of life insurance in force at December 31, were as follows:

2005 2004 2003

(in thousands)

Life insurance face amount in force $ 253,768,618 $ 204,016,616 $ 158,488,681Ceded (221,900,847) (179,108,664) (81,095,301)Net amount of life insurance in force $ 31,867,771 $ 24,907,952 $ 77,393,380

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7. INCOME TAXES

The components of income tax expense (benefit) for the years ended December 31, are as follows:

2005 2004 2003(in thousands)

Current tax (benefit) expense:U.S. $ (30,108) $ 61,801 $ (69,836)State and local - (2,119) 219Foreign - - -Total (30,108) 59,682 (69,617)

Deferred tax expense (benefit):U.S. 51,409 (31,944) 102,685State and local - (4,860) 981Total 51,409 (36,804) 103,666

Total income tax expense $ 21,301 $ 22,878 $ 34,049

The income tax expense for the years ended December 31, differs from the amount computed by applying the expected federal incometax rate of 35% to income from operations before income taxes and cumulative effect of accounting change for the following reasons:

2005 2004 2003(in thousands)

Expected federal income tax expense $ 88,276 $ 50,921 $ 41,644IRS settlement for examination period 1997 to 2001 (32,656) - -State and local income taxes - (4,537) 781Non taxable investment income (29,691) (21,736) (11,722)Other (4,628) (1,770) 3,346Total income tax expense $ 21,301 $ 22,878 $ 34,049

Deferred tax assets and liabilities at December 31, resulted from the items listed in the following table:


Deferred tax assetsInsurance reserves $ 28,029 $ 48,116Investments 9,709 5,652Other 4,291 4,743Deferred tax assets 42,029 58,511

Deferred tax liabilitiesDeferred acquisition costs 428,692 366,155Net unrealized gains on securities 13,076 74,984Other 29,163 24,390Deferred tax liabilities 470,931 465,529

Net deferred tax liability $ 428,902 $ 407,018

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7. INCOME TAXES (continued)

Management believes that based on its historical pattern of taxable income, the Company and its subsidiaries will produce sufficientincome in the future to realize its deferred tax assets. Adjustments to the valuation allowance will be made if there is a change inmanagement’s assessment of the amount of the deferred tax asset that is realizable.

On January 26, 2006, the Internal Revenue Service (“IRS”) officially closed the audit of the consolidated federal income tax returns forthe 1997 to 2001 periods. As a result of certain favorable resolutions, the Company’s statement of operations for the year endedDecember 31, 2005 includes an income tax benefit of $33 million, reflecting a reduction in the Company’s liability for income taxes.The consolidated federal income tax returns for the 2002 and 2003 periods are currently under examination.

8. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS

The Company issues traditional variable annuity contracts through its separate accounts for which investment income and investmentgains and losses accrue directly to, and investment risk is borne by, the contractholder. The Company also issues variable annuitycontracts with general and separate account options where the Company contractually guarantees to the contractholder a return of noless than (1) total deposits made to the contract less any partial withdrawals (“return of net deposits”), (2) total deposits made to thecontract less any partial withdrawals plus a minimum return (“minimum return”), or (3) the highest contract value on a specifiedanniversary date minus any withdrawals following the contract anniversary (“anniversary contract value”). These guarantees includebenefits that are payable in the event of death or annuitization.

The Company also issues annuity contracts with contractually guaranteed death benefits and market value adjusted investment options(“MVAs”), which provide for a return of principal plus a fixed rate of return if held to maturity, or, alternatively, a “market adjustedvalue” if surrendered prior to maturity or if funds are reallocated to other investment options. The market value adjustment mayresult in a gain or loss to the Company, depending on crediting rates or an indexed rate at surrender, as applicable.

In addition, the Company issues variable life, variable universal life and universal life contracts where the Company contractuallyguarantees to the contractholder a death benefit even when there is insufficient value to cover monthly mortality and expense charges,whereas otherwise the contract would typically lapse (“no lapse guarantee”). Variable life and variable universal life contracts areoffered with general and separate account options.

The assets supporting the variable portion of both traditional variable annuities and certain variable contracts with guarantees arecarried at fair value and reported as “Separate account assets” with an equivalent amount reported as “Separate account liabilities.”Amounts assessed against the contractholders for mortality, administration, and other services are included within revenue in “Policycharges and fee income” and changes in liabilities for minimum guarantees are generally included in “Policyholders’ benefits.” In 2005and 2004 there were no gains or losses on transfers of assets from the general account to a separate account.

