The Prudential Series Fund

During the year ended December 31, 2008, the Partnership spent approximately $3.7 million on capital improvements
to various existing properties. Approximately $1.2 million was associated with the renovation of the hotel property in
Lake Oswego, Oregon; approximately $0.7 million funded renovation and tenant improvements costs at the office
property in Lisle, Illinois; approximately $0.7 million contributed to interior renovations at one of the office properties in
Brentwood, Tennessee; and approximately $0.4 million financed tenant improvements at the retail property in Dunn,
North Carolina. The remaining $0.7 million was associated with minor capital improvements and transaction costs
associated with leasing expenses related to other properties in the Partnership. Additionally, $6.3 million of capital
improvements was funded at the retail property in Ocean City, Maryland through the aforementioned third party loan.
(b) Results of Operations
The following is a comparison of the Partnership’s results of operations for the periods ended December 31, 2008 and
2007.
Net Investment Income Overview
The Partnership’s net investment income for the year ended December 31, 2008 was approximately $11.1 million, a
decrease of approximately $1.5 million from the prior year. The decrease in net investment income was primarily
attributable to a $1.4 million increase in other net investment loss from the prior year. Additionally, the retail, office, and
hotel sectors’ net investment income declined approximately $0.9 million, $0.1 million, and $0.1 million, respectively
during the year ended December 31, 2008 from the prior year. Partially offsetting these decreases was an increase in
the apartment sector’s net investment income of approximately $1.0 million from the prior year. The industrial sector’s
net investment income remained relatively unchanged. The components of this net investment income are discussed
below by investment type.
Valuation Overview
The Partnership did not have any realized gains for the year ended December 31, 2008, compared with a net realized
gain of approximately $0.7 million for the prior year. The Partnership recorded a net unrealized loss of approximately
$44.2 million for the year ended December 31, 2008, compared with a net unrealized gain of approximately $4.8
million for the prior year. The Partnership recorded a net realized and unrealized loss of approximately $44.2 million for
the year ended December 31, 2008, compared with a net realized and unrealized gain of approximately $5.5 million for
the prior year. The net unrealized loss of approximately $44.2 million for the year ended December 31, 2008 was
attributable to valuation declines in every sector primarily due to increased investment rates suggesting an industrywide
repricing. Investment rates include direct and terminal capitalization rates, and discount rates, which reflect
investors’ yield requirements on investments. The increase in investment rates was caused by the national economic
downturn, frozen credit markets, weakening market fundamentals, and deteriorated demand for commercial real
estate. The components of these valuation losses are discussed below by investment type.
The following table presents a comparison of the Partnership’s sources of net investment income, and realized and
unrealized gains or losses by investment type for the years ended December 31, 2008 and 2007.
Net Investment Income:
Twelve Months Ended December 31,
2008 2007
Office properties $3,893,422 $3,945,096
Apartment properties 3,129,457 2,119,681
Retail properties 6,062,399 6,998,954
Industrial property - 49,279
Hotel property 1,213,328 1,343,200
Other (including interest income, investment mgt fee, etc.) (3,160,422) (1,792,630)
Total Net Investment Income $11,138,184 $12,663,580
Net Realized Gain (Loss) on Real Estate Investments:
Retail properties - 323,649
Industrial property - 345,832
Net Realized Gain (Loss) on Real Estate Investments
- 669,481
19 - Real Property