THE PRUDENTIAL SERIES FUND SEMIANNUAL REPORT ‰ JUNE 30, 2015 Based on the variable contract you own or the portfolios you invested in, you may receive additional reports that provide financial information on those investment choices. Please refer to your variable annuity or variable life insurance contract prospectus to determine which portfolios are available to you. The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter. The accompanying financial statements as of June 30, 2015, were not audited and, accordingly, no auditor’s opinion is expressed on them. Please note that this document may include prospectus supplements that are separate from and not a part of this report. Please refer to your variable annuity or variable life insurance contract prospectus to determine which supplements are applicable to you. For information regarding enrollment in the e-Delivery program, please see the inside front cover of this report. 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
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THE PRUDENTIAL SERIES FUNDSEMIANNUAL REPORT ‰ JUNE 30, 2015
Based on the variable contract you own or the portfolios you invested in,you may receive additional reports that provide financial information onthose investment choices. Please refer to your variable annuity or variablelife insurance contract prospectus to determine which portfolios areavailable to you.
The views expressed in this report and information about the Fund’sportfolio holdings are for the period covered by this report and are subjectto change thereafter.
The accompanying financial statements as of June 30, 2015, were notaudited and, accordingly, no auditor’s opinion is expressed on them.
Please note that this document may include prospectus supplements thatare separate from and not a part of this report. Please refer to your variableannuity or variable life insurance contract prospectus to determine whichsupplements are applicable to you.
For information regarding enrollment in the e-Delivery program, pleasesee the inside front cover of this report.
Conservative Balanced PortfolioDiversified Bond PortfolioEquity PortfolioFlexible Managed PortfolioGlobal PortfolioGovernment Income PortfolioHigh Yield Bond PortfolioJennison PortfolioMoney Market PortfolioNatural Resources PortfolioSmall Capitalization Stock PortfolioStock Index PortfolioValue Portfolio
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THE PRUDENTIAL SERIES FUND HIGH YIELD BOND PORTFOLIO
Supplement dated June 22, 2015
to the Currently Effective Prospectus, Summary Prospectus and Statement of Additional Information
Paul Appleby, CFA, Managing Director for Prudential Investment Management, Inc. (PIM), has announced his intention to retire effective on or about January 2016. Mr. Appleby currently serves as a portfolio manager for the Portfolio. After Mr. Appleby retires, the Portfolio will continue to be managed by a team of 7 portfolio managers, which includes Robert Cignarella, CFA, who is a Managing Director and co-head of Prudential Fixed Income’s Global Leveraged Finance Team.
PSFSUP1�
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The Prudential Series FundTable of Contents
Semiannual Report June 30, 2015
� L E T T E R T O C O N T R A C T O W N E R S
� P R E S E N T A T I O N O F P O R T F O L I O H O L D I N G S
� F E E S A N D E X P E N S E S
� F I N A N C I A L R E P O R T S
Section A Schedule of Investments and Financial Statements
Section B Notes to Financial StatementsSection C Financial Highlights
� A P P R O V A L O F A D V I S O R Y A G R E E M E N T S
This report may include financial information pertaining to certain portfolios that are not available through the variable lifeinsurance policy or variable annuity contract that you have chosen. Please refer to your variable life insurance or variable annuityprospectus to determine which portfolios are available to you.
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The Prudential Series FundLetter to Contract Owners
Semiannual Report June 30, 2015
� D E A R C O N T R A C T O W N E R
At Prudential, our primary objective is to help investors achieve and maintain long-term financial success. This Prudential SeriesFund semiannual report outlines our efforts to achieve this goal. We hope you find it informative and useful.
Prudential has been building on a heritage of success for more than 135 years. The quality of our businesses and riskdiversification has enabled us to manage effectively through volatile markets over time. We believe the array of our productsprovides a highly attractive value proposition to clients like you who are focused on financial security.
Your financial professional is the best resource to help you make the most informed investment decisions. Together, you canbuild a diversified investment portfolio that aligns with your long-term financial goals. Please keep in mind that diversificationand asset allocation strategies do not assure a profit or protect against loss in declining markets.
Thank you for selecting Prudential as one of your financial partners. We value your trust and appreciate the opportunity to helpyou achieve financial security.
Sincerely,
Timothy S. CroninPresident,The Prudential Series Fund July 31, 2015
The Prudential Series FundPresentation of Portfolio Holdings — unaudited
June 30, 2015
Conservative Balanced
Five Largest Holdings (% of Net Assets)
Apple, Inc. 1.8%
U.S. Treasury Notes,2.125%, 09/30/21 1.1%
Federal National MortgageAssoc., 3.000%, TBA 1.0%
Microsoft Corp. 0.9%
Exxon Mobil Corp. 0.9%
Diversified Bond
Allocation (% of Net Assets)
Banking 12.8%
Commercial Mortgage-BackedSecurities 10.7%
Residential Mortgage-BackedSecurities 7.8%
Healthcare & Pharmaceutical 5.1%
Sovereigns 4.9%
Equity
Five Largest Holdings (% of Net Assets)
Allergan PLC 3.5%
Apple, Inc. 3.5%
Facebook, Inc. (Class A Stock) 3.1%
Amazon.com, Inc. 2.1%
NIKE, Inc., (Class B Stock) 2.0%
Flexible Managed
Five Largest Holdings (% of Net Assets)
Apple, Inc. 2.6%
Exxon Mobil Corp. 1.4%
Microsoft Corp. 1.4%
JPMorgan Chase & Co. 1.2%
Johnson & Johnson 1.1%
Global
Top Five Countries (% of Net Assets)
United States 50.1%
Japan 9.7%
United Kingdom 7.8%
France 3.9%
Switzerland 3.1%
Government Income
Allocation (% of Net Assets)
U.S. Government AgencyObligations 50.9%
Commercial Mortgaged-BackedSecurities 22.7%
U.S. Treasury Obligations 19.5%
Collateralized Loan Obligations 5.6%
Foreign Agencies 0.7%
High Yield Bond
Allocation (% of Net Assets)
Technology 10.9%
Healthcare & Pharmaceutical 9.8%
Capital Goods 7.6%
Electric 6.3%
Energy—Other 5.7%
Jennison
Five Largest Holdings (% of Net Assets)
Apple, Inc. 5.7%
Facebook, Inc. (Class A Stock) 3.7%
Amazon.com. Inc. 3.5%
MasterCard, Inc. (Class A Stock) 3.5%
NIKE, Inc. (Class B Stock) 2.6%
Natural Resources
Five Largest Holdings (% of Net Assets)
Anadarko Petroleum Corp. 4.1%
Concho Resources, Inc. 4.0%
Schlumberger Ltd. 3.6%
Noble Energy, Inc. 3.2%
EOG Resources, Inc. 3.2%
Small Capitalization Stock
Five Largest Holdings (% of Net Assets)
iShares Core S&P Small-Cap ETF 0.7%
West Pharmaceutical Services, Inc. 0.6%
Toro Co. (The) 0.5%
Cracker Barrel Old CountryStore, Inc. 0.5%
PAREXEL International Corp. 0.5%
Stock Index
Five Largest Holdings (% of Net Assets)
Apple, Inc. 3.9%
Microsoft Corp. 1.9%
Exxon Mobil Corp. 1.9%
Johnson & Johnson 1.4%
General Electric Co. 1.4%
Value
Five Largest Holdings (% of Net Assets)
JPMorgan Chase & Co. 3.3%
Wells Fargo & Co. 3.1%
Citigroup, Inc. 2.5%
Allergan PLC 2.5%
Goldman Sachs Group, Inc. 2.5%
For a complete list of holdings, please refer to the Schedule of Investments section of this report. Holdings reflect only long-terminvestments. Holdings/Issues/Industries/Sectors are subject to change.
The Prudential Series FundFees and Expenses — unaudited
June 30, 2015
As a contract owner investing in Portfolios of the Fund through a variable annuity or variable life contract, you incur ongoing costs,including management fees, and other Portfolio expenses. This example is intended to help you understand your ongoing costs (indollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other investment options. Thisexample does not reflect fees and charges under your variable annuity or variable life contract. If contract charges were included, thecosts shown below would be higher. Please consult the prospectus for your contract for more information about contract feesand charges.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015through June 30, 2015.
Actual ExpensesThe first line of the table below provides information about actual account values and actual expenses. You may use this information,together with the amount you invested, to estimate the Portfolio expenses that you paid over the period. Simply divide your accountvalue by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the firstline under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the Portfolio expenses you paid on youraccount during this period. As noted above, the table does not reflect variable contract fees and charges.
Hypothetical Example for Comparison PurposesThe second line of the table below provides information about hypothetical account values and hypothetical expenses based on thePortfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return.The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paidfor the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other investment options.To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the otherinvestment options.
Please note that the expenses shown in the table are meant to highlight your ongoing Portfolio costs only and do not reflect anycontract fees and charges, such as sales charges (loads), insurance charges or administrative charges. Therefore the second line of thetable is useful to compare ongoing investment option costs only, and will not help you determine the relative total costs of owningdifferent contracts. In addition, if these contract fees and charges were included, your costs would have been higher.
The Prudential Series Fund Portfolios
BeginningAccount Value
January 1, 2015
EndingAccount ValueJune 30, 2015
Annualized ExpenseRatio based on theSix-Month period
Expenses PaidDuring the
Six-Month period*
Conservative Balanced (Class I) Actual $1,000.00 $1,005.30 0.58% $2.88
Hypothetical $1,000.00 $1,021.92 0.58% $2.91
Diversified Bond (Class I) Actual $1,000.00 $ 997.40 0.44% $2.18
Hypothetical $1,000.00 $1,022.61 0.44% $2.21
Equity (Class I) Actual $1,000.00 $1,031.90 0.47% $2.37
Hypothetical $1,000.00 $1,022.46 0.47% $2.36
Equity (Class II) Actual $1,000.00 $1,030.00 0.87% $4.38
Hypothetical $1,000.00 $1,020.48 0.87% $4.36
Flexible Managed (Class I) Actual $1,000.00 $1,008.40 0.63% $3.14
Hypothetical $1,000.00 $1,021.67 0.63% $3.16
Global (Class I) Actual $1,000.00 $1,044.70 0.81% $4.11
Hypothetical $1,000.00 $1,020.78 0.81% $4.06
Government Income (Class I) Actual $1,000.00 $1,001.70 0.49% $2.43
Hypothetical $1,000.00 $1,022.36 0.49% $2.46
High Yield Bond (Class I) Actual $1,000.00 $1,027.40 0.57% $2.87
Hypothetical $1,000.00 $1,021.97 0.57% $2.86
Jennison (Class I) Actual $1,000.00 $1,086.90 0.63% $3.26
Hypothetical $1,000.00 $1,021.67 0.63% $3.16
Jennison (Class II) Actual $1,000.00 $1,084.70 1.03% $5.32
Hypothetical $1,000.00 $1,019.69 1.03% $5.16
Money Market (Class I) Actual $1,000.00 $1,000.00 0.17% $0.84
Hypothetical $1,000.00 $1,023.95 0.17% $0.85
The Prudential Series FundFees and Expenses — unaudited (continued)
June 30, 2015
The Prudential Series Fund Portfolios
BeginningAccount Value
January 1, 2015
EndingAccount ValueJune 30, 2015
Annualized ExpenseRatio based on theSix-Month period
Expenses PaidDuring the
Six-Month period*
Natural Resources (Class I) Actual $1,000.00 $ 961.00 0.46% $2.24
Hypothetical $1,000.00 $1,022.51 0.46% $2.31
Natural Resources (Class II) Actual $1,000.00 $ 959.30 0.86% $4.18
Hypothetical $1,000.00 $1,020.53 0.86% $4.31
Small Capitalization Stock(Class I)
Actual $1,000.00 $1,040.30 0.40% $2.02
Hypothetical $1,000.00 $1,022.81 0.40% $2.01
Stock Index (Class I) Actual $1,000.00 $1,010.80 0.32% $1.60
Hypothetical $1,000.00 $1,023.21 0.32% $1.61
Value (Class I) Actual $1,000.00 $1,003.40 0.42% $2.09
Hypothetical $1,000.00 $1,022.71 0.42% $2.11
Value (Class II) Actual $1,000.00 $1,001.90 0.82% $4.07
Hypothetical $1,000.00 $1,020.73 0.82% $4.11
* Portfolio expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for eachshare class (provided in the table), multiplied by the average account value over the period, multiplied by the 181 days in the six-month period ended June 30, 2015, and divided by the 365 days in the Portfolio’s fiscal year ending December 31, 2015 (to reflectthe six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Portfoliomay invest.
CONSERVATIVE BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
NON-CORPORATE SOVEREIGNS — 0.5%Brazilian Government International Bond (Brazil), Sr. Unsec’d. Notes(a) . . . . . . 4.250% 01/07/25 2,270 2,191,685Colombia Government International Bond (Colombia), Sr. Unsec’d. Notes . . . . 4.000% 02/26/24 920 915,400Hungary Government International Bond (Hungary), Sr. Unsec’d. Notes . . . . . . 4.000% 03/25/19 392 404,662Indonesia Government International Bond (Indonesia), Sr. Unsec’d.
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
See the Glossary for abbreviations used in the Portfolio descriptions.
* Non-income producing security.
# Principal or notional amount is shown in U.S. dollars unless otherwise stated.
(a) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $57,070,426;cash collateral of $58,627,635 (included with liabilities) was received with which the Portfolio purchased highly liquid short-term investments.Securities on loan are subject to contractual netting arrangements.
(b) Variable rate instrument. The interest rate shown reflects the rate in effect at June 30, 2015.
(c) Indicates a restricted security; the aggregate original cost of the restricted securities is $4,272,642. The aggregate value of $4,355,269 isapproximately 0.2% of net assets.
(d) Indicates a security that has been deemed illiquid.
(e) Represents issuer in default on interest payments and/or principal re-payments;.non-income producing security. Such securities may be post maturity.
(f) Represents zero coupon bond or principal only security. Rate represents yield to maturity at purchase date.
(g) Represents security, or a portion thereof, segregated as collateral for futures contracts.
(h) Represents security, or a portion thereof, segregated as collateral for swap agreements.
(i) Rate quoted represents yield-to-maturity as of purchase date.
(j) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 — Prudential CoreTaxable Money Market Fund and the Prudential Investment Portfolios 2 — Prudential Core Short-Term Bond Fund.
(k) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
(l) All or partial principal amount represents “TBA” mortgage dollar rolls. The aggregate mortgage dollar roll principal amount of $100,000,000 isapproximately 4.0% of net assets.
(m) Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end:
Futures contracts outstanding at June 30, 2015:
Number ofContracts Type
ExpirationDate
Value atTrade Date
Value atJune 30, 2015
UnrealizedAppreciation
(Depreciation)(1)
Long Positions:91 2 Year U.S. Treasury Notes Sep. 2015 $19,930,551 $19,923,313 $ (7,238)
666 5 Year U.S. Treasury Notes Sep. 2015 78,964,065 79,425,703 461,638218 10 Year U.S. Treasury Notes Sep. 2015 27,425,071 27,505,469 80,39887 DAX Index Sep. 2015 26,619,996 26,676,473 56,477
691 DJ Euro STOXX 50 Sep. 2015 26,453,417 26,469,665 16,248221 IBEX 35 Index Jul. 2015 26,419,156 26,547,447 128,29116 MSCI EAFE Mini Futures Sep. 2015 1,506,518 1,467,200 (39,318)59 S&P 500 E-Mini Futures Sep. 2015 6,155,981 6,060,480 (95,501)62 S&P 500 Index Futures Sep. 2015 32,439,964 31,843,200 (596,764)
227 U.S. Ultra Bonds Sep. 2015 35,813,459 34,972,188 (841,271)
(837,040)
Short Position:194 U.S. Long Bonds Sep. 2015 29,872,710 29,263,688 609,022
$(228,018)
(1) A U.S. Treasury Obligation with a market value of $10,650,000 has been segregated with Goldman Sachs & Co. and U.S. Government AgencyObligations with a combined market value of $1,926,660 have been segregated with Citigroup Global Markets to cover requirements for opencontracts at June 30, 2015.
Interest rate swap agreements outstanding at June 30, 2015:
NotionalAmount(000)#
TerminationDate
FixedRate Floating Rate
FairValue
UpfrontPremiums
Paid(Received)
UnrealizedAppreciation Counterparty
Over-the-counter swap agreements:2,634 05/17/18 0.989% 3 Month LIBOR(1) $13,942 $ — $13,942 Credit Suisse First Boston Corp.
SEE NOTES TO FINANCIAL STATEMENTS.
A25
CONSERVATIVE BALANCED PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
Interest rate swap agreements outstanding at June 30, 2015 (continued):
Over-the-counter credit default swaps on credit indices—Sell Protection(2):CDX.NA.HY.17.V9 12/20/16 5.000% 1,150 $ 63,809 $ 47,923 $ 15,886 Credit Suisse First Boston Corp.CDX.NA.HY.17.V9 12/20/16 5.000% 2,990 165,903 128,338 37,565 Deutsche Bank AGCDX.NA.HY.17.V9 12/20/16 5.000% 4,140 229,713 181,413 48,300 Deutsche Bank AG
$459,425 $357,674 $101,751
A U.S. Government Agency Obligation and a U.S. Treasury Obligation with a combined market value of $3,538,677 have been segregated withCitigroup Global Markets to cover requirements for open exchange-traded interest rate and credit default swap contracts at June 30, 2015.
The Portfolio entered into credit default swap (“CDS”) to provide a measure of protection against defaults or to take an active long or short positionwith respect to the likelihood of a particular issuer’s default or the reference entity’s credit soundness. CDS contracts generally trade based on aspread which represents the cost a protection buyer has to pay the protection seller. The protection buyer is said to be short the credit as the value ofthe contract rises the more the credit deteriorates. The value of the CDS contract increases for the protection buyer if the spread increases.
(1) If the Portfolio is a buyer of protection, it pays the fixed rate. When a credit event occurs, as defined under the terms of that particular swapagreement, the Portfolio will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and make deliveryof the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash orsecurities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising thereferenced index.
(2) If the Portfolio is a seller of protection, it receives the fixed rate. When a credit event occurs, as defined under the terms of that particular swapagreement, the Portfolio will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap less the recovery value of thereferenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equalto the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
(3) Notional amount represents the maximum potential amount the Portfolio could be required to pay as a seller of credit protection or receive as abuyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
(4) The fair value of credit default swap agreements on credit indices serves as an indicator of the current status of the payment/performance riskand represents the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement beclosed/sold as of the reporting date. Increasing fair value in absolute terms, when compared to the notional amount of the swap, represents adeterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined underthe terms of the agreement.
SEE NOTES TO FINANCIAL STATEMENTS.
A26
CONSERVATIVE BALANCED PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
* Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and exchange-traded swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument, and over-the-counter swap contractswhich are recorded at fair value.
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 was as follows:
106.1Liabilities in excess of other assets . . . . . . . . . . . . . . . . . . . . . (6.1)
100.0%
The Portfolio invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments arecredit risk, equity risk and interest rate risk. The effect of such derivative instruments on the Portfolio’s financial position and financial performance asreflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of June 30, 2015 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for as hedginginstruments, carried at fair value
Asset Derivatives Liability DerivativesBalance Sheet Location Fair Value Balance Sheet Location Fair Value
Credit contractsPremiums paid for swapagreements $ 357,674 — $ —
Interest rate contracts Unaffiliated investments 507,875Options writtenoutstanding, at value 276,250
Total $2,837,722 $1,856,342
* Includes cumulative appreciation/depreciation as reported in schedule of open futures and exchange-traded swap contracts. Only unsettledvariation margin receivable (payable) is reported within the Statement of Assets and Liabilities.
The effects of derivative instruments on the Statement of Operations for the six months ended June 30, 2015 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in IncomeDerivatives not accounted for as hedginginstruments, carried at fair value Rights*
* Included in net realized gain (loss) on investment transactions in the Statement of Operations.
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in IncomeDerivatives not accounted for as hedginginstruments, carried at fair value
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
Offsetting of over-the-counter (OTC) derivative assets and liabilities:
The Portfolio invested in OTC derivatives during the reporting period that are either offset in accordance with current requirements or are subject toenforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related nettingarrangements for OTC derivatives, where the legal right to set-off exists, is presented in the summary below.
(1) Includes unrealized appreciation on swaps and forwards, premiums paid on swap agreements and market value of purchased options.
(2) Includes unrealized depreciation on swaps and forwards, premiums received on swap agreements and market value of written options.
(3) Amounts shown reflect actual collateral received or pledged by the Portfolio. Such amounts are applied up to 100% of the Portfolio’s OTCderivative exposure by counterparty.
SEE NOTES TO FINANCIAL STATEMENTS.
A30
CONSERVATIVE BALANCED PORTFOLIO (continued)
STATEMENT OF ASSETS & LIABILITIES(Unaudited)as of June 30, 2015ASSETS
Investments at value, including securities on loan of$57,070,426:Unaffiliated investments (cost $1,416,157,391) . . . . $2,131,908,504Affiliated investments (cost $526,076,804) . . . . . . . . 523,586,425
COMMERCIAL MORTGAGE-BACKED SECURITIES — 10.7%Banc of America Commercial Mortgage Trust, Series 2006-5, Class A2 . . . 5.317% 09/10/47 195 195,177Banc of America Commercial Mortgage Trust, Series 2006-6, Class A2 . . . 5.309% 10/10/45 334 334,384Banc of America Commercial Mortgage Trust, Series 2006-6, Class A4 . . . 5.356% 10/10/45 800 819,120Banc of America Commercial Mortgage Trust, Series 2007-2,
New Jersey — 0.4%New Jersey State Turnpike Authority, Revenue Bonds, Series A, BABs . . . . . . . 7.102% 01/01/41 1,175 1,578,319New Jersey State Turnpike Authority, Revenue Bonds, Series F, BABs . . . . . . . 7.414% 01/01/40 2,050 2,846,855
See the Glossary for abbreviations used in the Portfolio descriptions.
* Non-income producing security.
# Principal or notional amount is shown in U.S. dollars unless otherwise stated.
(a) Variable rate instrument. The interest rate shown reflects the rate in effect at June 30, 2015.
(b) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $36,993,201;cash collateral of $38,015,140 (included in liabilities) was received with which the Portfolio purchased highly liquid short-term investments.Securities on loan are subject to contractual netting arrangements.
(c) Represents security, or a portion thereof, segregated as collateral for swap agreements.
(d) Represents issuer in default on interest payments. Non-income producing security.
(e) Indicates a security or securities that has been deemed illiquid.
SEE NOTES TO FINANCIAL STATEMENTS.
A47
DIVERSIFIED BOND PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
(f) Indicates a restricted security; the aggregate original cost of the restricted securities is $20,117,055. The aggregate value of $18,631,856 isapproximately 1.8% of net assets.
(g) Represents zero coupon bond or principal only securities. Rate represents yield to maturity at purchase date.
(h) Represents security, or a portion thereof, segregated as collateral for futures contracts.
(i) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 — Prudential CoreTaxable Money Market Fund and the Prudential Investment Portfolios 2 — Prudential Core Short-Term Bond Fund.
(j) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
(k) Interest rate not available as of June 30, 2015.
(l) Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end:
Futures contracts outstanding at June 30, 2015:
Number ofContracts Type
ExpirationDate
Value atTrade Date
Value atJune 30, 2015
UnrealizedDepreciation(1)
Long Positions:2,961 5 Year U.S. Treasury Notes Sep. 2015 $353,273,889 $353,122,382 $ (151,507)1,767 10 Year U.S. Treasury Notes Sep. 2015 223,697,346 222,945,703 (751,643)350 U.S. Ultra Treasury Bond Sep. 2015 55,234,702 53,921,875 (1,312,827)
(2,215,977)
Short Position:1,564 2 Year U.S. Treasury Notes Sep. 2015 341,950,700 342,418,249 (467,549)
$(2,683,526)
(1) Cash of $48,350 and U.S. Treasury obligations with a combined market value of $6,403,033 have been segregated with Citigroup Global Marketsto cover requirements for open contracts at June 30, 2015.
Forward foreign currency exchange contracts outstanding at June 30, 2015:
Purchase Contracts Counterparty
NotionalAmount
(000)
Value atSettlement
DateCurrentValue
UnrealizedAppreciation
(Depreciation)
Brazilian Real,Expiring 07/14/15 Barclays Capital Group BRL 2,673 $ 830,500 $ 855,118 $ 24,618
British Pound,Expiring 07/28/15 JPMorgan Chase GBP 160 245,022 251,426 6,404
Canadian Dollar,Expiring 07/16/15 JPMorgan Chase CAD 406 323,894 324,955 1,061
Turkish Lira,Expiring 07/24/15 Deutsche Bank AG TRY 568 210,500 210,299 201Expiring 07/24/15 Hong Kong & Shanghai Bank TRY 46,254 16,718,090 17,127,758 (409,668)
$39,872,188 $40,710,861 (838,673)
$(841,119)
Interest rate swap agreements outstanding at June 30, 2015:
NotionalAmount(000)#
TerminationDate
FixedRate
FloatingRate
FairValue
UpfrontPremiums
Paid(Received)
UnrealizedAppreciation
(Depreciation) Counterparty
Over-the-counter swap agreements:AUD 1,270 12/19/32 4.423% 6 Month BBSW(2) $ 95,617 $ — $ 95,617 Barclays Capital GroupAUD 1,620 12/20/32 4.420% 6 Month BBSW(2) 121,376 — 121,376 Citigroup Global MarketsCLP 610,000 02/25/20 3.910% 1 Day CLP OIS(2) (2,956) — (2,956) JPMorgan ChaseCOP 185,000 02/13/20 5.050% 1 Day COLIBOR OIS(2) (445) — (445) Deutsche Bank AGCOP 685,000 04/17/20 5.050% 1 Day COLIBOR OIS(2) (2,027) — (2,027) Deutsche Bank AGCOP 1,365,000 04/10/25 6.020% 1 Day COLIBOR OIS(2) (8,819) — (8,819) JPMorgan Chase
MXN 76,000 06/20/18 6.020%28 Day Mexican Interbank
Rate(2) 198,130 — 198,130Credit Suisse First Boston
Corp.
MXN 73,100 11/09/18 5.410%28 Day Mexican Interbank
Rate(2) 99,973 — 99,973 Deutsche Bank AG25,690 11/15/19 1.334% 3 Month LIBOR(1) 282,091 — 282,091 Citigroup Global Markets
ZAR 10,000 09/03/33 8.970% 3 Month JIBAR(2) 22,171 — 22,171 Hong Kong & Shanghai Bank
(1) Portfolio pays the fixed rate and receives the floating rate.
(2) Portfolio pays the floating rate and receives the fixed rate.
Credit default swap agreements outstanding at June 30, 2015:
Reference Entity/ObligationTermination
DateFixedRate
NotionalAmount(000)#(4)
ImpliedCredit
Spread atJune 30,2015(5)
FairValue
UpfrontPremiums
Paid(Received)
UnrealizedDepreciation Counterparty
Over-the-counter credit default swaps on corporate issues—Buy Protection(1):American International Group,
Inc. 03/20/18 3.700% 3,700 0.320% $(342,728) $ — $(342,728) Deutsche Bank AGR.R. Donnelley & Sons Co. 09/20/16 1.000% 4,750 0.274% (44,040) 229,662 (273,702) JPMorgan Chase
$(386,768) $229,662 $(616,430)
Reference Entity/ObligationTermination
DateFixedRate
NotionalAmount(000)#(4)
FairValue(3)
UpfrontPremiums
Paid(Received)
UnrealizedAppreciation Counterparty
Over-the-counter credit default swaps on credit indices—Sell Protection(2):CDX.NA.HY.17.V9 12/20/16 5.000% 6,440 $ 357,331 $ 270,122 $ 87,209 Credit Suisse First Boston Corp.CDX.NA.HY.17.V9 12/20/16 5.000% 12,420 689,138 567,525 121,613 Deutsche Bank AGCDX.NA.HY.17.V9 12/20/16 5.000% 17,940 995,421 774,908 220,513 Deutsche Bank AGCDX.NA.HY.17.V9 12/20/16 5.000% 11,500 638,091 503,924 134,167 Deutsche Bank AG
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
A U.S. Treasury obligation and a Sovereign with a combined market value of $11,964,494 have been segregated with Citigroup Global Markets tocover requirements for open exchanged-traded interest rate and credit default swap contracts at June 30, 2015.
The Portfolio entered into credit default swaps (“CDS”) to provide a measure of protection against defaults or to take an active long or short positionwith respect to the likelihood of a particular issuer’s default or the reference entity’s credit soundness. CDS contracts generally trade based on aspread which represents the cost a protection buyer has to pay the protection seller. The protection buyer is said to be short the credit as the value ofthe contract rises the more the credit deteriorates. The value of the CDS contract increases for the protection buyer if the spread increases.
(1) If the Portfolio is a buyer of protection, it pays the fixed rate. When a credit event occurs, as defined under the terms of that particular swapagreement, the Portfolio will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and make deliveryof the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash orsecurities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising thereferenced index.
(2) If the Portfolio is a seller of protection, it receives the fixed rate. When a credit event occurs, as defined under the terms of that particular swapagreement, the Portfolio will either (i) pay the buyer of protection an amount equal to the notional amount of the swap less the recovery value ofthe referenced obligation or underlying securities comprising the referenced obligation or (ii) pay a net settlement amount in the form of cash orsecurities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising thereferenced index.
(3) The fair value of credit default swap agreements on credit indices serves as an indicator of the current status of the payment/performance riskand represents the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement beclosed/sold as of the reporting date. Increasing fair value in absolute terms when compared to the notional amount of the swap, represents adeterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined underthe terms of the agreement.
(4) Notional amount represents the maximum potential amount the Portfolio could be required to pay as a seller of credit protection or receive as abuyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
(5) Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swap agreements on corporate issuesor sovereign issues of the emerging country as of reporting date serve as an indicator of the current status of the payment/performance risk andrepresent the likelihood of risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost ofbuying/selling protection and may include up-front payments required to be made to enter into the agreement. Wider credit spreads represent adeterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined underthe terms of the agreement.
Currency swap agreements outstanding at June 30, 2015:
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
* Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and exchange-traded swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument, and over-the-counter swap contractswhich are recorded at fair value.
** Of which, $(28,126) was relating to securities held at the reporting period end.
Level 3 securities as presented in the table above are being fair valued using pricing methodologies approved by Board, which contain unobservableinputs as follows:
It is the Portfolio’s policy to recognize transfers in and transfers out at the fair value as of the beginning of period. At the reporting period end,securities transferred levels as follows:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 was asfollows:
103.0Liabilities in excess of other assets . . . . . . . . . . . . . . . . . . . . . (3.0)
100.0%
* Less than 0.05%
The Portfolio invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments arecredit risk, foreign exchange risk and interest rate risk. The effect of such derivative instruments on the Portfolio’s financial position and financialperformance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of June 30, 2015 as presented in the Statement of Assets and Liabilities:
Derivatives not designated as hedginginstruments, carried at fair value
Asset Derivatives Liability DerivativesBalance Sheet Location Fair Value Balance Sheet Location Fair Value
* Includes cumulative appreciation/depreciation as reported in the schedule of open futures and exchange-traded swap contracts. Only unsettledvariation margin receivable (payable) is reported within the Statement of Assets and Liabilities.