For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the currentguaranteed minimum death benefit in excess of the current account balance at the balance sheet date. For guarantees of benefits that arepayable at annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity paymentsavailable to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. TheCompany’s contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed may notbe mutually exclusive. As of December 31,2005 the Company had the following guarantees associated with these contracts, by productand guarantee type:

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8. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS (continued)

December 31, 2005 December 31, 2004

In the Event of Death

At Annuitization /Accumulation In the Event of Death

At Annuitization /Accumulation

Variable Annuity Contracts (dollars in thousands) (dollars in thousands)

Return of net deposits

Account value $2,707,932 N/A $2,185,831 N/A

Net amount at risk $3,758 N/A $7,373 N/A

Average attained age of contractholders 62 years N/A 62 years N/A

Minimum return or anniversary contract value

Account value $10,232,599 $3,247,771 $9,704,195 $2,034,671

Net amount at risk $1,189,296 $1,013 $1,456,702 $1,122

Average attained age of contractholders 64 years 59 years 65 years 59 years

Average period remaining until earliest expectedannuitization

5.94 years 6.3 years

Market value adjusted annuities Unadjusted Value Adjusted Value Unadjusted Value Adjusted Value

Account value $294,401 $299,387 $328,951 $345,342

December 31, 2005 December 31, 2004

In the Event of Death

Variable Life, Variable Universal Life andUniversal Life Contracts

(dollars in thousands)

No Lapse Guarantees

Separate account value $1,869,123 $1,625,520

General account value $593,514 $393,712

Net amount at risk $39,173,240 $32,294,429

Average attained age of contractholders 45 years 45 years

Account balances of variable annuity contracts with guarantees were invested in separate account investment options

as follows:December 31, 2005 December 31, 2004

(dollars in thousands)

Equity funds $ 9,464,782 $ 8,135,376

Bond funds $671,143 $760,834

Balanced funds $334,223 $305,574

Money market funds $228,471 $266,639

Specialty funds $44,265 $11,783

Total $ 10,742,884 $ 9,480,206

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The total amount of funds invested in separate account investment options for variable life, variable universal life and universal lifecontracts with guarantees was $1.869 billion at December 31, 2005.

In addition to the above mentioned amounts invested in separate account investment options, $2.197 billion of account balances ofvariable annuity contracts with guarantees (inclusive of contracts with MVA features) were invested in general account investmentoptions.

Liabilities For Guarantee Benefits

The table below summarizes the changes in general account liabilities for guarantees on variable contracts prior to reinsurance. Theliabilities for guaranteed minimum death benefits (“GMDB”) and guaranteed minimum income benefits (“GMIB”) and guaranteedminimum income withdrawal benefit (“GMIWB”) are included in “Future policy benefits” and the related changes in the liabilities areincluded in “Policyholders’ benefits.”

GMDB GMIB GMIWB Total(in thousands)

Balance as of January 1, 2004 $42,194 $2,211 - $44,405

Incurred guarantee benefits 24,700 5,214 - 29,914

Paid guarantee benefits (23,057) - - (23,057)Balance as of December 31, 2004 $43,837 $7,425 - $51,262

Incurred guarantee benefits 25,021 4,941 (1,370) 28,592Paid guarantee benefits (16,663) - - (16,663)

Balance as of December 31, 2005 $52,195 $12,366 (1,370) $63,191

The GMDB liability is determined each period end by estimating the accumulated value of a percentage of the total assessments to dateless the accumulated value of the death benefits in excess of the account balance. The percentage of assessments used is chosen suchthat, at issue, the present value of expected death benefits in excess of the projected account balance and the percentage of the presentvalue of total expected assessments over the lifetime of the contracts are equal. The Company regularly evaluates the estimates usedand adjusts the GMDB liability balance, with a related charge or credit to earnings, if actual experience or other evidence suggests thatearlier assumptions should be revised. The GMIB liability was determined at December 31, 2005 by estimating the accumulated valueof a percentage of the total assessments to date less the accumulated value of the projected income benefits in excess of the accountbalance.

The present value of death benefits in excess of the projected account balance and the present value of total expected assessments forGMDB’s were determined over a reasonable range of stochastically generated scenarios. For variable annuities and variable universallife, 5,000 scenarios were stochastically generated and, from these, 200 scenarios were selected using a sampling technique. Forvariable life, various scenarios covering a reasonable range were weighted based on a statistical lognormal model. For universal life,10,000 scenarios were stochastically generated and, from these, 100 were selected.

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The GMIWB feature provides a contractholder with two methods to receive guaranteed minimum payments over time - a "withdrawal"option and an "income" option. Each of these amounts is based on a "protected withdrawal value" (the "GMIWBProtected Withdrawal Value"). The initial GMIWB Protected Withdrawal Value is determined as of the date that the contractholdermakes his/her first withdrawal under the annuity following the election of the GMIWB. The initial GMIWB Protected WithdrawalValue is equal to the greatest of three amounts, which, stated generally, are (a) account value, plus additional purchase payments andany credits, rolled up at a specified percentage for a period of time (b) account value as of the date of the first withdrawal and (c) aspecified highest anniversary value. Under the withdrawal option, the Company guarantees that a specified percentage of the GMIWBProtected Withdrawal Value can be withdrawn each year until the GMIWB Protected Withdrawal Value has been exhausted. Underthe income option, the Company guarantees that a lesser percentage of the GMIWB Protected Withdrawal Value can be withdrawn forlife. As under the GMWB feature, the contractholder may elect to step-up the GMIWB Protected Withdrawal Value if, due to positivemarket performance, the account value is greater than the current GMIWB Protected Withdrawal Value.

Sales Inducements

The Company defers sales inducements and amortizes them over the anticipated life of the policy using the same methodology andassumptions used to amortize deferred policy acquisition costs. These deferred sales inducements are included in “Other assets.” TheCompany offers various types of sales inducements. These inducements include: (i) a bonus whereby the policyholder’s initial accountbalance is increased by an amount equal to a specified percentage of the customer’s initial deposit and (ii) additional interest creditsafter a certain number of years a contract is held. Changes in deferred sales inducements are as follows:

Sales Inducements

(in thousands)

Balance as of January 1, 2004 $ 79,143

Capitalization 43,286

Amortization (11,969)

Balance as of December 31, 2004 110,460

Capitalization 43,349

Amortization (14,797)

Balance as of December 31, 2005 $ 139,012

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9. STATUTORY NET INCOME AND SURPLUS AND DIVIDEND RESTRICTIONS

The Company is required to prepare statutory financial statements in accordance with accounting practices prescribed or permitted bythe Arizona Department of Insurance. Statutory accounting practices primarily differ from GAAP by charging policy acquisition coststo expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions and valuing investments,deferred taxes, and certain assets on a different basis.

Statutory net loss for the Company amounted to $2 million, $4 million, and $141 million for the years ended December 31, 2005, 2004,and 2003, respectively. Statutory surplus of the Company amounted to $540 million and $572 million at December 31, 2005 and 2004,respectively. The Company had statutory losses in 2003 primarily attributed to the surplus strain from new business, which results fromhigher commissions and selling expenses that are not deferred under statutory accounting, and from increases to reserves. During late2003 and in 2004, the Company obtained reinsurance on the term life business from a captive affiliate, mitigating the surplus strain onthat business. The agreement is discussed further in Note 13, below.

The Company prepares its statutory financial statements in accordance with accounting practices prescribed or permitted by theArizona Department of Insurance. Prescribed statutory accounting practices include publications of the NAIC, state laws, regulations,and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed.

The Company is subject to Arizona law, which limits the amount of dividends that insurance companies can pay to stockholderswithout approval of the Arizona Department of Insurance. The maximum dividend, which may be paid in any twelve-month periodwithout notification or approval, is limited to the lesser of 10% of statutory surplus as of December 31 of the preceding year or the netgain from operations of the preceding calendar year. Cash dividends may only be paid out of surplus derived from realized net profits.Based on these limitations, the Company would not be permitted a dividend distribution without prior approval in 2005. There havebeen no dividend payments to the parent in 2005, 2004 or 2003.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values presented below have been determined by using available market information and by applying valuation methodologies.Considerable judgment is applied in interpreting data to develop the estimates of fair value. These fair values may not be realized in acurrent market exchange. The use of different market assumptions and/or estimation methodologies could have a material effect on thefair values. The methods and assumptions discussed below were used in calculating the fair values of the instruments. See Note 11 tothe Consolidated Financial Statements for a discussion of derivative instruments.

Fixed maturitiesThe fair values of public fixed maturity securities are based on quoted market prices or estimates from independent pricing services.However, for investments in private placement fixed maturity securities, this information is not available. For these private investments,the fair value is determined typically by using a discounted cash flow model, which considers current market credit spreads for publiclytraded issues with similar terms by companies of comparable credit quality, and an additional spread component for the reducedliquidity associated with private placements. This additional spread component is determined based on surveys of various third partyfinancial institutions. Historically, changes in estimated future cash flows or the assessment of an issuer’s credit quality have been themore significant factors in determining fair values.

Commercial LoansThe fair value of commercial loans, other than those held by the Company’s commercial mortgage operations, is primarily based uponthe present value of the expected future cash flows discounted at the appropriate U.S. Treasury rate, and adjusted for the current marketspread for similar quality loans.

The fair value of commercial loans held by the Company’s commercial mortgage operations is based upon various factors, includingthe terms of the loans, the intended exit strategy for the loans based upon either a securitization pricing model or commitments frominvestors, prevailing interest rates, and credit risk.

Policy loansThe fair value of policy loans is calculated using a discounted cash flow model based upon current U.S. Treasury rates and historicalloan repayment patterns.

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10. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Investment contractsFor guaranteed investment contracts, income annuities and other similar contracts without life contingencies, fair values are derivedusing discounted projected cash flows based on interest rates being offered for similar contracts with maturities consistent with those ofthe contracts being valued. For individual deferred annuities and other deposit liabilities, carrying value approximates fair value.Investment contracts are reflected within “Policyholders’ account balances.”

The following table discloses the carrying amounts and fair values of the Company’s financial instruments at December 31:

2005 2004Carrying

Value Fair ValueCarrying

Value Fair Value(in thousands)

Financial assets:

Fixed maturities, available for sale $ 6,189,040 $ 6,189,040 $ 6,339,103 $ 6,339,103Policy loans 879,156 938,419 856,755 960,391Commercial Loans 269,161 269,161 2,285 2,285Short-term investments 113,144 113,144 122,061 122,061Cash and cash equivalents 158,010 158,010 743,533 743,533Separate account assets 19,094,129 19,094,129 17,326,555 17,326,555

Financial liabilities:Investment contracts 3,073,540 3,073,409 3,749,639 3,772,610Cash collateral for loaned securities 389,794 389,794 410,718 410,718Securities sold under repurchase agreements 36,439 36,439 45,254 45,254Short Term Debt to affiliates 105,596 105,596 - -Separate account liabilities $ 19,094,129 $ 19,094,129 $ 17,326,555 $ 17,326,555

11. DERIVATIVE INSTRUMENTS

Types of Derivative InstrumentsInterest rate swaps are used by the Company to manage interest rate exposures arising from mismatches between assets and liabilities(including duration mismatches) and to hedge against changes in the value of assets it anticipates acquiring and other anticipatedtransactions and commitments. Swaps may be specifically attributed to specific assets or liabilities or may be based on a portfolio basis.Under interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed rateand floating rate interest amounts calculated by reference to an agreed upon notional principal amount. Generally, no cash is exchangedat the outset of the contract and no principal payments are made by either party. Cash is paid or received based on the terms of theswap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by onecounterparty at each due date.