The effects of derivative instruments on the Statement of Operations for the six months ended June 30, 2015 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income
Derivatives not accounted for as hedginginstruments, carried at fair value
Offsetting of over-the-counter (OTC) derivative assets and liabilities:
The Portfolio invested in OTC derivatives during the reporting period that are either offset in accordance with current requirements or are subject toenforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related nettingarrangements for OTC derivatives, where the legal right to set-off exists, is presented in the summary below.
(1) Includes unrealized appreciation on swaps and forwards, premiums paid on swap agreements and market value of purchased options.
(2) Includes unrealized depreciation on swaps and forwards, premiums received on swap agreements and market value of written options.
(3) Amounts shown reflect actual collateral received or pledged by the Portfolio. Such amounts are applied up to 100% of the Portfolio’s OTCderivative exposure by counterparty.
SEE NOTES TO FINANCIAL STATEMENTS.
A56
DIVERSIFIED BOND PORTFOLIO (continued)
STATEMENT OF ASSETS AND LIABILITIES(Unaudited)as of June 30, 2015ASSETS
See the Glossary for abbreviations used in the Portfolio descriptions.
* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market valueof such securities, including those sold and pending settlement, is$93,785,223; cash collateral of $94,663,514 (included in liabilities)was received with which the Portfolio purchased highly liquid short-term investments. Securities on loan are subject to contractualnetting arrangements. Cash collateral is less than 102% of themarket value of securities loaned due to significant marketincreases on the last business day of the reporting period.Collateral was subsequently received on the following businessday and the Fund remained in compliance.
(b) Represents security, or a portion thereof, purchased with cashcollateral received for securities on loan.
(c) Prudential Investments LLC, the manager of the Portfolio, alsoserves as manager of the Prudential Investment Portfolios 2 —Prudential Core Taxable Money Market Fund.
Various inputs are used in determining the value of the Portfolio’sinvestments. These inputs are summarized in the three broad levelslisted below.
Level 1—quoted prices generally in active markets for identicalsecurities.
Level 2—quoted prices for similar securities, interest rates and yieldcurves, prepayment speeds, foreign currency exchange ratesand other observable inputs.
Level 3—unobservable inputs for securities valued in accordance withBoard approved fair valuation procedures.
SEE NOTES TO FINANCIAL STATEMENTS.
A59
EQUITY PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 was as follows:
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
ASSET-BACKED SECURITIES(continued)
InterestRate
MaturityDate
PrincipalAmount(000)#
Value(Note 2)
Residential Mortgage-Backed Securities (continued)LSTAR Securities Investment Trust, Series 2015-5, Class A1, 144A . . . . . . . . . 2.184%(b) 04/01/20 2,921 $ 2,909,845LSTAR Securities Investment Trust, Series 2015-6, Class A, 144A . . . . . . . . . . 2.184%(b) 05/01/20 5,150 5,111,790Morgan Stanley ABS Capital I, Inc. Trust, Series 2003-HE1, Class M1 . . . . . . . . 1.387%(b) 05/25/33 383 359,254Morgan Stanley ABS Capital I, Inc. Trust, Series 2004-HE5, Class M1 . . . . . . . . 1.132%(b) 06/25/34 819 769,466Morgan Stanley ABS Capital I, Inc. Trust, Series 2004-NC1, Class M1 . . . . . . . 1.237%(b) 12/25/33 693 668,839Morgan Stanley Dean Witter Capital I, Inc. Trust,
Series 2002-HE1, Class M1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.087%(b) 07/25/32 344 328,871Morgan Stanley Dean Witter Capital I, Inc. Trust,
SOVEREIGN BONDS 0.4%Brazilian Government International Bond (Brazil), Sr. Unsec’d. Notes(a) . . . . . . 4.250% 01/07/25 3,275 3,162,012Colombia Government International Bond (Colombia), Sr. Unsec’d. Notes . . . . 4.000% 02/26/24 1,475 1,467,625Hungary Government International Bond (Hungary), Sr. Unsec’d. Notes . . . . . . 4.000% 03/25/19 580 598,734Indonesia Government International Bond (Indonesia), Sr. Unsec’d. Notes,
See the Glossary for abbreviations used in the Portfolio descriptions.
# Principal or notional amount is shown in U.S. dollars unless otherwise stated.
* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is$103,974,613; cash collateral of $106,610,240 (included in liabilities) was received with which the Portfolio purchased highly liquid short-terminvestments. Securities on loan are subject to contractual netting arrangements.
(b) Variable rate instrument. The interest rate shown reflects the rate in effect at June 30, 2015.
(c) Indicates a security or securities that have been deemed illiquid.
(d) Represents issuer in default on interest payments. Non-income producing security. Such securities may be post maturity.
(e) Indicates a restricted security; the aggregate original cost of the restricted securities is $7,364,067. The aggregate value of $7,433,654 isapproximately 0.2% of net assets.
(f) Represents zero coupon bond or principal only securities. Rate represents yield to maturity at purchase date.
(g) Represents security, or a portion thereof, segregated as collateral for swap agreements.
(h) Represents security, or a portion thereof, segregated as collateral for futures contracts.
(i) All or partial principal amount represents “TBA” mortgage dollar rolls. The aggregate mortgage dollar roll principal amount of $151,250,000 isapproximately 3.91% of net assets.
(j) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 — Prudential CoreTaxable Money Market Fund and the Prudential Investment Portfolios 2 — Prudential Core Short-Term Bond Fund.
(k) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
(l) Rate quoted represents yield-to-maturity as of purchase date.
(m) Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end:
Futures contracts outstanding at June 30, 2015:
Number ofContracts Type
ExpirationDate
Value atTrade Date
Value atJune 30,
2015
UnrealizedAppreciation
(Depreciation)(1)
Long Positions:97 2 Year U.S. Treasury Notes Sep. 2015 $21,244,653 $21,236,938 $ (7,715)
666 5 Year U.S. Treasury Notes Sep. 2015 79,286,592 79,425,703 139,111330 10 Year U.S. Treasury Notes Sep. 2015 41,451,438 41,636,719 185,281109 DAX Index Sep. 2015 33,351,489 33,422,247 70,758
SEE NOTES TO FINANCIAL STATEMENTS.
A85
FLEXIBLE MANAGED PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
Futures contracts outstanding at June 30, 2015 (continued):
Number ofContracts Type
ExpirationDate
Value atTrade Date
Value atJune 30,
2015
UnrealizedAppreciation
(Depreciation)(1)
869 DJ Euro Stoxx 50 Index Sep. 2015 $33,267,755 $33,288,188 $ 20,433278 IBEX 35 Index Jul. 2015 33,233,147 33,394,526 161,37920 MSCI EAFE Index Mini Sep. 2015 1,883,147 1,834,000 (49,147)
257 U.S. Ultra Bonds Sep. 2015 40,668,214 39,594,063 (1,074,151)
(554,051)
Short Position:150 U.S. Long Bonds Sep. 2015 23,001,715 22,626,563 375,152
$ (178,899)
(1) U.S. Treasury Obligation with a market value of $10,250,000 has been segregated with Goldman Sachs & Co. and U.S. Government Agencysecurities and a U.S Treasury Obligation with a combined market value of $2,537,005 have been segregated with Citigroup Global Markets tocover requirements for open contracts at June 30, 2015.
Interest rate swap agreements outstanding at June 30, 2015:
NotionalAmount
(000)Termination
DateFixedRate Floating Rate
FairValue
UpfrontPremiums
Paid(Received)
UnrealizedAppreciation Counterparty
Over-the-counter swap agreements:3,158 05/17/18 0.989% 3 Month LIBOR(1) $16,715 $ — $16,715 Credit Suisse First Boston Corp.
(1) Portfolio pays the fixed rate and receives the floating rate.
Credit default swap agreements outstanding at June 30, 2015:
Reference Entity/Obligation
TerminationDate
FixedRate
NotionalAmount(000)(3)
FairValue(4)
UpfrontPremiums
Paid(Received)
UnrealizedAppreciation Counterparty
Over-the-counter credit default swaps on credit indices—Sell Protection(2):CDX.NA.HY.17.V5 12/20/16 5.000% 1,380 $ 76,571 $ 57,883 $ 18,688 Credit Suisse First Boston Corp.CDX.NA.HY.17.V5 12/20/16 5.000% 3,680 204,189 158,956 45,233 Deutsche Bank AGCDX.NA.HY.17.V5 12/20/16 5.000% 5,060 280,760 221,727 59,033 Deutsche Bank AG
U.S. Government Agency Obligations with a combined market value of $3,994,958 have been segregated with Citigroup Global Markets to coverrequirements for open interest rate and credit default exchange-traded swap contracts at June 30, 2015.
SEE NOTES TO FINANCIAL STATEMENTS.
A86
FLEXIBLE MANAGED PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
The Portfolio entered into credit default swaps (“CDS”) to provide a measure of protection against defaults or to take an active long or short positionwith respect to the likelihood of a particular issuer’s default or the reference entity’s credit soundness. CDS contracts generally trade based on aspread which represents the cost a protection buyer has to pay the protection seller. The protection buyer is said to be short the credit as the value ofthe contract rises the more the credit deteriorates. The value of the CDS contract increases for the protection buyer if the spread increases.
(1) If the Portfolio is a buyer of protection, it pays the fixed rate. When a credit event occurs, as defined under the terms of that particular swap agreement,the Series will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and make delivery of the referencedobligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to thenotional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
(2) If the Portfolio is a seller of protection, it receives the fixed rate. When a credit event occurs, as defined under the terms of that particular swapagreement, the Portfolio will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of thereferenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equalto the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
(3) Notional amount represents the maximum potential amount the Portfolio could be required to pay as a seller of credit protection or receive as abuyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
(4) The fair value of credit default swap agreements on asset-backed securities and credit indices serves as an indicator of the current status of thepayment/performance risk and represents the likelihood of an expected liability (or profit) for the credit derivative should the notional amount ofthe swap agreement be closed/sold as the reporting date. Increasing fair value in absolute terms, when compared to the notional amount of theswap, represents a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit eventoccurring as defined under the terms of the agreement.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
* Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and exchange-traded swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument, and over-the-counter swap contractswhich are recorded at fair value.
SEE NOTES TO FINANCIAL STATEMENTS.
A87
FLEXIBLE MANAGED PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 was as follows:
106.6Liabilities in excess of other assets . . . . . . . . . . . . . . . . . . . . . (6.6)
100.0%
* Less than 0.05%
SEE NOTES TO FINANCIAL STATEMENTS.
A88
FLEXIBLE MANAGED PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
The Portfolio invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments arecredit risk, equity risk and interest rate risk. The effect of such derivative instruments on the Portfolio’s financial position and financial performance asreflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of June 30, 2015 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for as hedginginstruments, carried at fair value
Asset Derivatives Liability DerivativesBalance Sheet Location Fair Value Balance Sheet Location Fair Value
Credit contractsPremiums paid for swapagreements $ 438,566 — $ —
* Includes cumulative appreciation/depreciation as reported in schedule of open futures and exchange-traded swap contracts. Only unsettledvariation margin receivable (payable) is reported within the Statement of Assets and Liabilities.
The effects of derivative instruments on the Statement of Operations for the six months ended June 30, 2015 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in IncomeDerivatives not accounted for as hedginginstruments, carried at fair value Rights*
* Included in net realized gain (loss) on investment transactions in the Statement of Operations.
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in IncomeDerivatives not accounted for as hedginginstruments, carried at fair value
** Included in net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.
SEE NOTES TO FINANCIAL STATEMENTS.
A89
FLEXIBLE MANAGED PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
For the six months ended June 30, 2015, the Portfolio’s average volume of derivative activities is as follows:
Options Purchased(1) Options Written(2)Futures
Long Position(3)Futures
Short Position(3)
$341,388 $116,867 $255,975,686 $13,093,134
Interest Rate Swaps(2)Credit Default
Swaps as Buyer(2)Credit Default
Swaps as Writer(2)
$100,123 $56,803 $10,267
(1) Cost.
(2) Notional Amount in USD (000).
(3) Value at Trade Date.
Offsetting of over-the-counter (OTC) derivative assets and liabilities:
The Portfolio invested in OTC derivatives during the reporting period that are either offset in accordance with current requirements or are subject toenforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related nettingarrangements for OTC derivatives, where the legal right to set-off exists, is presented in the summary below.
(1) Includes unrealized appreciation on swaps and forwards, premiums paid on swap agreements and market value of purchased options.
(2) Includes unrealized depreciation on swaps and forwards, premiums received on swap agreements and market value of written options.
(3) Amounts shown reflect actual collateral received or pledged by the Portfolio. Such amounts are applied up to 100% of the Portfolio’s OTCderivative exposure by counterparty.
SEE NOTES TO FINANCIAL STATEMENTS.
A90
FLEXIBLE MANAGED PORTFOLIO (continued)
STATEMENT OF ASSETS & LIABILITIES(Unaudited)as of June 30, 2015ASSETS
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
See the Glossary for abbreviations used in the Portfolio descriptions.
* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $21,605,587;cash collateral of $22,106,732 (included in liabilities) was received with which the Portfolio purchased highly liquid short-term investments.Securities on loan are subject to contractual netting arrangements.
(b) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 — Prudential CoreTaxable Money Market Fund.
(c) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 was asfollows:
102.4Liabilities in excess of other assets . . . . . . . . . . . . . . . . . . . . . (2.4)
100.0%
The Portfolio invested in derivative instruments during the reporting period. The primary type of risk associated with derivative instruments is equityrisk. The effect of such derivative instruments on the Portfolio’s financial position and financial performance as reflected in the Statement of Assetsand Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of June 30, 2015 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for as hedginginstruments, carried at fair value
Asset Derivatives Liability DerivativesBalance Sheet Location Fair Value Balance Sheet Location Fair Value
The effects of derivative instruments on the Statement of Operations for the six months ended June 30, 2015 are as follows:
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in IncomeDerivatives not accounted for as hedging instruments, carried at fair value Rights*
See the Glossary for abbreviations used in the Portfolio descriptions.
* Non-income producing security.
# Principal or notional amount shown in U.S. dollars unless otherwise stated.
(a) Variable rate instrument. The interest rate shown reflects the rate in effect at June 30, 2015.
(b) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $327,898;cash collateral of $335,198 (included in liabilities) was received with which the Portfolio purchased highly liquid short-term investments. Securitieson loan are subject to contractual netting arrangements.
(c) All or partial amount represents “TBA” mortgage dollar rolls. The aggregate mortgage dollar roll principal amount of $85,250,000 is approximately26% of net assets.
(d) Represents zero coupon bond or principal only securities. Rate represents yield to maturity at purchase date.
(e) Represents security, or a portion thereof, segregated as collateral for swap agreements.
(f) Represents security, or a portion thereof, segregated as collateral for futures contracts.
(g) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 — Prudential CoreTaxable Money Market Fund and the Prudential Investment Portfolios 2 — Prudential Core Short-Term Bond Fund.
(h) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
(j) Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end:
Futures contracts outstanding at June 30, 2015:
Number ofContracts Type
ExpirationDate
Value atTrade Date
Value atJune 30, 2015
UnrealizedAppreciation
(Depreciation)(1)
Long Positions:39 2 Year U.S. Treasury Notes Sep. 2015 $ 8,541,665 $ 8,538,563 $ (3,102)90 5 Year U.S. Treasury Notes Sep. 2015 10,669,507 10,733,203 63,696
346 10 Year U.S. Treasury Notes Sep. 2015 43,482,602 43,655,468 172,866
233,460
Short Positions:7 U.S. Long Bonds Sep. 2015 1,053,258 1,055,906 (2,648)5 U.S. Ultra Bonds Sep. 2015 769,836 770,312 (476)
(3,124)
$230,336
(1) U.S. Treasury securities with a combined market value of $1,167,445 has been segregated with Citigroup Global Markets to cover requirementsfor open contracts at June 30, 2015.
SEE NOTES TO FINANCIAL STATEMENTS.
A103
GOVERNMENT INCOME PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
Interest rate swap agreements outstanding at June 30, 2015:
U.S. Treasury obligations with a combined market value of $1,090,217 and U.S. Government Agency obligations with a combined market value of$1,023,418 has been segregated with Citigroup Global Markets to cover requirements for open exchange-traded interest rate swap contracts atJune 30, 2015.
(1) The Portfolio pays the fixed rate and receives the floating rate.
(2) The Portfolio pays the floating rate and receives the fixed rate.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
* Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and exchange-traded swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument, and over-the-counter swap contractswhich are recorded at fair value.
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 was asfollows:
126.9Liabilities in excess of other assets . . . . . . . . . . . . . . . . . . . . . (26.9)
100.0%
The Portfolio invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments arecredit risk, foreign exchange risk and interest rate risk. The effect of such derivative instruments on the Portfolio’s financial position and financialperformance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of June 30, 2015 as presented in the Statement of Assets and Liabilities:
Derivatives not designated as hedginginstruments, carried at fair value
Asset Derivatives Liability DerivativesBalance Sheet Location Fair Value Balance Sheet Location Fair Value
Interest rate contractsDue from broker —variation margin futures $ 236,562*
Due from broker —variation margin futures $ 6,226*
Interest rate contractsDue from broker —variation margin swaps 720,501*
Interest rate contracts Unaffiliated investments 395,844Options writtenoutstanding, at value 215,312
Total $1,443,462 $1,132,402
* Includes cumulative appreciation/depreciation as reported in the schedule of open futures and exchange-traded swap contracts. Only unsettledvariation margin receivable (payable) is reported within the Statement of Assets and Liabilities.
The effects of derivative instruments on the Statement of Operations for the six months ended June 30, 2015 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in IncomeDerivatives not designated as hedginginstruments, carried at fair value
* Included in net realized gain (loss) on investment transactions in the Statement of Operations.
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in IncomeDerivatives not designated as hedginginstruments, carried at fair value
Offsetting of over-the-counter (OTC) derivative assets and liabilities:
The Portfolio invested in OTC derivatives during the reporting period that are either offset in accordance with current requirements or are subject toenforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related nettingarrangements for OTC derivatives, where the legal right to set-off exists, is presented in the summary below.
(1) Includes unrealized appreciation on swaps and forwards, premiums paid on swap agreements and market value of purchased options.
(2) Includes unrealized depreciation on swaps and forwards, premiums received on swap agreements and market value of written options.
(3) Amounts shown reflect actual collateral received or pledged by the Portfolio. Such amounts are applied up to 100% of the Portfolio’s OTCderivative exposure by counterparty.
SEE NOTES TO FINANCIAL STATEMENTS.
A106
GOVERNMENT INCOME PORTFOLIO (continued)
STATEMENT OF ASSETS & LIABILITIES(Unaudited)as of June 30, 2015ASSETS
LIABILITIESPayable for investments purchased . . . . . . . . . . . . . . . . . . . 176,750,058Payable to broker for collateral for securities on loan . . . . 335,198Options written outstanding, at value (premiums received
See the Glossary for abbreviations used in the Portfolio descriptions.
# Principal or notional amount is shown in U.S. dollars unless otherwise stated.
* Non-income producing security.
(a) Variable rate instrument. The interest rate shown reflects the rate in effect at June 30, 2015.
(b) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is$494,488,012; cash collateral of $505,290,408 (included in liabilities) was received with which the Portfolio purchased highly liquid short-terminvestments. Securities on loan are subject to contractual netting arrangements.
(c) Indicates a security or securities that has been deemed illiquid.
(d) Indicates a restricted security; the aggregate cost of the securities is $264,290,873. The aggregate value of $250,399,251 is approximately 7.6%of net assets.
(e) Represents issuer in default on interest payments. Non-income producing security. Such security may be post maturity.
(f) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 — Prudential CoreTaxable Money Market Fund and the Prudential Investment Portfolios 2 — Prudential Core Short-Term Bond Fund.
(g) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
(h) Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end:
SEE NOTES TO FINANCIAL STATEMENTS.
A122
HIGH YIELD BOND PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
Credit default swap agreements outstanding at June 30, 2015:
Cash of $1,500,000 has been segregated with Citigroup Global Markets to cover requirements for open credit default swap contracts atJune 30, 2015.
The Portfolio entered into credit default swaps (“CDS”) to provide a measure of protection against defaults or to take an active long or short positionwith respect to the likelihood of a particular issuer’s default or the reference entity’s credit soundness. CDS contracts generally trade based on aspread which represents the cost a protection buyer has to pay the protection seller. The protection buyer is said to be short the credit as the value ofthe contract rises the more the credit deteriorates. The value of the CDS contract increases for the protection buyer if the spread increases.
(1) If the Portfolio is a seller of protection, it receives the fixed rate. When a credit event occurs, as defined under the terms of that particular swapagreement, the Portfolio will either (i) pay to buyer of protection an amount equal to the notional amount of the swap and take delivery of thereferenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securitiesequal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
(2) The fair value of credit default swap agreements on credit indices serves as an indicator of the current status of the payment/performance riskand represents the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement beclosed/sold as of the reporting date. Increasing fair value in absolute terms, when compared to the notional amount of the swap, represents adeterioration of the referenced entity’s credit soundness and greater likelihood of risk of default or other credit event occurring as defined underthe terms of the agreement.
(3) Notional amount represents the maximum potential amount the Portfolio could be required to pay as a seller of credit protection or receive as abuyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
(4) Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swap agreements on corporate orsovereign issues of an emerging country as of the reporting date serve as an indicator of the current status of the payment/performance risk andrepresent the likelihood of risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost ofbuying/selling protection and may include up-front payments required to be made to enter into the agreement. Wider credit spreads represent adeterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined underthe terms of the agreement.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
* Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and exchange-traded swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument, and over-the-counter swap contractswhich are recorded at fair value
** Of which, $100,139 was relating to securities held at the reporting period end.
Level 3 securities as presented in the table above are being fair valued using pricing methodologies approved by Board, which contain unobservableinputs as follows:
It is the Portfolio’s policy to recognize transfers in and transfers out at the fair value as of the beginning of period. At the reporting period end,securities transferred levels as follows:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 wasas follows:
114.3Liabilities in excess of other assets . . . . . . . . . . . . . . . . . . . . . (14.3)
100.0%
The Portfolio invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments arecredit risk and equity risk. The effect of such derivative instruments on the Portfolio’s financial position and financial performance as reflected in theStatement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of June 30, 2015 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for as hedginginstruments, carried at fair value
Asset Derivatives Liability DerivativesBalance Sheet Location Fair Value Balance Sheet Location Fair Value
* Includes cumulative appreciation/depreciation as reported in the the schedule of exchange-traded swap contracts. Only unsettled marginreceivable (payable) is reported within the Statement of Assets and Liabilities.
The effects of derivative instruments on the Statement of Operations for the six months ended June 30, 2015 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in IncomeDerivatives not accounted for as hedging instruments, carried at fair value Swaps Total
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in IncomeDerivatives not accounted for as hedging instruments, carried at fair value Swaps Warrants* Total
* Included in net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.
For the six months ended June 30 2015, the Portfolio’s average notional amount for credit default swaps as writer was $22,650,000.
Offsetting of over-the-counter (OTC) derivative assets and liabilities:
The Portfolio invested in OTC derivatives during the reporting period that are either offset in accordance with current requirements or are subject toenforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related nettingarrangements for OTC derivatives, where the legal right to set-off exists, is presented in the summary below.
(1) Includes unrealized appreciation on swaps and forwards, premiums paid on swap agreements and market value of purchased options.
(2) Includes unrealized depreciation on swaps and forwards, premiums received on swap agreements and market value of written options.
(3) Amounts shown reflect actual collateral received or pledged by the Portfolio. Such amounts are applied up to 100% of the Portfolio’s OTCderivative exposure by counterparty.
SEE NOTES TO FINANCIAL STATEMENTS.
A126
HIGH YIELD BOND PORTFOLIO (continued)
STATEMENT OF ASSETS & LIABILITIES(Unaudited)as of June 30, 2015ASSETS
Investments at value, including securities on loan of$494,488,012:Unaffiliated investments (cost $3,245,428,856) . . . . $3,181,032,423Affiliated investments (cost $575,916,576) . . . . . . . . 575,835,061
See the Glossary for abbreviations used in the Portfolio descriptions.
* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market valueof such securities, including those sold and pending settlement, is$86,416,474; cash collateral of $87,256,096 (included in liabilities)was received with which the Portfolio purchased highly liquidshort-term investments. Securities on loan are subject tocontractual netting arrangements. Cash collateral is less than102% of the market value of securities loaned due to significantmarket increases on the last business day of the reporting period.Collateral was subsequently received on the following businessday and the Fund remained in compliance.
(b) Represents security, or a portion thereof, purchased with cashcollateral received for securities on loan.
(c) Prudential Investments LLC, the manager of the Portfolio, alsoserves as manager of the Prudential Investment Portfolios 2 —Prudential Core Taxable Money Market Fund.
Various inputs are used in determining the value of the Portfolio’sinvestments. These inputs are summarized in the three broad levelslisted below.
Level 1—quoted prices generally in active markets for identicalsecurities.
Level 2—quoted prices for similar securities, interest rates and yieldcurves, prepayment speeds, foreign currency exchange ratesand other observable inputs.
Level 3—unobservable inputs for securities valued in accordance withBoard approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 wasas follows:
See the Glossary for abbreviations used in the Portfolio descriptions.
# Principal amount is shown in U.S. dollars unless otherwise stated.
(a) Variable rate instrument. The interest rate shown reflects the rate in effect at June 30, 2015.
(b) Rate quoted represents yield-to-maturity as of purchase date.
(c) The value of the Repurchase Agreement is $52,000,000. The Repurchase Agreement is collateralized by a U.S. Treasury Obligation (couponrate 6.000%, maturity date 02/15/26), with the value, including accrued interest of $53,040,007. The Repurchase Agreement is subject to acontractual netting arrangement. For further detail on the repurchase agreement and the corresponding counterparty, see the Scheduleof Investments.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
SEE NOTES TO FINANCIAL STATEMENTS.
A134
MONEY MARKET PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 wasas follows:
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
See the Glossary for abbreviations used in the Portfolio descriptions.
* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $37,905,746;cash collateral of $39,480,426 (included in liabilities) was received with which the Portfolio purchased highly liquid short-term investments.Securities on loan are subject to contractual netting arrangements.
(b) Indicates a security that has been deemed illiquid.
(c) Indicates a restricted security; the aggregate original cost of such securities is $8,840,190. The aggregate value of, $1,733,935, is approximately0.3% of net assets.
(d) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 — Prudential CoreTaxable Money Market Fund.
(e) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 was asfollows:
106.7Liabilities in excess of other assets . . . . . . . . . . . . . . . . . . . . . (6.7)
100.0%
The Portfolio invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments isequity risk. The effect of such derivative instruments on the Portfolio’s financial position and financial performance as reflected in the Statement ofOperations is presented in the summary below.
The effects of derivative instruments on the Statement of Operations for the six months ended June 30, 2015 are as follows:
For the six months ended June 30, 2015, the Portfolio did not have any realized gain or (loss) on derivatives recognized in income on the Statementof Operations.
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in IncomeDerivatives not designated as hedging instruments, carried at fair value Warrants*
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
See the Glossary for abbreviations used in the Portfolio descriptions.
* Non-income producing security.
# Principal amount shown in U.S. dollars unless otherwise stated.
(a) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $84,464,857;cash collateral of $86,589,727 (included with liabilities) was received with which the Portfolio purchased highly liquid short-term investments.Securities on loan are subject to contractual netting arrangements.
(b) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 — Prudential CoreTaxable Money Market Fund.
(c) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
(d) Rate quoted represents yield-to-maturity as of purchase date.
(e) Represents security, or a portion thereof, segregated as collateral for futures contracts.
(f) Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end:
Futures contracts outstanding at June 30, 2015:
Number ofContracts Type
ExpirationDate
Value atTrade Date
Value atJune 30, 2015
UnrealizedDepreciation(1)
Long Position:78 Russell 2000 Mini Index Sep. 2015 $9,863,379 $9,753,120 $(110,259)
(1) A U.S. Treasury Obligation with a market value of $750,000 has been segregated with UBS AG to cover requirements for open contracts atJune 30, 2015.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
* Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and exchange-traded swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument, and over-the-counter swap contractswhich are recorded at fair value.
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 was asfollows:
111.3Liabilities in excess of other assets . . . . . . . . . . . . . . . . . . . . . (11.3)
100.0%
The Portfolio invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments isequity risk. The effect of such derivative instruments on the Portfolio’s financial position and financial performance as reflected in the Statement ofAssets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of June 30, 2015 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for as headginginstruments, carried at fair value
Asset Derivatives Liability DerivativesBalance Sheet Location Fair Value Balance Sheet Location Fair Value
* Includes cumulative appreciation/depreciation as reported in the schedule of open futures. Only unsettled variation margin receivable (payable) isreported within the Statement of Assets and Liabilities.
The effects of derivative instruments on the Statement of Operations for the six months ended June 30, 2015 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in IncomeDerivatives not accounted for as hedging instruments, carried at fair value Futures
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in IncomeDerivatives not accounted for as hedging instruments, carried at fair value Futures
See the Glossary for abbreviations used in the Portfolio descriptions.
# Principal amount shown in U.S. dollars unless otherwise stated.
* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market valueof such securities, including those sold and pending settlement, is$108,588,439; cash collateral of $111,980,415 (included inliabilities) was received with which the Portfolio purchased highlyliquid short-term investments. Securities on loan are subject tocontractual netting arrangements.
(b) Represents security, or a portion thereof, purchased with cashcollateral received for securities on loan.
(c) Prudential Investments LLC, the manager of the Portfolio, alsoserves as manager of the Prudential Investment Portfolios 2 —Prudential Core Taxable Money Market Fund.
(d) Rate quoted represents yield-to-maturity as of purchase date.
(e) Represents security, or a portion thereof, segregated as collateralfor futures contracts.
(f) Includes net unrealized appreciation (depreciation) on the followingderivative contracts held at reporting period end:
201 S&P 500 Index Sep. 2015 104,944,702 103,233,600 (1,711,102)
$(1,777,747)
(1) A U.S. Government Treasury security with a market value of $6,000,000 has been segregated with UBS AG to cover requirements for opencontracts at June 30, 2015.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
* Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and exchange-traded swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument, and over-the-counter swap contractswhich are recorded at fair value.
SEE NOTES TO FINANCIAL STATEMENTS.