Exchange-traded futures are used by the Company to reduce market risks from changes in interest rates, to alter mismatches betweenthe duration of assets in a portfolio and the duration of liabilities supported by those assets, and to hedge against changes in the value ofsecurities it owns or anticipates acquiring or selling. In exchange-traded futures transactions, the Company agrees to purchase or sell aspecified number of contracts, the values of which are determined by the values of designated classes of securities, and to post variationmargin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters intoexchange-traded futures with regulated futures commissions merchants who are members of a trading exchange.

Futures typically are used to hedge duration mismatches between assets and liabilities. Futures move substantially in value as interestrates change and can be used to either modify or hedge existing interest rate risk. This strategy protects against the risk that cash flowrequirements may necessitate liquidation of investments at unfavorable prices resulting from increases in interest rates. This strategycan be a more cost effective way of temporarily reducing the Company’s exposure to a market decline than selling fixed incomesecurities and purchasing a similar portfolio when such a decline is believed to be over.

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11. DERIVATIVE INSTRUMENTS (continued)

Currency derivatives, including currency swaps, are used by the Company to reduce market risks from changes in currency exchangerates with respect to investments denominated in foreign currencies that the Company either holds or intends to acquire or sell.

Under currency swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between one currencyand another at a forward exchange rate and calculated by reference to an agreed principal amount. Generally, the principal amount ofeach currency is exchanged at the beginning and termination of the currency swap by each party. These transactions are entered intopursuant to master agreements that provide for a single net payment to be made by one counterparty for payments made in the samecurrency at each due date.

Credit derivatives are used by the Company to enhance the return on the Company’s investment portfolio by creating credit exposuresimilar to an investment in public fixed maturity cash instruments. With credit derivatives the Company can sell credit protection on anidentified name, or a basket of names in a first to default structure, and in return receive a quarterly premium. With single name creditdefault derivatives, this premium or credit spread generally corresponds to the difference between the yield on the referenced name’spublic fixed maturity cash instruments and swap rates, at the time the agreement is executed. With first to default baskets, the premiumgenerally corresponds to a high proportion of the sum of the credit spreads of the names in the basket. If there is an event of default bythe referenced name or one of the referenced names in a basket, as defined by the agreement, then the Company is obligated to pay thecounterparty the referenced amount of the contract and receive in return the referenced defaulted security or similar security. Inaddition to selling credit protection, the Company may purchase credit protection using credit derivatives in order to hedge specificcredit exposures in our investment portfolio.

Embedded DerivativesAs described in Note 8, the Company sells variable annuity products which contain embedded derivatives. These embedded derivativesare marked to market through “Realized investment gains (losses), net” based on the change in value of the underlying contractualguarantees which are determined using pricing models.

The Company invests in fixed maturities that, in addition to a stated coupon, provide a return based upon the results of an underlyingportfolio of fixed income investments and related investment activity. The Company accounts for these investments as available for salefixed maturities containing embedded derivatives. Such embedded derivatives are marked to market through “Realized investmentgains (losses), net,” based upon the change in value of the underlying portfolio.

Credit RiskThe Company is exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments.Generally, the current credit exposure of the Company’s derivative contracts is limited to the fair value at the reporting date. The creditexposure of the Company’s over-the-counter derivative transactions is represented by the fair value (market value) of contracts with apositive fair value (market value) at the reporting date. Because exchange-traded futures and options are effected through regulatedexchanges, and positions are settled on a daily basis, the Company has little exposure to credit-related losses in the event ofnonperformance by counterparties to such financial instruments.

The Company manages credit risk by entering into transactions with creditworthy counterparties and obtaining collateral whereappropriate and customary. In addition, the Company enters into over-the-counter swaps pursuant to master agreements that provide fora single net payment to be made by one counterparty to another at each due date and upon termination. Likewise, the Company effectsexchange-traded futures through regulated exchanges and these positions are marked to market on a daily basis.

12. COMMITMENTS, CONTINGENCIES AND LITIGATION AND REGULATORY MATTERS

CommitmentsThe Company has made commitments to fund $ 121 million of commercial loans in 2006. The Company also made commitments topurchase or fund investments, mostly private fixed maturities, of $73 million in 2006.

ContingenciesOn an ongoing basis, our internal supervisory and control functions review the quality of our sales, marketing and other customerinterface procedures and practices and may recommend modifications or enhancements. From time to time, this review process resultsin the discovery of product and administration, servicing or other errors, including errors relating to the timing or amount of paymentsdue to customers. In certain cases, if appropriate, we may offer customers remediation and may incur charges, including the cost ofsuch remediation, administrative costs and regulatory fines.