A160
STOCK INDEX PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 wasas follows:
103.1Liabilities in excess of other assets . . . . . . . . . . . . . . . . . . . . . (3.1)
100.0%
The Portfolio invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments isequity risk. The effect of such derivative instruments on the Portfolio’s financial position and financial performance as reflected in the Statement ofAssets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of June 30, 2015 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for as hedgingInstruments, carried at fair value
Asset Derivatives Liability DerivativesBalance Sheet Location Fair Value Balance Sheet Location Fair Value
Due from/to broker —variation margin futures $1,777,747*
* Includes cumulative appreciation/depreciation as reported in schedule of open futures. Only unsettled variation margin receivable (payable) isreported within the Statement of Assets and Liabilities.
The effects of derivative instruments on the Statement of Operations for the six months ended June 30, 2015 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in IncomeDerivatives not accounted for as hedging instruments, carried at fair value Futures
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in IncomeDerivatives not accounted for as hedging instruments, carried at fair value Futures
See the Glossary for abbreviations used in the Portfolio descriptions.
* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market valueof such securities, including those sold and pending settlement, is$36,127,204; cash collateral of $36,854,714 (included in liabilities)was received with which the Portfolio purchased highly liquid short-term investments. Securities on loan are subject to contractualnetting arrangements.
(b) Prudential Investments LLC, the manager of the Portfolio, alsoserves as manager of the Prudential Investment Portfolios 2 —Prudential Core Taxable Money Market Fund.
(c) Represents security, or a portion thereof, purchased with cashcollateral received for securities on loan.
Various inputs are used in determining the value of the Portfolio’sinvestments. These inputs are summarized in the three broad levelslisted below.
Level 1—quoted prices generally in active markets for identicalsecurities.
Level 2—quoted prices for similar securities, interest rates and yieldcurves, prepayment speeds, foreign currency exchange ratesand other observable inputs.
Level 3—unobservable inputs for securities valued in accordance withBoard approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 wasas follows:
SCHEDULE OF INVESTMENTS As of June 30, 2015 (Unaudited)
The following abbreviations are used in the preceding Portfolios’ descriptions:
CurrencyAUD Australian DollarBRL Brazilian RealCAD Canadian DollarCLP Chilean PesoCOP Colombian PesoEUR EuroGBP British PoundHUF Hungarian ForintJPY Japanese YenMXN Mexican PesoPLN Polish ZlotyTRY Turkish LiraZAR South African Rand
IndexCDX Credit Derivative IndexDAX German Stock IndexIBEX Spanish Stock IndexSTOXX Stock Index of Eurozone
Other144A Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except
to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid.Reg D Security was purchased pursuant to Regulation D under the Securities Act of 1933, providing exemption from the registration
requirements. Unless otherwise noted, Regulation D securities are deemed to be liquid.RegS Regulation S. Security was purchased pursuant to Regulation S and may not be offered, sold or delivered within the United
States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subjectto, the registration requirements of the Securities Act of 1933.
ABS Asset-Backed SecurityADR American Depositary ReceiptAID Agency for International DevelopmentBABs Build America BondsBBSW Australian Bank Bill Swap Reference Ratebps Basis PointsCDO Collateralized Debt ObligationCDO Credit Derivative IndexCLO Collateralized Loan ObligationCMBS Collateralized Mortgage-Backed SecurityCOLIBOR Columbia Interbank Offered RateCVA Certificate Van Aandelen (Bearer)EMTN Euro Medium Term NoteETF Exchange Traded FundEUROIS Euro Overnight Index SwapFHLMC Federal Home Loan Mortgage Corp.GMTN Global Medium Term NoteGO General ObligationI/O Interest OnlyJIBAR Johannesburg Interbank Agreed RateLIBOR London Interbank Offered RateMSCI Morgan Stanley Capital InternationalMTN Medium Term NoteOIS Overnight Index SwapPIK Payment-in-KindPIPE Private Investment in Public EquityPO Principle OnlyPRFC Preference SharesREIT Real Estate Investment TrustREMICS Real Estate Mortgage Investment Conduit ServiceSTRIPS Separate Trading of Registered Interest and Principle of SecuritiesSWX Swiss ExchangeTBA To Be AnnouncedTIPS Treasury Inflation Protected SecuritiesUSAID United States Agency for International Development
SEE NOTES TO FINANCIAL STATEMENTS.
A167
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NOTES TO THE FINANCIAL STATEMENTS OFTHE PRUDENTIAL SERIES FUND
(Unaudited)
Note 1: General
The Prudential Series Fund (“Series Fund”), organized as a Delaware statutory trust, is a diversified open-endmanagement investment company registered under the Investment Company Act of 1940, as amended(“1940 Act”). The Series Fund is composed of seventeen Portfolios (“Portfolio” or “Portfolios”), each withseparate series shares. The information presented in these financial statements pertains to the thirteenPortfolios which are listed below along with each Portfolio’s investment objective.
Conservative Balanced Portfolio: Total investment return consistent with a conservatively manageddiversified portfolio.
Diversified Bond Portfolio: High level of income over a longer term while providing reasonable safetyof capital.
Equity Portfolio: Long-term growth of capital.
Flexible Managed Portfolio: Total return consistent with an aggressively managed diversified portfolio.
Global Portfolio: Long-term growth of capital.
Government Income Portfolio: High level of income over the long-term consistent with the preservationof capital.
High Yield Bond Portfolio: High total return.
Jennison Portfolio: Long-term growth of capital.
Money Market Portfolio: Maximum current income consistent with the stability of capital and maintenanceof liquidity.
Natural Resources Portfolio: Long-term growth of capital.
Small Capitalization Stock Portfolio: Long-term growth of capital.
Stock Index Portfolio: Achieve investment results that generally correspond to the performance of publiclytraded common stocks.
Value Portfolio: Capital appreciation.
Note 2: Accounting Policies
The Series Fund follows investment company accounting and reporting guidance of the Financial AccountingStandards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services — InvestmentCompanies. The following accounting policies conform to U.S. generally accepted accounting principles. TheSeries Fund and the Portfolios consistently follow such policies in the preparation of their financial statements.
Securities Valuation: Each Portfolio holds securities and other assets that are fair valued at the close ofeach day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would bereceived to sell an asset or paid to transfer a liability in an orderly transaction between market participants onthe measurement date. The Board of Trustees (the “Board”) has adopted Valuation Procedures for securityvaluation under which fair valuation responsibilities have been delegated to Prudential Investments LLC(“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee isresponsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedurespermit a Portfolio to utilize independent pricing vendor services, quotations from market makers, andalternative valuation methods when market quotations are either not readily available or not deemedrepresentative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review,approval, and ratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how each Portfolio’s investments are valued, all of which are categorized accordingto the three broad levels (Level 1, 2, or 3) detailed in the table following each Portfolio’s Scheduleof Investments.
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Common and preferred stocks, exchange-traded funds, and derivative instruments, such as futures oroptions, that are traded on a national securities exchange are valued at the last sale price as of the close oftrading on the applicable exchange where the security principally trades. Securities traded via NASDAQ arevalued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price orNASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valuedat the mean between the last reported bid and ask prices, or at the last bid price in the absence of an askprice. These securities are classified as Level 2 in the fair value hierarchy.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendor servicesthat provide model prices derived using adjustment factors based on information such as local closing price,relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable.Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. Such securitiesare valued using model prices to the extent that the valuation meets the established confidence level for eachsecurity. If the confidence level is not met or the vendor does not provide a model price, securities are valuedin accordance with exchange-traded common and preferred stocks discussed above.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of theclose of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair valuehierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter (“OTC”) market are generally valued at prices providedby approved independent pricing vendors. The pricing vendors provide these prices after evaluatingobservable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranchelevel attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades.Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
The Money Market Portfolio values all of its securities of sufficient credit quality, at amortized cost, whichapproximates fair value. The amortized cost method involves valuing a security at its cost on the date ofpurchase and thereafter assuming a constant amortization to maturity of the difference between the principalamount due at maturity and cost. These securities are categorized as Level 2 in the fair value hierarchy.
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuationbased on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. Theseinstruments are categorized as Level 2 in the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registeredexchange, are generally valued at the daily settlement price determined by the respective exchange. Thesesecurities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
Portfolio securities and other assets that cannot be priced according to the methods described above arevalued based on pricing methodologies approved by the Board. In the event that unobservable inputs areused when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the natureof any restrictions on disposition of the securities; assessment of the general liquidity of the securities; theissuer’s financial condition and the markets in which it does business; the cost of the investment; the size ofthe holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for suchsecurities or any comparable securities; any available analyst media or other reports or information deemedreliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Usingfair value to price securities may result in a value that is different from a security’s most recent closing priceand from the price used by other mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, each Portfolio may invest upto 15% of their net assets (the Money Market Portfolio may invest up to 5% of its net assets) in illiquidsecurities, including those which are restricted as to disposition under securities law (“restricted securities”).Restricted securities are valued pursuant to the valuation procedures noted above. Illiquid securities are thosethat, because of the absence of a readily available market or due to legal or contractual restrictions on resale,cannot be sold within seven days in the ordinary course of business at approximately the amount at which thePortfolio has valued the investment. Therefore, the Portfolio may find it difficult to sell illiquid securities at the
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time considered most advantageous by its subadviser and may incur expenses that would not be incurred inthe sale of securities that were freely marketable. Certain securities that would otherwise be consideredilliquid because of legal restrictions on resale to the general public may be traded among qualified institutionalbuyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercialpaper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by thePortfolio’s subadviser under the guidelines adopted by the Board of the Portfolio. However, the liquidity of thePortfolio’s investments in Rule 144A securities could be impaired if trading does not develop or declines.
Repurchase Agreements: In connection with transactions in repurchase agreements with United Statesfinancial institutions, it is each Portfolio’s policy that its custodian or designated subcustodians, as the casemay be, under triparty repurchase agreements, take possession of the underlying collateral securities, thevalue of which exceeds the principal amount of the repurchase transaction, including accrued interest. To theextent that any repurchase transaction exceeds one business day, the value of the collateral is marked tomarket on a daily basis to ensure the adequacy of the collateral. If the seller defaults or the value of thecollateral declines, or if bankruptcy proceedings are commenced with respect to the seller of the security,realization of the collateral by the Portfolio may be delayed or limited.
Foreign Currency Translation: The books and records of the Portfolios are maintained in U.S. dollars.Foreign currency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities — at the current daily rates of exchange;
(ii) purchases and sales of investment securities, income and expenses — at the rates of exchangeprevailing on the respective dates of such transactions.
Although the net assets of the Portfolios are presented at the foreign exchange rates and market values at theclose of the period, the Portfolios do not isolate that portion of the results of operations arising as a result ofchanges in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Portfolios do not isolate the effect ofchanges in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, these realized foreign currency gains or lossesare included in the reported net realized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or lossesfrom holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currencygains or losses realized between the trade and settlement dates on securities transactions, and the differencebetween the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolios’ booksand the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or lossesfrom valuing foreign currency denominated assets and liabilities (other than investments) at period endexchange rates are reflected as a component of net unrealized appreciation (depreciation) onforeign currencies.
Concentration of Risk: The ability of debt securities issuers (other than those issued or guaranteed by theU.S. Government) held by the Portfolios to meet their obligations may be affected by the economic or politicaldevelopments in a specific industry, region or country. Foreign security and currency transactions may involvecertain considerations and risks not typically associated with those of domestic origin as a result of, amongother factors, the possibility of political or economic instability or the level of governmental supervision andregulation of foreign securities markets.
Forward Currency Contracts: A forward currency contract is a commitment to purchase or sell a foreigncurrency at a future date at a negotiated forward rate. Certain Portfolios entered into forward currencycontracts in order to hedge their exposure to changes in foreign currency exchange rates on their foreignportfolio holdings or specific receivables and payables denominated in a foreign currency. The contracts arevalued daily at current exchange rates and any unrealized gain or loss is included in net unrealizedappreciation or depreciation on foreign currencies. Gain or loss is realized on the settlement date of thecontract equal to the difference between the settlement value of the original and negotiated forward contracts.This gain or loss, if any, is included in net realized gain (loss) on foreign currency transactions. Risks mayarise upon entering into these contracts from the potential inability of the counterparties to meet the terms oftheir contracts. Forward currency contracts involve risks from currency exchange rate and credit risk inexcess of the amounts reflected on the Statement of Assets and Liabilities. A Portfolio’s maximum risk of loss
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from counterparty credit risk is the net value of the cash flows to be received from the counterparty at the endof the contract’s life.
Cross Currency Exchange Contracts: A cross currency contract is a forward contract where a specifiedamount of one foreign currency will be exchanged for a specified amount of another foreign currency.
Short Sales: Certain Portfolios may sell a security they do not own in anticipation of a decline in the marketvalue of that security (short sale). When a Portfolio makes a short sale, it must borrow the security sold shortand deliver it to the broker-dealer through which it made the short sale as collateral for its obligation to deliverthe security upon conclusion of the transaction. The Portfolio may have to pay a fee to borrow the particularsecurity and may be obligated to remit any interest or dividends received on such borrowed securities.Dividends declared on short positions open are recorded on the ex-date and interest payable is accrued dailyon fixed income securities sold short, both of which are recorded as an expense. A gain, limited to the price atwhich the Portfolio sold the security short, or a loss, unlimited in magnitude, will be recognized upon thetermination of a short sale if the market price at termination is less than or greater than, respectively, theproceeds originally received.
Loan Participations: Certain Portfolios may invest in loan participations. When the Portfolio purchases a loanparticipation, the Portfolio typically enters into a contractual relationship with the lender or third party sellingsuch participations (“Selling Participant”), but not the borrower. As a result, the Portfolio assumes the creditrisk of the borrower and any other persons interpositioned between the Portfolio and the borrower. ThePortfolio may not directly benefit from the collateral supporting the senior loan in which it has purchased theloan participation.
Financial Futures Contracts: A financial futures contract is an agreement to purchase (long) or sell (short) anagreed amount of securities at a set price for delivery on a future date. Upon entering into a financial futurescontract, the Portfolio is required to pledge to the broker an amount of cash and/or other assets equal to acertain percentage of the contract amount. This amount is known as the “initial margin.” Subsequentpayments, known as “variation margin,” are made or received by the Portfolio each day, depending on thedaily fluctuations in the value of the underlying security. Such variation margin is recorded for financialstatement purposes on a daily basis as unrealized gain or loss. When the contract expires or is closed, thegain or loss is realized and is presented in the Statement of Operations as net realized gain or loss onfinancial futures contracts.
Certain Portfolios invested in financial futures contracts in order to hedge their existing portfolio securities, orsecurities the Portfolio intends to purchase, against fluctuations in value caused by changes in prevailinginterest rates, the value of equities or foreign currency exchange rates. The Portfolio may also use futures togain additional market exposure. The Portfolio may not achieve the anticipated benefits of the financial futurescontracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation inmovements in the price of futures contracts, interest rates and the underlying hedged assets. With exchange-traded futures contracts, there is minimal counterparty credit risk to the Portfolio since the exchanges’clearinghouse acts as counterparty to all exchange-traded futures and guarantees the futures contractsagainst default.
Options: Certain Portfolios purchased and wrote options in order to hedge against adverse marketmovements or fluctuations in value caused by changes in prevailing interest rates and foreign currencyexchange rates, with respect to securities which the Portfolio currently owns or intends to purchase. ThePortfolios’ principal reason for writing options is to realize, through receipt of premiums, a greater currentreturn than would be realized on the underlying security alone. When the Portfolio purchases an option, itpays a premium and an amount equal to that premium is recorded as an asset. When the Portfolio writes anoption, it receives a premium and an amount equal to that premium is recorded as a liability. The asset orliability is adjusted daily to reflect the current market value of the option. If an option expires unexercised, thePortfolio realizes a gain or loss to the extent of the premium received or paid. If an option is exercised, thepremium received or paid is recorded as an adjustment to the proceeds from the sale or the cost of thepurchase in determining whether the Portfolio has realized a gain or loss. The difference between thepremium and the amount received or paid at the closing of a purchase or sale transaction is also treated as arealized gain or loss. Gain or loss on purchased options is included in net realized gain or loss on investmenttransactions. Gain or loss on written options is presented separately as net realized gain or loss on optionswritten. The Portfolio, as writer of an option, may have no control over whether the underlying securities maybe sold (called) or purchased (put). As a result, the Portfolio bears the market risk of an unfavorable change
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in the price of the security underlying the written option. The Portfolio, as a purchaser of an over-the-counteroption, bears the risk of the potential inability of the counterparties to meet the terms of their contracts. Withexchange-traded options contracts, there is minimal counterparty credit risk to the Portfolio since theexchanges’ clearinghouse acts as counterparty to all exchange-traded options, and guarantees the optionscontracts against default.
Swap Agreements: Certain Portfolios entered into credit default, interest rate, total return and other forms ofswap agreements. A swap agreement is an agreement to exchange the return generated by one instrumentfor the return generated by another instrument. Swap agreements are negotiated in the over-the-countermarket and may be executed either directly with a counterparty (“OTC-traded”) or through a central clearingfacility, such as a registered commodities exchange (“Exchange-traded”). Swap agreements are valued dailyat current market value and any change in value is included in the net unrealized appreciation or depreciationon investments. Exchange-traded swaps pay or receive an amount, known as “variation margin”, based ondaily changes in the valuation of the swap contract. Payments received or paid by the Portfolio are recordedas realized gains or losses upon termination or maturity of the swap. Risk of loss may exceed amountsrecognized on the Statements of Assets and Liabilities. Swap agreements outstanding at period end, if any,are listed on the Schedule of Investments.
Interest Rate Swaps: Interest rate swaps represent agreements between counterparties to exchange cashflows based on the difference between two interest rates, applied to a notional principal amount for a specifiedperiod. Certain Portfolios used interest rate swaps to either maintain their ability to generate steady cash flowby receiving a stream of fixed rate payments or to increase exposure to prevailing market rates by receivingfloating rate payments using interest rate swap contracts. Certain Portfolios are subject to interest rate riskexposure in the normal course of pursuing their investment objectives. A Portfolio’s maximum risk of loss fromcounterparty credit risk is the discounted net value of the cash flows to be received from the counterparty overthe contract’s remaining life.
Credit Default Swaps: Credit default swaps (“CDS”) involve one party (the protection buyer) making astream of payments to another party (the protection seller) in exchange for the right to receive a specifiedpayment in the event of a default or as a result of a default (collectively a “credit event”) for the referencedentity (typically corporate issues or sovereign issues of an emerging country) on its obligation; or in the eventof a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entitiescomprising a credit index. Certain Portfolios are subject to credit risk in the normal course of pursuing theirinvestment objectives. Certain Portfolios may enter into credit default swaps to provide a measure ofprotection against defaults or to take an active long or short position with respect to the likelihood of aparticular issuer’s default or the reference entity’s credit soundness. CDS contracts generally trade based ona spread which represents the cost a protection buyer has to pay the protection seller. The protection buyer issaid to be short the credit as the value of the contract rises the more the credit deteriorates. The value of theCDS contract increases for the protection buyer if the spread increases. A Portfolios’ maximum risk of lossfrom counterparty credit risk for purchased credit default swaps is the inability of the counterparty to honor thecontract up to the notional value due to a credit event.
As a seller of protection on credit default swap agreements, the Portfolio generally receives an agreed uponpayment from the buyer of protection throughout the term of the swap, provided no credit event occurs. Asthe seller, the Portfolio effectively increases its investment risk because, in addition to its total net assets, thePortfolio may be subject to investment exposure on the notional amount of the swap.
The maximum amount of the payment that the Portfolio, as a seller of protection, could be required to makeunder a credit default swap agreement would be equal to the notional amount of the underlying security orindex contract as a result of a credit event. This potential amount will be partially offset by any recoveryvalues of the respective referenced obligations, or net amounts received from the settlement of buy protectioncredit default swap agreements which the Portfolio entered into for the same referenced entity or index. As abuyer of protection, the Portfolio generally receives an amount up to the notional value of the swap if a creditevent occurs.
Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit defaultswap agreements on corporate or sovereign issues of an emerging country as of period end are disclosed inthe footnotes to the Schedule of Investments, if applicable. These spreads serve as indicators of the currentstatus of the payment/performance risk and represent the likelihood of default risk for the credit derivative.The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and
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may include upfront payments required to enter into the agreement. For credit default swap agreements onasset-backed securities and credit indices, the quoted market prices and resulting values serve as indicatorsof the current status of the payment/performance risk. Wider credit spreads and increased market value inabsolute terms, when compared to the notional amount of the swap, represent a deterioration of thereferenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurringas defined under the terms of the agreement.
Currency Swaps: Certain Portfolios entered into currency swap agreements primarily to gain yield exposureon foreign bonds. Currency swap agreements involve two parties exchanging two different currencies with anagreement to reverse the exchange at a later date at specified exchange rates.
Total Return Swaps: In a total return swap, one party would receive payments based on the market value ofthe security or the commodity involved, or total return of a specific referenced asset, such as an equity, indexor bond, and in return pay a fixed amount. The Portfolio is subject to risk exposures associated with thereferenced asset in the normal course of pursuing its investment objectives. Certain Portfolios entered intototal return swaps to manage its exposure to a security or an index. The Portfolio’s maximum risk of loss fromcounterparty credit risk is the change in the value of the security, in the Fund’s favor, from the point ofentering into the contract.
Master Netting Arrangements: Certain Portfolios are subject to various Master Agreements, or nettingarrangements, with select counterparties. These are arrangements which a subadviser may have negotiatedand entered into on behalf of the Portfolio. For multi-sleeve Portfolios, different subadvisers who manage theirrespective sleeve, may enter into such agreements with the same counterparty and are disclosed separatelyfor each sleeve when presenting information about offsetting and related netting arrangements for OTCderivatives under the FASB Accounting Standards Update (“ASU”) 2013-01 disclosure. A master nettingarrangement between the Portfolio and the counterparty permits the Portfolio to offset amounts payable bythe Portfolio to the same counterparty against amounts to be received; and by the receipt of collateral fromthe counterparty by the Portfolio to cover the Portfolio’s exposure to the counterparty. However, there is noassurance that such mitigating factors are easily enforceable. The right to set-off exists when all theconditions are met such that each of the parties owes the other determinable amounts, the reporting party hasthe right to set-off the amount owed with the amount owed by the other party, the reporting party intends toset-off, and the right of set-off is enforceable by law. During the reporting period, there were no instanceswhere the right of set-off existed and management has not elected to offset.
Certain Portfolios are parties to ISDA (International Swaps and Derivatives Association, Inc.) MasterAgreements with certain counterparties that govern over-the-counter derivative and foreign exchangecontracts entered into from time to time. The Master Agreements may contain provisions regarding, amongother things, the parties’ general obligations, representations, agreements, collateral requirements, events ofdefault and early termination. With respect to certain counterparties, in accordance with the terms of theMaster Agreements, collateral posted to the Portfolio is held in a segregated account by the Portfolio’scustodian, and with respect to those amounts which can be sold or re-pledged, are presented in the Scheduleof Investments. Collateral pledged by the Portfolio is segregated by the Portfolio’s custodian and identified inthe Schedule of Investments. Collateral can be in the form of cash or debt securities issued by the U.S.Government or related agencies or other securities as agreed to by the Portfolio and the applicablecounterparty. Collateral requirements are determined based on the Portfolio’s net position with eachcounterparty. Termination events applicable to the Portfolio may occur upon a decline in the Portfolio’s netassets below a specified threshold over a certain period of time. Termination events applicable tocounterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below aspecified level. In each case, upon occurrence, the other party may elect to terminate early and causesettlement of all derivative and foreign exchange contracts outstanding, including the payment of any lossesand costs resulting from such early termination, as reasonably determined by the terminating party. Anydecision by one or more of the Portfolio’s counterparties to elect early termination could impact the Portfolio’sfuture derivative activity.
In addition to each instrument’s primary underlying risk exposure (e.g. interest rate, credit, equity or foreignexchange, etc.), swap agreements involve, to varying degrees, elements of credit, market and documentationrisk. Such risks involve the possibility that no liquid market for these agreements will exist, the counterparty tothe agreement may default on its obligation to perform or disagree on the contractual terms of the agreement,and changes in net interest rates will be unfavorable. In connection with these agreements, securities in the
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portfolio may be identified or received as collateral from the counterparty in accordance with the terms of therespective swap agreements to provide or receive assets of value and to serve as recourse in the event ofdefault or bankruptcy/insolvency of either party. Such over-the-counter derivative agreements includeconditions which, when materialized, give the counterparty the right to cause an early termination of thetransactions under those agreements. Any election by the counterparty for early termination of the contract(s)may impact the amounts reported on financial statements.
As of June 30, 2015, none of the Portfolios have met conditions under such agreements which give thecounterparty the right to call for an early termination.
Forward currency contracts, written options, short sales, swaps and financial futures contracts involveelements of both market and credit risk in excess of the amounts reflected on the Statement of Assets andLiabilities. Such risks may be mitigated by engaging in master netting arrangements.
Warrants and Rights: Certain Portfolios hold warrants and rights acquired either through a direct purchase,included as part of a private placement, or pursuant to corporate actions. Warrants and rights entitle theholder to buy a proportionate amount of common stock, or such other security that the issuer may specify, ata specific price and time through the expiration dates. Such warrants and rights are held as long positions bythe Portfolio until exercised, sold or expired. Warrants and rights are valued at fair value in accordance withthe Board approved fair valuation procedures.
Securities Lending: Each Portfolio may lend its portfolio securities to banks and broker-dealers. The loansare secured by collateral at least equal to the market value of the securities loaned. Collateral pledged byeach borrower is invested in a highly liquid short-term money market and is marked to market daily, based onthe previous day’s market value, such that the value of the collateral exceeds the value of the loanedsecurities. Loans are subject to termination at the option of the borrower or the Portfolio. Upon termination ofthe loan, the borrower will return to the Portfolio securities identical to the loaned securities. Should theborrower of the securities fail financially, the Portfolio has the right to repurchase the securities in the openmarket using the collateral. The Portfolio recognizes income, net of any rebate and securities lending agentfees, for lending its securities, and any interest on the investment of cash received as collateral. The Portfolioalso continues to receive interest and dividends or amounts equivalent thereto, on the securities loaned andrecognizes any unrealized gain or loss in the market price of the securities loaned that may occur during theterm of the loan.
Dollar Rolls: Certain Portfolios enter into mortgage dollar rolls in which the Portfolio sells mortgagesecurities for delivery in the current month, realizing a gain (loss), and simultaneously contracts to repurchasesomewhat similar (same type, coupon and maturity) securities on a specified future date. During the rollperiod, the Portfolio forgoes principal and interest paid on the securities. The Portfolio is compensated by theinterest earned on the cash proceeds of the initial sale and by the lower repurchase price at the future date.The difference between the sales proceeds and the lower repurchase price is recorded as a realized gain.The Portfolio maintains a segregated account, the dollar value of which is at least equal to its obligations, withrespect to dollar rolls.
When-Issued/Delayed Delivery Securities: Securities purchased or sold on a when-issued or delayeddelivery basis may be settled a month or more after trade date; interest income is not accrued until settlementdate. At the time a Portfolio enters into such transactions, it instructs the custodian to segregate assets with acurrent value at least equal to the amount of its when-issued or delayed-delivery purchase commitments.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date.Realized gains or losses from investment and currency transactions are calculated on the identified costbasis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization ofpremium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expensesare recorded on the accrual basis, which may require the use of certain estimates by management that maydiffer from actual.
For Portfolios with multiple classes of shares, net investment income or loss (other than administration anddistribution fees, which are charged to the respective class) and unrealized and realized gains or losses areallocated daily to each class of shares based upon the relative proportion of adjusted net assets of each classat the beginning of the day.
Taxes: For federal income tax purposes, each Portfolio is treated as a separate taxpaying entity. ThePortfolios are treated as partnerships for tax purposes. No provision has been made in the financial
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statements for U.S. federal, state, or local taxes, as any tax liability arising from operations of the Portfolios isthe responsibility of the Portfolios’ shareholders (Participating Insurance Companies). The Portfolios are notgenerally subject to entity-level taxation. Shareholders of each Portfolio are subject to taxes on theirdistributive share of partnership items.
Withholding taxes on foreign dividends, interest and capital gains have been provided for in accordance withthe Portfolio’s understanding of the applicable country’s tax rules and regulations.
Distributions: Distributions from each Portfolio are made in cash and automatically reinvested in additionalshares of the same Portfolio. The Money Market Portfolio declares and reinvests distributions, if any, daily.Distributions are recorded on the ex-date.
Estimates: The preparation of financial statements requires management to make estimates andassumptions that affect the reported amounts and disclosures in the financial statements. Actual results coulddiffer from these estimates.
Note 3: Agreements
The Series Fund has a management agreement with PI. Pursuant to this agreement PI has responsibility forall investment advisory services and supervises the subadvisers’ performance of such services. PI hasentered into subadvisory agreements with Prudential Investment Management, Inc. (“PIM”), JennisonAssociates LLC (“Jennison”), Brown Advisory, LLC (“Brown”), LSV Asset Management (“LSV”), QuantitativeManagement Associates LLC (“QMA”), T. Rowe Price Associates, Inc. (“T. Rowe”) and William Blair & Co.LLC (“William Blair”) (collectively, the “Subadvisers”), under which each provides investment advisory servicesfor certain Portfolios of the Series Fund. PI pays for the services of the Subadvisers, cost of compensation ofofficers of the Series Fund, occupancy and certain clerical and administrative expenses of the Series Fund.The Portfolios bear all other costs and expenses.
The management fee paid to PI is accrued daily and payable monthly, using the value of each of thePortfolio’s average daily net assets, at the respective annual rates specified below.
* In order to support the income yield, PI has voluntarily agreed to limit the management fees of theMoney Market Portfolio such that the 1-day annualized yield of the Portfolio (excluding capital gainor loss) does not fall below 0.00%. Prior to July 1, 2012, PI had voluntarily agreed to limit themanagement fees of the Money Market Portfolio such that the 1-day annualized yield of the Portfo-lio (excluding capital gain or loss) did not fall below 0.02%. The waiver is voluntary and may bemodified or terminated by PI at any time without notice. During the six months ended June 30,2015, the total waiver as a result of this voluntary agreement was $999,485 or an annualized0.27% of the Money Market Portfolio’s average daily net assets.
** PI has contractually agreed, through June 30, 2016, to waive a portion of its management fee equalto an annual rate of 0.05% of the average daily net assets of the Portfolio.
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*** PI has contractually agreed, through March 31, 2015, to waive a portion of its management feeequal to an annual rate of 0.01% of the average daily net assets of the Portfolio. Effective April 1,2015, PI has contractually agreed, through June 30, 2016, to waive a portion of its managementfee equal to an annual rate of 0.011% of the average daily net assets of the Portfolio.
**** PI had contractually agreed, through June 30, 2015, to waive a portion of its management feeequal to an annual rate of 0.05% of the average daily net assets of the Portfolio.
At June 30, 2015, the Subadvisers that provide investment advisory services to the Portfolios are listeddirectly below. Where more than one Subadviser is listed, each Subadviser provides services to a segment ofthe Portfolio:
The Series Fund has a distribution agreement, pursuant to Rule 12b-1 under the 1940 Act, with PrudentialInvestment Management Services LLC (“PIMS”), which acts as the distributor of the Class I and Class IIshares of the Series Fund. The Series Fund compensates PIMS for distributing and servicing the SeriesFund’s Class II shares pursuant to a plan of distribution (the “Class II Plan”), regardless of expenses actuallyincurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service feesare paid to PIMS as distributor of the Class I shares of the Series Fund. Pursuant to the Class II Plan, theClass II shares of each Portfolio compensate PIMS for distribution-related activities at an annual rate of0.25% of the average daily net assets of the Class II shares.
The Series Fund has an administration agreement with PI, which acts as the administrator of the Class IIshares of the Series Fund. The administration fee paid to PI is accrued daily and payable monthly, at theannual rate of 0.15% of the average daily net assets of the Class II shares.
PIMS, PI, PIM, QMA and Jennison are indirect, wholly-owned subsidiaries of Prudential Financial,Inc. (“Prudential”).
Certain Portfolios have entered into a brokerage commission recapture agreement with certain registeredbroker-dealers. Under the brokerage commission recapture program, a portion of the commission is returnedto the Portfolio on whose behalf the trades were made. Commission recapture is paid solely to thosePortfolios generating the applicable trades. Such amounts are included with realized gain or loss oninvestment transactions presented in the Statement of Operations. For the six months ended June 30, 2015,brokerage commission recaptured under these agreements was as follows:
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary ofPrudential, serves as the Series Fund’s transfer agent. Transfer agent’s fees and expenses in the Statementof Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
PIM also serves as the Series Fund’s securities lending agent. Earnings from securities lending are disclosedon the Statement of Operations as “Affiliated income from securities lending, net”. For the six months endedJune 30, 2015, PIM was compensated for the securities lending as follows:
Certain Portfolios invest in the Prudential Core Short-Term Bond Fund and in the Prudential Core TaxableMoney Market Fund (the “Core Funds”), each a portfolio of the Prudential Investment Portfolios 2, registeredunder the 1940 Act, and managed by PI. Earnings from the Core Funds are disclosed on the Statement ofOperations as “Affiliated dividend income”.
Note 5: Portfolio Securities
The aggregate cost of purchases and the proceeds from the sales of securities (excluding governmentsecurities and short-term issues) for the six months ended June 30, 2015 were as follows:
All Portfolios are treated as partnerships for tax purposes. The character of the cash distributions made by thepartnerships is generally classified as return of capital nontaxable distributions. After each fiscal year eachpartner will receive information regarding their distributive allocable share of the partnership’s income, gains,losses and deductions.
With respect to the Portfolios, book cost of assets differs from tax cost of assets as a result of each Portfolio’sadoption of a mark to market method of accounting for tax purposes. Under this method, tax cost of assetswill approximate its fair market value. The Portfolios generally attempt to manage their diversification in amanner that supports the diversification requirements of the underlying separate accounts.
Management has analyzed the Portfolios’ tax positions taken on federal, state and local income tax returns forall open tax years and has concluded that no provision for income tax is required in the Portfolios’ financialstatements for the current reporting period. The Portfolios’ federal, state and local income tax returns for taxyears for which the applicable statutes of limitations have not expired are subject to examination by theInternal Revenue Service and state departments of revenue.
Note 7: Capital
The Series Fund offers Class I and Class II shares. Neither Class I nor Class II shares of a Portfolio aresubject to any sales charge or redemption charge and are sold at the net asset value of the Portfolio. Class Ishares are sold only to certain separate accounts of Prudential to fund benefits under certain variable lifeinsurance and variable annuity contracts (“contracts”). Class II shares are sold only to separate accounts ofnon-Prudential insurance companies as investment options under certain contracts. The separate accountsinvest in shares of the Series Fund through subaccounts that correspond to the Portfolios. The separateaccounts will redeem shares of the Series Fund to the extent necessary to provide benefits under thecontracts or for such other purposes as may be consistent with the contracts. As of June 30, 2015, the Equity,Jennison, Natural Resources and Value Portfolios have Class II shares outstanding.
B11
Transactions in shares of beneficial interest of the Equity, Jennison, Natural Resources and Value Portfolioswere as follows:
The Portfolios (excluding the Money Market Portfolio), along with other affiliated registered investmentcompanies (the “Funds”), are a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. Thepurpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions.The SCA provides for a commitment of $900 million for the period October 9, 2014 through October 8, 2015.The Funds pay an annualized commitment fee of .075% of the unused portion of the SCA. Interest on anyborrowings under the SCA is paid at contracted market rates. The commitment fee for the unused amount isaccrued daily and paid quarterly.
B13
The following Portfolios utilized the SCA during the six months ended June 30, 2015. The average balanceoutstanding is for the number of days the Portfolios had utilized the credit facility.
As of June 30, 2015, all of Class I shares of record of each Portfolio were owned by the Prudential InsuranceCompany of America (“PICA”), or subsidiaries thereof, on behalf of the owners of the variable insuranceproducts issued by PICA. PICA is an indirect, wholly-owned subsidiary of Prudential.
Note 10: New Accounting Pronouncement
In May 2015, the FASB issued ASU No. 2015-07 regarding “Disclosures for Investments in Certain EntitiesThat Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund forfiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASUNo. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fairvalue is measured at net asset value (“NAV”) per share (or its equivalent) using the practical expedient in theFASB’s fair value measurement guidance. At this time, management is evaluating the implications of ASUNo. 2015-07 and its impact on the financial statement disclosures has not yet been determined.
B14
Financial Highlights(Unaudited)
Conservative Balanced Portfolio
Six Months EndedJune 30, 2015(a)
Year Ended December 31,2014(a) 2013(a) 2012 2011 2010
(a) Calculated based on average shares outstanding during the period.
(b) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns forall periods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(c) Does not include expenses of the underlying portfolios in which the Portfolio invests.
(d) The Portfolio accounts for mortgage dollar roll transactions as purchases and sales which, as a result, can increase its portfolio turnover.
(e) Annualized.
(f) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
C1
Financial Highlights(Unaudited)
Equity PortfolioClass I
Six Months EndedJune 30, 2015(c)
Year Ended December 31,2014(c) 2013 2012(c) 2011 2010
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for allperiods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Does not include expenses of the underlying portfolio in which the Portfolio invests.
(c) Calculated based on average shares outstanding during the period.
(d) Annualized.
(e) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
C2
Financial Highlights(Unaudited)
Flexible Managed Portfolio
Six Months EndedJune 30, 2015(a)
Year Ended December 31,2014(a) 2013(a) 2012 2011 2010
(a) Calculated based on average shares outstanding during the period.
(b) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns forall periods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(c) Does not include expenses of the underlying portfolios in which the Portfolio invests.
(d) The Portfolio accounts for mortgage dollar roll transactions as purchases and sales which, as a result, can increase its portfolio turnover rate.
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns forall periods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Does not include expenses of the underlying portfolios in which the Portfolio invests.
(c) The Portfolio accounts for mortgage dollar roll transactions as purchases and sales which, as a result, can increase its portfolio turnover rate.
(d) Annualized.
(e) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
C4
Financial Highlights(Unaudited)
Jennison PortfolioClass I
Six Months EndedJune 30, 2015(a)
Year Ended December 31,2014 2013(a) 2012(a) 2011 2010(a)
(a) Calculated based upon average shares outstanding during the period.
(b) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns forall periods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(c) Does not include expenses of the underlying portfolios in which the Portfolio invests.
(b) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns forall periods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(c) The Portfolio received payments related to an unaffiliated-third party’s settlement of regulatory proceedings involving allegations of impropertrading in Portfolio shares during the fiscal year ended December 31, 2010. The Portfolio was not involved in the proceedings or in the calculationof the amount of settlement.
(d) Less than .005%.
(e) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
C6
Financial Highlights(Unaudited)
Natural Resources PortfolioClass I
Six Months EndedJune 30, 2015(a)
Year Ended December 31,2014(a) 2013(a) 2012 2011(a) 2010(a)
(a) Calculated based upon average shares outstanding during the period.
(b) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns forall periods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(c) Does not include expenses of the underlying portfolios in which the Portfolio invests.
(d) Annualized.
(e) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
C7
Financial Highlights(Unaudited)
Small Capitalization Stock Portfolio
Six Months EndedJune 30, 2015(d)
Year Ended December 31,2014(d) 2013 2012 2011 2010
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns forall periods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Does not include expenses of the underlying portfolios in which the Portfolio invests.
(c) Less than $0.005 per share.
(d) Calculated based on average shares outstanding during the period.
(e) Annualized.
(f) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
C8
Financial Highlights(Unaudited)
Value PortfolioClass I
Six Months EndedJune 30, 2015(a)
Year Ended December 31,2014(a) 2013 2012 2011 2010
(a) Calculated based on average shares outstanding during the period.
(b) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns forall periods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(c) Does not include expenses of the underlying portfolios in which the Portfolio invests.
(d) Annualized.
(e) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
C9
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Approval of Advisory Agreements
The Trust’s Board of Trustees
The Board of Trustees (the Board) of The Prudential Series Fund (the Trust, and each series thereof, the Portfolios) consists of tenindividuals, nine of whom are not “interested persons” of the Trust, as defined in the Investment Company Act of 1940, as amended (the1940 Act) (the Independent Trustees). The Board is responsible for the oversight of the Trust and each of its Portfolios, their operations,and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees haveretained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. TheBoard has established four standing committees: the Audit Committee, the Governance Committee, the Compliance Committee and theInvestment Review and Risk Committee. Each committee is chaired by an Independent Trustee.
Annual Approval of the Trust’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Trust’s management agreement with PrudentialInvestments LLC (PI) and each Portfolio’s subadvisory agreement(s). As is further discussed and explained below, in considering therenewal of the agreements, the Board, including all of the Independent Trustees, met on June 15-16, 2015 (the Meeting) and approvedthe renewal of the agreements through July 31, 2016, after concluding that the renewal of the agreements was in the best interests ofthe Trust, each Portfolio and each Portfolio’s beneficial shareholders.
In advance of the Meeting, the Trustees received materials relating to the agreements, and had the opportunity to ask questions andrequest further information in connection with the consideration of those agreements. Among other things, the Board consideredcomparisons with other mutual funds in a relevant peer universe and peer group, as is further discussed below.
In approving the agreements, the Trustees, including the Independent Trustees advised by independent legal counsel, considered thefactors they deemed relevant, including the nature, quality and extent of services provided, the performance of each Portfolio, theprofitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with each Portfolioand its shareholders. In their deliberations, the Trustees did not identify any single factor that alone was responsible for the Board’sdecision to approve the agreements. In connection with its deliberations, the Board considered information provided at or in advance ofthe Meeting as well as information provided throughout the year at regular and special Board meetings, including presentations from PIand subadviser personnel such as portfolio managers.
The Trustees determined that the overall arrangements between the Trust and PI, which serves as the Trust’s investment managerpursuant to a management agreement, and between PI and each subadviser, each of which serves pursuant to the terms of asubadvisory agreement with PI, are in the best interest of the Trust, each Portfolio and each Portfolio’s shareholders in light of theservices performed, fees charged and such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ determinations to approve the renewal of the agreementsare discussed separately below.
Nature, quality and extent of services
The Board received and considered information regarding the nature, quality and extent of services provided to the Trust by PI and eachsubadviser. The Board considered the services provided by PI, including but not limited to the oversight of the subadvisers, as well asthe provision of recordkeeping and compliance services to the Trust. With respect to PI’s oversight of the subadvisers, the Board notedthat PI’s Strategic Investment Research Group (SIRG), a business unit of PI, is responsible for screening and recommending newsubadvisers when appropriate, as well as monitoring and reporting to the Board on the performance and operations of the subadvisers.The Board also considered that PI pays the salaries of all of the officers and management Trustees of the Trust. The Board alsoconsidered the investment subadvisory services provided by each subadviser, as well as compliance with the Trust’s investmentrestrictions, policies and procedures. The Board considered PI’s evaluation of the subadvisers, as well as PI’s recommendation, based onits review of the subadvisers, to renew the subadvisory agreements.
The Board reviewed the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of theTrust and each subadviser, and also reviewed the qualifications, backgrounds and responsibilities of the subadvisers’ portfoliomanagers who are responsible for the day-to-day management of each Portfolio. The Board was provided with information pertaining toPI’s and each subadviser’s organizational structure, senior management, investment operations and other relevant information
pertaining to PI and each subadviser. The Board also noted that it received favorable compliance reports from the Trust’s ChiefCompliance Officer (CCO) as to PI and each subadviser. The Board noted that Prudential Investment Management, Inc. (PIM), JennisonAssociates LLC (Jennison) and Quantitative Management Associates LLC (QMA), each of which serve as subadvisers to various Portfoliosof the Trust, are affiliated with PI.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI andthe subadvisory services provided to the Portfolios by each subadviser, and that there was a reasonable basis on which to conclude thateach Portfolio benefits from the services provided by PI and each subadviser under the management and subadvisory agreements.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI and its affiliates in serving as the Trust’s investment manager. TheBoard discussed with PI the methodology utilized in assembling the information regarding profitability and considered itsreasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts becausecomparative information is not generally available and is affected by numerous factors, including the structure of the particular adviser,the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure andcost of capital. The Board considered information regarding the profitability of PIM, Jennison and QMA, each of which are affiliates of PI,on a consolidated basis. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation tothe services rendered was not unreasonable.
Economies of Scale
The Board received and discussed information concerning whether PI realizes economies of scale as the Portfolios’ assets grow beyondcurrent levels. The Board noted that economies of scale, if any, may be shared with the Portfolios in several ways, including lowmanagement fees from inception, additional technological and personnel investments to enhance shareholder services, and maintainingexisting expense structures in the face of a rising cost environment. The Board recognized the inherent limitations of any analysis ofeconomies of scale, stemming largely from the Board’s understanding that most of PI’s costs are not specific to individual funds, butrather are incurred across a variety of products and services.
With respect to the Stock Index Portfolio, the Board noted that the management fee schedule includes a breakpoint, which has the effect ofdecreasing the fee rate as assets increase, but that at its current level of assets, the Stock Index Portfolio does not realize the effect of anyrate reduction. The Board took note, however, that the Stock Index Portfolio’s fee structure would result in a benefit to shareholders when(and if) assets reach the level at which the fee rate is reduced. The Board also noted that the management fee was subject to a voluntarywaiver by PI of 0.05% of the management fee at each breakpoint level, and that PI had agreed to retain this waiver.
Other Benefits to PI and the Subadvisers
The Board considered potential ancillary benefits that might be received by PI, the subadvisers, and their affiliates as a result of theirrelationship with the Trust. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI forserving as the Portfolios’ securities lending agent, compensation received by insurance company affiliates of PI from the subadvisers, aswell as benefits to its reputation or other intangible benefits resulting from PI’s association with the Trust. The Board also consideredinformation provided by PI regarding the regulatory requirement that insurance companies determine that the fees and charges undertheir variable contracts are reasonable. The Board noted that the insurance company affiliates of PI at least annually review andrepresent that the fees and charges of the variable contracts using the Trust’s Portfolios are reasonable. The Board concluded that thepotential benefits to be derived by the subadvisers included the ability to use soft dollar credits, brokerage commissions that may bereceived by affiliates of the subadvisers, as well as the potential benefits consistent with those generally resulting from an increase inassets under management, specifically, potential access to additional research resources and benefits to their reputations. The Boardconcluded that the benefits derived by PI and the subadvisers were consistent with the types of benefits generally derived by investmentmanagers and subadvisers to mutual funds.
Performance of the Portfolios / Fees and Expenses / Other Factors
With respect to each Portfolio, the Board also considered certain additional specific factors and made related conclusions relating to thehistorical performance of the Portfolios for the one-, three-, five- and ten-year periods ended December 31, 2014, except as otherwisenoted below. The Board compared the historical performance of each Portfolio to the comparable performance of the Portfolio’sbenchmark index and to a universe of mutual funds (the Peer Universe) that were determined by Lipper Inc. (Lipper), an independentprovider of mutual fund data, to be similar to the Portfolio.
The Board also considered each Portfolio’s actual management fee, as well as each Portfolio’s net total expense ratio, for the calendaryear 2014. The Board considered the management fee for each Portfolio as compared to the management fee charged by PI to otherfunds and accounts and the fee charged by other advisers to comparable mutual funds in a group of similar mutual funds that weredetermined by Lipper to be similar to the Portfolio (the Peer Group). The actual management fee represents the fee rate actually paid byPortfolio shareholders and includes any fee waivers or reimbursements. The net total expense ratio for each Portfolio represents theactual expense ratio incurred by Portfolio shareholders, but does not include the charges associated with the variable contracts.
The mutual funds included in each Peer Universe and each Peer Group were objectively determined by Lipper Inc. (Lipper), anindependent provider of mutual fund data. The comparisons placed the Portfolios in various quartiles, with the first quartile being thebest 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds). Tothe extent that PI deems appropriate, and for reasons addressed in detail with the Board, PI may have provided and the Board may haveconsidered, supplemental data compiled by Lipper for the Board’s consideration.
The sections below summarize key factors considered by the Board and the Board’s conclusions regarding each Portfolio’s performance,fees and overall expenses. Each section sets forth gross performance comparisons (which do not reflect the impact on performance ofany subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group(which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factorsconsidered by the Board.
Conservative Balanced PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over all periods.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
Diversified Bond PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over all periods.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
Equity PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over the ten-year period, although it underperformed itsbenchmark index over the one-, three- and five-year periods.
• The Board noted that the Portfolio’s portfolio manager team responsible for the Portfolio’s performance record had recently beenreplaced, resulting in changes in the securities selection process for the Portfolio.
• The Board further noted that the Portfolio’s repositioning by the new portfolio manager was not completed until the end of 2014 andthat through the first quarter of 2015 the Portfolio beat its benchmark and its Peer Universe median.
• The Board considered that the Portfolio’s performance had improved during the first quarter of 2015, with the Portfolio ranked in thesecond quartile of its Peer Universe and outperforming its benchmark index.
• The Board concluded that in light of the above, it would be in the best interests of the Portfolio and its shareholders to continue tomonitor the Portfolio’s performance and to renew the agreements, and that the management fees (including subadvisory fees) andtotal expenses were reasonable in light of the services provided.
Flexible Managed PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over all periods.
• The Board concluded that, in light of the Portfolio’s competitive performance, it would be in the best interests of the Portfolio and itsshareholders to renew the agreements, and that the management fees (including subadvisory fees) and total expenses werereasonable in light of the services provided.
Global PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over the three-, five- and ten-year periods, although itunderperformed over the one-year period.
• The Board considered that the Portfolio’s recent performance had improved, with the Portfolio ranked in the first quartile of its PeerUniverse and outperforming its benchmark index during the first quarter of 2015.
• The Board noted that PI had contractually agreed to waive of 0.011% of its management fee through June 30, 2016.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
Government Income PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over all periods.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
High Yield Bond PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over all periods.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
Jennison PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board considered that the Portfolio outperformed its benchmark index over the three- and ten-year periods, although itunderperformed over the one- and five-year periods.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renewthe agreements.
• The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
Money Market PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio’s net performance (which reflects the impact of Portfolio fees, expenses and subsidies) in relation tothe Peer Universe was in the second quartile for the one-, three- and five-year periods, and in the first quartile for the ten-year period.
• The Board noted that PI presently voluntarily waived a portion of its management fee to ensure that the 1-day yield for the Portfoliodoes not fall below 0.00%. The Board and PI agreed to continue PI’s voluntary yield waiver support.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
Natural Resources PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed against its benchmark index over the ten-year period, although it underperformedover the one-, three- and five-year periods.
• The Board considered PI’s explanation that the Portfolio historically demonstrated a volatile pattern of returns over shorter timeperiods, but that over longer time periods the Portfolio had outperformed peer funds and its benchmark index.
• At the Board’s request, PI agreed to present strategic alternatives to the Board if the performance of the Portfolio does notimprove promptly.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
Small Capitalization Stock PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over all periods.
• The Board noted that PI had contractually agreed to waive 0.05% of its management fee through June 30, 2016.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
Stock Index PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio’s outperformed its benchmark index over the five- and ten-year periods, although it underperformedover the one- and three-year periods.
• The Board further considered that, through the first quarter of 2015, the Portfolio outperformed its benchmark and its Peer Universemedian for the trailing one-, three-, five- and ten-year periods.
• The Board took into account that, on a net basis, the Portfolio outperformed its Peer Universe Median for all periods.
• The Board noted that PI had contractually agreed to waive 0.05% of its management fee through June 30, 2016.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
Value PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over the ten-year period, although it underperformed over theone-, three- and five-year periods.
• The Board noted that the Portfolio’s portfolio manager team responsible for the Portfolio’s performance record had recently beenreplaced, resulting in changes in the securities selection process for the Portfolio.
• The Board further noted that the Portfolio’s repositioning by the new portfolio manager was not completed until the end of 2014 andthat through the first quarter of 2015 the Portfolio’s performance had begun to improve.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to continue tomonitor the Portfolio’s performance and to renew the agreements, and that the management fees (including subadvisory fees) andtotal expenses were reasonable in light of the services provided.
**********
After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Trust,each Portfolio and its beneficial shareholders.
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This report must be preceded or accompanied by the current prospectuses for the Prudential Series Fund portfolios and theapplicable variable annuity or variable life contract. The prospectuses contain information on the contract and the investmentobjectives, risks, charges and expenses of the portfolios, and should be read carefully.
A description of the Fund’s proxy voting policies and procedures is available, without charge, upon request by calling theappropriate phone number listed below. Information regarding how the Fund voted proxies relating to portfolio securitiesduring the most recent 12-month period ended June 30 is available on the website of the Securities and ExchangeCommission (the Commission) at www.sec.gov and on the Fund’s website at www.prudential.com/variableinsuranceportfolios.
The Fund files with the Commission a complete listing of portfolio holdings as of its first and third quarter-end on Form N-Q.Form N-Q is available on the Commission’s website at www.sec.gov or by visiting the Commission’s Public Reference Room.For more information on the Commission’s Public Reference Room, please visit the Commission’s website or call(800)SEC-0330. Form N-Q is also available on the Fund’s website or by calling the telephone number referenced below.
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and is availablewithout charge upon request by calling the appropriate phone number listed below.
This report may include financial information pertaining to certain portfolios that are not available through the variableannuity contract or the variable life insurance policy that you have chosen. Please refer to your variable product prospectusto determine which portfolios are available to you.
To contact your client services representative, please call the phone number listed below. Thank you.
Owners of Individual Annuity contracts should call (888) 778-2888.Owners of Individual Life Insurance contracts should call (800) 778-2255.Owners of Group Variable Universal Life Insurance contracts should call (800) 562-9874.Owners of Group Variable Universal Life Insurance contracts through AICPA should call (800) 223-7473.
The Prudential Series Fund offers two classes of shares in each Portfolio: Class I and Class II. Class I shares are sold only toseparate accounts of The Prudential Insurance Company of America, Pruco Life Insurance Company, and Pruco LifeInsurance Company of New Jersey (collectively, Prudential) as investment options under variable life insurance and variableannuity contracts (the Contracts). (A separate account keeps the assets supporting certain insurance contracts separatefrom the general assets and liabilities of the insurance company.) Class II shares are offered only to separate accounts ofnon-Prudential insurance companies for the same types of Contracts.
The Prudential Series Fund is distributed by Prudential Investment Management Services LLC (PIMS), 655 Broad Street,19th Floor, Newark, NJ 07102, member SIPC, a Prudential Financial company and solely responsible for its own financialcondition and contractual obligations.
Annuity and life insurance contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them inforce. Your licensed financial professional can provide you with costs and complete details. Contract guarantees are basedon the claims-paying ability of the issuing company.
The Prudential Insurance Company of America751 Broad StreetNewark, NJ 07102-3777
PRESORTED STDU.S. POSTAGE PAIDHARRISONBURG, VA
PERMIT No. 250ZIP CODE 22801
The Audited Financial Statements of Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey,Prudential Annuities Life Assurance Corporation, and The Prudential Insurance Company of America are available uponrequest. You may call (800)778-2255 to obtain a free copy of the audited financial statements of the insurance companythat issued your contract.
To reduce costs, we now generally send only a single copy of prospectuses and shareholder reports to each household(householding) in lieu of sending a copy to each Contract Owner who resides in the household. Householding is not yetavailable on all products. You should be aware that by calling (877)778-5008, you can revoke, or “opt out,” ofhouseholding at any time, which may increase the volume of mail you will receive.
THE PRUDENTIAL SERIES FUNDSEMIANNUAL REPORT ‰ JUNE 30, 2015
Based on the variable contract you own or the portfolios you invested in,you may receive additional reports that provide financial information onthose investment choices. Please refer to your variable annuity or variablelife insurance contract prospectus to determine which portfolios areavailable to you.
The views expressed in this report and information about the Fund’sportfolio holdings are for the period covered by this report and are subjectto change thereafter.
The accompanying financial statements as of June 30, 2015, were notaudited and, accordingly, no auditor’s opinion is expressed on them.
Please note that this document may include prospectus supplements thatare separate from and not a part of this report. Please refer to your variableannuity or variable life insurance contract prospectus to determine whichsupplements are applicable to you.
For information regarding enrollment in the e-Delivery program, pleasesee the inside front cover of this report.
SP Small Cap Value Portfolio
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The Prudential Series FundTable of Contents
Semiannual Report June 30, 2015
� L E T T E R T O C O N T R A C T O W N E R S
� P R E S E N T A T I O N O F P O R T F O L I O H O L D I N G S
� F E E S A N D E X P E N S E S
� F I N A N C I A L R E P O R T S
Section A Schedule of Investments and Financial StatementsSection B Notes to Financial StatementsSection C Financial Highlights
� A P P R O V A L O F A D V I S O R Y A G R E E M E N T S
This report may include financial information pertaining to certain portfolios that are not available through the variable lifeinsurance policy or variable annuity contract that you have chosen. Please refer to your variable life insurance or variable annuityprospectus to determine which portfolios are available to you.
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The Prudential Series FundLetter to Contract Owners
Semiannual Report June 30, 2015
� D E A R C O N T R A C T O W N E R
At Prudential, our primary objective is to help investors achieve and maintain long-term financial success. This Prudential SeriesFund semiannual report outlines our efforts to achieve this goal. We hope you find it informative and useful.
Prudential has been building on a heritage of success for more than 135 years. The quality of our businesses and riskdiversification has enabled us to manage effectively through volatile markets over time. We believe the array of our productsprovides a highly attractive value proposition to clients like you who are focused on financial security.
Your financial professional is the best resource to help you make the most informed investment decisions. Together, you canbuild a diversified investment portfolio that aligns with your long-term financial goals. Please keep in mind that diversificationand asset allocation strategies do not assure a profit or protect against loss in declining markets.
Thank you for selecting Prudential as one of your financial partners. We value your trust and appreciate the opportunity to helpyou achieve financial security.
Sincerely,
Timothy S. CroninPresident,The Prudential Series Fund July 31, 2015
Prudential Series FundPresentation of Portfolio Holdings — unaudited
June 30, 2015
SP Small Cap Value
Five Largest Holdings (% of Net Assets)
iShares Russell 2000 Value Index Fund,Exchange Traded Fund 2.0%
Pebblebrook Hotel Trust,Real Estate Investment Trusts (REITs) 0.9%
For a complete list of holdings, please refer to the Schedule of Investments section of this report. Holdings reflect only long-terminvestments. Holdings/Issues/Sectors are subject to change.
The Prudential Series FundFees and Expenses — unaudited
June 30, 2015
As a contract owner investing in Portfolios of the Fund through a variable annuity or variable life contract, you incur ongoing costs,including management fees, and other Portfolio expenses. This example is intended to help you understand your ongoing costs (indollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other investment options. Thisexample does not reflect fees and charges under your variable annuity or variable life contract. If contract charges were included, thecosts shown below would be higher. Please consult the prospectus for your contract for more information about contract feesand charges.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015through June 30, 2015.
Actual ExpensesThe first line of the table below provides information about actual account values and actual expenses. You may use this information,together with the amount you invested, to estimate the Portfolio expenses that you paid over the period. Simply divide your accountvalue by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the firstline under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the Portfolio expenses you paid on youraccount during this period. As noted above, the table does not reflect variable contract fees and charges.
Hypothetical Example for Comparison PurposesThe second line of the table below provides information about hypothetical account values and hypothetical expenses based on thePortfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return.The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paidfor the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other investment options.To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the otherinvestment options.
Please note that the expenses shown in the table are meant to highlight your ongoing Portfolio costs only and do not reflect anycontract fees and charges, such as sales charges (loads), insurance charges or administrative charges. Therefore the second line of thetable is useful to compare ongoing investment option costs only, and will not help you determine the relative total costs of owningdifferent contracts. In addition, if these contract fee and charges were included, your costs would have been higher.
The Prudential Series Fund Portfolios
BeginningAccount Value
January 1, 2015
EndingAccount ValueJune 30, 2015
Annualized ExpenseRatio based on theSix-Month period
Expenses PaidDuring the
Six-Month period*
SP Small Cap Value (Class I) Actual $1,000.00 $1,025.30 1.01% $5.07
Hypothetical $1,000.00 $1,019.79 1.01% $5.06
* Portfolio expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for eachshare class (provided in the table), multiplied by the average account value over the period, multiplied by the 181 days in the six-month period ended June 30, 2015, and divided by the 365 days in the Portfolio’s fiscal year ending December 31, 2015 (to reflectthe six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Portfoliomay invest.
(a) All or a portion of security is on loan. The aggregate market valueof such securities, including those sold and pending settlement, is$20,846,936; cash collateral of $21,257,377 (included in liabilities)was received with which the Portfolio purchased highly liquid short-term investments. Securities on loan are subject to contractualnetting arrangements.
(b) Represents security, or a portion thereof, purchased with cashcollateral received for securities on loan.
(g) Indicates a security or securities that has been deemed illiquid.
(w) Prudential Investments LLC, the manager of the Portfolio, alsoserves as manager of the Prudential Investment Portfolios 2 —Prudential Core Taxable Money Market Fund.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 wereas follows:
NOTES TO THE FINANCIAL STATEMENTS OFTHE PRUDENTIAL SERIES FUND
(Unaudited)
Note 1: General
The Prudential Series Fund (“Series Fund”), organized as a Delaware statutory trust, is a diversified open-endmanagement investment company registered under the Investment Company Act of 1940, as amended,(“1940 Act”). The Series Fund is composed of seventeen Portfolios (“Portfolio” or “Portfolios”), each withseparate series shares. The information presented in these financial statements pertains to SP Small CapValue Portfolio.