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12. COMMITMENTS, CONTINGENCIES AND LITIGATION AND REGULATORY MATTERS (continued)

It is possible that the results of operations or the cash flow of the Company in a particular quarterly or annual period could bematerially affected as a result of payments in connection with the matters discussed above depending, in part, upon the results ofoperations or cash flow for such period. Management believes, however, that the ultimate payments in connection with these mattersshould not have a material adverse effect on the Company’s financial position.

Litigation and Regulatory ProceedingsThe Company’s litigation and regulatory matters are subject to legal and regulatory actions in the ordinary course of their businesses,which may include class action lawsuits. Pending legal and regulatory actions include proceedings relating to aspects of the businessesand operations that are specific to the Company and that are typical of the businesses in which the Company operates. Class action andindividual lawsuits may involve a variety of issues and/or allegations, which include sales practices, underwriting practices, claimspayment and procedures, premium charges, policy servicing and breach of fiduciary duties to customers. We may also be subject tolitigation arising out of our general business activities, such as our investments and third party contracts. In certain of these matters, theplaintiffs may seek large and/or indeterminate amounts, including punitive or exemplary damages.

Stewart v. Prudential, et al. is a lawsuit brought in the Circuit Court of the First Judicial District of Hinds County, Mississippi by thebeneficiaries of an alleged life insurance policy against the Company and The Prudential Insurance Company of America. Thecomplaint alleges that the Prudential defendants acted in bad faith when they failed to pay a death benefit on an alleged contract ofinsurance that was never delivered. In February 2006, the jury awarded the plaintiffs $1.4 million in compensatory damages and $35million in punitive damages. The Company plans to appeal the verdict.

The Company’s litigation and regulatory matters is subject to many uncertainties, and given the complexity and scope, the outcomescannot be predicted. It is possible that the results of operations or the cash flow of the Company in a particular quarterly or annualperiod could be materially affected by an ultimate unfavorable resolution of litigation and regulatory matters. Management believes,however, that the ultimate outcome of all pending litigation and regulatory matters should not have a material adverse effect on theCompany’s financial position.

13. RELATED PARTY TRANSACTIONS

The Company has extensive transactions and relationships with Prudential Insurance and other affiliates. It is possible that the terms ofthese transactions are not the same as those that would result from transactions among wholly unrelated parties.

Expense Charges and AllocationsMany of the Company’s expenses are allocations or charges from Prudential Insurance or other affiliates. These expenses can begrouped into general and administrative expenses and agency distribution expenses.

The Company’s general and administrative expenses are charged to the Company using allocation methodologies based on businessprocesses. Management believes that the methodology is reasonable and reflects costs incurred by Prudential Insurance to processtransactions on behalf of the Company. The Company operates under service and lease agreements whereby services of officers andemployees, supplies, use of equipment and office space are provided by Prudential Insurance. Beginning in 2003, general andadministrative expenses also includes allocations of stock compensation expenses related to a stock option program and a deferredcompensation program issued by Prudential Financial.

The Company receives a charge to cover its share of employee benefits expenses. These expenses include costs for funded and non-funded contributory and non-contributory defined benefit pension plans. Some of these benefits are based on final group earning andlength of service. While others are based on an account balance, which takes into consideration age, service and earnings duringcareer.

Prudential Insurance sponsors voluntary savings plan for the Company’s employees (401(k) plans). The plans provide for salaryreduction contributions by employees and matching contributions by the Company of up to 4% of annual salary. The expense chargedthe Company for the matching contribution to the plans was $1.5 million and $1.5 million in 2005 and 2004, respectively.

The Company’s share of net expense for the pension plans was $3.1 million and $3.6 million for the twelve months ended December31, 2005 and twelve months ended December 31, 2004, respectively.

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13. RELATED PARTY TRANSACTIONS (continued)

The Company is charged distribution expenses from Prudential Insurance’s agency network for both its domestic life and annuityproducts through a transfer pricing agreement, which is intended to reflect a market based pricing arrangement.

Affiliated Asset Management Fee IncomeIn accordance with a revenue sharing agreement with Prudential Investments LLC, the Company receives fee income frompolicyholders’ account balances invested in the Prudential Series Funds (“PSF”). These revenues are recorded as “Asset managementfees” in the Consolidated Statements of Operations and Comprehensive Income.

Corporate Owned Life InsuranceThe Company has sold four Corporate Owned Life Insurance or, “COLI,” policies to Prudential Insurance. The cash surrender valueincluded in separate accounts for the COLI policies was $1.223 billion and $1.101 billion at December 31, 2005 and December 31,2004, respectively. Fees related to the COLI policies were $16 million, $13 million and $12 million for the years ending December 31,2005, 2004 and 2003.

Reinsurance with affiliates

Pruco Reinsurance Ltd.During September 2003, the Company implemented an agreement to reinsure its term life insurance policies with an affiliatedcompany, Pruco Reinsurance Ltd. or, “Pruco Re.” The Company reinsured with Pruco Re a significant portion of the risks under suchpolicies through an automatic and facultative coinsurance agreement. This Agreement covered all significant risks under the policiesreinsured. The Company is not relieved of its primary obligation to the policyholder as a result of these reinsurance transactions. Thiscoinsurance agreement replaced the yearly renewable term agreements with external reinsurers that were previously in effect on thisblock of business. The initial cost of this transaction of $8 million was deferred and amortized over the life of the underlyinginsurance policies; $1 million was amortized in 2003, less than $1 million in 2004, these amounts were recorded in other income.Reinsurance recoverables related to this transaction were $29 million at December 31, 2003, including the unamortized portion of theinitial cost of $7 million. Premiums ceded in 2004 and 2003 were $58 million and $31 million, respectively. Benefits ceded in 2004and 2003 were ($5) million and $6 million, respectively.

During September 2004, this transaction was recaptured by the Company and replaced with a new coinsurance with PARCC, describedin more detail below.

PARCCIn September 2004, the Company entered into an agreement to reinsure its term life insurance policies with an affiliated company,PARCC. The Company reinsures with PARCC 90 percent of the risks under such policies through an automatic and facultativecoinsurance agreement. The Company is not relieved of its primary obligation to the policyholder as a result of these reinsurancetransactions. There was no net cost associated with the initial transactions. Reinsurance recoverables related to this transaction were$356 million and $226 million as of December 31, 2005 and December 31, 2004, respectively. Premiums ceded to PARCC in 2005and 2004 were $297 million and $102 million, respectively. Benefits ceded in 2005 and 2004 were $111 million and $52 million,respectively.

Concurrent with implementing this new agreement, the Company recaptured the policies previously reinsured under a coinsurancetreaty with an affiliated offshore captive company, Pruco Re Ltd. The agreement had covered all term policies written on or afterOctober 1, 2002.

Prudential InsuranceIn December 2004, the Company recaptured the excess of loss reinsurance agreement with Prudential Insurance and replaced it with arevised agreement to reinsure all risks, not otherwise reinsured. Reinsurance recoverables were $60 million and $47 million as ofDecember 31, 2005 and December 31, 2004, respectively. Premiums and fees ceded to Prudential Insurance in 2005, 2004 and 2003were $178 million, $13 million and $12 million, respectively. Benefits ceded in 2005, 2004 and 2003 were $174 million, $28 millionand $38 million, respectively. The Company is not relieved of its primary obligation to the policyholder as a result of these reinsurancetransactions.

During 2005, the Company entered into new reinsurance agreements with affiliates as part of its risk management and capitalmanagement strategies for annuities. The Company entered into a coinsurance agreement with The Prudential Insurance Company ofAmerica providing for the 100% reinsurance of its Lifetime Five benefit feature sold on its annuities prior to May 6, 2005. EffectiveJuly 1, 2005, the Company entered into another coinsurance agreement with Pruco Reinsurance, Ltd. providing for the 100%reinsurance of its Lifetime Five benefit feature sold on its annuities after May 5, 2005. Effective July 1, 2005, the Company enteredinto a new coinsurance agreement with Pruco Re, Ltd. providing for the 100% reinsurance of its

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Lifetime Five benefit feature sold on new business after May 5, 2005 as well as for riders issued from March 15, 2005 forward onbusiness in-force before March 15, 2005.

Other affiliated reinsurance agreementsIn addition, the Company currently has a reinsurance Group Annuity Contract, whereby the reinsurer, in consideration for a singlepremium payment by the Company, provides reinsurance equal to 100% of all payments due under the contract. In addition, there aretwo yearly renewable term agreements in which the Company may offer and the reinsurer may accept reinsurance on any life in excessof the Company’s maximum limit of retention. The Company is not relieved of its primary obligation to the policyholder as a result ofthese reinsurance transactions.Group annuities affiliated benefits ceded were $2 million in 2005, $2 million in 2004, and $3 million in2003.

Taiwan branch reinsurance agreementOn January 31, 2001, the Company transferred all of its assets and liabilities associated with the Company’s Taiwan branch includingTaiwan’s insurance book of business to an affiliated Company, Prudential Life Insurance Company of Taiwan Inc. (“Prudential ofTaiwan”), a wholly owned subsidiary of Prudential Financial.

The mechanism used to transfer this block of business in Taiwan is referred to as a “full acquisition and assumption” transaction.Under this mechanism, the Company is jointly liable with Prudential of Taiwan for two years from the giving of notice to all obligeesfor all matured obligations and for two years after the maturity date of not-yet-matured obligations. Prudential of Taiwan is alsocontractually liable, under indemnification provisions of the transaction, for any liabilities that may be asserted against the Company.The transfer of the insurance related assets and liabilities was accounted for as a long-duration coinsurance transaction underaccounting principles generally accepted in the United States. Under this accounting treatment, the insurance related liabilities remainon the books of the Company and an offsetting reinsurance recoverable is established.

As part of this transaction, the Company made a capital contribution to Prudential of Taiwan in the amount of the net equity of theCompany’s Taiwan branch as of the date of transfer. In July 2001, the Company dividended its interest in Prudential of Taiwan toPrudential Financial.

Affiliated premiums ceded for the periods ended December 31, 2005, 2004 and 2003 from the Taiwan coinsurance agreement were $81million, $85 million and $84 million, respectively. Affiliated benefits ceded for the periods ended December 31, 2005, 2004 and 2003from the Taiwan coinsurance agreement were $13 million, $12 million and $13 million, respectively.

Included in the total affiliated reinsurance recoverable balances of $935 million and $752 million at December 31, 2005 and December31, 2004, respectively, were reinsurance recoverables related to the Taiwan coinsurance agreement of $519 million and $467 million atDecember 31, 2005 and December 31, 2004, respectively.