The Portfolio’s investment objective is long-term growth of capital.
Note 2: Accounting Policies
The Series Fund follows investment company accounting and reporting guidance of the Financial AccountingStandards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services — InvestmentCompanies. The following accounting policies conform to U.S. generally accepted accounting principles. TheSeries Fund and the Portfolio consistently follow such policies in the preparation of their financial statements.
Securities Valuation: The Portfolio holds securities and other assets that are fair valued at the close of eachday the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be receivedto sell an asset or paid to transfer a liability in an orderly transaction between market participants on themeasurement date. The Board of Trustees (the “Board”) has adopted Valuation Procedures for securityvaluation under which fair valuation responsibilities have been delegated to Prudential Investments LLC(“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee isresponsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedurespermit the Portfolio to utilize independent pricing vendor services, quotations from market makers, andalternative valuation methods when market quotations are either not readily available or not deemedrepresentative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review,approval, and ratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Portfolio’s investments are valued, all of which are categorized according tothe three broad levels (Level 1, 2, or 3) detailed in the table following the Schedule of Investments.
Common and preferred stocks, exchange-traded funds, and derivative instruments such as futures or optionsthat are traded on a national securities exchange are valued at the last sale price as of the close of trading onthe applicable exchange where the security principally trades. Securities traded via NASDAQ are valued atthe NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQofficial closing price, they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valuedat the mean between the last reported bid and ask prices, or at the last bid price in the absence of an askprice. These securities are classified as Level 2 in the fair value hierarchy, as the inputs are observable.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendorservices that provide model prices derived using adjustment factors based on information such as localclosing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, asapplicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy, asthe adjustment factors are observable. Such securities are valued using model prices to the extent that thevaluation meets the established confidence level for each security. If the confidence level is not met or thevendor does not provide a model price, securities are valued in accordance with exchange-traded commonand preferred stocks discussed above.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of theclose of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair valuehierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter (“OTC”) market are generally valued at prices providedby approved independent pricing vendors. The pricing vendors provide these prices after evaluating
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observable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranchelevel attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades.Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuationbased on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. Theseinstruments are categorized as Level 2 in the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registeredexchange, are generally valued at the daily settlement price determined by the respective exchange. Thesesecurities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
Portfolio securities and other assets that cannot be priced according to the methods described above arevalued based on pricing methodologies approved by the Board. In the event that unobservable inputs areused when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the natureof any restrictions on disposition of the securities; assessment of the general liquidity of the securities; theissuer’s financial condition and the markets in which it does business; the cost of the investment; the size ofthe holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for suchsecurities or any comparable securities; any available analyst media or other reports or information deemedreliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Usingfair value to price securities may result in a value that is different from a security’s most recent closing priceand from the price used by other mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Portfolio may hold up to15% of its net assets in illiquid securities, including those which are restricted as to disposition undersecurities law (“restricted securities”). Restricted securities are valued pursuant to the valuation proceduresnoted above. Illiquid securities are those that, because of the absence of a readily available market or due tolegal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of businessat approximately the amount at which the Portfolio has valued the investment. Therefore, the Portfolio mayfind it difficult to sell illiquid securities at the time considered most advantageous by its subadviser and mayincur expenses that would not be incurred in the sale of securities that were freely marketable. Certainsecurities that would otherwise be considered illiquid because of legal restrictions on resale to the generalpublic may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933.These Rule 144A securities, as well as commercial paper that is sold in private placements underSection 4(2) of the Securities Act, may be deemed liquid by the Portfolio’s subadviser under the guidelinesadopted by the Board. However, the liquidity of the Portfolio’s investments in Rule 144A securities could beimpaired if trading does not develop or declines.
Foreign Currency Translation: The books and records of the Portfolio are maintained in U.S. dollars. Foreigncurrency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities — at the current daily rates of exchange;
(ii) purchases and sales of investment securities, income and expenses — at the rates of exchangeprevailing on the respective dates of such transactions.
Although the net assets of the Portfolio are presented at the foreign exchange rates and market values at theclose of the period, the Portfolio does not isolate that portion of the results of operations arising as a result ofchanges in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term securities held at the end of the period. Similarly, the Portfolio does not isolate the effect of changes inforeign exchange rates from the fluctuations arising from changes in the market prices of long-term portfoliosecurities sold during the period. Accordingly, these realized foreign currency gains or losses are included inthe reported net realized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or lossesfrom holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currency gainsor losses realized between the trade and settlement dates on securities transactions, and the differencebetween the amounts of interest, dividends and foreign withholding taxes recorded on the Portfolio’s books andthe U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from
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valuing foreign currency denominated assets and liabilities (other than investments) at period end exchangerates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
Concentration of Risk: Foreign security and currency transactions may involve certain considerations andrisks not typically associated with those of domestic origin as a result of, among other factors, the possibilityof political and economic instability or the level of governmental supervision and regulation of foreignsecurities markets.
Master Netting Arrangements: The Portfolio is subject to various Master Agreements, or nettingarrangements, with select counterparties. These are agreements which a sub-advisor may have negotiatedand entered into on behalf of the Portfolio. For multi-sleeve Portfolios, different sub-advisors who managetheir respective sleeve, may enter into such agreements with the same counterparty and are disclosedseparately for each sleeve when presenting information about offsetting and related netting arrangements forOTC derivatives under FASB Accounting Standards Update (“ASU”) 2013-01 disclosure. A master nettingarrangement between the Portfolio and the counterparty permits the Portfolio to offset amounts payable bythe Portfolio to the same counterparty against amounts to be received; and by the receipt of collateral fromthe counterparty by the Portfolio to cover the Portfolio’s exposure to the counterparty. However, there is noassurance that such mitigating factors are easily enforceable. The right to set-off exists when all theconditions are met such that each of the parties owes the other determinable amounts, the reporting party hasthe right to set-off the amount owed with the amount owed by the other party, the reporting party intends toset-off, and the right of set-off is enforceable by law. During the reporting period, there were no instanceswhere the right to set-off existed and management has not elected to offset.
Securities Lending: The Portfolio may lend its portfolio securities to banks and broker-dealers. The loans aresecured by collateral at least equal to the market value of the securities loaned. Collateral pledged by eachborrower is invested in a highly liquid short-term money market fund and is marked to market daily, based onthe previous day’s market value, such that the value of the collateral exceeds the value of the loanedsecurities. Loans are subject to termination at the option of the borrower or the Portfolio. Upon termination ofthe loan, the borrower will return to the Portfolio securities identical to the loaned securities. Should theborrower of the securities fail financially, the Portfolio has the right to repurchase the securities in the openmarket using the collateral. The Portfolio recognizes income, net of any rebate and securities lending agentfees, for lending its securities, and any interest on the investment of cash received as collateral. The Portfolioalso continues to receive interest and dividends or amounts equivalent thereto, on the securities loaned andrecognizes any unrealized gain or loss in the market price of the securities loaned that may occur during theterm of the loan.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date.Realized gains or losses from investment and currency transactions are calculated on the identified costbasis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization ofpremium and accretion of discount on debt securities, is recorded on an accrual basis. Expenses arerecorded on an accrual basis, which may require the use of certain estimates by management, that may differfrom actual.
Taxes: For federal income tax purposes, the Portfolio in the Series Fund is treated as a separate taxpayingentity. The Portfolio is treated as a partnership for tax purposes. No provision has been made in the financialstatements for U.S. federal, state, or local taxes, as any tax liability arising from operations of the Portfolio isthe responsibility of the Portfolio’s shareholders (Participating Insurance Companies). The Portfolio is notgenerally subject to entity-level taxation. Shareholders of the Portfolio are subject to taxes on its distributiveshare of partnership items.
Withholding taxes on foreign dividends, interest and capital gains have been provided for in accordance withthe Portfolio’s understanding of the applicable country’s tax rules and regulations. Such taxes are accrued netof reclaimable amounts at the time the related income/gain is recorded.
Distributions: Distributions from the Portfolio are made in cash and automatically reinvested in additionalshares of the same Portfolio. Distributions are recorded on the ex-date.
Estimates: The preparation of financial statements requires management to make estimates andassumptions that affect the reported amounts and disclosures in the financial statements. Actual results coulddiffer from these estimates.
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Note 3: Agreements
The Portfolio has a management agreement with PI. Pursuant to this agreement PI has responsibility for allinvestment advisory services and supervises the subadvisers’ performance of such services. PI has enteredinto subadvisory agreements with Goldman Sachs Asset Management, L.P. (“GSAM and ClearBridgeAdvisors LLC (“ClearBridge”) (collectively, the “Subadvisers”), under which each provides investment advisoryservices for the Portfolio. PI pays for the services of the Subadvisers, cost of compensation of officers of thePortfolio, occupancy and certain clerical and administrative expenses of the Portfolio. The Portfolio bears allother costs and expenses.
PI has contractually agreed, through June 30, 2016, to waive a portion of its management fee equal to anannual rate of 0.008% of the average net assets of the Portfolio. The management fee paid to PI is accrueddaily and payable monthly at an annual rate of 0.90% of the Portfolio’s average daily net assets. The effectivemanagement fee rate was 0.89% for the six months ended June 30, 2015.
PI is an indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
The Portfolio has entered into a brokerage commission recapture agreement with certain registered broker-dealers. Under the brokerage commission recapture program, a portion of the commission is returned to thePortfolio on whose behalf the trades were made. Such amounts are included within realized gain or loss oninvestment transactions presented in the Statement of Operations. For the six months ended June 30, 2015,brokerage commission recaptured under these agreements was $1,568.
Note 4: Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary ofPrudential, serves as the Portfolio’s transfer agent. Transfer agent’s fees and expenses in the Statements ofOperations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
Prudential Investment Management, Inc. (“PIM”), an indirect, wholly-owned subsidiary of Prudential, servesas the Portfolio’s securities lending agent. Earnings from securities lending are disclosed on the Statement ofOperations as “Affiliated income from securities lending, net”. For the six months ended June 30, 2015, PIMwas compensated $11,278 for these services.
The Portfolio invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a portfolio ofPrudential Investment Portfolios 2, registered under the 1940 Act and managed by PI. Earnings from the CoreFund are disclosed on the Statement of Operations as “Affiliated dividend income”.
Note 5: Portfolio Securities
The aggregate cost of purchases and the proceeds from the sales of securities (excluding governmentsecurities and short-term issues) for the six months ended June 30, 2015 were $101,777,649 and$139,339,850, respectively.
Note 6: Tax Information
The Portfolio is treated as a partnership for tax purposes. The character of the cash distributions made by thepartnership is generally classified as return of capital nontaxable distributions. After each fiscal year eachpartner will receive information regarding their distributive allocable share of the partnership’s income, gains,losses and deductions.
With respect to the Portfolio, book cost of assets differs from tax cost of assets as a result of the Portfolio’sadoption of a mark to market method of accounting for tax purposes. Under this method, tax cost of assetswill approximate its fair market value. The Portfolio generally attempts to manage its diversification in amanner that supports the diversification requirements of the underlying separate accounts.
Management has analyzed the Portfolio’s tax positions taken on federal, state and local income tax returns forall open tax years and has concluded that no provisions for income tax are required in the Portfolio’s financialstatements for the current reporting period. The Portfolio’s federal, state and local income tax returns for taxyears for which the applicable statutes of limitations have not expired are subject to examination by theInternal Revenue Service and state departments of revenue.
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Note 7: Capital
The shares of the Portfolio are not subject to any sales charge or redemption charge and are sold at the netasset value of the Portfolio. Shares are sold only to certain separate accounts of Prudential to fund benefitsunder certain variable life insurance and variable annuity contracts (“contracts”). The separate accountsinvest in shares of the Series Fund through subaccounts that correspond to the Portfolio. The separateaccounts will redeem shares of the Series Fund to the extent necessary to provide benefits under thecontracts or for such other purposes as may be consistent with the contracts.
Note 8: Borrowings
The Portfolio, along with other affiliated registered investment companies (the “Funds”), is a party to aSyndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide analternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of$900 million for the period October 9, 2014 through October 8, 2015. The Funds pay an annualizedcommitment fee of .075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paidat contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
The Portfolio did not utilize the SCA during the six months ended June 30, 2015.
Note 9: Ownership and Affiliates
As of June 30, 2015, all of Class I shares of record of the Portfolio were owned by the Prudential InsuranceCompany of America (“PICA”), or subsidiaries thereof, on behalf of the owners of the variable insuranceproducts issued by PICA. PICA is an indirect, wholly-owned subsidiary of Prudential.
Note 10: New Accounting Pronouncement
In May 2015, the FASB issued ASU No. 2015-07 regarding “Disclosures for Investments in Certain Entities ThatCalculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscal yearsbeginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 willeliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured atnet asset value (“NAV”) per share (or its equivalent) using the practical expedient in the FASB’s fair valuemeasurement guidance. At this time, management is evaluating the implications of ASU No. 2015-07 and itsimpact on the financial statement disclosures has not yet been determined.
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for allperiods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Does not include expenses of the underlying portfolio in which the Portfolio invests.
(c) Annualized.
(d) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
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Approval of Advisory Agreements
The Trust’s Board of Trustees
The Board of Trustees (the Board) of The Prudential Series Fund (the Trust consists of ten individuals, nine of whom are not “interestedpersons” of the Trust, as defined in the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees). TheBoard is responsible for the oversight of the Trust and the SP International Growth Portfolio (the Portfolio), its operations, and performsthe various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retainedindependent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Boardhas established four standing committees: the Audit Committee, the Governance Committee, the Compliance Committee and theInvestment Review and Risk Committee. Each committee is chaired by an Independent Trustee.
Annual Approval of the Trust’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Trust’s management agreement with PrudentialInvestments LLC (PI) and the Portfolio’s subadvisory agreement(s). As is further discussed and explained below, in considering therenewal of the agreements, the Board, including all of the Independent Trustees, met on June 15-16, 2015 (the Meeting) and approvedthe renewal of the agreements through July 31, 2016, after concluding that the renewal of the agreements was in the best interests ofthe Trust, the Portfolio and the Portfolio’s beneficial shareholders.
In advance of the Meeting, the Trustees received materials relating to the agreements, and had the opportunity to ask questions andrequest further information in connection with the consideration of those agreements. Among other things, the Board consideredcomparisons with other mutual funds in a relevant peer universe and peer group, as is further discussed below.
In approving the agreements, the Trustees, including the Independent Trustees advised by independent legal counsel, considered thefactors they deemed relevant, including the nature, quality and extent of services provided, the performance of the Portfolio, theprofitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Portfolio andits shareholders. In their deliberations, the Trustees did not identify any single factor that alone was responsible for the Board’s decisionto approve the agreements. In connection with its deliberations, the Board considered information provided at or in advance of theMeeting as well as information provided throughout the year at regular and special Board meetings, including presentations from PI andsubadviser personnel such as portfolio managers.
The Trustees determined that the overall arrangements between the Trust and PI, which serves as the Trust’s investment managerpursuant to a management agreement, and between PI and each subadviser, each of which serves pursuant to the terms of asubadvisory agreement with PI, are in the best interest of the Trust, the Portfolio and the Portfolio’s shareholders in light of the servicesperformed, fees charged and such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ determinations to approve the renewal of the agreementsare discussed separately below.
Nature, quality and extent of services
The Board received and considered information regarding the nature, quality and extent of services provided to the Trust by PI and eachsubadviser. The Board considered the services provided by PI, including but not limited to the oversight of the subadvisers, as well asthe provision of recordkeeping and compliance services to the Trust. With respect to PI’s oversight of the subadvisers, the Board notedthat PI’s Strategic Investment Research Group (SIRG), a business unit of PI, is responsible for screening and recommending newsubadvisers when appropriate, as well as monitoring and reporting to the Board on the performance and operations of the subadvisers.The Board also considered that PI pays the salaries of all of the officers and management Trustees of the Trust. The Board alsoconsidered the investment subadvisory services provided by each subadviser, as well as compliance with the Trust’s investmentrestrictions, policies and procedures. The Board considered PI’s evaluation of the subadvisers, as well as PI’s recommendation, based onits review of the subadvisers, to renew the subadvisory agreements.
The Board reviewed the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of theTrust and each subadviser, and also reviewed the qualifications, backgrounds and responsibilities of the subadvisers’ portfoliomanagers who are responsible for the day-to-day management of the Portfolio. The Board was provided with information pertaining toPI’s and each subadviser’s organizational structure, senior management, investment operations and other relevant informationpertaining to PI and each subadviser. The Board also noted that it received favorable compliance reports from the Trust’s ChiefCompliance Officer (CCO) as to PI and each subadviser.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI andthe subadvisory services provided to the Portfolio by each subadviser, and that there was a reasonable basis on which to conclude thatthe Portfolio benefits from the services provided by PI and each subadviser under the management and subadvisory agreements.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI and its affiliates in serving as the Trust’s investment manager. TheBoard discussed with PI the methodology utilized in assembling the information regarding profitability and considered itsreasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts becausecomparative information is not generally available and is affected by numerous factors, including the structure of the particular adviser,the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure andcost of capital. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to theservices rendered was not unreasonable.
Economies of Scale
The Board received and discussed information concerning whether PI realizes economies of scale as the Portfolio’s assets grow beyondcurrent levels. The Board noted that economies of scale, if any, may be shared with the Portfolio in several ways, including lowmanagement fees from inception, additional technological and personnel investments to enhance shareholder services, and maintainingexisting expense structures in the face of a rising cost environment. The Board recognized the inherent limitations of any analysis ofeconomies of scale, stemming largely from the Board’s understanding that most of PI’s costs are not specific to individual funds, butrather are incurred across a variety of products and services.
Other Benefits to PI and the Subadvisers
The Board considered potential ancillary benefits that might be received by PI, the subadvisers, and their affiliates as a result of theirrelationship with the Trust. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI forserving as the Portfolio’s securities lending agent, compensation received by insurance company affiliates of PI from the subadvisers, aswell as benefits to its reputation or other intangible benefits resulting from PI’s association with the Trust. The Board also consideredinformation provided by PI regarding the regulatory requirement that insurance companies determine that the fees and charges undertheir variable contracts are reasonable. The Board noted that the insurance company affiliates of PI at least annually review andrepresent that the fees and charges of the variable contracts using the Portfolio are reasonable. The Board concluded that the potentialbenefits to be derived by the subadvisers included the ability to use soft dollar credits, brokerage commissions that may be received byaffiliates of the subadvisers, as well as the potential benefits consistent with those generally resulting from an increase in assets undermanagement, specifically, potential access to additional research resources and benefits to their reputations. The Board concluded thatthe benefits derived by PI and the subadvisers were consistent with the types of benefits generally derived by investment managers andsubadvisers to mutual funds.
Performance of the Portfolio / Fees and Expenses / Other Factors
With respect to the Portfolio, the Board also considered certain additional specific factors and made related conclusions relating to thehistorical performance of the Portfolio for the one-, three-, five- and ten-year periods ended December 31, 2014. The Board compared thehistorical performance of the Portfolio to the comparable performance of the Portfolio’s benchmark index and to a universe of mutual funds(the Peer Universe) that were determined by Lipper Inc. (Lipper), an independent provider of mutual fund data, to be similar to the Portfolio.
The Board also considered the Portfolio’s actual management fee, as well as the Portfolio’s net total expense ratio, for the calendar year2014. The Board considered the management fee for the Portfolio as compared to the management fee charged by PI to other funds andaccounts and the fee charged by other advisers to comparable mutual funds in a group of similar mutual funds that were determined byLipper to be similar to the Portfolio (the Peer Group). The actual management fee represents the fee rate actually paid by Portfolioshareholders and includes any fee waivers or reimbursements. The net total expense ratio for each Portfolio represents the actualexpense ratio incurred by Portfolio shareholders, but does not include the charges associated with the variable contracts.
The mutual funds included in each Peer Universe and each Peer Group were objectively determined by Lipper Inc. (Lipper), anindependent provider of mutual fund data. The comparisons placed the Portfolio in various quartiles, with the first quartile being thebest 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds). Tothe extent that PI deems appropriate, and for reasons addressed in detail with the Board, PI may have provided and the Board may haveconsidered, supplemental data compiled by Lipper for the Board’s consideration.
The sections below summarize key factors considered by the Board and the Board’s conclusions regarding the Portfolio’s performance,fees and overall expenses. Each section sets forth gross performance comparisons (which do not reflect the impact on performance ofany subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group(which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factorsconsidered by the Board.
SP Small Cap Value PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over all periods.
• The Board noted that PI had contractually agreed to waive 0.008% of its management fee through June 30, 2016.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
**********
After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Trust,each Portfolio and its beneficial shareholders.
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This report must be preceded or accompanied by the current prospectuses for the Prudential Series Fund portfolios and theapplicable variable annuity or variable life contract. The prospectuses contain information on the contract and the investmentobjectives, risks, charges and expenses of the portfolios, and should be read carefully.
A description of the Fund’s proxy voting policies and procedures is available, without charge, upon request by calling theappropriate phone number listed below. Information regarding how the Fund voted proxies relating to portfolio securitiesduring the most recent 12-month period ended June 30 is available on the website of the Securities and ExchangeCommission (the Commission) at www.sec.gov and on the Fund’s website at www.prudential.com/variableinsuranceportfolios.
The Fund files with the Commission a complete listing of portfolio holdings as of its first and third quarter-end on Form N-Q.Form N-Q is available on the Commission’s website at www.sec.gov or by visiting the Commission’s Public Reference Room.For more information on the Commission’s Public Reference Room, please visit the Commission’s website or call(800)SEC-0330. Form N-Q is also available on the Fund’s website or by calling the telephone number referenced below.
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and is availablewithout charge upon request by calling the appropriate phone number listed below.
This report may include financial information pertaining to certain portfolios that are not available through the variableannuity contract or the variable life insurance policy that you have chosen. Please refer to your variable product prospectusto determine which portfolios are available to you.
To contact your client services representative, please call the phone number listed below. Thank you.
Owners of Individual Annuity contracts should call (888) 778-2888.Owners of Individual Life Insurance contracts should call (800) 778-2255.Owners of Group Variable Universal Life Insurance contracts should call (800) 562-9874.Owners of Group Variable Universal Life Insurance contracts through AICPA should call (800) 223-7473.
The Prudential Series Fund offers two classes of shares in each Portfolio: Class I and Class II. Class I shares are sold only toseparate accounts of The Prudential Insurance Company of America, Pruco Life Insurance Company, and Pruco LifeInsurance Company of New Jersey (collectively, Prudential) as investment options under variable life insurance and variableannuity contracts (the Contracts). (A separate account keeps the assets supporting certain insurance contracts separatefrom the general assets and liabilities of the insurance company.) Class II shares are offered only to separate accounts ofnon-Prudential insurance companies for the same types of Contracts.
The Prudential Series Fund is distributed by Prudential Investment Management Services LLC (PIMS), 655 Broad Street,19th Floor, Newark, NJ 07102, member SIPC, a Prudential Financial company and solely responsible for its own financialcondition and contractual obligations.
Annuity and life insurance contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them inforce. Your licensed financial professional can provide you with costs and complete details. Contract guarantees are basedon the claims-paying ability of the issuing company.
The Prudential Insurance Company of America751 Broad StreetNewark, NJ 07102-3777
PRESORTED STDU.S. POSTAGE PAIDHARRISONBURG, VA
PERMIT No. 250ZIP CODE 22801
The Audited Financial Statements of Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey, andThe Prudential Insurance Company of America are available upon request. You may call (888)778-2888 to obtain a freecopy of the audited financial statements of the insurance company that issued your contract.
To reduce costs, we now generally send only a single copy of prospectuses and shareholder reports to each household(householding) in lieu of sending a copy to each Contract Owner who resides in the household. You should be aware thatby calling (877)778-5008, you can revoke, or “opt out,” of householding at any time.
THE PRUDENTIAL SERIES FUNDSEMIANNUAL REPORT ‰ JUNE 30, 2015
Based on the variable contract you own or the portfolios you invested in,you may receive additional reports that provide financial information onthose investment choices. Please refer to your variable annuity or variablelife insurance contract prospectus to determine which portfolios areavailable to you.
The views expressed in this report and information about the Fund’sportfolio holdings are for the period covered by this report and are subjectto change thereafter.
The accompanying financial statements as of June 30, 2015, were notaudited and, accordingly, no auditor’s opinion is expressed on them.
Please note that this document may include prospectus supplements thatare separate from and not a part of this report. Please refer to your variableannuity or variable life insurance contract prospectus to determine whichsupplements are applicable to you.
For information regarding enrollment in the e-Delivery program, pleasesee the inside front cover of this report.
SP Prudential U.S. Emerging Growth Portfolio
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The Prudential Series FundTable of Contents
Semiannual Report June 30, 2015
� L E T T E R T O C O N T R A C T O W N E R S
� P R E S E N T A T I O N O F P O R T F O L I O H O L D I N G S
� F E E S A N D E X P E N S E S
� F I N A N C I A L R E P O R T S
Section A Schedule of Investments and Financial StatementsSection B Notes to Financial StatementsSection C Financial Highlights
� A P P R O V A L O F A D V I S O R Y A G R E E M E N T S
This report may include financial information pertaining to certain portfolios that are not available through the variable lifeinsurance policy or variable annuity contract that you have chosen. Please refer to your variable life insurance or variable annuityprospectus to determine which portfolios are available to you.
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The Prudential Series FundLetter to Contract Owners
Semiannual Report June 30, 2015
� D E A R C O N T R A C T O W N E R
At Prudential, our primary objective is to help investors achieve and maintain long-term financial success. This Prudential SeriesFund semiannual report outlines our efforts to achieve this goal. We hope you find it informative and useful.
Prudential has been building on a heritage of success for more than 135 years. The quality of our businesses and riskdiversification has enabled us to manage effectively through volatile markets over time. We believe the array of our productsprovides a highly attractive value proposition to clients like you who are focused on financial security.
Your financial professional is the best resource to help you make the most informed investment decisions. Together, you canbuild a diversified investment portfolio that aligns with your long-term financial goals. Please keep in mind that diversificationand asset allocation strategies do not assure a profit or protect against loss in declining markets.
Thank you for selecting Prudential as one of your financial partners. We value your trust and appreciate the opportunity to helpyou achieve financial security.
Sincerely,
Timothy S. CroninPresident,The Prudential Series Fund July 31, 2015
Prudential Series FundPresentation of Portfolio Holdings — unaudited
June 30, 2015
SP Prudential U.S. Emerging Growth
Five Largest Holdings (% of Net Assets)
SBA Communications Corp. 2.8%
Vantiv, Inc. 2.1%
Electronic Arts, Inc. 2.1%
Dollar Tree, Inc. 2.0%
Roper Technologies, Inc. 1.9%
For a complete list of holdings, please refer to the Schedule of Investments section of this report. Holdings reflect only long-terminvestments. Holdings/Issues/Sectors are subject to change.
The Prudential Series FundFees and Expenses — unaudited
June 30, 2015
As a contract owner investing in Portfolios of the Fund through a variable annuity or variable life contract, you incur ongoing costs,including management fees, and other Portfolio expenses. This example is intended to help you understand your ongoing costs (indollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other investment options. Thisexample does not reflect fees and charges under your variable annuity or variable life contract. If contract charges were included, thecosts shown below would be higher. Please consult the prospectus for your contract for more information about contract feesand charges.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015through June 30, 2015.
Actual ExpensesThe first line of the table below provides information about actual account values and actual expenses. You may use this information,together with the amount you invested, to estimate the Portfolio expenses that you paid over the period. Simply divide your accountvalue by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the firstline under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the Portfolio expenses you paid on youraccount during this period. As noted above, the table does not reflect variable contract fees and charges.
Hypothetical Example for Comparison PurposesThe second line of the table below provides information about hypothetical account values and hypothetical expenses based on thePortfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return.The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paidfor the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other investment options.To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the otherinvestment options.
Please note that the expenses shown in the table are meant to highlight your ongoing Portfolio costs only and do not reflect anycontract fees and charges, such as sales charges (loads), insurance charges or administrative charges. Therefore the second line of thetable is useful to compare ongoing investment option costs only, and will not help you determine the relative total costs of owningdifferent contracts. In addition, if these contract fee and charges were included, your costs would have been higher.
The Prudential Series Fund Portfolios
BeginningAccount Value
January 1, 2015
EndingAccount ValueJune 30, 2015
Annualized ExpenseRatio based on theSix-Month period
Expenses PaidDuring the
Six-Month period*
SP Prudential U.S. EmergingGrowth (Class I)
Actual $1,000.00 $1,050.60 0.67% $3.41
Hypothetical $1,000.00 $1,021.47 0.67% $3.36
SP Prudential U.S. EmergingGrowth (Class II)
Actual $1,000.00 $1,048.50 1.07% $5.43
Hypothetical $1,000.00 $1,019.49 1.07% $5.36
* Portfolio expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for eachshare class (provided in the table), multiplied by the average account value over the period, multiplied by the 181 days in thesix-month period ended June 30, 2015, and divided by the 365 days in the Portfolio’s fiscal year ending December 31, 2015 (toreflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which thePortfolio may invest.
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SP PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
LONG-TERM INVESTMENTS — 96.4%COMMON STOCKS Shares
Value(Note 2)
Air Freight & Logistics — 0.6%Expeditors Internatioal Washington,
The following abbreviations are used in the Portfolio descriptions:
ADR American Depositary ReceiptPIPE Private Investment in Public EntityReg D Security was purchased pursuant to Regulation D
under the Securities Act of 1933, providing exemptionfrom the registration requirements. Unless otherwisenoted, Regulation D securities are deemed to be liquid.
SEE NOTES TO FINANCIAL STATEMENTS.
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SP PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $12,627,990;cash collateral of $12,771,853 (included in liabilities) was received with which the Portfolio purchased highly liquid short-term investments.Securities on loan are subject to contractual netting arrangements. Cash collateral is less than 102% of the market value of securities loaned dueto significant market increases on the last business day of the reporting period. Collateral was subsequently received on the following businessday and the Fund remained in compliance.
(b) Indicates a security that has been deemed illiquid.
(c) Indicates a restricted security; the original cost of the restricted security is $217,398. The value of $195,186 is approximately 0.1% of net assets.
(d) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
(w) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 — Prudential CoreTaxable Money Market Fund.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
The industry classification of investments and liabilities in excess ofother assets shown as a percentage of net assets as of June 30, 2015were as follows:
NOTES TO THE FINANCIAL STATEMENTS OFTHE PRUDENTIAL SERIES FUND
(Unaudited)
Note 1: General
The Prudential Series Fund (“Series Fund”), organized as a Delaware statutory trust, is a diversified open-endmanagement investment company registered under the Investment Company Act of 1940, as amended,(“1940 Act”). The Series Fund is composed of seventeen Portfolios (“Portfolio” or “Portfolios”), each withseparate series shares. The information presented in these financial statements pertains to SP PrudentialU.S. Emerging Growth Portfolio.