Purchase of fixed maturities from an affiliateDuring 2003, the Company invested $112 million in the preferred stock of two Delaware corporations (the “DE Subs”), which werecreated to acquire municipal fixed maturity investments from an affiliate of the Company. The DE Subs are included in the Company’sconsolidated financial statements. Prudential Financial, Inc., the Company’s ultimate parent company, owns a nominal common stockinvestment in each of the DE Subs.

The DE Subs purchased municipal fixed maturity investments for $112 million, the acquisition-date fair value, but reflected theinvestments at historic amortized cost of the affiliate. The difference between the historic amortized cost and the fair value, net of taxeswas reflected as a reduction to paid-in-capital. The fixed maturity investments are categorized in the Company’s consolidated balancesheet as available-for-sale debt securities, and are therefore carried at fair value, with the difference between amortized cost and fairvalue reflected in accumulated other comprehensive income.

In addition, the Company also purchased corporate fixed maturities with a fair value of $52 million from the same affiliate. Theseinvestments were reflected in the same manner as is described above, with the difference between the historic amortized cost and thefair value, net of taxes reflected as a reduction of paid-in-capital with an offsetting increase to accumulated other comprehensiveincome. The difference between the historic amortized cost and the fair value, net of taxes for both the municipal securities and thecorporate securities was $8 million.

During 2004, the Company invested an additional $110 million in fixed maturities owned by Prudential Insurance, but reflected theseinvestments at amortized cost of $99 million. The Company also sold $31 million of fixed maturities securities, recorded at anamortized cost of $29 million, to PARCC. The net difference between the historic amortized cost and the fair value, net of taxes forboth of these transactions was $5 million and was recorded as a decrease to paid in capital as described above.

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Debt AgreementsThe Company had a revolving line of credit facility of up to $800 million with Prudential Funding, LLC, a wholly owned subsidiary ofPrudential Insurance. This credit facility was revised in July 2005 to increase the total credit line to $1.2 billion, of which, the amountof non asset-based borrowings cannot exceed $600 million. As of December 31, 2005 and December 31, 2004, there was $426 millionand $456 million, respectively, of asset-based financing. There was $106 million of debt outstanding to Prudential Funding, LLC as ofDecember 31, 2005 as compared to none at December 31, 2004. Interest expense related to this agreement was $4 million in 2005,with related interest charged at a variable rate ranging from 3.06% to 4.40%.

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14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The unaudited quarterly results of operations for the years ended December 31, 2005 and 2004 are summarized in thetable below:

Three months ended (in thousands)March 31 June 30 September 30 December 31

2005 (restated)Total revenues $ 256,747 $ 245,683 $ 268,888 $ 263,969Total benefits and expenses 208,299 189,876 179,095 205,801Income from operations before income taxes beforeCumulative effect of accounting change 48,448 55,807 89,793 58,168Net income 49,159 42,223 95,920 43,613

2004Total revenues $ 280,713 $ 271,729 $ 266,329 $ 270,824Total benefits and expenses 240,797 250,795 236,081 216,433Income from operations before income taxes beforeCumulative effect of accounting change 39,916 20,934 30,248 54,391Net income 22,389 18,672 28,989 43,411

B - 33

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder ofPruco Life Insurance Company

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, thefinancial position of Pruco Life Insurance Company (a wholly owned subsidiary of The Prudential Insurance Company of America)and its subsidiaries at December 31, 2005 and December 31, 2004 and the results of their operations and their cash flows for the threeyears in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States ofAmerica. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinionon these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards ofthe Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles usedand significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.

As described in Note 2 of the financial statements, the Company adopted American Institute of Certified Public Accountants Statementof Position 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and forSeparate Accounts” as of January 1, 2004.

PricewaterhouseCoopers LLPNew York, New YorkMarch 24, 2006

Important Privacy Information and Choices

Prudential, Prudential Financial and the Prudential Financial logo are service marks of Your Financial Security, The Prudential Insurance Company of America, Newark, NJ and its affiliates. Your Satisfaction & Your Privacy

The Prudential Insurance Company of America Privacy 0001 Ed. 2/2006 751 Broad Street, Newark, NJ 07102-3777

Please read this Notice. It is from the Prudential Financial companies listed on the next page, and it applies to your relationships with us. It describes how we handle information about you, how we protect it, and the choices you have.

Information We Collect We collect information about you so we can serve you and offer products to you.

It includes information:

• You give us (such as name, address, Social Security number, income).

• About the Prudential products you have (such as the kinds of products you have with us, account balances, amount of insurance).

• Others give us (such as medical information for life insurance applications, creditworthiness information from credit reports, employee identifying information for group products, such as Social Security number).

• From visits to our websites (such as data from web forms, site visit data, and data from web “cookies”).

We call this information “customer data.”

Protecting Customer Information The only persons who are authorized to have access to customer data are those who need it to do their jobs. They must protect it and keep it confidential. We maintain physical, electronic, and procedural safeguards that comply with federal and state regulations to protect customer data.

Sharing Information Inside Prudential We may share the customer data described above with other Prudential Financial businesses, such as our insurance companies and agencies, our broker-dealers, and our banks. We may share it to serve you or maintain your account, or so our companies can tell you about other products or services.

Other Reasons Information Is Shared We may share the customer data described above with other companies that perform services for us or on our behalf. This includes firms that provide mailing or marketing services for us, or develop and maintain software for us. We may also share it with financial firms outside Prudential, such as banks or securities brokers or dealers, when we have agreements to jointly sponsor or offer other financial products. We do this only if the applicable federal or state law allows the disclosure. Medical and driving record information is never shared for this purpose. We may disclose it as permitted or required by law, for example, to law enforcement officials, in response to subpoenas, to regulators, or to prevent fraud.

Employers and others have relationships with us to provide services in connection with benefits that they provide for their employees or members, for example, group insurance policies or 401(k) plans. They may limit our sharing of customer data about their employees or members. When they do, we honor those restrictions.

It’s Your Choice We may share customer data within the Prudential family to tell you about other Prudential products and services. We may also share it with non-Prudential firms to jointly sponsor or offer other financial products. Customers tell us they want this information. If you don’t want us to share customer data about you for those offers, please let us know. We call this “opting out.”

We may mail information about other products or services to you, or we may call you to tell you about them. If you would rather not receive information in these ways, please tell us.

You can do that using the attached form. Mail it to the address or call us at the toll-free number provided. We will process your request as quickly as possible. It may take us four to six weeks in some cases for marketing campaigns that have already started.

If you ask to be removed from our mailing lists for corporate offers, we will continue to send you information about your policies and accounts. We may include inserts about other products or services in these mailings. Opting out will not affect your relationship with your Prudential Professional.

We are mailing this Notice to the address we have for you. If there is more than one owner of a product or account, we send this Notice to the same address that we use to mail statements. Each owner may opt out for himself or herself, and may also opt out for the other owners.

The law requires us to send Notices at least once a year. If you have more than one Prudential product or service, you may receive multiple copies of this Notice. If you do choose to opt out, you only need to tell us once. We will honor your choices until you tell us to change them.

Former Customers If your relationship with us ends, we will continue to handle information about you as this Notice describes.

To Reach Us, Write or Call Customer Privacy Prudential Financial PO Box 9047 Millville, NJ 08332-9047

(800) 236-6848

Many Prudential Financial companies are required to send privacy notices to their customers. This notice is being provided to customers of the Prudential Financial companies listed below:

Insurance Companies Prudential Insurance Company of America, The Pruco Life Insurance Company Pruco Life Insurance Company of New Jersey Insurance Agencies Prudential Direct Insurance Agency of Massachusetts, Inc. Prudential Direct, Inc. Prudential General Agency of Ohio, Inc. Prudential General Insurance Agency of Florida, Inc. Prudential General Insurance Agency of Kentucky, Inc. Prudential General Insurance Agency of

Massachusetts, Inc. Prudential General Insurance Agency of Mississippi, Inc. Prudential General Insurance Agency of Nevada, Inc. Prudential General Insurance Agency of New Mexico, Inc. Prudential General Agency of Texas, Inc. Prudential General Insurance Agency of Wyoming, Inc. Prudential Insurance Agency, LLC Prudential Insurance Brokerage, Inc.

Broker-Dealers and Registered Investment Advisers Pru Global Securities, LLC Pruco Securities, LLC Pramerica Asset Management, Inc. Prudential Equity Investors, Inc. Prudential Investment Management, Inc. Prudential Investment Management Services LLC Prudential Investments LLC Prudential Equity Group, LLC Bank and Trust Companies Prudential Bank & Trust, F.S.B. Prudential Trust Company Investment Companies and Other Investment Vehicles Cash Accumulation Trust High Yield Income Fund, Inc., The JennisonDryden Mutual Funds MoneyMart Assets, Inc. Nicholas-Applegate Fund, Inc. Prudential Capital Partners, L.P. Prudential Equity Investors III, L.P. Prudential Financial Derivatives, LLC Prudential Institutional Liquidity Portfolio, Inc. Strategic Partners Mutual Funds Target Portfolio Trust, The

Your Privacy Preferences

The Prudential Insurance Company of America Your Financial Security, Your Satisfaction & Your Privacy 751 Broad Street, Newark, NJ 07102-3777 Privacy 0001 Ed. 2/2006

Check each box according to your preference: � Do not share customer data about me within the Prudential family to offer me products or services, or with other

financial firms to jointly offer me products or services. � Do not send me separate offers by mail for products or services. � Do not call me at the telephone number below to tell me about products and services.

Account/Policy number as it appears on your statement

Print your name and address as it appears on your statement Name (First, middle initial, last name)

Address

City State Zip code

Telephone number

Additional account/policy numbers Additional Owner Name (First, middle initial, last name)

Address

City State Zip code

Telephone number

Additional Owner Name (First, middle initial, last name)

Address

City State Zip code

Telephone number

Mail or call: Customer Privacy Prudential Financial PO Box 9047 Millville, NJ 08332-9047

(800) 236-6848

Prudential Financial and the Rock logo are registered service marks of The Prudential Insurance Company of America, and its affiliates.

The Pruco Life Insurance Company 213 Washington Street, Newark, NJ 07102-2992Telephone: 800 286-7754

CVUL1 and CVUL2 Ed. 5/2006