The Portfolio’s investment objective is long-term capital appreciation.
Note 2: Accounting Policies
The Series Fund follows investment company accounting and reporting guidance of the Financial AccountingStandards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services — InvestmentCompanies. The following accounting policies conform to U.S. generally accepted accounting principles. TheSeries Fund and the Portfolio consistently follow such policies in the preparation of their financial statements.
Securities Valuation: The Portfolio holds securities and other assets that are fair valued at the close of eachday the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be receivedto sell an asset or paid to transfer a liability in an orderly transaction between market participants on themeasurement date. The Board of Trustees (the “Board”) has adopted Valuation Procedures for securityvaluation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI”or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsiblefor supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit thePortfolio to utilize independent pricing vendor services, quotations from market makers, and alternativevaluation methods when market quotations are either not readily available or not deemed representative offair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, andratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Portfolio’s investments are valued, all of which are categorized according tothe three broad levels (Level 1, 2, or 3) detailed in the table following the Schedule of Investments.
Common and preferred stocks, exchange-traded funds, and derivative instruments such as futures or optionsthat are traded on a national securities exchange are valued at the last sale price as of the close of trading onthe applicable exchange where the security principally trades. Securities traded via NASDAQ are valued atthe NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQofficial closing price, they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valuedat the mean between the last reported bid and ask prices, or at the last bid price in the absence of an askprice. These securities are classified as Level 2 in the fair value hierarchy, as the inputs are observable.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendorservices that provide model prices derived using adjustment factors based on information such as localclosing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, asapplicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy, asthe adjustment factors are observable. Such securities are valued using model prices to the extent that thevaluation meets the established confidence level for each security. If the confidence level is not met or thevendor does not provide a model price, securities are valued in accordance with exchange-traded commonand preferred stocks discussed above.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of theclose of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair valuehierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter (“OTC”) market are generally valued at prices providedby approved independent pricing vendors. The pricing vendors provide these prices after evaluating
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observable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranchelevel attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades.Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuationbased on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. Theseinstruments are categorized as Level 2 in the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registeredexchange, are generally valued at the daily settlement price determined by the respective exchange. Thesesecurities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
Portfolio securities and other assets that cannot be priced according to the methods described above arevalued based on pricing methodologies approved by the Board. In the event that unobservable inputs areused when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the natureof any restrictions on disposition of the securities; assessment of the general liquidity of the securities; theissuer’s financial condition and the markets in which it does business; the cost of the investment; the size ofthe holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for suchsecurities or any comparable securities; any available analyst media or other reports or information deemedreliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Usingfair value to price securities may result in a value that is different from a security’s most recent closing priceand from the price used by other mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Portfolio may hold up to15% of its net assets in illiquid securities, including those which are restricted as to disposition undersecurities law (“restricted securities”). Restricted securities are valued pursuant to the valuation proceduresnoted above. Illiquid securities are those that, because of the absence of a readily available market or due tolegal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of businessat approximately the amount at which the Portfolio has valued the investment. Therefore, the Portfolio mayfind it difficult to sell illiquid securities at the time considered most advantageous by its subadviser and mayincur expenses that would not be incurred in the sale of securities that were freely marketable. Certainsecurities that would otherwise be considered illiquid because of legal restrictions on resale to the generalpublic may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933.These Rule 144A securities, as well as commercial paper that is sold in private placements underSection 4(2) of the Securities Act, may be deemed liquid by the Portfolio’s subadviser under the guidelinesadopted by the Board. However, the liquidity of the Portfolio’s investments in Rule 144A securities could beimpaired if trading does not develop or declines.
Foreign Currency Translation: The books and records of the Portfolio are maintained in U.S. dollars. Foreigncurrency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities — at the current daily rates of exchange;
(ii) purchases and sales of investment securities, income and expenses — at the rates of exchangeprevailing on the respective dates of such transactions.
Although the net assets of the Portfolio are presented at the foreign exchange rates and market values at theclose of the period, the Portfolio does not isolate that portion of the results of operations arising as a result ofchanges in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term securities held at the end of the period. Similarly, the Portfolio does not isolate the effect of changes inforeign exchange rates from the fluctuations arising from changes in the market prices of long-term portfoliosecurities sold during the period. Accordingly, these realized foreign currency gains or losses are included inthe reported net realized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or lossesfrom holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currency gainsor losses realized between the trade and settlement dates on securities transactions, and the differencebetween the amounts of interest, dividends and foreign withholding taxes recorded on the Portfolio’s books andthe U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from
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valuing foreign currency denominated assets and liabilities (other than investments) at period end exchangerates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
Concentration of Risk: Foreign security and currency transactions may involve certain considerations andrisks not typically associated with those of domestic origin as a result of, among other factors, the possibilityof political and economic instability or the level of governmental supervision and regulation of foreignsecurities markets.
Master Netting Arrangements: The Portfolio is subject to various Master Agreements, or nettingarrangements, with select counterparties. These are agreements which a subadviser may have negotiatedand entered into on behalf of the Portfolio. A master netting arrangement between the Portfolio and thecounterparty permits the Portfolio to offset amounts payable by the Portfolio to the same counterparty againstamounts to be received; and by the receipt of collateral from the counterparty by the Portfolio to cover thePortfolio’s exposure to the counterparty. However, there is no assurance that such mitigating factors areeasily enforceable. The right to set-off exists when all the conditions are met such that each of the partiesowes the other determinable amounts, the reporting party has the right to set-off the amount owed with theamount owed by the other party, the reporting party intends to set-off, and the right of set-off is enforceable bylaw. During the reporting period, there were no instances where the right to set-off existed and managementhas not elected to offset.
Securities Lending: The Portfolio may lend its portfolio securities to banks and broker-dealers. The loans aresecured by collateral at least equal to the market value of the securities loaned. Collateral pledged by eachborrower is invested in a highly liquid short-term money market fund and is marked to market daily, based onthe previous day’s market value, such that the value of the collateral exceeds the value of the loanedsecurities. Loans are subject to termination at the option of the borrower or the Portfolio. Upon termination ofthe loan, the borrower will return to the Portfolio securities identical to the loaned securities. Should theborrower of the securities fail financially, the Portfolio has the right to repurchase the securities in the openmarket using the collateral. The Portfolio recognizes income, net of any rebate and securities lending agentfees, for lending its securities, and any interest on the investment of cash received as collateral. The Portfolioalso continues to receive interest and dividends or amounts equivalent thereto, on the securities loaned andrecognizes any unrealized gain or loss in the market price of the securities loaned that may occur during theterm of the loan.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date.Realized gains or losses from investment and currency transactions are calculated on the identified costbasis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization ofpremium and accretion of discount on debt securities, is recorded on an accrual basis. Expenses arerecorded on an accrual basis, which may require the use of certain estimates by management, that may differfrom actual.
Net investment income or loss (other than administration and distribution fees which are charged directly tothe respective class) and unrealized and realized gains or losses are allocated daily to each class of sharesbased upon the relative proportion of adjusted net assets of each class at the beginning of the day.
Taxes: For federal income tax purposes, the Portfolio in the Series Fund is treated as a separate taxpayingentity. The Portfolio is treated as a partnership for tax purposes. No provision has been made in the financialstatements for U.S. federal, state, or local taxes, as any tax liability arising from operations of the Portfolio isthe responsibility of the Portfolio’s shareholders (Participating Insurance Companies). The Portfolio is notgenerally subject to entity-level taxation. Shareholders of the Portfolio are subject to taxes on its distributiveshare of partnership items.
Withholding taxes on foreign dividends, interest and capital gains have been provided for in accordance withthe Portfolio’s understanding of the applicable country’s tax rules and regulations. Such taxes are accrued netof reclaimable amounts at the time the related income/gain is recorded.
Distributions: Distributions from the Portfolio are made in cash and automatically reinvested in additionalshares of the same Portfolio. Distributions are recorded on the ex-date.
Estimates: The preparation of financial statements requires management to make estimates andassumptions that affect the reported amounts and disclosures in the financial statements. Actual results coulddiffer from these estimates.
B3
Note 3: Agreements
The Portfolio has a management agreement with PI. Pursuant to this agreement PI has responsibility for allinvestment advisory services and supervises the subadvisers’ performance of such services. PI has enteredinto a subadvisory agreement with Jennison Associates LLC (“Jennison”) (the “Subadviser”), under whichJennison provides investment advisory services for the Portfolio. PI pays for the services of the Jennison, thecost of compensation of officers of the Portfolio, occupancy and certain clerical and administrative expensesof the Portfolio. The Portfolio bears all other costs and expenses.
The management fee paid to PI is accrued daily and payable monthly at an annual rate of .60% of thePortfolio’s average daily net assets. The effective management fee rate was .60% for the six months endedJune 30, 2015.
The Portfolio has a distribution agreement, pursuant to Rule 12b-1 under the 1940 Act, with PrudentialInvestment Management Services LLC (“PIMS”), which acts as the distributor of the Class I and Class IIshares of the Portfolio. The Portfolio compensates PIMS for distributing and servicing the Portfolio’s Class IIshares pursuant to a plan of distribution (the “Class II Plan”), regardless of expenses actually incurred byPIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid toPIMS as distributor of the Class I shares of the Portfolio. Pursuant to the Class II Plan, the Class II shares ofthe Portfolio compensate PIMS for distribution-related activities at an annual rate of 0.25% of the averagedaily net assets of the Class II shares.
The Portfolio has an administration agreement with PI, which acts as the administrator of the Class II sharesof the Portfolio. The administration fee paid to PI is accrued daily and payable monthly, at the annual rate of0.15% of the average daily net assets of the Class II shares.
PIMS, PI, and Jennison are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
The Portfolio has entered into a brokerage commission recapture agreement with certain registered broker-dealers. Under the brokerage commission recapture program, a portion of the commission is returned to thePortfolio on whose behalf the trades were made. Such amounts are included within realized gain or loss oninvestment transactions presented in the Statement of Operations. For the six months ended June 30, 2015,brokerage commission recaptured under these agreements was $7,366.
Note 4: Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary ofPrudential, serves as the Portfolio’s transfer agent. Transfer agent’s fees and expenses in the Statements ofOperations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
Prudential Investment Management, Inc. (“PIM”), an indirect, wholly-owned subsidiary of Prudential, servesas the Portfolio’s securities lending agent. Earnings from securities lending are disclosed on the Statement ofOperations as “Affiliated income from securities lending, net”. For the six months ended June 30, 2015, PIMwas compensated $2,951 for these services.
The Portfolio invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a portfolio ofPrudential Investment Portfolios 2, registered under the 1940 Act and managed by PI. Earnings from the CoreFund are disclosed on the Statement of Operations as “Affiliated dividend income”.
Note 5: Portfolio Securities
The aggregate cost of purchases and the proceeds from the sales of securities (excluding government securitiesand short-term issues) for the six months ended June 30, 2015 were $50,884,090 and $65,145,601, respectively.
Note 6: Tax Information
The Portfolio is treated as a partnership for tax purposes. The character of the cash distributions made by thepartnership is generally classified as return of capital nontaxable distributions. After each fiscal year eachpartner will receive information regarding their distributive allocable share of the partnership’s income, gains,losses and deductions.
B4
With respect to the Portfolio, book cost of assets differs from tax cost of assets as a result of the Portfolio’sadoption of a mark to market method of accounting for tax purposes. Under this method, tax cost of assetswill approximate its fair market value. The Portfolio generally attempts to manage its diversification in amanner that supports the diversification requirements of the underlying separate accounts.
Management has analyzed the Portfolio’s tax positions taken on federal, state and local income tax returns forall open tax years and has concluded that no provisions for income tax are required in the Portfolio’s financialstatements for the current reporting period. The Portfolio’s federal, state and local income tax returns for taxyears for which the applicable statutes of limitations have not expired are subject to examination by theInternal Revenue Service and state departments of revenue.
Note 7: Capital
The Series Fund offers Class I and Class II shares. Neither Class I nor Class II shares of the Portfolio aresubject to any sales charge or redemption charge and are sold at the net asset value of the Portfolio. Class Ishares are sold only to certain separate accounts of Prudential to fund benefits under certain variable lifeinsurance and variable annuity contracts (“contracts”). Class II shares are sold only to separate accounts ofnon-Prudential insurance companies as investment options under certain contracts. The separate accountsinvest in shares of the Series Fund through subaccounts that correspond to the Portfolio. The separateaccounts will redeem shares of the Series Fund to the extent necessary to provide benefits under thecontracts or for such other purposes as may be consistent with the contracts. As of June 30, 2015, the SPPrudential U.S. Emerging Growth Portfolio has Class II shares outstanding.
Transactions in shares of beneficial interest were as follows:
The Portfolio, along with other affiliated registered investment companies (the “Funds”), is a party to aSyndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide analternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of$900 million for the period October 9, 2014 through October 8, 2015. The Funds pay an annualizedcommitment fee of .075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paidat contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
The Portfolio did not utilize the SCA during the six months ended June 30, 2015.
B5
Note 9: Ownership and Affiliates
As of June 30, 2015, all of Class I shares of record of the Portfolio were owned by the Prudential InsuranceCompany of America (“PICA”), or subsidiaries thereof, on behalf of the owners of the variable insuranceproducts issued by PICA. PICA is an indirect, wholly-owned subsidiary of Prudential.
Note 10: New Accounting Pronouncement
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosuresfor Investments in Certain Entities That Calculate Net Asset Value per Share”. The amendments in thisupdate are effective for the Fund for fiscal years beginning after December 15, 2015, and interim periodswithin those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in thefair value hierarchy if their fair value is measured at net asset value (“NAV”) per share (or its equivalent)using the practical expedient in the FASB’s fair value measurement guidance. At this time, management isevaluating the implications of ASU No. 2015-07 and its impact on the financial statement disclosures hasnot yet been determined.
B6
Financial Highlights(Unaudited)
SP Prudential U.S. Emerging Growth PortfolioClass I
Six Months EndedJune 30, 2015(d)
Year Ended December 31,2014(d) 2013(d) 2012 2011 2010
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns forall periods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Does not include expenses of the underlying portfolios in which the Portfolio invests.
(c) Less than $.005 per share.
(d) Calculated based on average shares outstanding during the period.
(e) Annualized.
(f) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
C1
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Approval of Advisory Agreements
The Trust’s Board of Trustees
The Board of Trustees (the Board) of The Prudential Series Fund (the Trust consists of ten individuals, nine of whom are not “interestedpersons” of the Trust, as defined in the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees). TheBoard is responsible for the oversight of the Trust and the SP International Growth Portfolio (the Portfolio), its operations, and performsthe various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retainedindependent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Boardhas established four standing committees: the Audit Committee, the Governance Committee, the Compliance Committee and theInvestment Review and Risk Committee. Each committee is chaired by an Independent Trustee.
Annual Approval of the Trust’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Trust’s management agreement with PrudentialInvestments LLC (PI) and the Portfolio’s subadvisory agreement with Jennison Associates LLC (Jennison). As is further discussed andexplained below, in considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on June 15-16,2015 (the Meeting) and approved the renewal of the agreements through July 31, 2016, after concluding that the renewal of theagreements was in the best interests of the Trust, the Portfolio and the Portfolio’s beneficial shareholders.
In advance of the Meeting, the Trustees received materials relating to the agreements, and had the opportunity to ask questions andrequest further information in connection with the consideration of those agreements. Among other things, the Board consideredcomparisons with other mutual funds in a relevant peer universe and peer group, as is further discussed below.
In approving the agreements, the Trustees, including the Independent Trustees advised by independent legal counsel, considered thefactors they deemed relevant, including the nature, quality and extent of services provided, the performance of the Portfolio, theprofitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Portfolio andits shareholders. In their deliberations, the Trustees did not identify any single factor that alone was responsible for the Board’s decisionto approve the agreements. In connection with its deliberations, the Board considered information provided at or in advance of theMeeting as well as information provided throughout the year at regular and special Board meetings, including presentations from PI andsubadviser personnel such as portfolio managers.
The Trustees determined that the overall arrangements between the Trust and PI, which serves as the Trust’s investment managerpursuant to a management agreement, and between PI and Jennison, which serves pursuant to the terms of a subadvisory agreementwith PI, are in the best interest of the Trust, the Portfolio and the Portfolio’s shareholders in light of the services performed, fees chargedand such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ determinations to approve the renewal of the agreementsare discussed separately below.
Nature, quality and extent of services
The Board received and considered information regarding the nature, quality and extent of services provided to the Trust by PI andJennison. The Board considered the services provided by PI, including but not limited to the oversight of Jennison, as well as theprovision of recordkeeping and compliance services to the Trust. With respect to PI’s oversight of the subadvisers, the Board noted thatPI’s Strategic Investment Research Group (SIRG), a business unit of PI, is responsible for screening and recommending new subadviserswhen appropriate, as well as monitoring and reporting to the Board on the performance and operations of the subadvisers. The Boardalso considered that PI pays the salaries of all of the officers and management Trustees of the Trust. The Board also considered theinvestment subadvisory services provided by each subadviser, as well as compliance with the Trust’s investment restrictions, policiesand procedures. The Board considered PI’s evaluation of Jennison, as well as PI’s recommendation, based on its review of Jennison, torenew the subadvisory agreements.
The Board reviewed the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of theTrust and Jennison, and also reviewed the qualifications, backgrounds and responsibilities of the Jennison portfolio managers who areresponsible for the day-to-day management of the Portfolio. The Board was provided with information pertaining to PI’s and Jennison’sorganizational structure, senior management, investment operations and other relevant information pertaining to PI and Jennison. TheBoard also noted that it received favorable compliance reports from the Trust’s Chief Compliance Officer (CCO) as to PI and Jennison.The Board noted that Jennison is affiliated with PI.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI andthe subadvisory services provided to the Portfolio by Jennison, and that there was a reasonable basis on which to conclude that thePortfolio benefits from the services provided by PI and Jennison under the management and subadvisory agreements.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI and its affiliates in serving as the Trust’s investment manager. TheBoard discussed with PI the methodology utilized in assembling the information regarding profitability and considered itsreasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts becausecomparative information is not generally available and is affected by numerous factors, including the structure of the particular adviser,the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure andcost of capital. The Board considered information regarding the profitability of Jennison, which is an affililate of PI, on a consolidatedbasis. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the servicesrendered was not unreasonable.
Economies of Scale
The Board received and discussed information concerning whether PI realizes economies of scale as the Portfolio’s assets grow beyondcurrent levels. The Board noted that economies of scale, if any, may be shared with the Portfolio in several ways, including lowmanagement fees from inception, additional technological and personnel investments to enhance shareholder services, and maintainingexisting expense structures in the face of a rising cost environment. The Board recognized the inherent limitations of any analysis ofeconomies of scale, stemming largely from the Board’s understanding that most of PI’s costs are not specific to individual funds, butrather are incurred across a variety of products and services.
Other Benefits to PI and the Subadvisers
The Board considered potential ancillary benefits that might be received by PI, Jennison, and their affiliates as a result of theirrelationship with the Trust. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI forserving as the Portfolio’s securities lending agent, compensation received by insurance company affiliates of PI from the subadvisers, aswell as benefits to its reputation or other intangible benefits resulting from PI’s association with the Trust. The Board also consideredinformation provided by PI regarding the regulatory requirement that insurance companies determine that the fees and charges undertheir variable contracts are reasonable. The Board noted that the insurance company affiliates of PI at least annually review andrepresent that the fees and charges of the variable contracts using the Portfolio are reasonable. The Board concluded that the potentialbenefits to be derived by Jennison included the ability to use soft dollar credits, brokerage commissions that may be received byaffiliates of Jennison, as well as the potential benefits consistent with those generally resulting from an increase in assets undermanagement, specifically, potential access to additional research resources and benefits to their reputations. The Board concluded thatthe benefits derived by PI and Jennison were consistent with the types of benefits generally derived by investment managers andsubadvisers to mutual funds.
Performance of the Portfolio / Fees and Expenses / Other Factors
With respect to the Portfolio, the Board also considered certain additional specific factors and made related conclusions relating to thehistorical performance of the Portfolio for the one-, three-, five- and ten-year periods ended December 31, 2014. The Board compared thehistorical performance of the Portfolio to the comparable performance of the Portfolio’s benchmark index and to a universe of mutualfunds (the Peer Universe) that were determined by Lipper Inc. (Lipper), an independent provider of mutual fund data, to be similar tothe Portfolio.
The Board also considered the Portfolio’s actual management fee, as well as the Portfolio’s net total expense ratio, for the calendar year2014. The Board considered the management fee for the Portfolio as compared to the management fee charged by PI to other funds andaccounts and the fee charged by other advisers to comparable mutual funds in a group of similar mutual funds that were determined byLipper to be similar to the Portfolio (the Peer Group). The actual management fee represents the fee rate actually paid by Portfolioshareholders and includes any fee waivers or reimbursements. The net total expense ratio for each Portfolio represents the actualexpense ratio incurred by Portfolio shareholders, but does not include the charges associated with the variable contracts.
The mutual funds included in each Peer Universe and each Peer Group were objectively determined by Lipper Inc. (Lipper), anindependent provider of mutual fund data. The comparisons placed the Portfolio in various quartiles, with the first quartile being the
best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds). Tothe extent that PI deems appropriate, and for reasons addressed in detail with the Board, PI may have provided and the Board may haveconsidered, supplemental data compiled by Lipper for the Board’s consideration.
The sections below summarize key factors considered by the Board and the Board’s conclusions regarding the Portfolio’s performance,fees and overall expenses. Each section sets forth gross performance comparisons (which do not reflect the impact on performance ofany subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group(which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factorsconsidered by the Board.
SP Prudential U.S. Emerging Growth PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over the ten-year period, although it underperformed over theone-, three- and five-year periods.
• The Board considered that, although the Portfolio underperformed against its benchmark index over the one-, three- and five-yearperiods, the Portfolio returned positive results over these periods, which were only slightly lower than the benchmark index returns.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
**********
After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Trust,each Portfolio and its beneficial shareholders.
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This report must be preceded or accompanied by the current prospectuses for the Prudential Series Fund portfolios and theapplicable variable annuity or variable life contract. The prospectuses contain information on the contract and the investmentobjectives, risks, charges and expenses of the portfolios, and should be read carefully.
A description of the Fund’s proxy voting policies and procedures is available, without charge, upon request by calling theappropriate phone number listed below. Information regarding how the Fund voted proxies relating to portfolio securitiesduring the most recent 12-month period ended June 30 is available on the website of the Securities and ExchangeCommission (the Commission) at www.sec.gov and on the Fund’s website at www.prudential.com/variableinsuranceportfolios.
The Fund files with the Commission a complete listing of portfolio holdings as of its first and third quarter-end on Form N-Q.Form N-Q is available on the Commission’s website at www.sec.gov or by visiting the Commission’s Public Reference Room.For more information on the Commission’s Public Reference Room, please visit the Commission’s website or call(800)SEC-0330. Form N-Q is also available on the Fund’s website or by calling the telephone number referenced below.
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and is availablewithout charge upon request by calling the appropriate phone number listed below.
This report may include financial information pertaining to certain portfolios that are not available through the variableannuity contract or the variable life insurance policy that you have chosen. Please refer to your variable product prospectusto determine which portfolios are available to you.
To contact your client services representative, please call the phone number listed below. Thank you.
Owners of Individual Annuity contracts should call (888) 778-2888.Owners of Individual Life Insurance contracts should call (800) 778-2255.Owners of Group Variable Universal Life Insurance contracts should call (800) 562-9874.Owners of Group Variable Universal Life Insurance contracts through AICPA should call (800) 223-7473.
The Prudential Series Fund offers two classes of shares in each Portfolio: Class I and Class II. Class I shares are sold only toseparate accounts of The Prudential Insurance Company of America, Pruco Life Insurance Company, and Pruco LifeInsurance Company of New Jersey (collectively, Prudential) as investment options under variable life insurance and variableannuity contracts (the Contracts). (A separate account keeps the assets supporting certain insurance contracts separatefrom the general assets and liabilities of the insurance company.) Class II shares are offered only to separate accounts ofnon-Prudential insurance companies for the same types of Contracts.
The Prudential Series Fund is distributed by Prudential Investment Management Services LLC (PIMS), 655 Broad Street,19th Floor, Newark, NJ 07102, member SIPC, a Prudential Financial company and solely responsible for its own financialcondition and contractual obligations.
Annuity and life insurance contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them inforce. Your licensed financial professional can provide you with costs and complete details. Contract guarantees are basedon the claims-paying ability of the issuing company.
The Prudential Insurance Company of America751 Broad StreetNewark, NJ 07102-3777
PRESORTED STDU.S. POSTAGE PAIDHARRISONBURG, VA
PERMIT No. 250ZIP CODE 22801
The Audited Financial Statements of Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey, andThe Prudential Insurance Company of America are available upon request. You may call (888)778-2888 to obtain a freecopy of the audited financial statements of the insurance company that issued your contract.
To reduce costs, we now generally send only a single copy of prospectuses and shareholder reports to each household(householding) in lieu of sending a copy to each Contract Owner who resides in the household. You should be aware thatby calling (877)778-5008, you can revoke, or “opt out,” of householding at any time.
THE PRUDENTIAL SERIES FUNDSEMIANNUAL REPORT ‰ JUNE 30, 2015
Based on the variable contract you own or the portfolios you invested in,you may receive additional reports that provide financial information onthose investment choices. Please refer to your variable annuity or variablelife insurance contract prospectus to determine which portfolios areavailable to you.
The views expressed in this report and information about the Fund’sportfolio holdings are for the period covered by this report and are subjectto change thereafter.
The accompanying financial statements as of June 30, 2015, were notaudited and, accordingly, no auditor’s opinion is expressed on them.
Please note that this document may include prospectus supplements thatare separate from and not a part of this report. Please refer to your variableannuity or variable life insurance contract prospectus to determine whichsupplements are applicable to you.
For information regarding enrollment in the e-Delivery program, pleasesee the inside front cover of this report.
SP International Growth Portfolio
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The Prudential Series FundTable of Contents
Semiannual Report June 30, 2015
� L E T T E R T O C O N T R A C T O W N E R S
� P R E S E N T A T I O N O F P O R T F O L I O H O L D I N G S
� F E E S A N D E X P E N S E S
� F I N A N C I A L R E P O R T S
Section A Schedule of Investments and Financial StatementsSection B Notes to Financial StatementsSection C Financial Highlights
� A P P R O V A L O F A D V I S O R Y A G R E E M E N T S
This report may include financial information pertaining to certain portfolios that are not available through the variable lifeinsurance policy or variable annuity contract that you have chosen. Please refer to your variable life insurance or variable annuityprospectus to determine which portfolios are available to you.
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The Prudential Series FundLetter to Contract Owners
Semiannual Report June 30, 2015
� D E A R C O N T R A C T O W N E R
At Prudential, our primary objective is to help investors achieve and maintain long-term financial success. This Prudential SeriesFund semiannual report outlines our efforts to achieve this goal. We hope you find it informative and useful.
Prudential has been building on a heritage of success for more than 135 years. The quality of our businesses and riskdiversification has enabled us to manage effectively through volatile markets over time. We believe the array of our productsprovides a highly attractive value proposition to clients like you who are focused on financial security.
Your financial professional is the best resource to help you make the most informed investment decisions. Together, you canbuild a diversified investment portfolio that aligns with your long-term financial goals. Please keep in mind that diversificationand asset allocation strategies do not assure a profit or protect against loss in declining markets.
Thank you for selecting Prudential as one of your financial partners. We value your trust and appreciate the opportunity to helpyou achieve financial security.
Sincerely,
Timothy S. CroninPresident,The Prudential Series Fund July 31, 2015
Prudential Series FundPresentation of Portfolio Holdings — unaudited
June 30, 2015
SP International Growth
Five Largest Holdings (% of Net Assets)
Tencent Holdings Ltd. (China) 2.8%
Continental AG (Germany) 2.3%
Murata Manufacturing Co. Ltd. (Japan) 2.2%
FANUC Corp. (Japan) 2.1%
St. James’s Place PLC (United Kingdom) 1.9%
For a complete list of holdings, please refer to the Schedule of Investments section of this report. Holdings reflect only long-terminvestments. Holdings/Issues/Sectors are subject to change.
The Prudential Series FundFees and Expenses — unaudited
June 30, 2015
As a contract owner investing in Portfolios of the Fund through a variable annuity or variable life contract, you incur ongoing costs,including management fees, and other Portfolio expenses. This example is intended to help you understand your ongoing costs (indollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other investment options. Thisexample does not reflect fees and charges under your variable annuity or variable life contract. If contract charges were included, thecosts shown below would be higher. Please consult the prospectus for your contract for more information about contract feesand charges.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015through June 30, 2015.
Actual ExpensesThe first line of the table below provides information about actual account values and actual expenses. You may use this information,together with the amount you invested, to estimate the Portfolio expenses that you paid over the period. Simply divide your accountvalue by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the firstline under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the Portfolio expenses you paid on youraccount during this period. As noted above, the table does not reflect variable contract fees and charges.
Hypothetical Example for Comparison PurposesThe second line of the table below provides information about hypothetical account values and hypothetical expenses based on thePortfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return.The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paidfor the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other investment options.To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the otherinvestment options.
Please note that the expenses shown in the table are meant to highlight your ongoing Portfolio costs only and do not reflect anycontract fees and charges, such as sales charges (loads), insurance charges or administrative charges. Therefore the second line of thetable is useful to compare ongoing investment option costs only, and will not help you determine the relative total costs of owningdifferent contracts. In addition, if these contract fee and charges were included, your costs would have been higher.
The Prudential Series Fund Portfolios
BeginningAccount Value
January 1, 2015
EndingAccount ValueJune 30, 2015
Annualized ExpenseRatio based on theSix-Month period
Expenses PaidDuring the
Six-Month period*
SP International Growth (Class I) Actual $1,000.00 $1,084.20 1.23% $6.36
Hypothetical $1,000.00 $1,018.70 1.23% $6.16
SP International Growth (Class II) Actual $1,000.00 $1,082.30 1.63% $8.42
Hypothetical $1,000.00 $1,016.71 1.63% $8.15
* Portfolio expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for eachshare class (provided in the table), multiplied by the average account value over the period, multiplied by the 181 days in thesix-month period ended June 30, 2015, and divided by the 365 days in the Portfolio’s fiscal year ending December 31, 2015 (toreflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which thePortfolio may invest.
Indonesia — 0.7%PT Bank Rakyat Indonesia Persero Tbk . . . 345,200 267,174PT Tower Bersama Infrastructure Tbk* . . . . 162,434 112,391PT Tower Bersama Infrastructure Tbk ,
The following abbreviations are used in the Portfolio descriptions:
144A Security was purchased pursuant to Rule 144A underthe Security Act of 1933 and may not be resold subjectto that rule except to qualified institutional buyers.Unless otherwise noted, 144A securities are deemed tobe liquid.
ADR American Depositary ReceiptADS American Depositary SharePRFC Preference Shares
* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market valueof such securities, including those sold and pending settlement, is$2,153,414; cash collateral of $2,201,984 (included in liabilities)was received with which the Portfolio purchased highly liquid short-term investments.
(b) Represents security, or a portion thereof, purchased with cashcollateral received for securities on loan.
(g) Indicates a security or securities that has been deemed illiquid.
(w) Prudential Investments LLC, the manager of the Portfolio, alsoserves as manager of the Prudential Investment Portfolios 2—Prudential Core Taxable Money Market Fund.
Various inputs are used in determining the value of the Portfolio’sinvestments. These inputs are summarized in the three broad levelslisted below.
Level 1—quoted prices generally in active markets for identicalsecurities.
Level 2—quoted prices for similar securities, interest rates and yieldcurves, prepayment speeds, foreign currency exchange ratesand other observable inputs.
Level 3—unobservable inputs for securities valued in accordance withBoard approved fair valuation procedures.
SEE NOTES TO FINANCIAL STATEMENTS.
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SP INTERNATIONAL GROWTH PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS June 30, 2015 (Unaudited)
The following is a summary of the inputs used as of June 30, 2015 invaluing such portfolio securities:
The industry classification of investments and liabilities in excess ofother assets shown as a percentage of net assets as of June 30, 2015were as follows:
102.0Liabilities in excess of other assets . . . . . . . . . . . . . . . . . . . . . (2.0)
100.0%
SEE NOTES TO FINANCIAL STATEMENTS.
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SP INTERNATIONAL GROWTH PORTFOLIO (continued)
SCHEDULE OF INVESTMENTS June 30, 2015 (Unaudited)
The Portfolio invested in various derivative instruments during the reporting period. The primary type of risk associated with these derivativeinstruments is equity risk.
The effect of such derivative instruments on the Portfolio's financial position and financial performance as reflected in the Statement of Assets andLiabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of June 30, 2015 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for as hedginginstruments, carried at fair value
Asset Derivatives Liability DerivativesBalance Sheet Location Fair Value Balance Sheet Location Fair Value
The effects of derivative instruments on the Statement of Operations for the six months ended June 30, 2015 are as follows:
For the six months ended June 30, 2015, the Portfolio did not have any realized gain or (loss) or derivatives recognized in income on the Statementof Operations.
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income
Derivatives not accounted for as hedging instruments, carried at fair valueParticipatory
NOTES TO THE FINANCIAL STATEMENTS OFTHE PRUDENTIAL SERIES FUND
(Unaudited)
Note 1: General
The Prudential Series Fund (“Series Fund”), organized as a Delaware statutory trust, is a diversified open-endmanagement investment company registered under the Investment Company Act of 1940, as amended,(“1940 Act”). The Series Fund is composed of seventeen Portfolios (“Portfolio” or “Portfolios”), each withseparate series shares. The information presented in these financial statements pertains to SP InternationalGrowth Portfolio.
The Portfolio’s investment objective is long-term growth of capital.
Note 2: Accounting Policies
The Series Fund follows investment company accounting and reporting guidance of the Financial AccountingStandards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services — InvestmentCompanies. The following accounting policies conform to U.S. generally accepted accounting principles. TheSeries Fund and the Portfolio consistently follow such policies in the preparation of their financial statements.
Securities Valuation: The Portfolio holds securities and other assets that are fair valued at the close of eachday the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be receivedto sell an asset or paid to transfer a liability in an orderly transaction between market participants on themeasurement date. The Board of Trustees (the “Board”) has adopted Valuation Procedures for securityvaluation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI”or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsiblefor supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit thePortfolio to utilize independent pricing vendor services, quotations from market makers, and alternativevaluation methods when market quotations are either not readily available or not deemed representative offair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, andratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Portfolio’s investments are valued, all of which are categorized according tothe three broad levels (Level 1, 2, or 3) detailed in the table following the Schedule of Investments.
Common and preferred stocks, exchange-traded funds, and derivative instruments such as futures or optionsthat are traded on a national securities exchange are valued at the last sale price as of the close of trading onthe applicable exchange where the security principally trades. Securities traded via NASDAQ are valued atthe NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQofficial closing price, they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valuedat the mean between the last reported bid and ask prices, or at the last bid price in the absence of an askprice. These securities are classified as Level 2 in the fair value hierarchy.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendorservices that provide model prices derived using adjustment factors based on information such as localclosing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, asapplicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy.Such securities are valued using model prices to the extent that the valuation meets the establishedconfidence level for each security. If the confidence level is not met or the vendor does not provide a modelprice, securities are valued in accordance with exchange-traded common and preferred stocks discussedabove.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of theclose of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair valuehierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter (“OTC”) market are generally valued at prices providedby approved independent pricing vendors. The pricing vendors provide these prices after evaluating
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observable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranchelevel attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades.Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuationbased on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. Theseinstruments are categorized as Level 2 in the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registeredexchange, are generally valued at the daily settlement price determined by the respective exchange. Thesesecurities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
Portfolio securities and other assets that cannot be priced according to the methods described above arevalued based on pricing methodologies approved by the Board. In the event that unobservable inputs areused when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the natureof any restrictions on disposition of the securities; assessment of the general liquidity of the securities; theissuer’s financial condition and the markets in which it does business; the cost of the investment; the size ofthe holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for suchsecurities or any comparable securities; any available analyst media or other reports or information deemedreliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Usingfair value to price securities may result in a value that is different from a security’s most recent closing priceand from the price used by other mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Portfolio may hold up to15% of its net assets in illiquid securities, including those which are restricted as to disposition undersecurities law (“restricted securities”). Restricted securities are valued pursuant to the valuation proceduresnoted above. Illiquid securities are those that, because of the absence of a readily available market or due tolegal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of businessat approximately the amount at which the Portfolio has valued the investment. Therefore, the Portfolio mayfind it difficult to sell illiquid securities at the time considered most advantageous by its subadvisor and mayincur expenses that would not be incurred in the sale of securities that were freely marketable. Certainsecurities that would otherwise be considered illiquid because of legal restrictions on resale to the generalpublic may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933.These Rule 144A securities, as well as commercial paper that is sold in private placements underSection 4(2) of the Securities Act, may be deemed liquid by the Portfolio’s subadvisor under the guidelinesadopted by the Board. However, the liquidity of the Portfolio’s investments in Rule 144A securities could beimpaired if trading does not develop or declines.
Foreign Currency Translation: The books and records of the Portfolio are maintained in U.S. dollars. Foreigncurrency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities — at the current daily rates of exchange;
(ii) purchases and sales of investment securities, income and expenses — at the rates of exchangeprevailing on the respective dates of such transactions.
Although the net assets of the Portfolio are presented at the foreign exchange rates and market values at theclose of the period, the Portfolio does not isolate that portion of the results of operations arising as a result ofchanges in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term securities held at the end of the period. Similarly, the Portfolio does not isolate the effect of changes inforeign exchange rates from the fluctuations arising from changes in the market prices of long-term portfoliosecurities sold during the period. Accordingly, these realized foreign currency gains or losses are included inthe reported net realized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or lossesfrom holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currencygains or losses realized between the trade and settlement dates on securities transactions, and the differencebetween the amounts of interest, dividends and foreign withholding taxes recorded on the Portfolio’s books andthe U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from
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valuing foreign currency denominated assets and liabilities (other than investments) at period end exchangerates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
Participatory Notes: The Portfolio may gain exposure to securities in certain foreign markets throughinvestments in participatory notes (“P-notes”). The Portfolio may purchase P-notes pending ability to investdirectly in a foreign market due to restrictions applicable to foreign investors or other market factors. P-notesare generally issued by banks or broker-dealers and are designed to offer a return linked to a particularunderlying security. P-notes involve transaction costs, which may be higher than those applicable to theequity securities. An investment in a P-note may involve risks, including counter-party risk, beyond thosenormally associated with a direct investment in the underlying security. The Portfolio must rely on thecreditworthiness of the counterparty and would have no rights against the issuer of the underlying security.Furthermore, the P-note’s performance may differ from that of the underlying security. The holder of a P-noteis entitled to receive from the bank or broker-dealer, an amount equal to dividends paid by the issuer of theunderlying security; however, the holder is not entitled to the same rights (e.g., dividends, voting rights) as anowner of the underlying security. There is also no assurance that there will be a secondary trading market fora P-note or that the trading price of a P-note will equal the value of the underlying security.
Concentration of Risk: Foreign security and currency transactions may involve certain considerations andrisks not typically associated with those of domestic origin as a result of, among other factors, the possibilityof political and economic instability or the level of governmental supervision and regulation of foreignsecurities markets.
Master Netting Arrangements: The Portfolio is subject to various Master Agreements, or nettingarrangements, with select counterparties. These are agreements which a sub-advisor may have negotiatedand entered into on behalf of the Portfolio. For multi-sleeve Portfolios, different sub-advisors who managetheir respective sleeve, may enter into such agreements with the same counterparty and are disclosedseparately for each sleeve when presenting information about offsetting and related netting arrangements forOTC derivatives under FASB Accounting Standards Update (“ASU”) 2013-01 disclosure. A master nettingarrangement between the Portfolio and the counterparty permits the Portfolio to offset amounts payable bythe Portfolio to the same counterparty against amounts to be received; and by the receipt of collateral fromthe counterparty by the Portfolio to cover the Portfolio’s exposure to the counterparty. However, there is noassurance that such mitigating factors are easily enforceable. The right to set-off exists when all theconditions are met such that each of the parties owes the other determinable amounts, the reporting party hasthe right to set-off the amount owed with the amount owed by the other party, the reporting party intends toset-off, and the right of set-off is enforceable by law. During the reporting period, there were no instanceswhere the right to set-off existed and management has not elected to offset.
Warrants and Rights: The Portfolio holds warrants and rights acquired either through a direct purchase,included as part of a private placement, or pursuant to corporate actions. Warrants and rights entitle theholder to buy a proportionate amount of common stock, or such other security that the issuer may specify, ata specific price and time through the expiration dates. The Portfolio holds such warrants and rights as longpositions until exercised, sold or expired. Warrants and rights are valued at fair value in accordance with theBoard approved fair valuation procedures.
Securities Lending: The Portfolio may lend its portfolio securities to banks and broker-dealers. The loans aresecured by collateral at least equal to the market value of the securities loaned. Collateral pledged by eachborrower is invested in a highly liquid short-term money market fund and is marked to market daily, based onthe previous day’s market value, such that the value of the collateral exceeds the value of the loanedsecurities. Loans are subject to termination at the option of the borrower or the Portfolio. Upon termination ofthe loan, the borrower will return to the Portfolio securities identical to the loaned securities. Should theborrower of the securities fail financially, the Portfolio has the right to repurchase the securities in the openmarket using the collateral. The Portfolio recognizes income, net of any rebate and securities lending agentfees, for lending its securities, and any interest on the investment of cash received as collateral. The Portfolioalso continues to receive interest and dividends or amounts equivalent thereto, on the securities loaned andrecognizes any unrealized gain or loss in the market price of the securities loaned that may occur during theterm of the loan.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date.Realized and unrealized gains or losses from investment and currency transactions are calculated on theidentified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including
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amortization of premium and accretion of discount on debt securities, as required, is recorded on an accrualbasis. Expenses are recorded on an accrual basis, which may require the use of certain estimates bymanagement, that may differ from actual.
Net investment income or loss (other than administration and distribution fees which are charged directly tothe respective class) and unrealized and realized gains or losses are allocated daily to each class of sharesbased upon the relative proportion of adjusted net assets of each class at the beginning of the day.
Taxes: For federal income tax purposes, each Portfolio in the Series Fund is treated as a separatetaxpaying entity. The Portfolio is treated as a partnership for tax purposes. No provision has been made in thefinancial statements for U.S. federal, state, or local taxes, as any tax liability arising from operations of thePortfolio is the responsibility of the Portfolio’s shareholders (Participating Insurance Companies). The Portfoliois not generally subject to entity-level taxation. Shareholders of the Portfolio are subject to taxes on itsdistributive share of partnership items.
Withholding taxes on foreign dividends, interest and capital gains have been provided for in accordance withthe Portfolio’s understanding of the applicable country’s tax rules and regulations. Such taxes are accrued netof reclaimable amounts at the time the related income/gain is recorded.
Distributions: Distributions from the Portfolio are made in cash and automatically reinvested in additionalshares of the Portfolio. Distributions are recorded on the ex-dividend date.
Estimates: The preparation of financial statements requires management to make estimates andassumptions that affect the reported amounts and disclosures in the financial statements. Actual results coulddiffer from these estimates.
Note 3: Agreements
The Portfolio has a management agreement with PI. Pursuant to this agreement PI has responsibility for allinvestment advisory services and supervises the subadvisors’ performance of such services. PI has enteredinto subadvisory agreements with Jennison Associates LLC (“Jennison”), Neuberger Berman Management,LLC (“Neuberger Berman”) and William Blair & Company LLC (“William Blair”) (collectively, the“Subadvisors”), under which each provides investment advisory services for the Portfolio. PI pays for theservices of the Subadvisors, the cost of compensation of officers of the Portfolio, occupancy and certainclerical and administrative expenses of the Portfolio. The Portfolio bears all other costs and expenses.
The management fee paid to PI is accrued daily and payable monthly at an annual rate of 0.85% of thePortfolio’s average daily net assets. PI has contractually agreed, through June 30, 2016, to waive a portion ofits management fee equal to an annual rate of 0.013% of the average net assets of the Portfolio. Theeffective management fee rate was 0.84% for the six months ended June 30, 2015.
The Portfolio has a distribution agreement, pursuant to Rule 12b-1 under the 1940 Act, with PrudentialInvestment Management Services LLC (“PIMS”), which acts as the distributor of the Class I and Class IIshares of the Portfolio. The Portfolio compensates PIMS for distributing and servicing the Portfolio’s Class IIshares pursuant to a plan of distribution (the “Class II Plan”), regardless of expenses actually incurred byPIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid toPIMS as distributor of the Class I shares of the Portfolio. Pursuant to the Class II Plan, the Class II shares ofthe Portfolio compensate PIMS for distribution-related activities at an annual rate of 0.25% of the averagedaily net assets of the Class II shares.
The Portfolio has an administration agreement with PI, which acts as the administrator of the Class II sharesof the Portfolio. The administration fee paid to PI is accrued daily and payable monthly, at the annual rate of0.15% of the average daily net assets of the Class II shares.
PIMS, PI, and Jennison are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
The Portfolio has entered into a brokerage commission recapture agreement with certain registered broker-dealers. Under the brokerage commission recapture program, a portion of the commission is returned to thePortfolio on whose behalf the trades were made. Such amounts are included within realized gain or loss oninvestment transactions presented in the Statement of Operations. For the six months ended June 30, 2015,brokerage commission recaptured under these agreements was $1,806.
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Note 4: Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary ofPrudential, serves as the Portfolio’s transfer agent. Transfer agent’s fees and expenses in the Statements ofOperations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
Prudential Investment Management, Inc. (“PIM”), an indirect, wholly-owned subsidiary of Prudential, servesas the Portfolio’s securities lending agent. Earnings from securities lending are disclosed on the Statement ofOperations as “Affiliated income from securities lending, net”. For the six months ended June 30, 2015, PIMwas compensated $2,925 for these services.
The Portfolio invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a portfolio ofPrudential Investment Portfolios 2, registered under the 1940 Act and managed by PI. Earnings from the CoreFund are disclosed on the Statement of Operations as “Affiliated dividend income”.
Note 5: Portfolio Securities
The aggregate cost of purchases and the proceeds from the sales of securities (excluding governmentsecurities and short-term issues) for the six months ended June 30, 2015 were $25,513,928 and$27,725,913, respectively.
Note 6: Tax Information
The Portfolio is treated as a partnership for tax purposes. The character of the cash distributions made by thepartnership is generally classified as return of capital nontaxable distributions. After each fiscal year eachpartner will receive information regarding their distributive allocable share of the partnership’s income, gains,losses and deductions.
With respect to the Portfolio, book cost of assets differs from tax cost of assets as a result of the Portfolio’sadoption of a mark to market method of accounting for tax purposes. Under this method, tax cost of assetswill approximate its fair market value. The Portfolio generally attempts to manage its diversification in amanner that supports the diversification requirements of the underlying separate accounts.
Management has analyzed the Portfolio’s tax positions taken on federal, state and local income tax returns forall open tax years and has concluded that no provisions for income tax are required in the Portfolio’s financialstatements for the current reporting period. The Portfolio’s federal, state and local income and federal excisetax returns for tax years for which the applicable statutes of limitations have not expired are subject toexamination by the Internal Revenue Service and state departments of revenue.
Note 7: Capital
The Portfolio offers Class I and Class II shares. Neither Class I nor Class II shares of the Portfolio are subjectto any sales charge or redemption charge and are sold at the net asset value of the Portfolio. Class I sharesare sold only to certain separate accounts of Prudential to fund benefits under certain variable life insuranceand variable annuity contracts (“contracts”). Class II shares are sold only to separate accounts of non-Prudential insurance companies as investment options under certain contracts. The separate accounts investin shares of the Series Fund through subaccounts that correspond to the Portfolio. The separate accounts willredeem shares of the Portfolio to the extent necessary to provide benefits under the contracts or for suchother purposes as may be consistent with the contracts.
Transactions in shares of beneficial interest were as follows:
The Portfolio, along with other affiliated registered investment companies (the “Funds”), is a party to aSyndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide analternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of$900 million for the period October 9, 2014 through October 8, 2015. The Funds pay an annualizedcommitment fee of .075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paidat contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
The Portfolio utilized the SCA during the six months ended June 30, 2015. The average daily balance for the1 day that the Portfolio had loans outstanding during the period was $103,000 borrowed at a weightedaverage interest rate of 1.44%. The maximum loan outstanding amount during the period was $103,000. AtJune 30, 2015, the Portfolio had an outstanding loan amount of $103,000.
Note 9: Ownership and Affiliates
As of June 30, 2015, all of Class I shares of record of the Portfolio were owned by the Prudential InsuranceCompany of America (“PICA”), or subsidiaries thereof, on behalf of the owners of the variable insuranceproducts issued by PICA. PICA is an indirect, wholly-owned subsidiary of Prudential.
Note 10: New Accounting Pronouncement
In May 2015, the FASB issued ASU No. 2015-07 regarding “Disclosures for Investments in Certain EntitiesThat Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscalyears beginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 willeliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured atnet asset value (“NAV”) per share (or its equivalent) using the practical expedient in the FASB’s fair valuemeasurement guidance. At this time, management is evaluating the implications of ASU No. 2015-07 and itsimpact on the financial statement disclosures has not yet been determined.
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for allperiods shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Does not include expenses of the underlying portfolio in which the Portfolio invests.
(c) Calculation based on average shares outstanding during the period.
(d) Less than $.005.
(e) Annualized.
(f) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
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Approval of Advisory Agreements
The Trust’s Board of Trustees
The Board of Trustees (the Board) of The Prudential Series Fund (the Trust consists of ten individuals, nine of whom are not “interestedpersons” of the Trust, as defined in the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees). TheBoard is responsible for the oversight of the Trust and the SP International Growth Portfolio (the Portfolio), its operations, and performsthe various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retainedindependent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Boardhas established four standing committees: the Audit Committee, the Governance Committee, the Compliance Committee and theInvestment Review and Risk Committee. Each committee is chaired by an Independent Trustee.
Annual Approval of the Trust’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Trust’s management agreement with PrudentialInvestments LLC (PI) and the Portfolio’s subadvisory agreement(s). As is further discussed and explained below, in considering therenewal of the agreements, the Board, including all of the Independent Trustees, met on June 15-16, 2015 (the Meeting) and approvedthe renewal of the agreements through July 31, 2016, after concluding that the renewal of the agreements was in the best interests ofthe Trust, the Portfolio and the Portfolio’s beneficial shareholders.
In advance of the Meeting, the Trustees received materials relating to the agreements, and had the opportunity to ask questions andrequest further information in connection with the consideration of those agreements. Among other things, the Board consideredcomparisons with other mutual funds in a relevant peer universe and peer group, as is further discussed below.
In approving the agreements, the Trustees, including the Independent Trustees advised by independent legal counsel, considered thefactors they deemed relevant, including the nature, quality and extent of services provided, the performance of the Portfolio, theprofitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Portfolio andits shareholders. In their deliberations, the Trustees did not identify any single factor that alone was responsible for the Board’s decisionto approve the agreements. In connection with its deliberations, the Board considered information provided at or in advance of theMeeting as well as information provided throughout the year at regular and special Board meetings, including presentations from PI andsubadviser personnel such as portfolio managers.
The Trustees determined that the overall arrangements between the Trust and PI, which serves as the Trust’s investment managerpursuant to a management agreement, and between PI and each subadviser, each of which serves pursuant to the terms of asubadvisory agreement with PI, are in the best interest of the Trust, the Portfolio and the Portfolio’s shareholders in light of the servicesperformed, fees charged and such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ determinations to approve the renewal of the agreementsare discussed separately below.
Nature, quality and extent of services
The Board received and considered information regarding the nature, quality and extent of services provided to the Trust by PI and eachsubadviser. The Board considered the services provided by PI, including but not limited to the oversight of the subadvisers, as well asthe provision of recordkeeping and compliance services to the Trust. With respect to PI’s oversight of the subadvisers, the Board notedthat PI’s Strategic Investment Research Group (SIRG), a business unit of PI, is responsible for screening and recommending newsubadvisers when appropriate, as well as monitoring and reporting to the Board on the performance and operations of the subadvisers.The Board also considered that PI pays the salaries of all of the officers and management Trustees of the Trust. The Board alsoconsidered the investment subadvisory services provided by each subadviser, as well as compliance with the Trust’s investmentrestrictions, policies and procedures. The Board considered PI’s evaluation of the subadvisers, as well as PI’s recommendation, based onits review of the subadvisers, to renew the subadvisory agreements.
The Board reviewed the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of theTrust and each subadviser, and also reviewed the qualifications, backgrounds and responsibilities of the subadvisers’ portfoliomanagers who are responsible for the day-to-day management of the Portfolio. The Board was provided with information pertaining toPI’s and each subadviser’s organizational structure, senior management, investment operations and other relevant informationpertaining to PI and each subadviser. The Board also noted that it received favorable compliance reports from the Trust’s ChiefCompliance Officer (CCO) as to PI and each subadviser.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI andthe subadvisory services provided to the Portfolio by each subadviser, and that there was a reasonable basis on which to conclude thatthe Portfolio benefits from the services provided by PI and each subadviser under the management and subadvisory agreements.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI and its affiliates in serving as the Trust’s investment manager. TheBoard discussed with PI the methodology utilized in assembling the information regarding profitability and considered itsreasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts becausecomparative information is not generally available and is affected by numerous factors, including the structure of the particular adviser,the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure andcost of capital. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to theservices rendered was not unreasonable.
Economies of Scale
The Board received and discussed information concerning whether PI realizes economies of scale as the Portfolio’s assets grow beyondcurrent levels. The Board noted that economies of scale, if any, may be shared with the Portfolio in several ways, including lowmanagement fees from inception, additional technological and personnel investments to enhance shareholder services, and maintainingexisting expense structures in the face of a rising cost environment. The Board recognized the inherent limitations of any analysis ofeconomies of scale, stemming largely from the Board’s understanding that most of PI’s costs are not specific to individual funds, butrather are incurred across a variety of products and services.
Other Benefits to PI and the Subadvisers
The Board considered potential ancillary benefits that might be received by PI, the subadvisers, and their affiliates as a result of theirrelationship with the Trust. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI forserving as the Portfolio’s securities lending agent, compensation received by insurance company affiliates of PI from the subadvisers, aswell as benefits to its reputation or other intangible benefits resulting from PI’s association with the Trust. The Board also consideredinformation provided by PI regarding the regulatory requirement that insurance companies determine that the fees and charges undertheir variable contracts are reasonable. The Board noted that the insurance company affiliates of PI at least annually review andrepresent that the fees and charges of the variable contracts using the Portfolio are reasonable. The Board concluded that the potentialbenefits to be derived by the subadvisers included the ability to use soft dollar credits, brokerage commissions that may be received byaffiliates of the subadvisers, as well as the potential benefits consistent with those generally resulting from an increase in assets undermanagement, specifically, potential access to additional research resources and benefits to their reputations. The Board concluded thatthe benefits derived by PI and the subadvisers were consistent with the types of benefits generally derived by investment managers andsubadvisers to mutual funds.
Performance of the Portfolio / Fees and Expenses / Other Factors
With respect to the Portfolio, the Board also considered certain additional specific factors and made related conclusions relating to thehistorical performance of the Portfolio for the one-, three-, five- and ten-year periods ended December 31, 2014. The Board compared thehistorical performance of the Portfolio to the comparable performance of the Portfolio’s benchmark index and to a universe of mutual funds(the Peer Universe) that were determined by Lipper Inc. (Lipper), an independent provider of mutual fund data, to be similar to the Portfolio.
The Board also considered the Portfolio’s actual management fee, as well as the Portfolio’s net total expense ratio, for the calendar year2014. The Board considered the management fee for the Portfolio as compared to the management fee charged by PI to other funds andaccounts and the fee charged by other advisers to comparable mutual funds in a group of similar mutual funds that were determined byLipper to be similar to the Portfolio (the Peer Group). The actual management fee represents the fee rate actually paid by Portfolioshareholders and includes any fee waivers or reimbursements. The net total expense ratio for each Portfolio represents the actualexpense ratio incurred by Portfolio shareholders, but does not include the charges associated with the variable contracts.
The mutual funds included in each Peer Universe and each Peer Group were objectively determined by Lipper Inc. (Lipper), anindependent provider of mutual fund data. The comparisons placed the Portfolio in various quartiles, with the first quartile being thebest 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds). Tothe extent that PI deems appropriate, and for reasons addressed in detail with the Board, PI may have provided and the Board may haveconsidered, supplemental data compiled by Lipper for the Board’s consideration.
The sections below summarize key factors considered by the Board and the Board’s conclusions regarding the Portfolio’s performance,fees and overall expenses. Each section sets forth gross performance comparisons (which do not reflect the impact on performance ofany subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group(which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factorsconsidered by the Board.
SP International Growth PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over the three-, five- and ten-year periods, though itunderperformed over the one-year period.
• The Board considered that the Portfolio’s recent performance against its Peer Universe had shown improvement, with the Portfolioranked in the first quartile of its Peer Universe for the first quarter of 2015.
• The Board noted that PI had contractually agreed to waive 0.013% of its management fee through June 30, 2016.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
**********
After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Trust,each Portfolio and its beneficial shareholders.
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This report must be preceded or accompanied by the current prospectuses for the Prudential Series Fund portfolios and theapplicable variable annuity or variable life contract. The prospectuses contain information on the contract and the investmentobjectives, risks, charges and expenses of the portfolios, and should be read carefully.
A description of the Fund’s proxy voting policies and procedures is available, without charge, upon request by calling theappropriate phone number listed below. Information regarding how the Fund voted proxies relating to portfolio securitiesduring the most recent 12-month period ended June 30 is available on the website of the Securities and ExchangeCommission (the Commission) at www.sec.gov and on the Fund’s website at www.prudential.com/variableinsuranceportfolios.
The Fund files with the Commission a complete listing of portfolio holdings as of its first and third quarter-end on Form N-Q.Form N-Q is available on the Commission’s website at www.sec.gov or by visiting the Commission’s Public Reference Room.For more information on the Commission’s Public Reference Room, please visit the Commission’s website or call(800)SEC-0330. Form N-Q is also available on the Fund’s website or by calling the telephone number referenced below.
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and is availablewithout charge upon request by calling the appropriate phone number listed below.
This report may include financial information pertaining to certain portfolios that are not available through the variableannuity contract or the variable life insurance policy that you have chosen. Please refer to your variable product prospectusto determine which portfolios are available to you.
To contact your client services representative, please call the phone number listed below. Thank you.
Owners of Individual Annuity contracts should call (888) 778-2888.Owners of Individual Life Insurance contracts should call (800) 778-2255.Owners of Group Variable Universal Life Insurance contracts should call (800) 562-9874.Owners of Group Variable Universal Life Insurance contracts through AICPA should call (800) 223-7473.
The Prudential Series Fund offers two classes of shares in each Portfolio: Class I and Class II. Class I shares are sold only toseparate accounts of The Prudential Insurance Company of America, Pruco Life Insurance Company, and Pruco LifeInsurance Company of New Jersey (collectively, Prudential) as investment options under variable life insurance and variableannuity contracts (the Contracts). (A separate account keeps the assets supporting certain insurance contracts separatefrom the general assets and liabilities of the insurance company.) Class II shares are offered only to separate accounts ofnon-Prudential insurance companies for the same types of Contracts.
The Prudential Series Fund is distributed by Prudential Investment Management Services LLC (PIMS), 655 Broad Street,19th Floor, Newark, NJ 07102, member SIPC, a Prudential Financial company and solely responsible for its own financialcondition and contractual obligations.
Annuity and life insurance contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them inforce. Your licensed financial professional can provide you with costs and complete details. Contract guarantees are basedon the claims-paying ability of the issuing company.
The Prudential Insurance Company of America751 Broad StreetNewark, NJ 07102-3777
PRESORTED STDU.S. POSTAGE PAIDHARRISONBURG, VA
PERMIT No. 250ZIP CODE 22801
The Audited Financial Statements of Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey, andThe Prudential Insurance Company of America are available upon request. You may call (888)778-2888 to obtain a freecopy of the audited financial statements of the insurance company that issued your contract.
To reduce costs, we now generally send only a single copy of prospectuses and shareholder reports to each household(householding) in lieu of sending a copy to each Contract Owner who resides in the household. You should be aware thatby calling (877)778-5008, you can revoke, or “opt out,” of householding at any time.
THE PRUDENTIAL SERIES FUNDSEMIANNUAL REPORT ‰ JUNE 30, 2015
Based on the variable contract you own or the portfolios you invested in,you may receive additional reports that provide financial information onthose investment choices. Please refer to your variable annuity or variablelife insurance contract prospectus to determine which portfolios areavailable to you.
The views expressed in this report and information about the Fund’sportfolio holdings are for the period covered by this report and are subjectto change thereafter.
The accompanying financial statements as of June 30, 2015, were notaudited and, accordingly, no auditor’s opinion is expressed on them.
Please note that this document may include prospectus supplements thatare separate from and not a part of this report. Please refer to your variablelife insurance contract prospectus to determine which supplements areapplicable to you.
For information regarding enrollment in the e-Delivery program, pleasesee the inside front cover of this report.
Jennison 20/20 Focus Portfolio
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The Prudential Series FundTable of Contents
Semiannual Report June 30, 2015
� L E T T E R T O C O N T R A C T O W N E R S
� P R E S E N T A T I O N O F P O R T F O L I O H O L D I N G S
� F E E S A N D E X P E N S E S
� F I N A N C I A L R E P O R T S
Section A Schedule of Investments and Financial StatementsSection B Notes to Financial StatementsSection C Financial Highlights
� A P P R O V A L O F A D V I S O R Y A G R E E M E N T S
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The Prudential Series FundLetter to Contract Owners
Semiannual Report June 30, 2015
� D E A R C O N T R A C T O W N E R
At Prudential, our primary objective is to help investors achieve and maintain long-term financial success. This Prudential SeriesFund semiannual report outlines our efforts to achieve this goal. We hope you find it informative and useful.
Prudential has been building on a heritage of success for more than 135 years. The quality of our businesses and riskdiversification has enabled us to manage effectively through volatile markets over time. We believe the array of our productsprovides a highly attractive value proposition to clients like you who are focused on financial security.
Your financial professional is the best resource to help you make the most informed investment decisions. Together, you canbuild a diversified investment portfolio that aligns with your long-term financial goals. Please keep in mind that diversificationand asset allocation strategies do not assure a profit or protect against loss in declining markets.
Thank you for selecting Prudential as one of your financial partners. We value your trust and appreciate the opportunity to helpyou achieve financial security.
Sincerely,
Timothy S. CroninPresident,The Prudential Series Fund July 31, 2015
The Prudential Series FundPresentation of Portfolio Holdings — unaudited
June 30, 2015
Jennison 20/20 Focus
Five Largest Holdings (% of Net Assets)
Allergan PLC 5.2%
Facebook, Inc. (Class A Stock) 4.8%
Apple, Inc. 3.9%
Walt Disney Co. (The) 3.8%
Amazon.com, Inc. 3.7%
For a complete list of holdings, please refer to the Schedule of Investments section of this report. Holdings reflect only long-terminvestments. Holdings/Issues/Sectors/Industries are subject to change.
The Prudential Series FundFees and Expenses — unaudited
June 30, 2015
As a contract owner investing in Portfolios of the Fund through a variable annuity or variable life contract, you incur ongoing costs,including management fees, and other Portfolio expenses. This example is intended to help you understand your ongoing costs (indollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other investment options. Thisexample does not reflect fees and charges under your variable annuity or variable life contract. If contract charges were included, thecosts shown below would be higher. Please consult the prospectus for your contract for more information about contract feesand charges.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015through June 30, 2015.
Actual ExpensesThe first line of the table below provides information about actual account values and actual expenses. You may use this information,together with the amount you invested, to estimate the Portfolio expenses that you paid over the period. Simply divide your accountvalue by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the firstline under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the Portfolio expenses you paid on youraccount during this period. As noted above, the table does not reflect variable contract fees and charges.
Hypothetical Example for Comparison PurposesThe second line of the table below provides information about hypothetical account values and hypothetical expenses based on thePortfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return.The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paidfor the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other investment options.To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the otherinvestment options.
Please note that the expenses shown in the table are meant to highlight your ongoing Portfolio costs only and do not reflect anycontract fees and charges, such as sales charges (loads), insurance charges or administrative charges. Therefore the second line of thetable is useful to compare ongoing investment option costs only, and will not help you determine the relative total costs of owningdifferent contracts. In addition, if these contract fee and charges were included, your costs would have been higher.
The Prudential Series Fund Portfolios
BeginningAccount Value
January 1, 2015
EndingAccount ValueJune 30, 2015
Annualized ExpenseRatio based on theSix-Month period
Expenses PaidDuring the
Six-Month period*
Jennison 20/20 Focus (Class I) Actual $1,000.00 $1,054.60 0.83% $4.23
Hypothetical $1,000.00 $1,020.68 0.83% $4.16
Jennison 20/20 Focus (Class II) Actual $1,000.00 $1,052.60 1.23% $6.26
Hypothetical $1,000.00 $1,018.70 1.23% $6.16
* Portfolio expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for eachshare class (provided in the table), multiplied by the average account value over the period, multiplied by the 181 days in the six-month period ended June 30, 2015, and divided by the 365 days in the Portfolio’s fiscal year ending December 31, 2015 (to reflectthe six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Portfoliomay invest.
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JENNISON 20/20 FOCUS PORTFOLIO
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
The following abbreviation is used in the Portfolio descriptions:
ADR American Depositary Receipt
* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $10,850,929;cash collateral of $10,922,653 (included in liabilities) was received with which the Portfolio purchased highly liquid short-term investments.Securities on loan are subject to contractual netting arrangements. Cash collateral is less than 102% of the market value of securities loaned dueto significant market increases on the last business day of the reporting period. Collateral was subsequently received on the following businessday and the Portfolio remained in compliance.
(b) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
(c) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 — Prudential CoreTaxable Money Market Fund.
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other
observable inputs.Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of June 30, 2015 in valuing such portfolio securities:
SCHEDULE OF INVESTMENTS as of June 30, 2015 (Unaudited)
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of June 30, 2015 wasas follows:
NOTES TO THE FINANCIAL STATEMENTS OFTHE PRUDENTIAL SERIES FUND
(Unaudited)
Note 1: General
The Prudential Series Fund (“Series Fund”), organized as a Delaware statutory trust, is a diversified open-endmanagement investment company registered under the Investment Company Act of 1940, as amended(“1940 Act”). The Series Fund is composed of seventeen Portfolios (“Portfolio” or “Portfolios”), each withseparate series shares. The information presented in these financial statements pertains to Jennison 20/20Focus Portfolio.
The Portfolio’s investment objective is long-term growth of capital.
Note 2: Accounting Policies
The Series Fund follows investment company accounting and reporting guidance of the Financial AccountingStandards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services — InvestmentCompanies. The following accounting policies conform to U.S. generally accepted accounting principles. TheSeries Fund and the Portfolio consistently follow such policies in the preparation of their financial statements.
Securities Valuation: The Portfolio holds securities and other assets that are fair valued at the close of eachday the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be receivedto sell an asset or paid to transfer a liability in an orderly transaction between market participants on themeasurement date. The Board of Trustees (the “Board”) has adopted Valuation Procedures for securityvaluation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI”or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsiblefor supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit thePortfolio to utilize independent pricing vendor services, quotations from market makers, and alternativevaluation methods when market quotations are either not readily available or not deemed representative offair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, andratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Portfolio’s investments are valued, all of which are categorized according tothe three broad levels (Level 1, 2, or 3) detailed in the table following the Schedule of Investments.
Common and preferred stocks, exchange-traded funds, and derivative instruments, such as futures oroptions, that are traded on a national securities exchange are valued at the last sale price as of the close oftrading on the applicable exchange where the security principally trades. Securities traded via NASDAQ arevalued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price orNASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valuedat the mean between the last reported bid and ask prices, or at the last bid price in the absence of an askprice. These securities are classified as Level 2 in the fair value hierarchy.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendor servicesthat provide model prices derived using adjustment factors based on information such as local closing price,relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable.Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. Such securitiesare valued using model prices to the extent that the valuation meets the established confidence level for eachsecurity. If the confidence level is not met or the vendor does not provide a model price, securities are valued inaccordance with exchange-traded common and preferred stocks discussed above.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of theclose of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair valuehierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter (“OTC”) market are generally valued at prices providedby approved independent pricing vendors. The pricing vendors provide these prices after evaluatingobservable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranche
B1
level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades.Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuationbased on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. Theseinstruments are categorized as Level 2 in the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registeredexchange, are generally valued at the daily settlement price determined by the respective exchange. Thesesecurities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
Portfolio securities and other assets that cannot be priced according to the methods described above arevalued based on pricing methodologies approved by the Board. In the event that unobservable inputs areused when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the natureof any restrictions on disposition of the securities; assessment of the general liquidity of the securities; theissuer’s financial condition and the markets in which it does business; the cost of the investment; the size ofthe holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for suchsecurities or any comparable securities; any available analyst media or other reports or information deemedreliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Usingfair value to price securities may result in a value that is different from a security’s most recent closing priceand from the price used by other mutual funds to calculate their net asset values.
Foreign Currency Translation: The books and records of the Portfolio are maintained in U.S. dollars. Foreigncurrency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities — at the current daily rates of exchange;
(ii) purchases and sales of investment securities, income and expenses — at the rates of exchange prevailingon the respective dates of such transactions.
Although the net assets of the Portfolio are presented at the foreign exchange rates and market values at theclose of the period, the Portfolio does not isolate that portion of the results of operations arising as a result ofchanges in the foreign exchange rates from the fluctuations arising from changes in the market prices ofsecurities held at the end of the period. Similarly, the Portfolio does not isolate the effect of changes in foreignexchange rates from the fluctuations arising from changes in the market prices of portfolio securities soldduring the period. Accordingly, these realized foreign currency gains or losses are included in the reported netrealized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or lossesfrom holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currencygains or losses realized between the trade and settlement dates on securities transactions, and the differencebetween the amounts of interest, dividends and foreign withholding taxes recorded on the Portfolio’s books andthe U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses fromvaluing foreign currency denominated assets and liabilities (other than investments) at period end exchangerates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
Concentration of Risk: The ability of debt securities issuers (other than those issued or guaranteed by theU.S. Government) held by the Portfolio to meet their obligations may be affected by the economic or politicaldevelopments in a specific industry, region or country. Foreign security and currency transactions may involvecertain considerations and risks not typically associated with those of domestic origin as a result of, amongother factors, the possibility of political or economic instability or the level of governmental supervision andregulation of foreign securities markets.
Master Netting Arrangements: The Portfolio may be subject to various Master Agreements, or nettingarrangements, with select counterparties. These are arrangements which a sub-adviser may have negotiatedand entered into on behalf of the Portfolio. For multi-sleeve Portfolios, different sub-advisors who managetheir respective sleeve, may enter into such agreements with the same counterparty and are disclosedseparately for each sleeve when presenting information about offsetting and related netting arrangements forover-the-counter (“OTC”) derivatives under the FASB Accounting Standards Update (“ASU”) 2013-01
B2
disclosure. A master netting arrangement between the Portfolio and the counterparty permits the Portfolio tooffset amounts payable by the Portfolio to the same counterparty against amounts to be received; and by thereceipt of collateral from the counterparty by the Portfolio to cover the Portfolio’s exposure to thecounterparty. However, there is no assurance that such mitigating factors are easily enforceable. The right toset-off exists when all the conditions are met such that each of the parties owes the other determinableamounts, the reporting party has the right to set-off the amount owed with the amount owed by the otherparty, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reportingperiod, there were no instances where the right of set-off existed and management has not elected to offset.
Securities Lending: The Portfolio may lend its portfolio securities to banks and broker-dealers. The loans aresecured by collateral at least equal to the market value of the securities loaned. Collateral pledged by eachborrower is invested in a highly liquid short-term money market fund and is marked to market daily, based onthe previous day’s market value, such that the value of the collateral exceeds the value of the loanedsecurities. Loans are subject to termination at the option of the borrower or the Portfolio. Upon termination ofthe loan, the borrower will return to the Portfolio securities identical to the loaned securities. Should theborrower of the securities fail financially, the Portfolio has the right to repurchase the securities in the openmarket using the collateral. The Portfolio recognizes income, net of any rebate and securities lending agentfees, for lending its securities in the form of fees or interest on the investment of any cash received ascollateral. The Portfolio also continues to receive interest and dividends or amounts equivalent thereto, on thesecurities loaned and recognizes any unrealized gain or loss in the market price of the securities loaned thatmay occur during the term of the loan.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date.Realized gains or losses from investment and currency transactions are calculated on the identified costbasis. Dividend income is recorded on the ex-dividend date and interest income, including amortization ofpremium and accretion of discount on debt securities, is recorded on the accrual basis. Expenses arerecorded on the accrual basis which may require the use of certain estimates by management, that may differfrom actual.
Net investment income or loss (other than administration and distribution fees, which are charged to therespective class) and unrealized and realized gains or losses are allocated daily to each class of sharesbased upon the relative proportion of adjusted net assets of each class at the beginning of the day.
Taxes: For federal income tax purposes, the Portfolio in the Series Fund is treated as a separate taxpayingentity. The Portfolio is treated as a partnership for tax purposes. No provision has been made in the financialstatements for U.S. Federal, state, or local taxes, as any tax liability arising from operations of the Portfolio isthe responsibility of the Portfolio’s shareholders (Participating Insurance Companies). The Portfolios is notgenerally subject to entity-level taxation. Shareholders of the Portfolio is subject to taxes on its distributiveshare of partnership items.
Withholding taxes on foreign dividends, interest and capital gains have been provided for in accordance withthe Portfolio’s understanding of the applicable country’s tax rules and regulations.
Distributions: Distributions from the Portfolio are made in cash and automatically reinvested in additionalshares of the same Portfolio. Distributions are recorded on the ex-date.
Estimates: The preparation of the financial statements requires management to make estimates andassumptions that affect the reported amounts and disclosures in the financial statements. Actual results coulddiffer from those estimates.
Note 3: Agreements
The Portfolio has a management agreement with PI. Pursuant to this agreement PI has responsibility for allinvestment advisory services and supervises the subadviser’s performance of such services. PI has enteredinto a subadvisory agreement with Jennison Associates LLC (“Jennison”) (the “Subadviser”), under whichJennison provides investment advisory services for the Portfolio. PI pays for the services of the Subadviser,cost of compensation of officers of the Portfolio, occupancy and certain clerical and administrative expensesof the Portfolio. The Portfolio bears all other costs and expenses.
The management fee paid to PI is accrued daily and payable monthly at an annual rate of .75% of thePortfolio’s average daily net assets.
B3
The Portfolio has a distribution agreement, pursuant to Rule 12b-1 under the 1940 Act, with PrudentialInvestment Management Services LLC (“PIMS”), which acts as the distributor of the Class I and Class IIshares of the Portfolio. The Portfolio compensates PIMS for distributing and servicing the Portfolio’s Class IIshares pursuant to a plan of distribution (the “Class II Plan”), regardless of expenses actually incurred byPIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid toPIMS as distributor of the Class I shares of the Portfolio. Pursuant to the Class II Plan, the Class II shares ofthe Portfolio compensate PIMS for distribution-related activities at an annual rate of .25% of the average dailynet assets of the Class II shares.
The Portfolio has an administration agreement with PI, which acts as the administrator of the Class II sharesof the Portfolio. The administration fee paid to PI is accrued daily and payable monthly, at the annual rate of.15% of the average daily net assets of the Class II shares.
PIMS, PI and Jennison are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
The Portfolio has entered into a brokerage commission recapture agreement with certain registered broker-dealers. Under the brokerage commission recapture program, a portion of the commission is returned to thePortfolio on whose behalf the trades were made. Commission recapture is paid solely to those Portfoliosgenerating the applicable trades. Such amounts are included with realized gain or loss on investmenttransactions presented in the Statement of Operations. For the six months ended June 30, 2015, brokeragecommission recaptured under these agreements was $8,466.
Note 4: Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary ofPrudential, serves as the Portfolio’s transfer agent. Transfer agent’s fees and expenses in the Statement ofOperations include certain out-of-pocket expenses paid to non-affiliates, where applicable. PrudentialInvestment Management, Inc. (“PIM”), an indirect, wholly-owned subsidiary of Prudential, serves as thePortfolio’s security lending agent. For the six months ended June 30, 2015, PIM was compensated $4,654 forthese services by the Jennison 20/20 Focus Portfolio.
The Portfolio invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a portfolio of thePrudential Investment Portfolios 2, registered under the 1940 Act and managed by PI. Earnings from the CoreFund are disclosed on the Statement of Operations as affiliated dividend income.
Note 5: Portfolio Securities
The aggregate cost of purchases and the proceeds from the sales of securities (excluding governmentsecurities and short-term issues) for the six months ended June 30, 2015 were $83,478,488 and$89,867,832, respectively.
Note 6: Tax Information
The Portfolio is treated as a partnership for tax purposes. The character of the cash distributions made by thepartnership is generally classified as return of capital nontaxable distributions. After each fiscal year eachpartner will receive information regarding their distributive allocable share of the partnership’s income, gains,losses and deductions.
With respect to the Portfolio, book cost of assets differs from tax cost of assets as a result of the Portfolio’sadoption of a mark to market method of accounting for tax purposes. Under this method, tax cost of assetswill approximate its fair market value.
Management has analyzed the Portfolio’s tax positions taken on federal income tax returns for all open taxyears and has concluded that no provision for income tax is required in the Portfolio’s financial statements forthe current period. The Portfolio’s federal and state and local income tax returns for tax years for which theapplicable statutes of limitations have not expired are subject to examination by the Internal Revenue Serviceand state departments of revenue.
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Note 7: Capital
The Series Fund offers Class I and Class II shares. Neither Class I nor Class II shares of the Portfolio aresubject to any sales charge or redemption charge and are sold at the net asset value of the Portfolio. Class Ishares are sold only to certain separate accounts of Prudential to fund benefits under certain variable lifeinsurance and variable annuity contracts (“contracts”). Class II shares are sold only to separate accounts ofnon-Prudential insurance companies as investment options under certain contracts. The separate accountsinvest in shares of the Series Fund through subaccounts that correspond to the Portfolios. The separateaccounts will redeem shares of the Series Fund to the extent necessary to provide benefits under thecontracts or for such other purposes as may be consistent with the contracts.
Transactions in shares of beneficial interest of the Jennison 20/20 Focus Portfolio were as follows:
The Portfolio, along with other affiliated registered investment companies (the “Funds”), is a party to aSyndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide analternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of$900 million for the period October 9, 2014 through October 8, 2015. The Funds pay an annualizedcommitment fee of .075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paidat contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
The Portfolio utilized the SCA during the six months ended June 30, 2015. The average daily balance for the7 days that the Portfolio had loans outstanding during the period was $154,571, borrowed at a weightedaverage interest rate of 1.42%. The maximum loan outstanding amount during the period was $273,000. AtJune 30, 2015, the Portfolio did not have an outstanding loan amount.
Note 9: Ownership and Affiliates
As of June 30, 2015, all of Class I shares of record of the Portfolio were owned by the Prudential InsuranceCompany of America (“PICA”), or subsidiaries thereof, on behalf of the owners of the variable insuranceproducts issued by PICA. PICA is an indirect, wholly-owned subsidiary of Prudential.
Note 10: New Accounting Pronouncement
In May 2015, the FASB issued ASU No. 2015-07 regarding “Disclosures for Investments in Certain EntitiesThat Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscal
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years beginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 willeliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured atnet asset value (“NAV”) per share (or its equivalent) using the practical expedient in the FASB’s fair valuemeasurement guidance. At this time, management is evaluating the implications of ASU No. 2015-07 and itsimpact on the financial statement disclosures has not yet been determined.
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Financial Highlights(Unaudited)
Jennison 20/20 Focus PortfolioClass I
Six Months EndedJune 30, 2015(c)
Year Ended December 31,2014(c) 2013(c) 2012(c) 2011(c) 2010(c)
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includesreinvestment of distributions and does not reflect the effect of insurance contract charges. Total return does not reflect expenses associated withthe separate account such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total returns forall years shown. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expensereimbursements, the total return would be lower. Past performance is no guarantee of future results. Total returns may reflect adjustments toconform to generally accepted accounting principles. Total Returns for periods less than one full year are not annualized.
(b) Does not include expenses of the underlying portfolios in which the Portfolio invests.
(c) Calculated based upon average shares outstanding during the period.
(d) Annualized.
(e) Not annualized.
(f) Less than $0.005 per share.
(g) Less than .005%.
SEE NOTES TO FINANCIAL STATEMENTS.
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Approval of Advisory Agreements
The Trust’s Board of Trustees
The Board of Trustees (the Board) of The Prudential Series Fund (the Trust consists of ten individuals, nine of whom are not “interestedpersons” of the Trust, as defined in the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees). TheBoard is responsible for the oversight of the Trust and the SP International Growth Portfolio (the Portfolio), its operations, and performsthe various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retainedindependent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Boardhas established four standing committees: the Audit Committee, the Governance Committee, the Compliance Committee and theInvestment Review and Risk Committee. Each committee is chaired by an Independent Trustee.
Annual Approval of the Trust’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Trust’s management agreement with PrudentialInvestments LLC (PI) and the Portfolio’s subadvisory agreement with Jennison Associates LLC (Jennison). As is further discussed andexplained below, in considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on June 15-16,2015 (the Meeting) and approved the renewal of the agreements through July 31, 2016, after concluding that the renewal of theagreements was in the best interests of the Trust, the Portfolio and the Portfolio’s beneficial shareholders.
In advance of the Meeting, the Trustees received materials relating to the agreements, and had the opportunity to ask questions andrequest further information in connection with the consideration of those agreements. Among other things, the Board consideredcomparisons with other mutual funds in a relevant peer universe and peer group, as is further discussed below.
In approving the agreements, the Trustees, including the Independent Trustees advised by independent legal counsel, considered thefactors they deemed relevant, including the nature, quality and extent of services provided, the performance of the Portfolio, theprofitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Portfolio andits shareholders. In their deliberations, the Trustees did not identify any single factor that alone was responsible for the Board’s decisionto approve the agreements. In connection with its deliberations, the Board considered information provided at or in advance of theMeeting as well as information provided throughout the year at regular and special Board meetings, including presentations from PI andsubadviser personnel such as portfolio managers.
The Trustees determined that the overall arrangements between the Trust and PI, which serves as the Trust’s investment managerpursuant to a management agreement, and between PI and Jennison, which serves pursuant to the terms of a subadvisory agreementwith PI, are in the best interest of the Trust, the Portfolio and the Portfolio’s shareholders in light of the services performed, fees chargedand such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ determinations to approve the renewal of the agreementsare discussed separately below.
Nature, quality and extent of services
The Board received and considered information regarding the nature, quality and extent of services provided to the Trust by PI andJennison. The Board considered the services provided by PI, including but not limited to the oversight of Jennison, as well as theprovision of recordkeeping and compliance services to the Trust. With respect to PI’s oversight of the subadvisers, the Board noted thatPI’s Strategic Investment Research Group (SIRG), a business unit of PI, is responsible for screening and recommending new subadviserswhen appropriate, as well as monitoring and reporting to the Board on the performance and operations of the subadvisers. The Boardalso considered that PI pays the salaries of all of the officers and management Trustees of the Trust. The Board also considered theinvestment subadvisory services provided by each subadviser, as well as compliance with the Trust’s investment restrictions, policiesand procedures. The Board considered PI’s evaluation of Jennison, as well as PI’s recommendation, based on its review of Jennison, torenew the subadvisory agreements.
The Board reviewed the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of theTrust and Jennison, and also reviewed the qualifications, backgrounds and responsibilities of the Jennison portfolio managers who areresponsible for the day-to-day management of the Portfolio. The Board was provided with information pertaining to PI’s and Jennison’sorganizational structure, senior management, investment operations and other relevant information pertaining to PI and Jennison. TheBoard also noted that it received favorable compliance reports from the Trust’s Chief Compliance Officer (CCO) as to PI and Jennison.The Board noted that Jennison is affiliated with PI.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI andthe subadvisory services provided to the Portfolio by Jennison, and that there was a reasonable basis on which to conclude that thePortfolio benefits from the services provided by PI and Jennison under the management and subadvisory agreements.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI and its affiliates in serving as the Trust’s investment manager. TheBoard discussed with PI the methodology utilized in assembling the information regarding profitability and considered itsreasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts becausecomparative information is not generally available and is affected by numerous factors, including the structure of the particular adviser,the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure andcost of capital. The Board considered information regarding the profitability of Jennison, which is an affililate of PI, on a consolidatedbasis. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the servicesrendered was not unreasonable.
Economies of Scale
The Board received and discussed information concerning whether PI realizes economies of scale as the Portfolio’s assets grow beyondcurrent levels. The Board noted that economies of scale, if any, may be shared with the Portfolio in several ways, including lowmanagement fees from inception, additional technological and personnel investments to enhance shareholder services, and maintainingexisting expense structures in the face of a rising cost environment. The Board recognized the inherent limitations of any analysis ofeconomies of scale, stemming largely from the Board’s understanding that most of PI’s costs are not specific to individual funds, butrather are incurred across a variety of products and services.
Other Benefits to PI and the Subadvisers
The Board considered potential ancillary benefits that might be received by PI, Jennison, and their affiliates as a result of theirrelationship with the Trust. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI forserving as the Portfolio’s securities lending agent, compensation received by insurance company affiliates of PI from the subadvisers, aswell as benefits to its reputation or other intangible benefits resulting from PI’s association with the Trust. The Board also consideredinformation provided by PI regarding the regulatory requirement that insurance companies determine that the fees and charges undertheir variable contracts are reasonable. The Board noted that the insurance company affiliates of PI at least annually review andrepresent that the fees and charges of the variable contracts using the Portfolio are reasonable. The Board concluded that the potentialbenefits to be derived by Jennison included the ability to use soft dollar credits, brokerage commissions that may be received byaffiliates of Jennison, as well as the potential benefits consistent with those generally resulting from an increase in assets undermanagement, specifically, potential access to additional research resources and benefits to their reputations. The Board concluded thatthe benefits derived by PI and Jennison were consistent with the types of benefits generally derived by investment managers andsubadvisers to mutual funds.
Performance of the Portfolio / Fees and Expenses / Other Factors
With respect to the Portfolio, the Board also considered certain additional specific factors and made related conclusions relating to thehistorical performance of the Portfolio for the one-, three-, five- and ten-year periods ended December 31, 2014. The Board compared thehistorical performance of the Portfolio to the comparable performance of the Portfolio’s benchmark index and to a universe of mutualfunds (the Peer Universe) that were determined by Lipper Inc. (Lipper), an independent provider of mutual fund data, to be similar tothe Portfolio.
The Board also considered the Portfolio’s actual management fee, as well as the Portfolio’s net total expense ratio, for the calendar year2014. The Board considered the management fee for the Portfolio as compared to the management fee charged by PI to other funds andaccounts and the fee charged by other advisers to comparable mutual funds in a group of similar mutual funds that were determined byLipper to be similar to the Portfolio (the Peer Group). The actual management fee represents the fee rate actually paid by Portfolioshareholders and includes any fee waivers or reimbursements. The net total expense ratio for each Portfolio represents the actualexpense ratio incurred by Portfolio shareholders, but does not include the charges associated with the variable contracts.
The mutual funds included in each Peer Universe and each Peer Group were objectively determined by Lipper Inc. (Lipper), anindependent provider of mutual fund data. The comparisons placed the Portfolio in various quartiles, with the first quartile being the
best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds). Tothe extent that PI deems appropriate, and for reasons addressed in detail with the Board, PI may have provided and the Board may haveconsidered, supplemental data compiled by Lipper for the Board’s consideration.
The sections below summarize key factors considered by the Board and the Board’s conclusions regarding the Portfolio’s performance,fees and overall expenses. Each section sets forth gross performance comparisons (which do not reflect the impact on performance ofany subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group(which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factorsconsidered by the Board.
Jennison 20/20 Focus PortfolioPerformance 1 Year 3 Years 5 Years 10 Years
• The Board noted that the Portfolio outperformed its benchmark index over the ten-year period, although it underperformed over theone-, three- and five-year periods.
• The Board noted PI’s explanation that the underperformance was primarily attributable to the Portfolio’s value sleeve. The Boardconsidered that the portfolio manager team responsible for the value sleeve’s performance record had recently been replaced,resulting in changes in the securities selection process for the sleeve.
• The Board considered that the Portfolio’s performance during the first quarter of 2015 had shown significant improvement, with thePortfolio ranking in the first quartile of its Peer Universe and outperforming its benchmark index.
• The Board concluded that, in light of the above, it would be in the best interests of the Portfolio and its shareholders to renew theagreements, and that the management fees (including subadvisory fees) and total expenses were reasonable in light of theservices provided.
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After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Trust,each Portfolio and its beneficial shareholders.
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This report must be preceded or accompanied by the current prospectuses for the Prudential Series Fund portfolios and theapplicable variable annuity or variable life contract. The prospectuses contain information on the contract and the investmentobjectives, risks, charges and expenses of the portfolios, and should be read carefully.
A description of the Fund’s proxy voting policies and procedures is available, without charge, upon request by calling theappropriate phone number listed below. Information regarding how the Fund voted proxies relating to portfolio securitiesduring the most recent 12-month period ended June 30 is available on the website of the Securities and ExchangeCommission (the Commission) at www.sec.gov and on the Fund’s website at www.prudential.com/variableinsuranceportfolios.
The Fund files with the Commission a complete listing of portfolio holdings as of its first and third quarter-end on Form N-Q.Form N-Q is available on the Commission’s website at www.sec.gov or by visiting the Commission’s Public Reference Room.For more information on the Commission’s Public Reference Room, please visit the Commission’s website or call(800)SEC-0330. Form N-Q is also available on the Fund’s website or by calling the telephone number referenced below.
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and is availablewithout charge upon request by calling the appropriate phone number listed below.
This report may include financial information pertaining to certain portfolios that are not available through the variableannuity contract or the variable life insurance policy that you have chosen. Please refer to your variable product prospectusto determine which portfolios are available to you.
To contact your client services representative, please call the phone number listed below. Thank you.
Owners of Individual Annuity contracts should call (888) 778-2888.Owners of Individual Life Insurance contracts should call (800) 778-2255.Owners of Group Variable Universal Life Insurance contracts should call (800) 562-9874.Owners of Group Variable Universal Life Insurance contracts through AICPA should call (800) 223-7473.
The Prudential Series Fund offers two classes of shares in each Portfolio: Class I and Class II. Class I shares are sold only toseparate accounts of The Prudential Insurance Company of America, Pruco Life Insurance Company, and Pruco LifeInsurance Company of New Jersey (collectively, Prudential) as investment options under variable life insurance and variableannuity contracts (the Contracts). (A separate account keeps the assets supporting certain insurance contracts separatefrom the general assets and liabilities of the insurance company.) Class II shares are offered only to separate accounts ofnon-Prudential insurance companies for the same types of Contracts.
The Prudential Series Fund is distributed by Prudential Investment Management Services LLC (PIMS), 655 Broad Street,19th Floor, Newark, NJ 07102, member SIPC, a Prudential Financial company and solely responsible for its own financialcondition and contractual obligations.
Annuity and life insurance contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them inforce. Your licensed financial professional can provide you with costs and complete details. Contract guarantees are basedon the claims-paying ability of the issuing company.
The Prudential Insurance Company of America751 Broad StreetNewark, NJ 07102-3777
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U.S. PostagePAID
Prudential
The Audited Financial Statements of Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey, andThe Prudential Insurance Company of America are available upon request. You may call (800)778-2255 to obtain a freecopy of the audited financial statements of the insurance company that issued your contract.
To reduce costs, we now generally send only a single copy of prospectuses and shareholder reports to each household(householding) in lieu of sending a copy to each Contract Owner who resides in the household. You should be aware thatby calling (877)778-5008, you can revoke, or “opt out,” of householding at any time.